Tax Blog/Blawg

Any corporate tax executive who has ever been involved in contesting an audit adjustment knows all too well how unfavorable documents relating to the subject of the adjustment – particularly improvident comments reflected in email correspondences – can be an ongoing impediment to resolving a tax dispute from the audit phase right up to and through litigation with the IRS or Department of Justice.  When such documents exist, even where taken out of context, the government will zealously sink its teeth into them like a junkyard dog, making the prospects of reaching a reasonable ...

In a recent TaxBlawg post, my colleague Jonathan Prokup discussed the IRS’ intention to begin requesting electronic files as part of taxpayer examinations so that it can analyze the “metadata” contained in those files.  One of the concerns raised in the post, as announced in Chief Counsel Advice 201146017, was the possibility that such data in the hands of the IRS may be insecure and therefore potentially susceptible to theft by third-party hackers (which, by the way, could conceivably expose the IRS to damages for disclosure of taxpayer information under IRC § 6103

As reported earlier this week in the tax press, the recently completed initial filing season for Schedule UTP produced at least one major surprise in the eyes of IRS officials, who had anticipated a much greater number of items listed on the average Schedule UTP than actually materialized.  In fact, the IRS’s predictions were off by a wide margin, with the number of disclosed positions of the 1,500 or so Schedule UTPs filed averaging only slightly more than three items per schedule for CIC taxpayers, and less than two items for non-CIC taxpayers.  Pre-filing expectations of item ...

The Internal Revenue Service on Friday released the final version of the much-anticipated Schedule UTP (and accompanying instructions) as well as additional guidance about changes that had been made the schedule.  At the same time, the IRS also announced an expansion of the Compliance Assurance Program (CAP) as well as some other minor matters.  In the face of much criticism of the draft Schedule UTP and instructions, the IRS made a numbers of significant adjustments; however, several issues remain unresolved.

Judging by the feedback we receive from our readers, the topic of workpapers and work product continues to be an area of major concern for many tax practitioners.  For those who are interested in learning more about the topic, particularly in light of the D.C. Circuit's recent decision in United States v. Deloitte LLP, I will be speaking on a webinar panel, U.S. v. Deloitte: Expansion of Work Product Doctrine in Tax Controversies, next Tuesday at 1pm (EDT).  For prior TaxBlawg discussion of the Deloitte opinion, see here.

Together with Edward Froelich of Morrison & Foerster and Kevin ...

In Tuesday’s confirmation hearings for Supreme Court nominee Elena Kagan, one topic on which there appeared to be agreement between the nominee and the panel was concern about the dwindling number of cases heard by the High Court. In response to questioning from Senator Arlen Specter, Kagan had no explanation for the precipitous decline in the Court’s docket over the last 20 years, but agreed that it has led to an increase in unresolved conflicts among the circuit courts on “vital national issues.”

Quite naturally, those of us in the tax field like to think of our livelihoods as ...

Just when the Department of Justice must have thought that it could do no wrong in pursuing the workpapers of taxpayers and their auditors, it ran smack into the formidable blockade that is the Court of Appeals for the District of Columbia Circuit.  In United States v. Deloitte LLP et al., No. 09-5171 (D.C. Cir. Jun. 29, 2010), the D.C. Circuit seems to have fired a shot across the bow of both the Department of Justice and the IRS’s brand-new Schedule UTP.  

Last week, at the TEI Midyear Conference in Washington, LMSB Commissioner Heather Maloy told corporate tax executives attending the conference that “trust” was the key to successfully implementing the new reporting requirements for uncertain tax positions first set forth in Announcement 2010-9.  As reported in the April 14th edition of Tax Notes, 2010 TNT 71-2, Maloy also told the attendees that enhanced transparency through the use of this reporting mechanism would be “mutually beneficial” in terms of improved issue resolution and efficiency.

Last month, I commented ...

Predictably, there has been a good deal of consternation accompanying the release of IRS Announcement 2010-09, which continues the trend away from the Service's traditional "policy of restraint" in seeking to uncover uncertain tax positions.  The first chink in this long-standing policy of restraint was exhibited in Announcement 2002-63, where the Service expanded the circumstances under which it would seek tax accrual workpapers.  Prior to the earlier Announcement, workpaper demands were limited to workpapers relating to listed transactions provided such transactions had been disclosed.  Thereafter, a taxpayer who engaged in more than one listed transaction, whether previously disclosed or not, was subject to a demand to disclose all workpapers.  The IRS's summons enforcement action in Textron relied on Announcement 2002-63 to seek all of the taxpayer's workpapers (arguing that six separate SILO transactions fit within the scope of its new policy).

Announcement 2010-09 goes significantly further in eroding the policy of restraint by placing the onus on the taxpayer to make its own affirmative disclosures of uncertain positions rather than requiring the Service to deduce them from the taxpayer's workpapers.  What has received little attention, however, are the implications of the Service's intention to require the new disclosure form not only for taxpayers who record a reserve in their financial statements for uncertain tax positions, but also taxpayers who "expect[] to litigate the position."