The Large Business and International (LB&I) Division of the Internal Revenue Service serves corporations, subchapter S corporations and partnerships with assets greater than $10 million. The LB&I division recently announced new campaigns in which additional attention and resources are devoted to exposing potential tax abuse areas. They will develop criteria for creating tools that select returns for examination based on the likelihood they will pay more tax.
These campaigns were developed in response to declining funding for the IRS as well as a decrease in IRS examination personnel. LB&I's move toward issue-based examinations and a campaign process also provides the division with better information when deciding which tax issues need to be allocated additional resources. Like previously announced campaigns, businesses with activity in the campaign areas will typically have a higher likelihood that the IRS will examine their tax returns.
Below are some of the new campaigns:
Claims for Domestic Production Activity Deductions (DPADs) under former IRC Section 199 deduction
Captive Insurance companies under 831(b)
Syndicated conservation easement transactions and similar charitable contribution schemes
Contributions of intellectual property to related entities for royalties
S-corporation basis and at-risk limitations
S-corporation compensation and shareholder loans
Manufacturing branch rules related to foreign base company sales income
Interest and home office expenses of foreign corporations filing Form 1120F (U.S. Income Tax Return of a Foreign Corporation)
Individuals employed by foreign government and international organizations
If you have business activity that falls under one of the areas listed above, now would be a good time to review your processes to ensure compliance before the IRS comes to call. If you have questions about the campaigns listed above or your specific situation, and particularly if you have received an IRS examination letter, contact your Eide Bailly professional or a member of the Eide Bailly IRS Controversy Team.