The Compliance Assurance Process is a method of identifying and resolving tax issues that come about through a system of cooperative interaction between the Large Business and International (LB&I) taxpayers and Internal Revenue Service (IRS) prior to the completion and submission of the tax filing. The CAP program began in 2005 with only 17 different corporations. Since that time, more than 150 other taxpayers have jumped on board, equating to a total of 169 CAP participants every year.
In recent months, the IRS has been looking at changes to the program and announced this week that some of the changes will be taking place soon. The IRS highlighted six changes that should be expected for this calendar year and four additional changes which can be expected in future years.
For this year’s Compliance Assurance Process, the following changes should be expected:
- The application period will shift this year, with the new opening date on October 1 for existing CAP taxpayers, and the closing date on November 30.
- Taxpayers will now need to provide a preliminary list of material issues for their filing. The preliminary issues will help the collaboration and discussions between the IRS and corporations and in turn, the list will be used to determine what issues need to be reviewed and allow for appropriate resource allocation.
- Resources devoted to the CAP program will now be allocated on an annual basis. The number of taxpayers able to fit into the CAP program may be limited by the number of resources available within the IRS to complete the process.
- Taxpayers and LB&I will be subject to stricter requirements regarding communication of resolving key issues. Specifically, LB&I will be held to a 90-day issue resolution time period and disagreements will be sent to Appeals on a hastier basis to encourage quicker resolutions.
- In an extension to the last point, taxpayers will be expected to provide a representation letter within 30 days of return filing to push a timely resolution
- CAP will continue to be a work in progress. The process will continue with Compliance Maintenance and some low-risk taxpayers might not see a review on a yearly basis.
In future years, the following changes should be expected:
- More taxpayers who meet criteria and requirements will be able to enroll in the program.
- All taxpayers in the program will have to provide certification of a tax control framework.
- The idea of whether or not issue-based resolutions are appropriate for the program will be explored by the LB&I division in line with their vision and resource limitations.
- Additional changes will be made to the process as more LB&Is and taxpayers get involved.