US IRS Makes Pre-Filing Agreement Program Permanent

Mike Godfrey, Tax-News.com, New York

07 February 2001

The US Internal Revenue Service announced recently that its program for pre-filing agreements, which has been under trial for the past year, has been successful and will be made permanent. The IRS says that the trial of PFAs, which will now be available to all Large and Mid-Size Business (LMSB) taxpayers, showed that they are cost efficient, assist timely filing of returns, improve the accuracy of returns, and save time for both the taxpayer and the IRS.

Rev. Proc. 2001-22 provides information and detailed procedures that should be followed with regard to PFAs. In addition, the revenue procedure specifies the following international issues that are likely to be suitable for resolution through the LMSB PFA program:

• The valuation of specified assets, but not a retrospective change in the method of valuation or a determination of appropriate valuation methodology;
  
  
• The proper SIC or NAIC classification code(s) for the taxpayer's line(s) of business;
  
  
• Whether the taxpayer's apportionment of deductions, including general and administrative expenses, that are related to all gross income properly reflects the factual relationship between deductions and gross income as required by Reg. Sec. 1.861-8(f)(5);
  
  
• Whether, as a factual matter, an expense relates to fewer than all members of an affiliated group for purposes of Reg. Sec. 1.861-14T(c)(2);
  
  
• The verification of amounts of foreign taxes paid and the applicable exchange rates, but not whether such taxes are creditable; and
  
  
• Whether the taxpayer must recapture a dual consolidated loss following a triggering event under Reg. Sec. 1503(d).
  

An LMSB PFA may be requested with respect to the current taxable year or any prior taxable year for which the return is not yet due (including extensions) and is not yet filed. However, the procedure says that the PFA process is only permitted if there is sufficient time remaining until the date for filing the return to which the desired LMSB PFA would relate and the overall likelihood that the LMSB PFA process can be completed prior to such date.

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