IRS seeks comments on Revenue Procedure 94-69

 

August 19, 2020

The IRS' Large Business and International Division (LB&I) is requesting comments from large corporate taxpayers currently utilizing the procedures under Revenue Procedure 94-69 to disclose changes in tax positions after the opening of an examination.

Revenue Procedure 94-69 provides special procedures for taxpayers that are subject to the (former) Coordinated Examination Program ("CEP") to show additional tax due or make disclosures to avoid the imposition of accuracy-related penalties for negligence, disregard of rules or regulations, or substantial understatement of income tax under IRC sections 6662(b)(1) and (b)(2). In general, in lieu of filing a qualified amended return as defined in Treasury Regulations section 1.6664-2(c)(3), the procedure allows taxpayers to avoid the accuracy-related penalty to the extent that adjustments resulting in additional tax are reported, or a position contrary to a rule is adequately disclosed, in a written statement within a 15-day window beginning with the IRS's first written information request.

After the elimination of CEP in 2000, Revenue Procedure 94-69 was applied to taxpayers under the Coordinated Industry Case Program ("CIC"). The procedures were generally used by taxpayers in a continuous examination cycle.

In 2019, the IRS replaced CIC with the Large Corporate Compliance Program ("LCC") effective for audits for tax years 2017 and later. As such, for tax years 2017 and later, no taxpayers are part of CIC, and thus, the IRS intends to notify all former CIC taxpayers that they are no longer part of CIC (generally referred to as decontrolled from CIC).

LCC is not a continuous examination program. Like other taxpayers, large corporate taxpayers are selected annually for examination based on their risk profile. While a small number of taxpayers may be examined in multiple consecutive years due to consecutive selection, unlike the prior CIC program, the LCC program is not premised on the assumption of a continuous examination.

The IRS announced in May 2019 that, as a transition, Revenue Procedure 94-69 will continue to apply to any taxpayer that is in both the CIC program (for years prior to 2017) and the new LCC program (for the 2017 tax year). See Memorandum for all Large Business and International Division Employees PDF. Revenue Procedure 94-69 does not apply to LCC taxpayers that were not previously CIC taxpayers, or to any CIC taxpayers that did not have an open CIC examination as of May 2019. These taxpayers, like all other taxpayers, have the opportunity to utilize existing methods for making adequate disclosures under IRC section 6662 to avoid the imposition of penalties (including, for example, Form 8275, Form 8275-R and Schedule UTP, as applicable). Also, in general, taxpayers can file a qualified amended return at any time before the taxpayer is first contacted regarding the examination of the return. See Treasury Regulations sections 1.6664-2(c)(2) & (3). Taxpayers under audit can generally use the qualified amended return process for subsequent years if the qualified amended return is filed before the taxpayer is contacted in writing regarding the examination of that subsequent year return. Other rules stated in the regulations may restrict a taxpayer's eligibility to use the qualified amended return process.

Comments requested

Revenue Procedure 94-69, which is available to a small group of large corporate taxpayers, creates a disparity among the LB&I filing population, as well as the broader IRS filing population who must use the qualified amended return process. It also does not support the broader tax administration effort to improve the accuracy and reliability of returns at the time of filing, a factor that is important to the successful administration of the new LCC. In addition, the LB&I Examination Process allows all taxpayers to submit informal claims for refunds to the exam team within 30 calendar days of the opening conference. See IRS Publication 5125 PDF. Accordingly, the IRS is considering obsoleting Revenue Procedure 94-69.

Taxpayers may submit comments on this issue. Commenters should take into account the issues noted in the immediately preceding paragraph, the availability of existing avenues for adequate disclosures that are currently utilized by all other taxpayers and should not merely request a continuation of the treatment afforded under Revenue Procedure 94-69.

Provide comments by October 19, 2020 to lbi.lcc.program@irs.gov.