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 2016-30 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 for participation in the program.
- The user fee is $174,000.
- 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:
- Since the program’s inception in 2001 through September 2018, we have received 534 applications, accepted 362, and closed 281 with an agreement.
- The total time to complete a PFA was 664 days in fiscal year 2018.
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. 2016-30.
- The application is evaluated by Counsel, the Audit team, and Subject Matter Experts.
- The Practice Area Director makes the decision to accept or not; there is no appeal to the Practice Area Director’s decision.
For more information:
- Visit the PFA page on irs.gov under information for Large Business and International Division.