The IRS has released a final Form Schedule UTP — and the accompanying instructions — for 2022 with significant changes and new requirements from prior years.
As background, C corporations with more than $10 million in assets must generally file a Schedule UTP to report any tax positions for which they have recorded a financial reserve (or did not reserve because the taxpayer expects to litigate the position) Historically, for each position, taxpayers were required to disclose:
- The pertinent Code section
- Whether the position was permanent, temporary, or both
- The employer identification number of any passthrough entity involved
- Whether the position was a major tax position
- The rankings of the position by size without disclosing the amount of the reserve associated with each position
This year, the IRS is mandating that taxpayers disclose additional information on their Schedule UTP compared to prior years, including:
- Any revenue rulings, revenue procedures, notices, court decisions, or Treasury regulations that are contrary to the tax position
- The location of the position on the tax return by form/schedule and line number and the amount of income tax benefit
The final version of the form and instructions clarified key points from draft versions released earlier in 2022. Most notably, the IRS revised the instructions to remove the phrase "incremental amount," meaning the amount that must be reported on Schedule UTP is now simply the amount reported on the line identified elsewhere on the schedule. This change helps alleviate potential taxpayer confusion over the exact amount that must be reported on the Schedule UTP.
The IRS also removed private letter rulings, technical advice memoranda, chief counsel advice, field service advice, and general counsel memoranda from the list of contrary guidance that must be disclosed — likely because these items are non-precedential rulings that a taxpayer could not rely on to argue its position (other than to avoid penalties).
The final schedule and instructions continue to require taxpayers to identify contrary court decisions without distinguishing between court opinions that would be binding on a taxpayer and those that would not be binding upon such taxpayer, however. For example, a taxpayer in the Fourth Circuit still would need to identify pertinent contrary authority in the Seventh Circuit even though that circuit is not directly binding on the taxpayer.
The IRS also released a statement accompanying the release of the final schedule and instructions, noting "the IRS policy of restraint as set forth in Announcement 2010-76 remains in effect." This announcement generally notes that if a document is privileged — e.g., attorney-client privilege, the tax advice privilege under Section 7525 of the Code, or the work product doctrine — and the document was provided to an independent auditor as part of an audit of the taxpayer’s financial statements, the IRS will not assert during an examination that privilege was waived by such disclosure.
Given the plethora of notable updates to the Schedule UTP and accompanying instructions, taxpayers should carefully review the new rules, assess any potential uncertain positions and ensure compliance with the updated requirements.
Contact:
Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “§,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.
More tax hot topics
No Results Found. Please search again using different keywords and/or filters.
Share with your network
Share