The Compliance Assurance Process (CAP) employs real-time issue resolution, through transparent and cooperative interaction between taxpayers and the IRS, to improve federal tax compliance by resolving issues prior to the filing of a tax return. CAP requires a contemporaneous exchange of information related to a taxpayer’s proposed return positions and its completed events and transactions that may affect federal tax liability. Successful conclusion of CAP allows the IRS to achieve an acceptable level of assurance regarding the accuracy of the taxpayer’s filed tax return and to substantially shorten the length of the post filing examination.
Since 2015, the IRS has not accepted new applicants into CAP, but we are working toward accepting new applicants as resources allow. To help determine our approach for the 2020 CAP year, we are seeking information about the taxpayers who may be interested in applying to the program if new applicants are accepted. New applicants who meet the eligibility criteria set forth below and are interested in applying for the 2020 CAP year should submit a statement of interest to the CAP program mailbox by July 26, 2019. The statement of interest is a precursor to the formal application process that will take place in the fall of 2019.
Eligibility Criteria for New CAP Applicants
To be eligible for CAP, applicants must:
- Have assets of $10 million or more;
- Be a U.S. publicly-traded C-Corporation with a legal requirement to prepare and submit Forms 10-K, 10-Q, and 8-K to the Securities & Exchange Commission;
- Not be under investigation by, or in litigation with, the IRS or another government agency that would limit the IRS’ access to current corporate tax records; and
- If currently under examination, must not have more than one open filed return and one open unfiled return on the first day of the applicant’s CAP year; unless an exception applies.
For applicants without any IRS examination history in the last three tax years, the IRS may need to perform a review of your most recently filed returns to determine the scope of your material issues and whether they are suitable for resolution in the CAP timeframes.
Statement of Interest
Taxpayers who are interested in applying for the 2020 CAP year should submit a statement of interest to the CAP program mailbox by July 26, 2019. The statement of interest should include the taxpayer’s name and EIN, and should provide answers to the following questions:
- Why are you interested in participating in the CAP program?
- What tax years are currently or recently under IRS examination? (Please list years and status/outcomes)
- What are your significant and material issues of concern that you would like to resolve in CAP?
- If you engage in transfer pricing, what is the nature of your transfer pricing activity?
The IRS will use the information to determine the full extent to which we will be expanding the program for 2020. Additional communication will be forthcoming before the 2020 application period.
2020 Application Process and Related Documents
To apply for the 2020 CAP year, taxpayers must complete and submit the following forms:
- Taxpayer Initial Issues List
- Research Credit Questionnaire
- Material Intercompany Transactions Template
- Tax Control Framework Questionnaire
The 2019 versions for forms 1-3 above, which are likely to be updated for 2020, are available for reference on the CAP webpage. Once accepted into the program, taxpayers must sign a Memorandum of Understanding (MOU) and establish secure email for communications with the IRS. A copy of the 2019 MOU is also available on the CAP webpage. The IRS will provide necessary CAP training and orientation to taxpayers the first year they are accepted into the CAP.
To enable real-time issue resolution of material issues, CAP taxpayers are expected to make open, comprehensive, and contemporaneous disclosures of their material issues. CAP taxpayers provide IRS with information and documentation proactively and as requested. For example, taxpayers with international cross-border activity will provide a copy of their Worldwide Tax Organization Chart, and if available, a copy of their Master File.