The IRS launched a compliance campaign targeting issues arising out of the 2017 Tax Cuts and Jobs Act ("TCJA") on May 1, 2020.1 The Large Business & International Division ("LB&I") has released a number of issue-based compliance campaigns in recent years, including one targeting the so-called repatriation tax enacted under the TCJA in Internal Revenue Code Section 965. For previous coverage of the Section 965 compliance campaign, please click here.

LB&I's announcement of the TCJA campaign explains that it will "closely monitor issues on a select pool of returns and share information learned throughout LB&I and the IRS."2 The campaign's goals are to identify transactions and restructurings to better understand taxpayers' behavior under the TCJA. LB&I explained that the treatment streams may include examinations, soft letters, outreach, new practice units, and the development of future campaigns. As part of the TCJA campaign, the IRS will also consider the impact of the Coronavirus Aid, Relief and Economic Security (CARES) Act on examined returns. While LB&I is refraining from initiating most new examinations through July 15, 2020 in light of the COVID-19 pandemic, it will continue work on the new TCJA campaign, albeit without in-person contact with taxpayers.3

Speaking at the Federal Bar Association conference on March 6, 2020, LB&I's deputy commissioner Nikole Flax previewed the TCJA-related campaign and suggested that it will differ from the existing issue-based campaigns to consider compliance with the TCJA on a holistic basis. She stated that the IRS is opening exams to focus on the interaction of TCJA issues, and the agency is working to ensure real-time sharing of information between field auditors and other LB&I staff to promote consistency.

Examinations of TCJA-related items could include:

  • Compliance with global intangible low-taxed income ("GILTI") regulations;
  • Compliance with Section 965's repatriation tax;
  • Compliance with temporary regulations relating to Section 245A's dividends received deduction; and
  • Compliance with the base erosion and anti-avoidance ("BEAT") regulations.

The TCJA-related campaign is not surprising, as LB&I's 2020 Focus Guide projects "an increase in campaign work, including the introduction of tax reform work later this year." LB&I's Focus Guide also lists as a strategic goal implementing a compliance campaign to reflect TCJA workload selections.

Footnotes

1 https://www.irs.gov/businesses/corporations/lbi-active-campaigns#tcja.

2 Id.

3 https://www.irs.gov/pub/foia/ig/spder/lbi-04-0420-0009.pdf.

Originally published Ropes & Gray, May 2020

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