1 CAP Compliance Assurance Process (CAP) Permanency

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1 CAP Compliance Assurance Process (CAP) Permanency Slide 2 2 CAP Permanency CAP Overview Slide 3 3 CAP Overview: History Pilot program began in 2005 with 17 TPs For 2011, 140 TPs are anticipated CAP phase will be permanent in 2012 Slide 4 4 CAP Overview: What is CAP? LB&I compliance strategy Method of identifying and resolving tax issues in a real-time environment Slide 5 5 CAP Overview: Basic Requirements Open, cooperative, and transparent interaction between IRS and LB&I TPs TPs disclose completed business transactions and the tax issue within the transactions Slide 6 6 CAP Overview: IRS Benefits Quality work product Post cycle-time has decreased Emerging issues have been identified sooner Slide 7 7 CAP Overview: TP Benefits Certainty Currency Potential to avoid amending state returns Slide 8 8 CAP Permanency CAP Permanency Phases Slide 9 9 CAP Permanency: Three Phases Pre-CAP CAP Compliance Maintenance Slide 10 10 CAP Permanency Phases Pre-CAP Compliance Maintenance CAP TP is required to be fully cooperative and transparent Service and TP develop a plan to examine tax returns of the open years within a set timeframe Service may adjust the level of review work and time applied to each TP based on their unique factors Slide 11 11 Pre-CAP Phase: Description Traditional post-file environment Audit conducted by a Team Coordinator (TC), not an Account Coordinator (AC) Slide 12 12 Pre-CAP Phase: Description (2) TP can apply at any time TP and IRS develop action plan to close transition years Purpose is to prepare TP to meet CAP selection criteria Slide 13 13 Pre-CAP Phase: Requirements TP works with exam team to develop action plan to prepare TP for CAP TP signs a Pre-CAP MOU TP exhibits transparency and cooperation needed to progress to CAP Slide 14 14 Pre-CAP Phase: Requirements (2) TP agrees to identify issues within transactions TP agrees to provide information in a timely manner to resolve issues Slide 15 15 CAP Phase: Description TP proactively provides all pertinent facts to develop material issues Transparency and cooperation reduces use of resources IRS conducts due diligence review as appropriate. Slide 16 16 CAP Phase: Requirements TP signs the CAP MOU TP exhibits transparency and cooperation TP identifies tax issues within completed business transactions TP meets CAP eligibility criteria Slide 17 17 CAP Selection Criteria Must have assets of $10M or more Must be a publicly held entity Legal requirement to prepare and submit 10Ks, 10Qs, 8Ks, 20Fs and other disclosure type forms to the SEC or equivalent regulatory body Slide 18 18 CAP Selection Criteria (2) Privately held entities will be eligible if they are able to provide to the Service certified, audited financial statements or equivalent documentation on a quarterly basis Slide 19 19 CAP Selection Criteria (3) Must not have more than two income tax returns under consideration by the Service. Must not be in litigation with the Service and not under investigation that would limit access to books. Slide 20 20 CAP Application Example 2008/12 Filed 2009/12 Filed 2010/12 Filed 2011/12 Filed 09/15/2012 2013/12 Pre-CAP Years 2012/12 Unfiled Transition Years (Intervening Yrs.) CAP Year The CAP Assumption: 2013 will be the first CAP Year - 1 filed and 1 unfiled return plus the CAP Year. This is the structure presumed to be as of 10/31 of the year preceding the CAP Year. Slide 21 21 Compliance Maintenance Phase: Description Teams conduct reduced scope and depth review Level of review based on TPs experience in CAP TPs history of compliance and risk Slide 22 22 Compliance Maintenance Phase: Description (2) Allows ACs to manage more than one CAP case TP can move between CAP and Compliance Maintenance depending on the number and complexity of transactions Slide 23 23 Compliance Maintenance Phase: Requirements TP completed one CAP cycle through post-file TP maintains professional relationship with CAP team TP maintains consistency in tax department personnel Slide 24 24 Compliance Maintenance Phase: Requirements (2) TP must continue to maintain full transparency and cooperation TP must disclose all material transactions and the tax issues within the transactions TP has good internal controls Slide 25 25 Compliance Maintenance Phase: Requirements (3) Historically, throughout CAP: TP has low risk transactions TP has limited controversy TP has minimal non-complex issues anticipated for the CAP Year Slide 26 26 CAP Program Information Resources External Website External CAP website See irs.gov Internal Revenue Manual MOUs FAQs Slide 27 27 Questions ??