US Government Clarifies New Book-Tax Difference Disclosure Rules

by Mike Godfrey, Tax-News.com, Washington

10 August 2004

The US government announced on Friday that it has published further guidance relating to a new corporate tax form aimed at combating the use of abusive tax shelters.

Last month the Treasury and the IRS issued a revenue procedure that streamlines the disclosure by taxpayers of transactions with a significant book-tax difference.

The new Schedule M-3 requires all C corporations under the jurisdiction of the IRS Large and Mid-Size Business Division (LMSB) to disclose detailed information about book-tax differences as part of their tax returns for 2004 and later taxable years.

"Large book-tax differences frequently indicate the existence of an abusive transaction. The new Schedule M-3 will enable the IRS to identify quickly those differences that warrant additional scrutiny," commented Acting Assistant Secretary for Tax Policy Greg Jenner at the time.

However, the Treasury said on Friday that taxpayers and practitioners have raised numerous questions regarding the alternative disclosure procedures.

As a result, the IRS and the Treasury have published a list of questions and answers in an attempt to clarify the new rules.

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