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Fact Sheet: Pre-Filing Agreement (PFA) Program (March 2014)

The PFA program is a beneficial way to reach agreement on a contentious issue through a cooperative effort before the return is filed.

  • Revenue Procedure 2009-14 provides the program guidelines.
  • Taxpayers estimate they save 48% by using this process instead of the traditional audit; the Service estimates savings of 30%.
  • On a scale of 1 to 5, taxpayers report an overall level of satisfaction with the program of 4.7 and 4.6 on the likelihood of recommending the process to others.

There is a user fee of $50,000 for participation in the program.

  • OMB requires a user fee on special benefits beyond those received by the general public.
  • The fee is paid only if the issue is accepted.

Any taxpayer under LB&I’s jurisdiction may apply for a PFA; eligible issues are factual and governed by well settled law.

  • PFAs can cover the current and up to four future tax years, but the transaction must be complete.
  • They may also be used to determine the appropriate methodology for determining tax consequences affecting future tax years.
  • PFAs are available on International issues.
  • The most common issues are worthless stock/bad debts, research credit, cost segregation studies, and disposition or acquisition of a subsidiary. Recently we have received several on deduction of settlement costs, fines, and penalties.

Following are recent statistics on the PFA program:

  • In calendar year 2013 we received 38 applications, accepted 35, and completed closing agreements on 22.
  • Since the program’s inception in 2001 through February 2014, we have received 478 applications, accepted 326, and closed 230 with an agreement.
  • The total time to complete a PFA was 415 days in calendar year 2013.

A brief summary of the PFA process is below:

  • The taxpayer can file a request with the Case Manager or PFA Program Manager.
  • The request should include all items listed in Rev. Proc. 2009-14.
  • The application is evaluated by Counsel, the Audit team, and Technical Advisors.
  • The Industry Director makes the decision to accept or not; there is no appeal to the Industry Director’s decision.

For more information:

  • Contact the PFA Program Manager, Melanie Perrin, at 202-317-3157 or
  • Visit the PFA page on irs.gov under information for Large Business and International Division.

 

Page Last Reviewed or Updated: 27-Mar-2014