Middle-Market Taxpayers on LB&I Radar

December 06, 2010, 07:22 PM

On November 9, 2010, the IRS Large Business and International (“LB&I”) Division Commissioner, Heather Maloy, announced that the IRS needed to shift the division’s historic focus to industry cases (“IC”) as opposed to coordinated industry cases (“CIC”). LB&I handles both types of cases, and Maloy recognized that the historic focus of the division prior to reorganization was on CIC taxpayers but that the area of lowest compliance fell with the ICs. CICs are generally defined as those cases that have 12 or more points assigned on its tax return. Points are based on various criteria including the taxpayer’s operating entities, gross receipts, gross assets, multiple industry status, total foreign assets, total related transactions, and foreign tax. Once the threshold points have been met and the application of team examination procedures are warranted, the taxpayer and its effectively controlled entities may be considered a CIC. Taxpayers that do not meet this definition are generally defined as ICs unless the taxpayer’s situation warrants the inclusion as a CIC. The examination procedures for both types of cases are similar and, until the recent reorganization of the LB&I division, the focus has generally been on CICs. Maloy conceded that the ICs have generally enjoyed little risk of being audited. More information regarding the IRS’s procedures and guidelines with respect to ICs and CICs can be found in the Internal Revenue Manual Section 4.46.2. –Elaina L. Blanks