The IRS Large Business and International (LB&I) Division has released a list of 11 new targeted compliance campaigns. These campaigns are part of an effort to realign the focus of LB&I toward issue-based examinations. The new campaign approach replaces the tiered issue approach the LB&I used previously to target specific examination areas. The IRS began following this approach in January 2017 when it announced 13 additional campaigns. It is not clear from the IRS news release whether the 11 new campaigns are intended to supplement or replace the 13 campaigns announced previously.
The list of campaigns includes:
- Form 1120-F withholding. Verify withholding at the source for Form 1120-F, “U.S. Income Tax Return of a Foreign Corporation,” claiming refunds. This includes verifying that proper returns (such as Forms 1042, “Annual Withholding Tax Return for U.S. Source Income of Foreign Persons”; 1042-S, “Foreign Person’s U.S. Source Income Subject to Withholding”; 8804, “Annual Return for Partnership Withholding Tax”; 8805, “Foreign Partner's Information Statement of Section 1446 Withholding Tax”; 8288, “U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests”; and 8288-A, “Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests”) have been filed.
- Swiss bank program. Address noncompliance of U.S. taxpayers that were identified as owners of Swiss bank accounts through a joint program between the U.S. Department of Justice and Swiss financial institutions.
- Agricultural chemicals security credit. Verify that agricultural security chemical credits were claimed for qualified expenses.
- Deferral of cancellation of indebtedness income. Ensure taxpayer compliance with a law allowing limited deferral for recognizing cancellation of indebtedness income recognized in 2009 and 2010.
- Energy efficient commercial building property. Ensure taxpayer compliance with Section 179D for energy efficient commercial building deductions claims.
- Corporate direct foreign tax credit. Implement issue-based examinations of corporate taxpayers in an excess credit limitation position.
- Section 956 avoidance. Identify taxpayers that use cash pooling arrangements and other strategies to avoid an income inclusion when a controlled foreign corporation loans money to a U.S. parent.
- Economic development incentives. Identify taxpayers that improperly exclude government incentives from income.
The IRS also has campaigns for the foreign earned income exclusion, the proper reporting of Form 1042-S on an individual’s Form 1040NR, and individual foreign tax credits.
The new campaigns focus on specific issues, but some potentially large areas of inquiry, such as the research credit, have not yet been addressed. The LB&I Division indicated that more campaigns will continue to be released in the coming months.