IRS Large Business and International Division Guidance

| 2/2/2017

The IRS Large Business and International (LB&I) Division has released a list of 13 targeted compliance campaigns. These campaigns are part of an effort to realign the focus of LB&I toward issues-based examinations. The IRS has developed and targeted each campaign based on an area of risk identified through data analysis, suggestions from IRS compliance employees, and feedback from the tax community. The new campaign approach replaces the tiered issue approach the LB&I previously used to target specific examination areas.

The list of campaigns includes:

  • Related-party transactions: Identify level of compliance with statutory and regulatory requirements for transactions among commonly controlled middle-market entities.
  • S corporations: Identify S-corporation shareholders claiming losses in excess of stock and debt basis.
  • Land developers: Identify large residential land developers improperly using the completed contract method of accounting.
  • Micro-captive insurance companies: Focus on 831(b) captive insurance transactions as identified within Notice 2016-66.
  • Income repatriation: Target high-risk foreign income repatriation transactions, and improve identification of repatriation issues.
  • Foreign corporations doing business in the U.S.: Identify foreign corporations required to file Form 1120-F, “U.S. Income Tax Return of a Foreign Corporation.”
  • Inbound distributors: Focus on identifying U.S. distributors of goods sourced from foreign countries that do not use an arm’s-length transfer price.

The IRS also has campaigns for the advanced energy credit, taxpayer abuse of the offshore voluntary disclosure program, domestic production activity deduction computations for multichannel video program distributors and television broadcasters, certain life insurance industry issues, listed basket and basket option transactions, and TEFRA partnerships.

The LB&I Division indicated that this guidance is only the first wave of campaigns, with additional campaigns to be launched in the coming months.

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