IRS Opens 2027 CAP Application Period

The IRS Large Business and International division (LB&I) has opened the application period for the 2027 CAP program, with applications due Oct. 30, 2026, and acceptance decisions expected in February 2027. The 2027 announcement does not identify any substantive changes from the 2026 CAP cycle. The core eligibility, financial statement, and access-to-records requirements remain the same.

Background

The CAP program is the IRS’ prefiling compliance program for eligible large corporate taxpayers. The program uses real-time issue resolution and cooperative interaction between taxpayers and the IRS to address federal tax issues before a return is filed. By participating, eligible taxpayers can gain certainty regarding complicated tax positions and might be able to avoid the high monetary and time-consuming costs of protracted tax controversies with the IRS.

Crowe observation

Given the resource-intensive nature of CAP audits, the U.S. Department of the Treasury inspector general for tax administration recently recommended a cost-benefit analysis to determine the effectiveness of the CAP program from the government’s perspective.

To qualify, applicants must have at least $10 million in assets and cannot be under investigation by, or in litigation with, a government agency if that matter would limit IRS access to current tax records. Publicly traded applicants must be legally required to file Securities and Exchange Commission Forms 10-K, “Annual Report”; 10-Q, “General Instructions”; and 8-K, “Current Report.” Privately held applicants must continue to provide annual audited financial statements prepared under U.S. GAAP, International Financial Reporting Standards, or another IRS-approved method, together with unaudited quarterly financial statements. The audited financial statements must include an unqualified opinion from an independent auditor, and reported net income or loss must reconcile to Schedule M-3, line 4(a), worldwide consolidated net income (loss).

Crowe observation

While there have been doubts about the continued viability of the CAP program due to the reduction in IRS resources since 2025, it appears that the IRS will continue to maintain the program through at least 2027.

Looking ahead

While taxpayers that participate in the CAP program identify significant benefits, strict limitations on eligibility and significant transparency requirements mean that the CAP program is not suitable for most taxpayers. Taxpayers interested in participating in the 2027 CAP program should consult their tax advisers to determine whether it is a good fit for them, as well as whether the taxpayer is eligible to apply. Taxpayers already familiar with the 2026 CAP rules should not expect a different eligibility framework for 2027.