The Internal Revenue Service is closing off admission to a program that allows large corporations to discuss and resolve their tax issues with the IRS before filing their tax returns, due to budget constraints.
The IRS said Friday no new taxpayers will be accepted into its Compliance Assurance Process program for the 2017 application season, which begins next month. Only corporate taxpayers that are already in the CAP and Compliance Maintenance phases of the program can submit applications to participate next year. Taxpayers that are currently in the pre-CAP phase of the program will not be accepted now into the actual CAP phase, and new pre-CAP applications will not be accepted.
Current pre-CAP taxpayers can remain in the pre-CAP phase, and taxpayers that are now in the CAP phase might be moved into the Compliance Maintenance phase as appropriate.
The Compliance Assurance Process provides a way for the IRS’s Large Business and International division to identify and resolve tax issues by interacting on a cooperative basis with big corporations before they file their tax returns. The program is supposed to give corporate taxpayers more certainty about whether the IRS will object to their tax filings and be less of an administrative burden on the IRS, as opposed to the traditional way of examining the companies’ tax returns after they’re filed.
The CAP program started out as a pilot program in 2005 for six years with 17 taxpayers before the IRS made it permanent in March 2011, adding the Pre-CAP and Compliance Maintenance phases. There are now 181 companies in the program today. However, the IRS said Friday that its LB&I division is in the process of re-assessing all three phases of the program, which include CAP, pre-CAP and Compliance Maintenance.
The IRS said the reassessment is necessary “given today’s challenging environment of limited resources and budget constraints, combined with a business need to evaluate existing programs to ensure they are aligned with LB&I’s strategic vision.”
The IRS has been struggling with a series of budget cuts in recent years. The agency had its budget cut five years in a row, although last December Congress approved $290 million in additional funding for the IRS for fiscal year 2016, earmarking the funds for improving taxpayer service, strengthening cybersecurity and expanding efforts against identity theft. However, for fiscal 2017 the House Appropriations Committee has approved a cut of $236 million below this year’s level for the IRS, $1.3 billion below the amount requested by the Obama administration.
For more information on the CAP program, click here.
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