IRS extends CAP program and announces some changes

Tax Hot Topics newsletterThe IRS Large Business & International division (LB&I) announced Aug. 27 that it would continue to offer the compliance assurance process (CAP) program to large, generally compliant business taxpayers.

As part of the release (IR-2018-174), LB&I Commissioner Doug O’Donnell said that the CAP program “continues to provide benefit for taxpayers and tax administration.” Previously LB&I had announced it was reassessing the program and stopped accepting new participants in 2017. Some taxpayers expressed concern that CAP, which provides an avenue for pre-filing issue resolution by large taxpayers, would come to an end in an era of increasingly strained IRS budgets.

The IRS announced that while it would accept applications from existing participants for 2019, there would be some changes to “improve operation of the program and make the best use of limited government resources.” The application process for the 2019 program will open on Oct. 1 and close on Nov. 30 and will require applicants to provide a preliminary list of material issues for the year, including any relevant transfer pricing and research credit information. In addition, LB&I will approach issues with an eye toward quick resolution. For example, transfer pricing issues may need to be resolved through advance pricing agreements, and disagreements will be sent to the Office of Appeals on a faster basis. Overall, LB&I envisions a 90-day goal for resolving disputes.

Taxpayers in the CAP maintenance phase, which generally consists of the most compliant of large taxpayers, may see their participation in the program modified as well. The IRS stated that “some taxpayers determined to be the lowest risk may continue in the program without IRS review of a particular year.”

The IRS indicated that the program would be open in future years to additional taxpayers who meet the eligibility criteria and program requirements. Interested business taxpayers should be aware of other anticipated changes, including the requirement to develop and provide certification of a tax control framework. Finally, resource constraints may dictate the number of taxpayers that may participate in the program, as well as whether all issues may addressed as part of CAP.

Dave Auclair
National Managing Principal, Washington National Tax Office
T +1 202 521 1515

Liz Askey
Managing Director, Washington National Tax Office
T +1 202 521 1513

Shamik Trivedi
Senior Manager, Washington National Tax Office
T +1 202 521 1511

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