The IRS Large Business and International (LB&I) Division recently identified five new issues that will be the focus of its ongoing compliance and examination campaign program. The five new issues are as follows:
- Allocation of success-based fees without Rec. Proc. 2011-29: This issue targets taxpayers that do not use the 70/30 safe harbor in Rev. Proc. 2011-29 to allocate the amount of success-based fess as facilitating or not facilitating a covered transaction under Treas. Reg. Sec. 1.263(a)-5(e)(3), and instead use a facts-and-circumstances approach. The stated goal of this campaign issue is “to ensure taxpayer compliance with current law.”
- FIRPTA Reporting Compliance for NRAs: This issue targets required withholding and reporting of taxes under the Foreign Investment in Real Property Tax Act (FIRPTA) on foreign persons on the disposition of U.S. real property interests. The stated goal of this campaign issue is “to increase FIRPTA voluntary compliance through issue-based examinations and external education and outreach.”
- Computation of life insurance reserves under Section 807(d): This issue targets life insurance companies (Form 1120-L filers) to determine compliance with the new method of computing life insurance reserves enacted as part of the Tax Cuts and Jobs Act. The stated goal of this campaign issue is “to examine Forms 1120-L filed by life insurance companies for their 2017 and/or 2018 taxable years (and any related and subsequent year returns) to understand how taxpayers implemented TCJA Section 13517, to ensure compliance, and to identify compliant and non-compliant technical issues.”
- Re-computation of life insurance reserves under Section 807(d): This issue targets life insurance companies (Form 1120-L filers) that elect to recompute the interest rate used in the computation of life insurance reserves. The stated goal of this campaign issues is “is to examine original and amended Forms 1120-L filed by life insurance companies for their 2017 and/or 2018 taxable years (and any related and subsequent year returns) to ensure compliance, and to identify compliant and non-compliant technical issues.”
National Managing Principal
Washington National Tax Office
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