United States

IRS LB&I issued R&D credit exam directive for consistent audits

TAX ALERT  | 

The Large Business and International (LB&I) Division of the IRS issued a directive (LB&I-04-0320-0006) to its employees in an effort to better manage resources to review research credit issues for all Industry Cases, Large Corporate Compliance cases and all claims and amended returns.

The directive is meant to help LB&I employees better manage risk of non-compliance in a centralized manner. The directive tasks the Research Risk Review Team (RT), which consists of subject matter experts, engineers, revenue agents and other specialists, with ensuring that LB&I treats research issues consistently across all examine cases. The group helps to identify high-risk returns, and engages in knowledge sharing by collaborating with field employees. The RT is required to review and concur with the preliminary risk analysis.  

Research Risk Review Team Involvement

Once initial risk assessments are completed by the case manager, specialist manager, exam agent and specialist there are different possible outcomes. Depending on determination of those assessments, review by the RT is not always required.

Review and concurrence by the RT is required when the case and specialist managers agree to examine the research issue or, the case and specialist managers disagree on whether to examine the research issue.

Review and concurrence by the RT is not required if the case and specialist managers agree not to examine the research issue.

The RT must also be contacted for review and concurrence when: 

  • An Industry Case return does not meet the risk assessment guidelines;
  • A Large Corporate Compliance return is risk assessed and the case or specialist manager wants to examine a research issue;
  • Any subsequent year or related return pickup has a research issue that will be examined;
  • A research issue claim or amended return is received during an examination, whether informal or formal, where the research issue will be examined;
  • The scope and depth of the research issue changes at any point during the examination; or
  • Pre-filing agreements are received and considered with a research issue.

This directive is expected to bring some more consistency to IRS exams for large taxpayers, but will have no impact on smaller taxpayers that are under IRS SBSE division.

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