In January 2017, the Internal Revenue Service (IRS) Large Business & International (LB&I) Division released its announcement related to the identification and selection of its campaigns. The primary purpose of the campaigns was to end the resource intensive continuous audit program (where the LB&I audits a large taxpayer year after year for decades) and a move to an issue focused coordinated approach. LB&I originally identified 13 campaign issues and in November 2017, identified 11 additional campaigns and on March 13, 2018, identified 5 additional campaigns. We have extensively discussed LB&I’s campaign examination process including posts on Understanding LB&I “Campaigns”, Run for Cover – IRS Unveils Initial “Campaigns” for Audit, IRS Continues to Barrage Taxpayers with New Campaigns.
At the March 9 meeting of the Federal Bar Association Section on Taxation, an LB&I executive indicated that the rollout of the campaigns may have hit a snag. John Hinding, Director of Cross Border Activities at LB&I, reported that “the campaign work is still a minority of our work,” and its implementation has been slow going. According to Hinding, “A lot of the issue spotting that we’d like to do is driven by data analysis, and changes to systems to allow that is a lengthy process to get in place.” Additionally, the campaign initiative is being assessed in light of the impact from 2017 tax reform legislation (P.L. 115-97), including whether some campaigns should eventually be retired.
LB&I is not retreating on its goal of reducing direct examinations and Hinder reiterated that campaigns remain to be “still very much on our minds.” LB&I has received hundreds of suggestions for new campaigns and is seeking approval for others since “nothing is more onerous to a taxpayer or to the service than a direct examination; it takes a tremendous amount of resources.”
Practice Point: The captive insurance campaign has resulted in the examination of hundreds of captive insurance companies. To address this backlog, the IRS is considering possible treatment streams including a global settlement process, but according to Hinder, no final decision has been made. Additionally, if you are currently being examined under the captive insurance campaign, watch for an update on whether a global settlement initiative will be offered.
