cap
DESCRIPTION
CAP. Compliance Assurance Process (CAP) Permanency. CAP Permanency. CAP Overview. CAP Overview: History. Pilot program began in 2005 with 17 TPs For 2011, 140 TPs are anticipated CAP phase will be permanent in 2012. CAP Overview: What is CAP?. LB&I compliance strategy - PowerPoint PPT PresentationTRANSCRIPT
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CAP Overview: History
•Pilot program began in 2005 with 17 TPs
•For 2011, 140 TPs are anticipated
•CAP phase will be permanent in 2012
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CAP Overview: What is CAP?
•LB&I compliance strategy
•Method of identifying and resolving tax issues in a real-time environment
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CAP Overview: Basic Requirements
•Open, cooperative, and transparent interaction between IRS and LB&I TPs
•TPs disclose completed business transactions and the tax issue within the transactions
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CAP Overview: IRS Benefits
•Quality work product
•Post cycle-time has decreased
•Emerging issues have been identified sooner
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CAP Permanency Phases
Pre-CAP Compliance Maintenance
CAP
TP is required to be fully cooperative and
transparent
Service and TP develop a plan to
examine tax returns of the open years within
a set timeframe
Service may adjust the level of review work
and time applied to each TP based on their
unique factors
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Pre-CAP Phase: Description
•Traditional post-file environment
•Audit conducted by a Team Coordinator (TC), not an Account Coordinator (AC)
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Pre-CAP Phase: Description (2)
•TP can apply at any time
•TP and IRS develop action plan to close transition years
•Purpose is to prepare TP to meet CAP selection criteria
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Pre-CAP Phase: Requirements
•TP works with exam team to develop action plan to prepare TP for CAP
•TP signs a Pre-CAP MOU
•TP exhibits transparency and cooperation needed to progress to CAP
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Pre-CAP Phase: Requirements (2)
•TP agrees to identify issues within transactions
•TP agrees to provide information in a timely manner to resolve issues
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CAP Phase: Description
•TP proactively provides all pertinent facts to develop material issues
•Transparency and cooperation reduces use of resources
• IRS conducts due diligence review as appropriate.
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CAP Phase: Requirements
•TP signs the CAP MOU
•TP exhibits transparency and cooperation
•TP identifies tax issues within completed business transactions
•TP meets CAP eligibility criteria
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CAP Selection Criteria
Must have assets of $10M or more
Must be a publicly held entity•Legal requirement to prepare and submit 10Ks, 10Qs, 8Ks, 20Fs and other disclosure type forms to the SEC or equivalent regulatory body
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CAP Selection Criteria (2)
Privately held entities will be eligible if they are able to provide to the Service certified, audited financial statements or equivalent documentation on a quarterly basis
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CAP Selection Criteria (3)
• Must not have more than two income tax returns under consideration by the Service.
• Must not be in litigation with the Service and not under investigation that would limit access to books.
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CAP Application Example
2008/12Filed
2009/12Filed
2010/12Filed
2011/12Filed
09/15/2012
2013/12
Pre-CAP Years
2012/12Unfiled
Transition Years(Intervening Yrs.)
CAP
Year
The CAP
Assumption: 2013 will be the first CAP Year - 1 filed and 1 unfiled return plus the CAP Year. This is the structure presumed to be as of 10/31 of the year preceding the CAP Year.
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Compliance Maintenance Phase:
Description
•Teams conduct reduced scope and depth review
•Level of review based on• TP’s experience in CAP
• TP’s history of compliance and risk
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Compliance Maintenance Phase: Description (2)
•Allows ACs to manage more than one CAP case
•TP can move between CAP and Compliance Maintenance depending on the number and complexity of transactions
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Compliance Maintenance Phase: Requirements
•TP completed one CAP cycle through post-file
•TP maintains professional relationship with CAP team
•TP maintains consistency in tax department personnel
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Compliance Maintenance Phase: Requirements (2)
• TP must continue to maintain full transparency and cooperation
• TP must disclose all material transactions and the tax issues within the transactions
• TP has good internal controls
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Compliance Maintenance Phase: Requirements (3)
• Historically, throughout CAP:
• TP has low risk transactions
• TP has limited controversy
• TP has minimal non-complex issues anticipated for the CAP Year
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CAP Program Information
Resources – External Website•External CAP website – See irs.gov
• Internal Revenue Manual
• MOUs
• FAQs