TEI, Commissioner of Internal Revenue and Large Business and International Division Liaison meeting agenda.

• Position: TECHNICAL SUBMISSIONS

On February 26-27, a delegation from Tax Executives Institute met with the Commissioner of Internal Revenue, John Koskinen, and senior officials of the Internal Revenue Service and with the Treasury Department's Assistant Secretary for Tax Policy, Mark Mazur, and senior officials of Treasury's Office of Tax Policy. The agendas from the meetings are published here. We will publish the meeting minutes at a later date.

1. Welcome and Introductions

2. Commissioner's 2015 Priorities

   The IRS is facing unprecedented challenges. Congress continues to cut the agency's budget, yet its enforcement responsibilities continue to grow. The IRS is losing critical leaders through retirement and normal attrition, yet the agency is under a hiring freeze with only a handful of "mission-critical" exceptions. TEI commends Commissioner Koskinen for his tireless work and dedication to the agency during this perfect storm and invites a discussion of his priorities during calendar year 2015, particularly the initiatives and operating divisions that will have priority in the current atmosphere of doing less with less.

3. Leveraging Stakeholders

   In times of budget cuts, difficult choices must be made. In making these decisions and charting a course for the future, we urge IRS leaders to recognize that more can be achieved when working in collaboration with stakeholders. TEI and the IRS have a long history of working together to improve efficiency and overcome difficult issues, both in terms of program development and training. For example, the IRS called on TEI members to assist with the design of Schedule M-3 and to better understand the use of pass-through entities by large business taxpayers. TEI worked hand-in-hand with representatives of LB&I's predecessor in designing and implementing the Quality Examination Process. And, TEI members and IRS officials have engaged in joint negotiation skills training, which proved invaluable to both parties.

   Agent training and industry knowledge are two critical aspects of conducting efficient and effective examinations of large business taxpayers. These are also two areas that may be adversely impacted by the current budget situation. TEI and its chapters would welcome the opportunity to work collaboratively with the IRS to develop and conduct joint training programs across the United States that would include tax technical issues, process issues, and industry issues. Such training could be held at or near IRS offices to minimize travel expense. We invite discussion of the IRS's interest in pursuing this or other joint initiatives with TEI.

   TEI appreciates the IRS's continuing participation in its national, regional, and chapter educational events. These interactions allow revenue officials and taxpayers to communicate and establish relationships outside the enforcement environment to the benefit of both parties. It also provides an effective avenue for the IRS to communicate technical positions and policy shifts with one of its largest stakeholder groups and serves as a means for gathering unfiltered taxpayer comments on tax administration issues. TEI members are concerned that the current budget situation may curtail IRS participation in stakeholder events, and we invite discussion on this topic, as well as any recent changes to IRS operating procedures that may impact IRS participation in stakeholder events. We also invite discussion of things TEI can do when planning events with IRS officials that avoid running afoul of travel restrictions, for example holding TEI events in office buildings near or adjacent to IRS offices.

4. Compliance Assurance Process (CAP)

   For the past several years, leadership of TEI's CAP subcommittee has had monthly conference calls with LB&I officials who oversee the CAP program. During these calls, the parties have discussed best practices, common concerns, and proposed solutions to recurring problems encountered by CAP agents and taxpayers during CAP examinations. We believe this cooperative, transparent environment is key to the CAP program and are hopeful that it will continue.

   Our members have generally been pleased with the CAP program's results, and the IRS professionals charged with implementing and administering the program should be commended. CAP is a best practice that should serve as a model for enhancements to LB&I's general examination process. It is the ideal mechanism for identifying more compliant and transparent taxpayers and providing them a more efficient audit. The program breaks down, however, when taxpayers provide the transparency and cooperation required under CAP, yet CAP examination teams fail to conduct a more efficient audit. As CAP continues to evolve and expand, we encourage the IRS to stay true to CAP'S guiding principles of risk-based, issue focused examinations within a designated timeframe. Adherence to these principles will not only increase the efficiency of CAP examinations, thereby saving IRS resources that can be reallocated to increase audit coverage, but also increase the number of taxpayers that are willing to participate in the program. With this backdrop, we invite a discussion of the following points:

   * How does the CAP program fit within LB&I's strategic plan of increasing the efficiency and effectiveness of its examinations?

   * Does LB&I plan to expand CAP to a larger population of taxpayers? If so, does LB&I have the resources necessary to process taxpayers through Pre-CAP and into CAP?

   * Does LB&I anticipate allocating increased resources to training agents on CAP principles and conducting CAP audits?

   * Expansion of CAP Maintenance seems to be an efficient and low risk means of saving scarce IRS resources that can be reallocated to higher risk taxpayers. Does LB&I plan to ease the entry requirements of CAP maintenance so a larger population of taxpayers can participate?

   * Given budget pressures, what steps has the IRS taken to ensure there will be sufficient resources to resolve complex issues within expedited CAP timeframes, particularly international tax issues?

   * What steps is LB&I taking to ensure the international and other specialists who assist audit teams understand and follow CAPs fundamental principles of focusing the examination on particular issues and resolving them in expedited timeframes?

   As CAP has expanded, discrepancies in how CAP audits are administered in the field have grown. To illustrate, CAP taxpayers across the country have reported that their exam teams do not conduct "issue focused" exams, but rather continue with a regular audit plan, including numerous IDRs unrelated to CAP disclosures. Further, CAP exam teams are suggesting that taxpayers may be removed from CAP if they continually receive Partial Acceptance Letters, file refund claims after the tax return is filed, or claim credits or deductions for items typically considered contentious and time consuming, e.g., research and exploration credits. These practices are contrary to CAP principles and consume significant time and resources for taxpayers and CAP agents. The pervasiveness of these incidents suggests an erosion of the shared vision by LB&I CAP teams and taxpayers of the purpose, goals and guiding principles of CAP. A training program jointly developed by LB&I and TEI members could provide guidance on the more significant problem areas and develop a broader shared understanding of how CAP is supposed to work in the field. Would LB&I consider participating in such a project?

   In February 2014, LB&I's Transfer Pricing Operations unit (TPO) released examination guidelines known as the "Transfer Pricing Roadmap." In connection with the rollout of the guidelines, Sam Maruca, who then served as LB&I's transfer pricing director, explained that the roadmap "is structured under 'a notional 24-month audit' [but] there is nothing...