IRS Large Business and International Division
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IRS LB&I Sharpens Its Risk Analysis, Announces Large Corporate Compliance (LCC) Program

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.




IRS Continues to Barrage Taxpayers with New Campaigns

On November 3, 2017, the Internal Revenue Service (IRS) Large Business and International (LB&I) division identified 11 new examination compliance “campaigns.” We have extensively discussed LB&I’s “campaign” examination process, including posts on Understanding LB&I “Campaigns” and Run for Cover – IRS Unveils Initial “Campaigns” for LB&I Audits.

The IRS identified the 11 new campaigns “through LB&I data analysis and suggestions from IRS compliance employees.” The new campaigns are:

  • Form 1120-F Chapter 3 and Chapter 4 Withholding Campaign
  • Swiss Bank Program Campaign
  • Foreign Earned Income Exclusion Campaign
  • Verification of Form 1042-S Credit Claimed on Form 1040NR
  • Agricultural Chemicals Security Credit Campaign
  • Deferral of Cancellation of Indebtedness Income Campaign
  • Energy Efficient Commercial Building Property Campaign
  • Corporate Direct (Section 901) Foreign Tax Credit
  • Section 956 Avoidance
  • Economic Development Incentives Campaign
  • Individual Foreign Tax Credit (Form 1116)

Practice Point:  The IRS’s salvo represents the “second wave” of LB&I’s issue-focused compliance work.  Indeed, the IRS noted that “[m]ore campaigns will continue to be identified, approved and launched in the coming months.” It is clear that the IRS is focusing its resources on these campaigns, and has developed significant internal expertise on these issues. If you have one of the identified issues, consider being proactive and preparing an audit ready-file as the issue will likely be examined.




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