Expedited Resolution of Uncertain Tax Positions - Initiative to Address Certain
Implications of FIN 48
As a result of the impending effective date for the application of Financial Accounting
Standard Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes,
of FASB Statement 109 (FIN 48), some taxpayers may wish to request a greatly accelerated
examination and resolution before the end of their current financial statement accounting
year of “uncertain tax positions” taken in filed returns and/or expected to be taken
in tax returns yet to be filed.
This document provides an initiative by which the Service will be able to greatly
expedite examination and accelerate resolution of important issues within the framework
of its normal processes and its normal rules of engagement, while at the same time
providing good customer service.
This initiative is not intended to produce a different result in the resolution
of tax issues than would obtain under the normal pace of examination and resolution,
but simply to speed up the processes by which such examination and resolution would
otherwise result. As such, it is appropriate to work closely with the taxpayer to
resolve the issue they are concerned with relative to FIN 48 implementation in the
time frames established by the team and taxpayer and then work any further issues,
but the focus continues to be overall compliance by taxpayers.
Section A. Overview
This document sets forth the requirements for the Service to permit taxpayers’ participation
in this expedited resolution initiative. Section B describes eligibility.
Section C describes procedures. Section D discusses operational rules.
Section E discusses resolution of uncertain tax positions using some of the various
existing IRS resolution tools that may be utilized in an expedited manner.
Section B. Eligibility, Timeframes, Deadlines
1) Taxpayers that issue certified financial statements in accordance with
U.S. Generally Accepted Accounting Principles (GAAP) are eligible to raise an issue
or multiple issues for consideration under this initiative. The effective date for
the adoption of FIN 48 is the taxpayer’s first fiscal financial accounting year
beginning after December 15, 2006. For calendar year taxpayers, adoption is
required on January 1, 2007.
2) This initiative will not be available to any promoters of any listed transactions.
A promoter is a person who (i) organized, managed, or sold the transaction; (ii)
participated in the organization, management, or sale of the transaction; or (iii)
received fees in connection with the organization, management, or sale of the transaction.
3) This initiative is intended to apply primarily to taxpayers that will issue
certified financial statements for their current financial accounting years ending
on or before 03/31/2007. Time is considered ample under ordinary practice
to address similar concerns of taxpayers that will issue certified financial statements
for their current financial years ending after 03/31/2007.
4) Requests for the resolution of issues under this initiative must be received
no later than the day that is 45 days prior to the taxpayer’s financial statement
5) The Service will not agree to resolve the following issues under this initiative:
a) Any issue or transaction that has been designated for litigation or for
which the taxpayer has been notified that the Service is considering designating
the issue or transaction for litigation;
b) Any issue or transaction for which the taxpayer is a party in a court proceeding
to determine the tax treatment of any aspect of the issue or transaction;
c) Any issue or transaction for which the taxpayer has had the fraud penalty
under § 6663 imposed or for which the taxpayer has been notified that the Service
is considering imposing the fraud penalty;
d) Any issue or transaction for which the taxpayer is under a tax-related
criminal investigation by the Service or the Department of Justice or for which
the taxpayer has been notified that the Service or the Department of Justice intends
to commence a tax-related criminal investigation; and
e) Any other issue or transaction that, in the discretion of the Service,
is not appropriate for resolution in an expedited manner.
6) Any uncertain tax positions expected to be taken in tax return(s) yet to
be filed are subject to all of the eligibility restrictions and excluded issues
set forth in Rev. Proc. 2005-12, 2005-1 C.B. 206 with respect to pre-filing agreements.
In particular in such circumstances, the Service will only consider issues that
require either a determination of facts or the application of well-established legal
principles to known facts.
Section C. Procedures
1) Taxpayers must agree to, and act with complete transparency and be committed
to timely issue resolution.
2) The taxpayer and the Service must jointly agree upon a timeline for specific
objectives, including a specific deadline for the closing agreement (see Form
of Agreement below), bearing in mind the goal of final closure by the
end of the current financial statement accounting year.
3) Taxpayers have the following responsibilities in the event the Service
accepts an issue for resolution under this initiative:
a) The taxpayer will be required to provide the following information, generally
immediately, but as soon as possible in the circumstances, after the taxpayer is
notified that an issue will be considered under this initiative:
i) the information necessary to determine the proper tax treatment of the issue
ii) all documents relating to the issue or the transaction, such as transaction
documents and all related legal and/or accounting opinions, regardless of whether
these documents would otherwise be subject to claims of judicial or statutory privilege;
iii) a description of the issue and summary of all relevant facts;
iv) a document setting forth all relevant legal authorities including any and all
contrary authorities with relevant citations;
v) original documents that relate to the taxpayer’s risk assessment of the issue
or transaction; and
vi) where the uncertain tax position appears on the return filed or would be reflected
on a return yet to be filed.
b) All requested information provided in writing must include a declaration, signed
by a person currently authorized to sign the taxpayer’s federal income tax return,
in the following form:
"Under penalties of perjury, I declare that I have examined these documents, and
to the best of my knowledge and belief, the facts presented in support of the request
are true, correct, and complete."
c) The taxpayer will be required to provide access to taxpayer personnel or representatives
knowledgeable with the facts and/or the transaction. The taxpayer will endeavor
to have in attendance at all meeting(s) those individuals necessary to resolve any
problems, issues, and/or concerns.
4) With respect to resolution of uncertain tax positions taken in a filed return
for which the taxpayer is under examination, the taxpayer should submit a request
to the examiner and/or team manager.
5) With respect to resolution of uncertain tax positions taken in a filed return
but for which the taxpayer is not under examination:
a) if the taxpayer is under examination for any other taxable year(s), the
taxpayer should submit a request to the examiner and/or team manager conducting
b) if the taxpayer is not under examination for any year, the taxpayer should
submit the request stating that it is pursuant to the FIN 48 initiative to one of
Email Address: Melanie.Perrin@irs.gov
Fax: (202) 283-8406
Mailing Address using FedEx or UPS:
Internal Revenue Service
Attn: Melanie Perrin
801 9th St. N.W.
Washington D.C. 20001
6) With respect to the resolution of uncertain tax positions for which the tax return
is not yet filed, the taxpayer must submit a request that follows all of the procedures
set forth in Rev. Proc. 2005-12 and clearly state that expedited treatment under
the initiative described in this document is desired.
7) LMSB’s office of Pre-Filing & Technical Guidance (PFTG) will:
a) Appoint one of its personnel to act as Point of Contact for taxpayer inquiries
and to receive requests for expedited issue resolution that are made by taxpayers
not currently engaged in a compliance examination for any year.
b) Ensure that its PFA procedures are expedited as necessary.
c) Establish a rapid but informal method (email, fax, phone call, etc.) by which
requests tentatively accepted by team managers, examiners, or PFTG designees
may be forwarded to PFTG for concurrence, coordination, monitoring, etc.,
and by which PFTG will respond swiftly with concurrence or rejection.
d) Establish a method to record and report on the nature of all issues accepted
and rejected under this initiative.
e) Establish a method to report the outcomes of this initiative and include them
in the Service’s usual measurement processes.
8) The Service will handle requests for expedited issue resolution under this
Initiative as follows:
a) Examination team managers, examiners, or designees assigned by PFTG will endeavor
to respond to taxpayers’ requests either tentatively accepting an issue or declining
to consider an issue within 1 business day of receiving the request.
b) Tentative decisions by examination team managers, examiners, or designees assigned
by PFTG to accept an issue for resolution will be immediately communicated to PFTG
c) PFTG will endeavor to respond to the communications of examination team managers,
examiners, or designees assigned by PFTG, with concurrence or, based on policy or
other considerations, with rejection, within 1 business day of receiving those communications.
d) Examination team managers, examiners, or designees assigned by PFTG will endeavor
to render final acceptance or rejection of taxpayers’ requests to requesting taxpayers,
within 1 business day of receiving PFTG’s concurrence or instruction to reject.
e) The examination team manager, examiner, or designee assigned by PFTG, will engage
appropriate resources and employ all available tools to reach an expedited resolution.
f) With respect to issues or transactions that require the PFA process, the Service
will expedite the PFA process.
g) Once a matter is accepted for resolution, the Service agrees to employ its best
efforts to resolve the matter within the agreed timeline.
h) The Service will endeavor to have in attendance at these meetings those individuals
necessary to resolve any problems, issues and/or concerns.
i) The Service will exercise its best efforts to execute closing agreements expeditiously
and within the agreed timeline.
Section D. Operational Rules – Internal Procedures
1) Return Filed and Under Examination
a) The taxpayer approaches the examining agent and/or team manager requesting assistance.
b) Management of the issue remains within the Industry line of management.
c) PFTG is notified the examination of the issue has started (for tracking purposes).
d) Team meets with the taxpayer to establish evidenced intent on behalf of the taxpayer
to resolve the issue.
e) Taxpayer and team establish expectations as to firm closure date and craft a
timeline for specific objectives.
f) Taxpayer presents the issue(s) and all information as outlined in the above eligibility
g) All other eligibility and guideline requirements as set forth in the above Eligibility
and Guidelines section are present and or available.
h) For tracking and monitoring purposes, the team/examiner will update the ERCS
system with Project Code 0544 and Tracking Code 0544 (both codes are the same).
i) If a successful resolution of the issue is met, the team will finalize the issue
by securing a Closing Agreement Form 906.
j) At the conclusion of the examination of the FIN 48 issue(s), whether or not successfully,
the examiner will notify PFTG with the updated information.
NOTE: It is anticipated that in the process of examination
of the issue(s), where appropriate, existing Issue Resolution Tools may be utilized,
DO 4-24, DO 4-25, Early Referral to Appeals, Fast Track Appeals, etc.
2) Return Filed and the Taxpayer is Not Under Examination. (There is no taxpayer
relationship with the field.)
a) The taxpayer will Email/Fax or overnight a request for an expedited review
of the FIN 48 issue(s) to the PFA Coordinator, Melanie Perrin at:
Fax: (202) 283-8406
Mailing Address using FedEx or UPS:
Internal Revenue Service
Attn: Melanie Perrin
801 9th St. N.W.
Washington D.C. 20001
b) PFTG will notify the appropriate PSP.
c) PSP assigns case to appropriate work unit within the industry and updates with
appropriate project and tracking codes.
d) The decision to open the return is made by the team manager.
e) Upon contact by the examiner the examination will begin using the same procedures
outlined under procedures for a “Return Filed and Under Examination”, above.
3) Un-filed Returns
a) If the taxpayer is currently under examination a team or examiner is on
site, submission of a request for a Pre-Filing Agreement (PFA) should be given to
the LMSB team manager. The team manager will complete the PFA transmittal
form and forward to the PFTG PFA Coordinator.
b) Upon approval of the PFA by the appropriate industry director, the team/examiner
will secure the PFA filing agreement fee from the taxpayer and immediately begin
the review of the FIN 48 issue.
c) If the taxpayer is not currently under examination, the taxpayer will be
expected to the normal PFA procedures as provided by Rev Proc 2005-12.
d) The taxpayer will be expected to provide/ disclose all information as required
under the above procedures.
Section E. Resolution of Uncertain Tax Positions
1) In order to expedite the resolution of issues under this initiative, one
or more meetings will be convened in which the taxpayer or its representatives will
provide a full exposition of all pertinent facts and documents and will present
all legal arguments for and against the uncertain tax position.
a) All items described in paragraph 3(a) of the section on Procedures, above,
will be demonstrated and discussed as necessary for the Service to be made fully
aware of the taxpayer’s return positions and why those positions are uncertain.
b) All Service personnel attending the meeting(s) will be able to raise questions
c) Total transparency and candor is required at these meetings.
d) To expedite the consideration of issues under this initiative, Informal
Document Request procedures should be suspended and other paperwork processes should
be postponed until the execution of a closing agreement or withdrawal as described
2) Resolution of issues will be reached in accordance with standard rules
of engagement for examinations. However, upon acceptance of an issue for expedited
examination and resolution, Service personnel should give consideration to which,
if any, of the various resolutions tools might be helpful in expediting resolution
so that any necessary advance notice can be given to other personnel that may be
required for the application of such processes (e.g., the Office of Appeals if Fast
Track may be contemplated).
3) For issues or transactions in filed returns, whether or not an examination
is currently open, the following are examples of some alternative dispute resolution
tools that may be employed on an expedited basis:
a) D.O. 4-24, IRM 184.108.40.206.33;
b) D.O. 4-25, IRM 220.127.116.11.3;
c) Industry Issue Resolution, IRM 7.40.1, Rev. Proc. 2003-36 (for issues where an
acceptable filing position already exists under and IIR, but the taxpayer does not
d) Early Referral to Appeals, Rev. Proc. 99-28;
e) Fast Track Settlement, Rev. Proc. 2003-40; and
f) Accelerated Issue Resolution, IRM 18.104.22.168, Rev. Proc. 94-67.
4) For issues or transactions expected to be reflected in tax return(s) yet
to be filed, the PFA process under Rev. Proc. 2005-12 will be employed on an expedited
5) Appeals has agreed to provide its services, as needed to assist in this
initiative, in an expedited manner. (See “Contacts” below for Appeals contact information.)
Form of Agreement
All expedited resolutions under this initiative will be incorporated in a closing
agreement under section 7121. The form and content of the closing agreement
must comply with Rev. Proc. 68-16, 1968-1 C.B. 770.
At any time prior to the execution of a closing agreement, either the taxpayer or
the Service may withdraw from consideration of all or part of the request.
Financial Accounting Standards Board - This link
goes to the FASB website, from which FIN 48 can be accessed. To access FIN 48, scroll
down the FASB page to the section that includes FASB Interpretations.