Last week, the IRS unveiled a major change in how it identifies its biggest and most complex large corporations for examination. The move is part of the IRS’s broader efforts toward “portfolio management”—maximizing and modernizing its resources to focus upon areas of highest tax compliance risk.
The IRS’s Large Business and International Division (LB&I) has just begun greater use of data analytics to identify the population of its largest and most complex corporate taxpayers. This new Large Corporate Compliance (LCC) program replaces the Coordinated Industry Case (CIC) program and covers compliance oversight for LB&I’s largest corporate taxpayers. LCC is one of LB&I’s portfolio of compliance programs.
In a change from the prior system, which identified large cases on a manual and regional basis, LCC will automatically apply large case pointing criteria to select the LCC population. Pointing criteria include such items as gross assets and gross receipts. According to the IRS press release announcing the change, LB&I believes that automatic pointing will allow “a more objective determination of the taxpayers that should be part of the population.” Further, LB&I expects that use of data analytics will allow it to select returns that “pose the highest compliance risk.”
Practice point: LB&I’s change to the LCC program and heightened use of data analytics are only the most recent developments in the Service’s recent plan to do more with less, deploying staff time to its highest compliance priorities. It is still uncertain whether and how CIC-specific procedures, like the availability of taxpayer disclosures under Rev. Proc. 94-69, will continue under the LCC program. Taxpayers subject to the former CIC regime would do well to monitor developments under the new LCC program closely.