The PFA program is a beneficial way to reach an 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 reported 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 $181,500.
- OMB requires a user fee for special benefits beyond those the general public receives. 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.
- PFAs may be used to determine the appropriate methodology for determining tax consequences affecting future tax years.
- PFAs are available on international issues.
Recent statistics on the PFA program
- Each prefiling application is reviewed by a PFA subject matter expert, the Office of Chief Counsel, and the applicable Practice Area to determine program eligibility.
- The chart below reflects the number of PFAs received, accepted, rejected, and closed in the calendar years 2019, 2020, 2021, and 2022.
- PFAs accepted may have been received in a previous year; those closed were likely accepted in a previous year.
PFA program applications for calendar years 2019 through 2022
| Received | Accepted | Rejected | Closed |
|---|---|---|---|
| 20 | 9 | 7 | 8 |
- The chart below reflects the average processing time for PFAs during each calendar year (CY).
Average processing time
| CY 2019 | CY 2020 | CY 2021 | CY 2022 |
|---|---|---|---|
| 256 | 306 | 258 | 349 |
Since 2019, the PFA program has received and/or accepted applications to address issues regarding:
- Losses on liquidation of a foreign subsidiary
- Sale/Leaseback transactions
- IRC 165 (g), Worthless Stock
- IRC 41, Research Credit
- Loan for federal tax purposes
- IRC 856, Real Estate Trust Investment
- Sale lease back transactions
- Passthrough elections
Certain applications were rejected due to failure to meet requirements of Revenue Procedure 2016-30 to adequately describe issue, facts, law, and proposed methodology; coverage of an issue impacted by recent tax law changes and therefore not meeting the “well-established law” standard; and coverage of an issue relating to a transaction, the treatment of which could impact a third party and potential post-filing “whipsaw” considerations.
Summary of the PFA process
- The taxpayer can file a request with the case manager or PFA program analyst.
- The application is evaluated by Chief 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.