4.1.21 LB&I Planning and Monitoring

Manual Transmittal

July 20, 2020

Purpose

(1) This transmits revised IRM 4.1.21, Planning and Special Programs (PSP), LB&I Planning and Monitoring.

Background

This section addresses the planning and development of the various LB&I compliance workplans.

Material Changes

(1) Renamed IRM 4.1.21.1, Overview, to Program Scope and Objectives to conform to the new rules described in IRM 1.11.2.2.5, Address Management and Internal Controls. Added new subsections for Background, Authority, Responsibilities, Program Management and Review, Program Controls, Terms and Acronyms, and Related Resources.

(2) This IRM introduces new subsections: IRM 4.1.21.3, LB&I Resource Allocation Plan, and IRM 4.1.21.4, LB&I TEFRA/Non-TEFRA Investor Closure Plan.

(3) IRM 4.1.21.2, Strategic Examination Planning Process, is revised (formerly IRM 4.1.21.2.1).

(4) This IRM brings previously disparate parts of the IRM relative to LB&I compliance workplan development into one centralized location for easier reference and guidance to the field.

Effect on Other Documents

IRM 4.1.21 dated August 1, 2007 is superseded. IRM 4.46.2, LB&I Guide for Quality Examinations, Administrative Matters and Annual Compliance Plan, dated July 22, 2011 is superseded.

Audience

All LB&I employees

Effective Date

(07-20-2020)

John V. Cardone
Assistant Deputy Commissioner Compliance Integration
Large Business and International Division

Program Scope and Objectives

  1. Purpose: This IRM provides an overview of the various LB&I compliance workplans developed by the Plan Development team. These workplans include, but are not limited to, closure plans, resource allocation plans, etc.

  2. Audience: LB&I employees

  3. Policy and Program Owner: LB&I Assistant Deputy Commissioner Compliance Integration (ADCCI)

  4. Primary Stakeholders: All LB&I employees

  5. Program Goals: The overall program goal is to develop workplans for LB&I management to direct and apply resources in support of LB&I mission, goals and objectives.

Background

  1. LB&I compliance planning processes continue to evolve to meet the needs of a rapidly changing tax administration environment. Currently, LB&I has implemented a resource driven workplan to determine how staffing is applied to various compliance program areas through review and analysis of work-in-process inventory, and staff hours applied. Because of changes such as workload selection, use of non-examination compliance tools, hiring, training and attrition, LB&I will require flexibility in how resources are applied to its work.

Authority

  1. This IRM section provides the authority to conduct research necessary to prepare various compliance plans for LB&I. The planning process includes review and analysis of data from various management information systems, including, but not limited to, tax return related data and input from management.

Responsibilities

  1. The LB&I Plan Development team is responsible for the following:

    • Strategic Examination Planning Process (which includes examination coverage for Office of Management and Budget (OMB), and The Congressional Budget Justification)

    • LB&I Resource Allocation Plan

    • LB&I TEFRA/Non-TEFRA Investor Closure Plan for the Campus Pass-Through Function (Ogden)

Program Management and Review

  1. Program Responsibilities and Deliverables:

    • Current and projected staffing (adjusted by attrition, hiring plans, environmental disasters, government shutdowns and other contingencies).

    • Resource allocation plan.

    • Closure plans for TEFRA/Non-TEFRA linked investors.

    • Examination closure and coverage plans for the OMB, Treasury Department and Congressional Budget justification.

    • Full-Time Equivalent reports for Servicewide requests, which includes technical examination resources, and related support employees to account for staffing involved in the examination process.

  2. Program Effectiveness: The business objective for the Plan Development team is to provide management the tools and products necessary to take actions and direct resources to align with LB&I’s Mission Statement and Focus Guide. The accuracy of any plan is highly contingent upon the accuracy of the data contained within the various management information systems.

  3. Reporting: Resource allocation monitoring reports are produced monthly for LB&I management by the Reporting team.

Program Controls

  1. Separation of duties: See IRM Exhibit 4.50.1-2, Guidance with Respect to Separation of Duties.

  2. Policy Statement 1-236: See IRM 1.2.1.2.36, Fairness and Integrity in Enforcement Selection.

  3. Internal Control: The compliance plans are developed by the Plan Development team using data from various management information systems and includes documented assumptions/methodologies. The workplans go through a robust peer review process to ensure accuracy and reasonableness. Each workplan and workplan component are the primary responsibility of one or more dedicated Plan Team member(s), as well as a backup team member who performs a review of the accuracy/reasonableness of the work product.

  4. Approvals / Governance: The workplans are reviewed and approved by ADCCI management.

    • The LB&I Closure Plan is approved by the Compliance Planning and Analytics (CP&A) Director and the Assistant Deputy Commissioner Compliance Integration.

    • The Compliance Strategy Council provides oversight for the Resource Allocation Plan and approves the Annual Program Plan. The planned target hours to be applied by program area are determined by CP&A in coordination with the program stakeholder as defined in the Annual Program Plan process.

Terms and Acronyms

  1. The tables below provide some terms and definitions pertaining to plan development. See IRM Exhibit 4.50.2-3, Acronyms, for a table of related acronyms and their definitions.

    Terms

    Term Definition
    Activity Code (A/C) Direct Examination Time activity codes used to identify resource hours charged. This includes activity codes for return examinations, and Direct Non-Return compliance activities. Refer to Document 6209, IRS Processing Codes and Information, and Document 6036, Examination Division Reporting Codes Booklet, for codes and definitions.
    Annual Program Plan Process The processes and oversight required to identify, prioritize, approve and allocate resources by the various compliance programs to monitor and report on progress.
    Campaigns LB&I process for identifying and deciding which issues to pursue to achieve its compliance objectives. Refer to IRM 4.50.1 for details.
    Compliance Programs LB&I has eight defined compliance programs for allocation of resources. Refer to IRM 4.50.2 for details.
    • Campaigns (IIC/LBR)

    • Large Corporate Compliance (LCC)

    • Compliance Assurance Process (CAP)

    • Discretionary (DAS, Industry Cases)

    • Mandatory

    • Global High Wealth & Pass-Through Entites (GHW-PTE)

    • Foreign Payments Practice (FPP)

    • Direct Non-Return

    Direct Examination Time (DET) Direct examination time represents the time charged in SETTS to the eight compliance programs above. This time is for activity codes 001–599. Refer to Document 6209 and Document 6036 for codes and definitions.
    Direct Non-Return This is one of the Compliance Programs and is a subset component of Direct Examination Time for certain compliance activities that are not tax return examinations. This time is for activity codes 501–599. For example, Direct Non-Return Time includes such activities as:
    • Pre-filing agreements

    • Campaign development

    • Promoter investigations

    • Industry issue resolution

    • Team coordinator coaching/mentoring activities

    Refer to Document 6209 and Document 6036 for codes and definitions.
    Discovery Directory IRS tool to identify current LB&I staffing.
    Discretionary This compliance program includes DAS selected returns and general types of work that are not included in other identified compliance program categories. See "Compliance Program" for more information.
    Full-Time Equivalent (FTE) One FTE represents the amount of time that a full-time employee would charge in a fiscal year. FTEs worked for a fiscal year are determined by dividing the number of compliance hours charged in a fiscal year for all employees by the available work hours for that year. This allows for the effect of part-time employees and the impact of attrition during the year.
    GHW & Pass-Through Entities Global High Wealth Industry and Pass-Through entities. Refer to IRM 4.50.2.2.5 for details.
    Large Business Returns (LBR) These are specific categories of returns identified by assets or activity code, including:
    • Forms 1120, 1120S and 1120F with assets $10M and greater.

    • Forms 1065 with activity codes 481 through 483 (excluding IIC).

    Large Corporate Compliance (LCC) Large Corporate Compliance program is the current program for large corporate taxpayers. LCC replaces the Coordinated Industry Case (CIC) Program. Refer to IRM 4.50.2 for details.
    Mandatory This compliance program is for mandatory type work and includes work on the following types of return examinations: Joint Committee, tax shelters and National Research Projects.
    Portfolio Management Portfolio Management is a structured approach to balance resources across several types of compliance work and other competing priorities. LB&I leadership makes decisions evaluating the resource requirements of different compliance activities across the division.
    Resource Allocation Plan This plan informs how resources (i.e., available staffing) should be allocated among the identified compliance programs for a fiscal year.
    Resources Resources represent the technical staff (e.g., revenue agents, specialists, subject matter experts) involved in direct compliance related activities, and charge time in SETTS to activity codes 001 – 599. Refer to Document 6036 for details. These activities include, but are not limited to, examinations, soft letters, post-filing reviews, pre-filing agreements, etc.
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    Work in Process (WIP) Cycle Time This represents the number of hours estimated to be needed to complete the cases in process at the beginning of the fiscal year. This is determined by the historical average SETTS time charged to examined and closed returns by return activity code. The work in process estimate to close all in-process inventory at the beginning of a plan fiscal year would reduce the amount of resources available for starting new return examinations, CAP cases, and direct non-return compliance activities.
     

    Acronyms

    Acronym Definition
    A-CIS AIMS - Centralized Information System
    ADCCI Assistant Deputy Commissioner Compliance Integration
    CAP Compliance Assurance Process
    CPF Campus Pass-Through Function
    CBJ Congressional Budget Justification
    CIC Coordinated Industry Case (legacy term)
    CP&A Compliance Planning and Analytics
    DAS Discriminant Analysis System. Refer to IRM 4.50.2.2.1 for details.
    FPP Foreign Payments Practice. Refer to IRM 4.50.2.2.3 for details.
    IBMIS Issue-Based Management Information System
    IIC International Individual Compliance
    IMS Issue Management System
    OMB Office of Management and Budget
    PCS Partnership Control System
    RAP Resource Allocation Plan
    SETTS Summary Exam Time Transmittal System
    Refer to IRM 4.9.1 for information on SETTS.
    TEFRA Tax Equity and Fiscal Responsibility Act of 1982

Related Resources

  1. See IRM 4.50.1, Campaign Development Process, for information about campaign-sourced workload selection.

  2. See IRM 4.50.2, Other Workload Selection – Non-campaign Workstreams, for information pertaining to all workload selection, other than campaign-sourced inventory.

  3. See IRM 4.31.3, TEFRA Examinations – CPF Procedures, for information pertaining to procedures performed by the LB&I Campus Pass-Through function (Ogden) for TEFRA investor returns.

  4. See https://irssource.web.irs.gov/LBI/Lists/LBI_Programs/ADCCI.aspx for more information about other related programs and services.

Strategic Examination Planning Process

  1. The strategic planning process establishes the long-term direction of an organization with a vision of the future and a set of goals and objectives. The process of strategic planning enables alignment between IRS' functional requirements and the IRS Strategic Plan, operating divisions and the agency's institutional capabilities.

  2. Strategic planning generally takes a one to three year look at the goals and objectives of LB&I. The Plan Development team provides a closure plan and coverage percentages based on the assumptions of the initiative process.

OMB and Congressional Budget Justification

  1. On at least an annual basis, the Plan Development team contributes to the Office of Management and Budget (OMB), Treasury Department and the Congressional Budget Justifications (CBJ) by providing an LB&I division-level projected closure plan for large business return (LBR) examination coverage rates. This information is provided through the IRS Servicewide process.

  2. The workplans provided to the OMB and the CBJ play a critical role in determining the level of LB&I funding for future years.

  3. Coverage rates are determined by dividing projected return closures (from the LB&I Fiscal Year Closure Plan) by projected return filings.

  4. Coverage rates are computed separately for several different return categories, based on activity code. An overall coverage rate for all total LBR returns is also computed.

LB&I Fiscal Year Closure Plan
  1. The LB&I Fiscal Year Closure Plan is prepared at the LB&I business operating division level, primarily for budget and coverage purposes. The plan is developed and prepared using data from various management information systems, including A-CIS, IBMIS and Discovery Directory.

Closure Plan Components
  1. Work in Process analysis using A-CIS and IMS data. The data is used to compute an estimate of large business returns (LBR) that are projected to be open at the beginning of the plan fiscal year and will close within that same year.

  2. Calculation of projected new starts to close. Projected new starts to close is an estimate to account for returns that will be starting in the future, and closing within the plan fiscal year, but not yet reflected in either IMS or A-CIS. It is based on the following factors:

    1. Current and future staffing resources; Discovery Directory data is used to identify current LB&I resources. The current resources are used to estimate future resources, taking into account attrition, hiring, training, and other resource needs.

    2. The closure plan includes the LB&I resources that control and charge direct examination time (DET) to return examinations.

    3. Historical rates of new starts per available LB&I agent.

    4. Historical cycle times by activity code (A/C).

      Example:

      A/C 219 returns have a much shorter historical cycle time than A/C 230 returns. Therefore, A/C 219 returns opening in October 2019 will be projected to close during FY2020, while A/C 230 returns opening in October 2019 will not be projected to close until after FY2020.

  3. Management feedback and input is also one of the closure plan components.

LB&I Resource Allocation Plan

  1. LB&I has implemented a Resource Allocation Plan (RAP) to determine how resources should be allocated among the identified compliance programs for a fiscal year. The goal is to maintain a balanced workload in alignment with the LB&I mission statement and Focus Guide.

  2. The factors taken into consideration by the RAP include:

    • Defining the number and types of employees who will be assigned the work at a future point in time.

    • Identifying the resources currently available.

    • Projecting available resources, taking into account planned attrition and training.

    • Projecting work-in-process at the start of a given fiscal year.

    • Calculating available resource hours, taking into account the additional hours needed to be applied to complete the start of the fiscal year work-in-process.

    • Identifying and analyzing differences between anticipated workload demand and forecasted staff resources.

  3. In developing the RAP, senior management and the respective compliance program point-of-contact provide projected resource hours to be applied and allocated based on the defined compliance programs, except for the Direct Non-Return program. Resources are accounted for based on planned direct examination time (i.e., revenue agent-controlled returns) as well as direct non-exam time.

  4. The RAP is flexible to allow for adjustments needed due to unanticipated events such as furloughs and significant environmental impact (e.g., hurricanes, floods, etc.).

Compliance Programs

  1. Resources are allocated to various compliance programs based on planned target percentages determined by LB&I senior management. The compliance programs to which resources are currently allocated are:

    1. CAP

    2. Large Corporate Compliance / CIC

    3. Global High Wealth & Pass-Through Entities

    4. Campaigns

    5. Foreign Payments Practice

    6. Mandatory

    7. Discretionary / DAS, IC

    8. Direct Non-Return

  2. Compliance programs are categories of work (e.g., return examinations, CAP and other direct non-examination work) performed by LB&I agents. The categories are defined by a combination of AIMS indicators including, but not limited to, Activity Code, Project Code, Tracking Code, Source Code, Program Code, and Special Feature Code.

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Projected Work in Process Cycle Time

  1. A key component of the LB&I RAP is to determine the amount of resources in terms of SETTS time that will be required to close work-in-process (WIP) inventory at the beginning of the fiscal year.

  2. From the fiscal year planned hours provided by the Compliance Program point-of-contact and the APP process (described above), the amount of time estimated to process forecast WIP at the beginning of the fiscal year is deducted, leaving a balance of planned amount of time available to start new work during the year.

  3. If the amount of time necessary to process forecast WIP is greater than the initial allocation, this suggests that the resource allocation may be insufficient to process WIP and/or start new work, in which case LB&I senior management will need to resolve the issue with the Compliance Integration Council.

  4. Forecast WIP is calculated using an algorithm developed by the Plan Team. It considers each return currently open in the A-CIS Open Case Database (OCDB) and determines percentage of completion based both on months in process and time applied. It compares this data against 3-year historical averages, determines whether the return is likely to still be open at the start of the next fiscal year, and how much time will be required in the fiscal year to close the return. The total WIP computation for all open returns by compliance area is illustrated in the following example.

    Example:

    • Return first goes to status 12 on 1/1/2019.

    • Based on historical data, that Activity Code return averages 12 months and 600 hours (i.e., 50/month) to close.

    • Expected closing date will be 12/31/2019 (12 months from 1/1/2019).

    • Three months work will occur after 9/30/2019 (i.e., in FY 2020).

    • If 3 months in FY 2020 are remaining, and historical time is 50/month, the algorithm will calculate 150 WIP hours needed in FY 20 for that return.

LB&I TEFRA/Non-TEFRA Investor Closure Plan

  1. The LB&I TEFRA/Non-TEFRA Investor Closure Plan is a projection of the TEFRA and non-TEFRA linked investor returns to be closed in a fiscal year by the LB&I Campus Pass-Through Function (CPF). The linked investor returns are the investors in a TEFRA or non-TEFRA partnership. The CPF performs a risk assessment of the investor returns to determine which investors will be linked.

  2. The CPF manages the TEFRA inventory and workload by a "one-year assessment date." Under TEFRA, the IRS has a maximum of one year to make an assessment on the investor based upon the resolution of the TEFRA key case. Refer to IRM 4.31.3, TEFRA Examinations - CPF Procedures, for details.

  3. The CPF closes the linked investors as a no-change or a change, resulting in a partial or complete closure. Complete closures are reflected on AIMS, while partial closures are not. An example of a completed closure is where all the linkages have been resolved, and the investor case can close out. An example of a partial closure is where there are two linkages from two different key cases, and one key case gets resolved, while the other case remains open.

  4. In developing the closure plan, the following information is considered:

    1. Analysis of data from various management information systems including, but not limited to, A-CIS and PCS.

      Note:

      A-CIS provides information on open and closed returns. The PCS generates a 2-2 report. A 2-2 report is an inventory type report that shows the one-year assessment dates, summarized by month and investor counts. The investor counts represent individuals and tiered entities. Refer to IRM 4.29.4.5.2 for details.

    2. Trend analysis of historical closures.

    3. Feedback and input from the CBF, TEFRA coordinators and the LB&I Office of Resource Solutions, Finance.