Basics and Beyond Income Tax Seminars

On Tuesday, January 26, 2010, the IRS announced a proposal that, if effective, would require many companies to disclose uncertain tax positions in their annual income tax return filings. IRS Commissioner Douglas Shulman made the announcement during remarks to the New York State Bar Association Tax Section, and indicated that this is a major step in the move towards increased transparency.

This proposal is the next step in the continuing saga between taxpayers and the IRS regarding tax accrual work papers.

As proposed, the requirement would apply to business taxpayers who have both:

a financial statement prepared under FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48, now contained within FASB Accounting Standards Codification (ASC) 740-10, Income Taxes) or other similar accounting standards reflecting uncertain tax positions (such as International Financial Reporting Standards (IFRS) or country-specific generally accepted accounting standards), and

total assets over $10 million.

A schedule or form would be included in applicable business tax returns annually. Each uncertain tax position would require a concise description to determine the nature of the particular issue and would require the taxpayer to determine the maximum amount of potential federal tax liability attributable to each uncertain tax position. The IRS is evaluating additional options for penalties or sanctions for lack of adequate disclosure.

Commissioner Shulman indicated that this proposal was intended to improve the efficiency and effectiveness of tax examinations and that he understands this is information that taxpayers have already prepared for financial reporting purposes. He stressed that taxpayers would not be required to disclose how strong or weak they regarded their tax positions.