4.50.2 Other Workload Selection – Non-campaign Workstreams

Manual Transmittal

April 22, 2019

Purpose

(1) This transmits new IRM 4.50.2, LB&I Compliance Integration, Other Workload Selection – Non-Campaign Workstreams. This IRM describes the functions, procedures, tools, and systems for LB&I workload selection methods that are non-campaign-sourced.

Material Changes

(1) This IRM includes relevant material from Planning and Special Programs (PSP) IRM 4.1.22 and IRM 4.1.24.

(2) This IRM also includes content from Global High Wealth IRM 4.52.1. GHW workload selection is now one of the activities managed by the Assistant Deputy Commissioner Compliance Integration. For campaign-selected workload, see IRM 4.50.1.

(3) This IRM brings together previously disparate parts of the IRM relative to LB&I workload selection into one centralized place for easier reference and guidance to the field.

(4) The new Large Corporate Compliance Program is described.

(5) This section adds internal controls for the workstreams listed in IRM 4.50.2.2 that are non-campaign sourced.

(6) This section incorporates and updates content from IRM 4.46.2.4, Case Categories; IRM 4.46.2.5, Point Criteria Factors; and Exhibit 4.46.2-2, Criteria for the Identification of Coordinated Industry Case Program.

Effect on Other Documents

This IRM supersedes IRM 4.1.22, LMSB Workload Study, dated March 23, 2010; IRM 4.1.24, LMSB Sources of Returns, Ordering and Classification, dated March 23, 2010; and partially supersedes IRM 4.52.1, Global High Wealth Industry Processes and Procedures, dated August 12, 2013. It also supersedes parts of IRM 4.46.2, Administrative Matters and Annual Compliance Plan referencing Coordinated Industry Case (CIC) pointing criteria.

Audience

LB&I employees

Effective Date

(04-22-2019)

De Lon Harris
Assistant Deputy Commissioner Compliance Integration
Large Business and International Division

Program Scope and Objectives

  1. Purpose: This IRM provides an overview of the business operations responsible for performing workload selection for LB&I. This section distinguishes non-campaign generated sources of returns, including international returns, both business and individual, with an international element from campaign-driven workload selection.

  2. Audience: All LB&I employees.

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

  4. Primary Stakeholders: Including, but not limited to, all geographic and subject matter practice areas in LB&I.

  5. Program Goals: The overall program goal is to direct LB&I resources toward the highest compliance risks and to select the best work.

Background

  1. LB&I work processes are evolving to meet the needs of a rapidly changing taxpayer environment. I LB&I’s goal is for campaigns to become the predominant source of work. This section describes the current state of workload identification and selection from non-campaign-generated sources.

Authority

  1. This IRM section provides the authority to conduct research. The research extends to all LB&I returns including related forms and schedules.

Responsibilities

  1. Compliance Planning and Analytics (CP&A), is the responsible function in LB&I for all non-campaign workload selection methods currently in force in LB&I. This business unit is housed in the Assistant Deputy Commissioner Compliance Integration (ADCCI) organization.

  2. In addition to administering the campaign process, CP&A manages research requests (as described in IRM 4.50.2.1.5) from the practice areas in LB&I. CP&A is responsible for establishing return coverage across LB&I practice areas and supports research studies based on voluntary compliance objectives.

  3. The full suite of non-campaign workload selection programs is described in IRM 4.50.2.2.

Program Management and Review

  1. Program Reports: Research studies include:

    • Conducting environmental scans on filing information

    • Examining compliance of specific taxpayer segments

    • Developing mathematical models and expert systems to support audit selection

  2. Business Performance Reports contain metrics used to gauge the effectiveness of current workload selection methods and processes.

  3. Program Effectiveness: The business objective for conducting research studies is to make informed decisions, drive compliance efforts and to improve voluntary compliance by identifying and delivering the highest risk returns to audit or by sending soft notices to ensure the methodology applied is aligned to the IRS mission. The business objective for producing performance reports is to provide LB&I management with statistics and trends to evaluate the various workload selection activities.

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 1.2.10.37, Fairness and Integrity in Enforcement Selection.

  3. Risk Identification Control Board (RICB): The mission of RICB is to ensure the enforcement selection process is an equitable and fair process to all taxpayers under Policy Statement 1-236. RICB Part I and II approval is required before models are used for workload selection. RICB approval is required for Part I and Project Prospectus/Plan to develop and test the selection model. RICB and CP&A Director’s approval is required on Part II to implement the model into a workstream. See IRM 4.50.1, LB&I Compliance Integration, Campaign Development Process, for more information.

  4. RICB will only approve workload selection models using criteria based on tax laws and Treasury regulations and not on organization names or their policy positions. The goal of RICB is to ensure that the criteria used for workload selection promotes public confidence that tax laws are being applied impartially.

  5. Research requests from the practice areas must be approved by CP&A Director. CP&A is responsible for establishing workload selection across LB&I practice areas and in supporting research studies based on voluntary compliance objectives. Research studies include conducting environmental scans on filing information, examining compliance of specific segment of the population and developing mathematical models and expert systems to support audit selection. The business objective for conducting research studies is to drive compliance efforts and to improve voluntary compliance by identifying and delivering noncompliant returns to audit to ensure the methodology applied is aligned to the IRS mission. This IRM section also provides the authority to conduct research. The research extends to all LB&I returns including related forms and schedules.

Terms/Definitions/Acronyms

  1. The table below provides common terms and definitions. See Exhibit 4.50.2-3, Acronyms, for a table of acronyms and their definitions.

    Defined Terms

    Term Definition
    Campaigns Campaigns are a type of workstream in which the LB&I organization decides which compliance issues to pursue in order to achieve its compliance objectives.
    E-Classifier E-Classifier is an electronic classification tool currently used to classify LB&I returns.
    Risk Identification Control Board (RICB) The Risk Identification Control Board (RICB) is the governance body over filters used in workload selection.
    Workstreams Workstreams are seven compliance programs that together represent total LB&I inventory.
    Treatment streams Treatment streams are approaches to achieving taxpayer compliance including administrative guidance, outreach, issued-based examinations, new legislation and published guidance.

     

Related Resources

  1. See IRM 4.50.1, Campaign Development Process, for information about campaign-sourced workload selection. Resources for campaign work are the Campaign Quick Start Guide, the Campaign Process Flowchart, and the LB&I Campaign Guide.

  2. The ADCCI website provides more information about their programs and services.

Workload Selection Program Areas

  1. LB&I administers seven workload selection methods. These are:

    • Campaigns - see IRM 4.50.1

    • Compliance Assurance Program (CAP) - see IRM 4.51.8

    • Discriminant Analysis System (DAS) / IC Program

    • Large Corporate Compliance Program (LCC)

    • Foreign Payments Program

    • Mandatory Program

    • Flow-through/Global High Wealth (GHW) Program

Corporate Return Scoring Methods (DAS Selection)

  1. LB&I is responsible for corporate returns that have assets greater than or equal to $10 million. The activity codes are 219, 221, 223, 226, 227, 228, 229 and 230.

  2. The DAS Program includes the processes and oversight required to identify, prioritize and allocate resources towards the remaining corporate filing population not covered by other compliance programs.

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  4. All activity code 219-230 Form 1120 returns are automatically established in DAS.

  5. LB&I Planning and Special Programs (PSP) in LB&I’s practice areas have primary responsibility for ordering LB&I returns using the LB&I Workload Identification System (LWIS).

Large Corporate Compliance Program (LCC)

  1. The Large Corporate Compliance Program (LCC) is the successor program to Coordinated Industry Case (CIC) program. LCC employs a risk based selection process to address selected compliance risks in the large corporate taxpayer population using a finite amount of resources, through the application of one or more treatment streams to achieve the intended compliance outcomes.

  2. LCC is inclusive of large corporate taxpayers who are included in the population of taxpayers as set forth in the pointing criteria and where compliance risk is based on a predetermined data analytics method. See IRM 4.50.2.5, Large Corporate Compliance Program – Pointing Criteria. The LCC pointing criteria is automated and applied to all filed LB&I Form 1120s.

  3. The data analytics method must be approved by the Risk Identification Control Board (RICB). See IRM 4.50.2.1.5, Program Controls.

Foreign Payments Practice (FPP)

  1. The Foreign Payments Practice (FPP) includes the processes and oversight required to identify, prioritize and allocate resources towards foreign withholding tax matters and foreign financial institution compliance under Chapters 3 and 4 of the Internal Revenue Code. See IRM 4.63.1.5, Foreign Payment Practice (FPP) Field Operations Overview.

  2. The FPP provides oversight of non-resident alien withholding tax matters with an emphasis on Service-wide coordination of technical issues, compliance, processing and other information relating to non-resident aliens. The FPP is also responsible for monitoring and enforcing compliance of foreign financial institutions participating in the Foreign Account Tax Compliance Act Program (FATCA).

  3. The FPP focuses resources through coordinated development of information and educational material, improved forms and publications, processing capabilities, examination strategies and other treatment streams to achieve intended compliance outcomes.

  4. FPP identifies compliance risks within the non-resident alien withholding population.

Mandatory Compliance Program

  1. The Mandatory Compliance Program includes the processes and oversight required to identify, prioritize and allocate resources towards defined forms of mandatory work that demand application of resources and can arise unexpectedly such as the enactment of new legislation, reactions to natural disasters or assistance to other business operating divisions (BODs).

  2. Mandatory work includes taxpayer claims and implementation of new legislation such as FATCA, ACA or TCJA. It also includes APAs and JCC work.

Claims
  1. In general, LB&I taxpayers file claims for refund on Form 1120X, Amended U.S. Corporation Income Tax Return, or Form 1139, Corporation Application for Tentative Refund. Also see IRM 25.6.1.10, Claims, Abatements and Refunds. Claims related to returns already controlled by the field are not classified, but rather forwarded to the field for association with controlled return(s). All other claims, (i.e., without open AIMS) that meet Category A criteria (IRM Exhibit 21.5.3-2) are classified prior to processing. The classifier may review and request other relevant returns.

  2. Claims in excess of $5 million for corporations are to be reviewed by Joint Committee Review per IRMs 4.36.1.4 and are subject to mandatory review per IRM 4.36.2.2. These claims are automatically selected for examination.

  3. All claims selected for examination are sent to SB/SE Classification Control Unit (CCU). CCU updates the claim to Exam Organization Code 1086; status 08 and the appropriate activity and/or source code (Refer to IRM 4.4, AIMS Procedures and Processing Instructions, Exhibit 4.4.1-1). CCU will prepare and send selected claims to the field using LB&I contact listing.

  4. All claims accepted as filed are sent to W&I Accounts Management for processing.

Joint Committee Case Work
  1. The primary reference for Joint Committee cases is IRM 4.36. Any Form 1139 (Corporation Application for Tentative Refund), Form 1120X (Amended U.S. Corporation Income Tax Return), or other claim for refund, in excess of $5,000,000 for the same taxpayer must be selected for examination and routed to the field. These claims meet Joint Committee criteria.

    Note:

    As of December 19, 2014, the Joint Committee refund threshold was increased to $5,000,000 for C corporations. The threshold remains at $2,000,000 for all returns other than C corporations.

  2. Returns meeting Joint Committee criteria are updated with project code 0077 and the appropriate source code (refer to IRM Exhibit 4.4.1-19).

Flow-through/Global High Wealth (GHW) Compliance Program

  1. Pass-Through Entities Practice Area has the primary responsibility over Flow-Through/GHW Compliance Program, which includes the processes and oversight required to identify, prioritize and allocate resources towards flow-through returns.

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  3. LB&I pass-through population includes partnerships and subchapter S corporations with assets greater than or equal to $10 million.

  4. The Flow-through/GHW program was formed to take a holistic approach in addressing the high-income, high-wealth population, including consideration of items associated with flow-through returns. This program leverages data, applied analytics, algorithms and institutional experience to assess the compliance risk that these enterprises pose with their increasingly sophisticated tax strategies.

  5. The Flow-through/GHW program covers the entire business enterprise of entities controlled by high wealth individuals. These enterprises may include interests in partnerships, trusts, subchapter S corporations, private foundations and others.

  6. In addition, under the Flow-through/GHW program, LB&I will develop, test, enhance, and monitor mathematical and machine learning models to identify partnership and S corporation returns with examination potential.

  7. CP&A has primary responsibility for overall coordination of the compliance plan and workload identification.

  8. CP&A uses mathematical models for workload selection. Similar to the LCC Program, GHW models must be approved by the RICB. See IRM 4.50.2.1.5, Program Controls.

  9. GHW consists of two functions: Workload Services (WLS) and field examination groups. The GHW returns identified by the models are made available to the WLS for classification and risk assessment.

  10. Partnership or S corporation returns identified under these models will be classified and risk-assessed in CMC.

  11. An "enterprise" is defined as a group of entities that are managed for the economic and tax benefit of a controlling interest. Enterprise Risk Assessment uses the evaluation of multi-entity and multi-year related return groupings to determine what constitutes a single economic "enterprise."

  12. Models to be developed include:

    • Single return selection systems

    • Enterprise selection systems

    • Single year and/or multi-year models

  13. Models will be developed using internal and external data sources. The validation of models and data fields will be analyzed and gathered from examination feedback and operational databases to monitor the model’s effectiveness in identifying the next best case.

GHW Risk Assessment and Case Building
  1. WLS conducts a detailed risk assessment process consisting of researching taxpayer forms and related data, identifying particular issues, observing trends and consulting with issue specialists. Risk assessment includes preparation and review of a yK-1 analysis for each taxpayer to gain an understanding of the taxpayer enterprise (Form 1040 and all related entities). During the risk assessment, large, unusual, or questionable items (LUQs) are noted by WLS for consideration by field agents for all entities in the enterprise that are determined to pose a risk of noncompliance. Related entities considered to be high risk are identified for inclusion in the case building package.

  2. Upon conducting a complete risk assessment, WLS risk assessors determine whether the case will be included in inventory ready for assignment. WLS personnel build enterprise case files for delivery to the field with all related returns to be examined and other tax-relevant materials.

  3. Once an enterprise case is assigned, a virtual case team folder is established on a secure shared drive for additional case-building, exam workpapers, and examination-related materials. GHW enterprise cases may consist of one or more of the following forms.

    Form Title
    Form 1040 U.S. Individual Income Tax Return
    Form 1065 U.S. Return of Partnership Income
    Form 1120 Corporation Income Tax Return
    Form 1120S U.S. Income Tax Return for an S Corporation
    Form 1041 Fiduciary Income Tax Return (for Estates and Trusts)
    Form 990 Return of Organization Exempt from Income Tax
    Form 990PF Return of Private Foundation
    Form 990T Exempt Organization Business Income Tax Return
    Form 706 Estate Tax Return
    Form 709 Gift Tax Return
  4. WLS uses a Microsoft Access database to monitor GHW inventory available for assignment. WLS establishes AIMS controls on all selected returns using the following codes.

    Name Code Description
    Source Code (SC) 20 Key case Initial Year
    Source Code (SC) 40 Key case Subsequent / Prior Year
    Source Code (SC) 50 Related Entity
    Source Code (SC) 70 Whistleblower
    Primary Business Code (PBC) 303 Identifies the primary level of responsibility for the account
    Secondary Business Code (SBC) 87700 Identifies the secondary level of responsibility for the account
    Employee Group Code (EGC) 1025 GHW – no return secured
    Employee Group Code (EGC) 1026 GHW – return secured
    Employee Group Code (EGC) 1027 GHW Reserved
    Project Code 1048 GHW Industry (No longer in use, discontinued 08/2013)
    Tracking Code 6205 Cases selected to be sent to the field
    Tracking Code 6243 HIHW Tier 2 GHW Training Returns
    Tracking Code 6244 HIHW Tier 2 High Risk Model
    Tracking Code 0017 GHW Test Scoring Model
    Tracking Code 0018 GHW/PAIR 1040 Returns
    Tracking Code 0019 GHW 1040 Supplemental Returns
    Tracking Code 0020 GHW Supplemental 2 Returns
    Tracking Code 0023 GHW Referral Returns
    Tracking Code 0024 GHW Whistleblower Returns
Supplemental GHW Inventory Sources
  1. In addition to the high-risk individuals identified by CP&A, additional work sources are used to supplement inventory and balance coverage of the GHW population.

  2. Supplemental sources include:

    1. Referrals: WLS receives referrals from the field and other business units by way of a referral form located at:https://irssource.web.irs.gov/LBI/Spec/GHW/GHW_Referral_Form.pdf. Once it is determined that a referral may be appropriate for GHW, the enterprise is subjected to the risk assessment process described above on the GHW shared drive. Referrals that are not accepted by WLS are forwarded to the appropriate Planning and Special Programs (PSP) personnel or back to the exam group that made the referral, as appropriate.

    2. Whistleblower Claims: WLS receives whistleblower claims from the Whistleblower Office and works these claims in accordance with established IRS policy. See IRM 25.2.2, Information and Whistleblower Awards, for specific procedures on how to address whistleblower claims.

    3. Issue-driven: WLS may identify issues of significant impact to the GHW population that warrant screening for all taxpayers within this population. These issues can be identified from the WLS team, GHW field examinations, and/or networking interactions with specialists in technical areas such as international compliance. As issues are identified, further research and analysis are undertaken to determine whether the scope of the issue is significant in the GHW population, at which time a campaign will be submitted for consideration.

Classification Tools

  1. This subsection describes the main functions, tools, and systems for classification and is not an all-inclusive listing:

    • Content Management and Collaboration (CMC)

    • E-Classifier

  2. CMC is utilized for classifying and risking returns. CMC provides enhanced inventory management to CMC managers, leads and team members. CMC allows for cases to be assigned to a group, assigned to a specific team member and submitted for approval to the manager by the team member with system generated e-mail alerting the appropriate person when an action is needed. CMC allows for cases to be automatically updated on AIMS when the manager approves a case to be sent to the LWIS system for assignment to the field. Feedback is provided in the risk assessment form in CMC.

  3. The E-Classifier is a secured virtual and physical environment used for classifying case work from large volumes of international data that must be analyzed to identify compliance issues, to support the case processing mission. The E-Classifier tool enables classifiers access to a wide range of returns and works seamlessly within the classification process. The E-Classifier tool provides electronic feedback measurements from classifiers that identify non-compliant activity.

Other Source Workload

  1. Other source workload for LB&I includes but is not limited to the following:

    • Tax Shelters and Disclosures

    • Bankruptcy

    • Information Referrals and Reports

    • Program Action Cases

    • Change in Accounting Method-Voluntary Change-Advance Consent

    • Flow-through entity workload that crosses operating divisions

Tax Shelters and Disclosures

  1. The Office of Tax Shelter Analysis (OTSA) receives and evaluates all Form 8886, Reportable Transaction Disclosure Statements and Form 8918, Material Advisor Disclosure Statements.

  2. OTSA analysts review each disclosure for completeness and determine which disclosures have large, unusual, questionable (LUQ) items, or Listed Transactions requiring further action or review.

  3. Disclosures requiring further action are distributed to the established point of contact (POC) within the appropriate business operating division (BOD).

  4. If the Form 8886 disclosure has LUQ transactions and is associated with an LB&I taxpayer, then OTSA will determine whether there is an open examination and take appropriate action as outlined below:

    1. If there is an open examination, OTSA will send the disclosure to the Case Built File (CBF) or forward it to the team manager for examination consideration.

    2. If there is no open examination, OTSA will match the taxpayer’s return against established risk assessment models and may conduct further development to identify appropriate returns for exam assignment through the LB&I Workload Identification System (LWIS).

  5. If the Form 8918 disclosure requires further information or potential promoter examination:

    1. OTSA will follow the procedures outlined in IRM 4.32.2.3.3.4 to refer an LB&I Material Advisor to the LB&I Technical Tax Shelter Promoter Committee (TTSPC).

    2. For an SB/SE or other BOD Material Advisor, OTSA will refer the disclosure to the SB/SE Lead Development Center or TE/GE Abusive Transactions function as appropriate.

  6. OTSA will also use information received from the Form 8886, Form 8918, and other tax forms to determine taxpayer compliance with disclosure laws and identification of tax returns with potential tax shelter issues.

Bankruptcy

  1. SB/SE Insolvency Unit will notify/forward any bankruptcy notifications or requests that are related to LB&I taxpayers to the LB&I Bankruptcy coordinator. These can include, but are not limited to, proof of claims and prompt determinations. Refer to IRM 4.27, Bankruptcy, for detailed information on examination bankruptcy procedures.

  2. The LB&I Bankruptcy coordinator requests and controls all returns needed for determinations and presents them to the LB&I classifier for classification.

  3. All selected returns will be coordinated through the practice area PSPs for assignment to the field.

  4. All taxpayers are sent a notification of selection or acceptance of the return by the LB&I Bankruptcy coordinator for all LB&I prompt determination requests.

Information Referrals and Reports

  1. LB&I information referrals and reports originate from several different sources including Form 5346, Examination Information Report, Form 3949-A, Information Referral, federal and state agencies referrals, foreign government referrals and public citizen referrals.

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  4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  8. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Program Action Cases

  1. Program Action Cases (PACs) are preparer investigations where clients of preparers of interest are examined to determine whether preparer penalties and/or injunctive actions against the preparers are warranted. If a preparer’s misconduct appears to be pervasive and not isolated to a single taxpayer, consideration should be given to opening a PAC.

  2. Information on the PAC approval process and return identification and selection is found in IRM 4.1.10, Return Preparer Program Coordinator.

  3. Return preparer penalties are described in IRM 20.1.6 , Penalty Handbook, Preparer, Promoter, Material Advisor Penalties.

  4. Any inquiry regarding a return preparer penalty or PAC should be referred to the LB&I Return Preparer Coordinator (RPC), who is located in the Penalty Practice Network.

Change in Accounting Method - Voluntary Change - Advance Consent

  1. Form 3115, Application for Change in Accounting Method (CAM), is filed with National Office and a copy attached to the taxpayer’s tax return in the year of change. National Office reviews the Form 3115 and issues determination letters to taxpayers authorizing or denying a change in accounting method.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Cross Divisional Pass-Through Entity Workload

  1. The LB&I and SB/SE operating divisions established a Memorandum of Understanding that sets the procedures and responsibilities for pass-through entities and their related investors when the returns cross operating divisions.

SB/SE Identified LB&I Return
  1. SB/SE may identify an issue on an LB&I pass-through entity that is not established on AIMS. At this point, SB/SE may request a collateral examination. See IRM 4.2.2, Miscellaneous Examination Procedures.

  2. Prior to requesting collateral examination, there must be a minimum of 18 months remaining on the statute of limitations for the LB&I TEFRA returns, or 12 months for LB&I non-TEFRA returns.

  3. SB/SE determines the proper routing of Form 6229, Collateral Examination, to LB&I. In general, the SB/SE group manager will contact the LB&I territory manager responsible for the applicable post of duty of the taxpayer.

  4. The SB/SE group manager will forward Form 6229 to the SB/SE territory manager, along with an information copy to the SB/SE Area Planning and Special Programs.

  5. The SB/SE territory manager will forward the Form 6229 to the LB&I territory manager. The receiving LB&I territory manager will forward a copy of the request to the responsible PSP analyst.

  6. The LB&I territory manager and LB&I team manager have 20 days to respond with a decision of whether the examination will be performed by LB&I.

  7. If the collateral referral is accepted, the SB/SE-controlled return will be transferred to an LB&I team. LB&I will consider SB/SE classified issues.

  8. If LB&I rejects the collateral examination request, then SB/SE will decide at the SB/SE territory manager level if the return will be worked based on skill level, resources available and scope of the work related to the SB/SE return.

LB&I Identified Return
  1. LB&I may identify an issue on a related SB/SE return when examining a pass-through entity.

    1. If the return is TEFRA, then normal procedures apply for establishing investor returns on AIMS and PCS.

    2. If the return is non-TEFRA and there are no returns open on AIMS, LB&I will follow normal AIMS opening procedures to request control of the return.

    3. If the return is non-TEFRA and open on AIMS, LB&I should contact the SB/SE group manager requesting the transfer of the return to LB&I. LB&I must include justification for the transfer and agree to take full responsibility for examination of SB/SE classified issues. If SB/SE declines the transfer request, the SB/SE revenue agent is responsible for coordinating with the LB&I revenue agent.

Large Corporate Compliance Program – Point Criteria Factors

  1. The factors used in computing the point criteria for LCC cases are as follows:

    • Gross assets

    • Gross receipts

    • Operating entities

    • Total foreign assets

    • Total related transactions

    • Foreign tax

    • Multiple industry status

  2. Each factor mentioned above is assigned a point value as described in Exhibit 4.50.2-2.

  3. A case qualifies as a LCC case if after using the point criteria the case totals 15 or more points.

Criteria for the Identification of Large Corporate Compliance Cases

This exhibit describes the criteria to be used in identifying those cases for the Large Corporate Compliance Program. The points should be combined to determine the score in the following seven areas.

  1. Gross Assets (12 points maximum)
    Total Assets is from Form 1120, Schedule L, Line 15d, Form 1120, Schedule L, Line 15b, or Form 1120 Box D.
    Total assets are determined by combining the assets of the principal taxpayer with those of all effectively controlled domestic and foreign entities. In applying this criterion, use the tax year in the cycle being pointed that has the greatest gross assets. The following asset ranges will be used:

    • 1 point up to $500 Million in assets

    • 2 points for assets above $500 Million to $1 Billion asset range

    • 3 points for assets above $1 Billion to $2 Billion asset range

    • 4 points for assets above $2 Billion to $5 Billion asset range

    • 5 points for assets above $5 Billion to $8 Billion asset range

    • Add 1 point for each additional $3 billion in assets or fraction thereof in excess of $8 Billion in assets.

  2. Gross Receipts (10 points maximum)
    Gross Receipts are included in Form 1120, Line 1c and Form 5471, Schedule C, Line 1c.
    Gross receipts are determined by combining the gross receipts of the principal taxpayer with those of all effectively controlled domestic and foreign entities. In applying this criterion, use the tax year in the cycle being pointed that has the greatest gross receipts.

    • 1 point up to $1 Billion in gross receipts

    • 2 points for gross receipts above $1 Billion to $2 Billion range

    • 3 points for gross receipts above $2 Billion to $3 Billion range

    • 4 points for gross receipts above $3 Billion to $5 Billion range

    • 5 points for gross receipts above $5 Billion to $10 Billion range

    • Add one point for each additional $3 Billion, or fraction thereof, in excess of $10 Billion in gross receipts.

  3. Operating Entities (9 points maximum)
    Operating Entities are included from a sum of Form 1120 Schedule N.
    Points are to be computed as follows:

    • Number of Entities 1 - Number of Points 1;

    • Number of Entities 2-5 - Number of Points 3

    • Number of Entities 6-9 - Number of Points 5;

    • Number of Entities 10-13 - Number of Points 7

    • Number of Entities Over 13 - Number of Points 9

  4. Total Foreign Assets (8 points maximum)
    Total Assets from Schedule F for all Forms 5471 are included. Points are to be computed as follows:

    • Up to $250 Million – 1 point

    • $250 Million to $6 Billion – 2 points

    • $6 Billion to $100 Billion – 3 points

    • Add 1 point for each additional $100 Billion or fraction thereof.

  5. Total Related Transactions
    Total of transactions from Forms 5471 Schedule M and Forms 5472. Points are to be computed as follows:

    • Up to $1 Million – 1 point

    • $1 Million – $40 Million – 2 points

    • $40 Million - $1 Billion – 3 points

    • Add 1 point for each additional $1 Billion or fraction thereof

  6. Foreign Tax
    The sum of Foreign Taxes Paid or Accrued and Foreign Taxes Deemed Paid are included from Form 1118, Schedule B, Part II. There is a maximum of 8 points for this factor. Points are to be computed as follows:

    • Up to $7 Million – 1 point

    • $7 Million - $100 Million – 2 points

    • $100 Million - $200 Million – 3 points

    • Add 1 point for each additional $200 million or fraction thereof.

  7. Multiple Industry Status (One point per industry, no maximum)
    Separate and distinct major industries (subsidiaries, branches, and operating divisions regardless of form).

Modifications in LCC Pointing System for the Financial Industry

Adjust gross assets pointing for financial industry (by NAICS codes)

Gross Assets (IRM) Points Financial Industry
< or = $0 0  
Up to $500M 1 Up to $5B
$500M-$1B 2 $5B-$10B
$1B-$2B 3 $10B-$20B
$1B-$2B 4 $20B-$50B
$1B-$2B 5 $50B-$80B
each additional $3B 1 each additional $40B
    Max 12 points

Acronyms

Acronym Definition
ACA Affordable Care Act
ADCCI Assistant Deputy Commissioner Compliance Integration
AIMS Audit Information Management System
APA Advance Pricing Agreement
BOD Business Operating Division
CAM Collaboration Assessment Matrix
CAP Compliance Assurance Program
CBF Case Built File
CCU Campus Compliance Unit
CIC Coordinated Industry Case
CMC Content Management and Collaboration
CP&A Compliance Planning and Analytics
DAS / IC Discriminant Analysis System / Industry Case
FATCA Foreign Account Tax Compliance Act
FPP Foreign Payments Practice
GHW Global High Wealth
JCC Joint Committee Case
LCC Large Corporate Compliance Program (aka CIC Successor Program)
LUQ Large, Unusual and Questionable
LWIS LB&I Workload Identification System - delivery system for delivering case built files for examination
NAICS North American Industry Classification System
OTSA Office of Tax Shelter Analysis
PAC Program Action Case
PCS Partnership Control System
POC Point of Contact
PSP Planning and Special Programs
RICB Risk Identification Control Board
RPC Return Preparer Coordinator
SB/SE Small Business/Self-Employed
SME Subject Matter Expert
TCJA Tax Cuts and Jobs Act
TEFRA Tax Equity and Fiscal Responsibility Act
WLS Workload Services