Tax Control Framework Questionnaire

The IRS previously announced its intent to require all CAP applicants to adhere to a tax control framework requirement.  As part of implementing this requirement, the IRS will require CAP applicants, as part of the 2020 application process, to complete the following tax control framework questionnaire.  This questionnaire will provide IRS with an understanding of your company’s tax governance processes and the system of internal controls that ensure the accuracy and completeness of your federal income tax returns, information reporting, tax reporting data and other tax-related disclosures (hereinafter collectively referred to as “tax returns and disclosures”).  The input received in response to this questionnaire will, in part, inform the CAP tax control framework requirements for future years.  Questions or comments on this questionnaire can be emailed to the CAP program mailbox.

For each of the questions below, provide sufficient detail for the IRS to have a clear picture of your company’s controls related to tax returns and disclosures.    

  1. Describe the internal controls that your organization has established and maintained to ensure the accuracy, completeness and reliability of your tax returns and disclosures.
  2. Describe your organization's process for tax risk management, specifically the processes that are used to identify, monitor, prevent and manage risks arising from tax.  As part of your response to this question, please address the following specific questions.
    • Does the Chief Tax Officer make periodic presentations to the board of directors or one of its designated committees?
    • Has the board provided guidance to management and the tax department as to the level of tax risk that should be taken by the company?
    • Does the company have in place policies and procedures for proper and timely elevation to the board, as well as sign-off procedures, for material transactions?
    • Has the company reported a material weakness or financial restatement related to tax matters in the last three years?
    • Is the company's internal audit function involved in reviewing the tax function and/or tax issues?  If so, have any deficiencies been discovered in the last three years?
    • Does your company outsource any of its tax function, and if so, what processes and controls are in place for managing risks related to outsourcing any of these functions to an entity outside your organization?
  3. Do any of the certifications required by your organization under a SOX (Sarbanes Oxley) Section 404 requirement assess the effectiveness of the controls described in response to #1 or #2 above?  If yes, please describe how.  If no, what is the process by which you assess the operational effectiveness of your tax related internal controls?
  4. Do your external auditors perform tests of the internal control framework for tax matters?  If so, describe the results of the testing and specifically whether any deficiencies have been identified within the last three years.