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CAP

CAP. Compliance Assurance Process (CAP) Permanency. CAP Permanency. TOPICS CAP Overview CAP Permanency Phases Program Resources. CAP Permanency. CAP Overview. CAP Overview. CAP History Pilot program began in 2005 with 17 TPs For 2012, 161 TPs are participating

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CAP

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  1. CAP Compliance Assurance Process (CAP) Permanency

  2. CAP Permanency • TOPICS • CAP Overview • CAP Permanency Phases • Program Resources

  3. CAP Permanency CAP Overview

  4. CAP Overview CAP History • Pilot program began in 2005 with 17 TPs • For 2012, 161 TPs are participating • CAP phase is permanent in 2012

  5. CAP Overview What is CAP? • LB&I compliance strategy • Method of identifying and resolving tax issues in a real-time environment

  6. CAP Overview Basic Requirements • Open, cooperative, and transparent interaction between IRS and LB&I TPs • TPs disclose completed business transactions, a description of the steps within the transactions and their proposed tax positions

  7. CAP Overview IRS Benefits • Quality work product • Post cycle-time is decreased • Emerging issues are identified sooner

  8. CAP Overview TP Benefits • Certainty • Currency • Potential to avoid amending state returns

  9. CAP Permanency CAP Permanency Phases

  10. CAP Permanency Phases Three CAP Phases • Pre-CAP • CAP • Compliance Maintenance

  11. CAP Permanency Phases Pre-CAP Compliance Maintenance CAP Service and TP develop a plan to examine tax returns of the open years within a set time frame Service and TP work contemporaneously to resolve tax positions prior to filing the tax return Service may adjust the level of review work and time applied to each TP based on their unique factors

  12. Pre-CAP Phase Description • Traditional post-file environment • Audit conducted by a Team Coordinator (TC), not an Account Coordinator (AC)

  13. Pre-CAP Phase Description • 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

  14. 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

  15. Pre-CAP Phase Requirements • TP agrees to identify transactions as well as material items and steps within the transactions • TP agrees to provide information in a timely manner to resolve issues

  16. 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

  17. CAP Phase Requirements • TP signs the CAP MOU • TP exhibits transparency and cooperation • TP identifies the steps within completed business transactions • TP meets CAP eligibility criteria

  18. 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

  19. CAP Selection Criteria 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

  20. CAP Selection Criteria If under exam, must not have more than one filed return under exam and one unfiled year (the most recently ended year) Must not be under investigation or in litigation that would limit the IRS’ access to tax records

  21. 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

  22. Compliance Maintenance Phase Description • Allows ACs to manage more than one CAP case • IRS may move TP between CAP and Compliance Maintenance depending on the number and complexity of transactions

  23. 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

  24. Compliance Maintenance Phase Requirements • TP must continue to maintain full transparency and cooperation • TP must disclose all material transactions and the steps within the transactions • TP has good internal controls

  25. Compliance Maintenance Phase Requirements • Historically, throughout CAP: • TP has low risk transactions • TP has limited controversy • TP has minimal non-complex issues anticipated for the CAP Year

  26. CAP Permanency Program Resources

  27. CAP Program Information • Resources – External Website • External CAP website – See irs.gov • Internal Revenue Manual • MOUs • FAQs

  28. Questions ??

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