The Internal Revenue Service is changing its procedures for resolving issues with corporate taxpayers through pre-filing agreements while also increasing the fees.
Revenue Procedure 2016-30 revises Rev. Proc. 2009-14, which outlines the procedures to resolve issues through a pre-filing agreement, or PFA. The revenue procedure expands the scope of a PFA to include issues relating to changes in methods of accounting requested pursuant to the automatic consent procedures and also reflects the new structure of the IRS’s Large Business and International Division.
The Rev. Proc. also clarifies or updates procedures for fling PFA requests; and increases the user fee for PFAs from $50,000 to $134,300 for requests submitted on or after the date that is 30 days after the Rev. Proc. is released, to $218,600 for requests submitted on or after Jan. 1, 2017.
The revenue procedure allows a taxpayer under the jurisdiction of the Large Business and International Division, or LB&I, to ask the IRS to examine specific issues relating to tax returns before those returns are filed. The document provides the framework within which a taxpayer and the IRS can work together in a cooperative environment to resolve, after examination, the issues accepted into the program. If the taxpayer and the IRS are able to resolve the examined issues before the tax returns that they affect are filed, the revenue procedure authorizes the taxpayer and the IRS to memorialize their agreement by executing a PFA.
The document outlines the procedures for resolving issues through pre-filing examinations. The IRS noted that taxpayers often resolve issues more effectively and efficiently with the Service through a pre-filing examination rather than a post-filing examination, because the taxpayer and the IRS have more timely access to the records and personnel that are relevant to the issues. A pre-filing examination also provides the taxpayer with certainty regarding the examined issue at an earlier point than a post-filing examination. The procedures benefit both taxpayers and the IRS by improving the quality of tax compliance while reducing costs, burdens, and delays.
Unlike letter rulings and other forms of written advice provided by the Offices of the Associate Chief Counsels, however, the IRS pointed out that a PFA does not determine the tax treatment of prospective or future transactions or events, but only of completed transactions or events whose tax treatment has not yet been reported on a return.
The user fee for taxpayers selected to participate in the PFA program is currently $50,000. The user fee will increase to $134,300 for PFA requests submitted on or after June 3, 2016, and to $218,600 for PFA requests submitted on or after Jan. 1, 2017. A fee will be assessed for each separate and distinct issue. The orientation meeting or the first substantive meeting with the taxpayer to discuss the PFA issues will not take place until after the fee is received. Payment of the user fee needs to be made within 15 business days of notification that the issues have been selected for the PFA program. The payment should be made electronically by visiting www.pay.gov.
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