TEI-IRS Large and Mid-Size Business Division liaison meeting agenda.

• Position: Tax Executives Institute

On February 19, 2008, Tax Executives Institute held its annual liaison with the Commissioner of the IRS's Large and Mid-Size Business Division, Frank Y. Ng, and other representatives of the LMSB. The agenda for the meeting follows.

1. Introduction

2. LMSB Recruiting and Training Strategy

   In 2006, the Treasury Inspector General for Tax Administration (TIGTA) concluded that "the future success of the LMSB Division is dependent upon ongoing efforts to replenish the workforce, provide education and training, and provide work inventory more effectively. Additionally, communication of workforce plans to employees and stakeholders is essential to the success of the strategic management of human capital." Michael R. Phillips, Final Audit Report--The Large and Mid-Size Business Division Has Effectively Implemented Its Human Capital Initiatives (Reference No.: 200630-099) (July 26, 2006).

   An effective recruitment and training strategy is an especially important component of LMSB's overall business plan because more than 50 percent of LMSB's management and executive staff will be eligible for retirement by FY 2010. As Paul Jones, former Chair of the IRS Oversight Board has observed, "About 4,000 IRS employees a year for the next four years are expected to retire, taking with them years of experience and valuable skills. Maintaining and growing workforce skills during this period of change must be addressed in a strategic manner."

   Tax Executives Institute agrees that an effective recruitment and training strategy must be a central component to LMSB's overall business plan. In a recent TEI member survey, respondents reported general satisfaction with their overall LMSB-taxpayer relationship but suggested that enhanced technical and industry training especially among agents and specialists would enhance the quality of their audit experience. This feedback coupled with the looming changes in IRS staff demographics underscores the importance of an effective recruiting and training strategy. TEI invites a discussion on the components LMSB's human resources strategy as well as a dialogue regarding how TEI can assist LMSB to achieve those goals.

3. Examination-Related Matters

   1. International Examination Program Update

      International tax compliance matters are occupying an increasingly larger piece of the overall LMSB agenda. More than half of the current Tier I Industry Issue Focus issues involve international tax, i.e., transfer pricing, abusive transactions involving hybrid instruments, section 936, section 965 (repatriation) transactions, and foreign tax credit generating transactions. In response to this emphasis, 150 IRS employees will be transferred to LMSB's compliance function from the Small Business/Self-Employed and Wage & Investment Divisions. Moreover, LMSB has also signalled its intention to continue working with other countries and organizations in bilateral information exchange as well as global cooperative efforts, including the Joint International Tax Shelter Information Centre (JITSIC) and the Organisation for Economic Co-operation and Development.

      As international matters take on a larger piece of the overall LMSB footprint, TEI invites a discussion on the following:

      * Beyond the Tier I issues, key international tax enforcement and compliance priorities for the coming FY;

      * The nature and scope of IRS's current participation in JITSIC;

      * The recent placement of an IRS tax attache in Beijing, including Asia-specific LMSB priorities;

      * LMSB programmatic changes following the release of the OECD's "Study into the Role of Tax Intermediaries'; and

      * Utilization of Mutual Assistance and Arbitration Procedures in LMSB examinations.

   2. Case Management/Risk Assessment

      1. Case Currency, Cycle Time and Coverage Rates

         TEI invites a discussion on and a comparative assessment of current case management statistics; specifically:

         * Overall "coverage rate" for large business: FY07--6.8% and FY08--6.6% (estimate);

         * CIC currency rate: FY06--67.1% and FY07--84.1%;

         * Examination Cycle Time: FY06--14.3 months and FY07--14.0 months; and

         * Total Cycle Time: FY06--34.3 months and FY07--32.4.

         What effect have the increases/decreases in LMSB exam closure rates and cycle times had on other LMSB priorities?

      2. Tax Data Utilization Assessment (including Schedule M-3, e-filed return information)

         Improving audit currency is closely linked with efforts to identify areas of compliance risk and non-compliance. Streamlining the survey and evaluation processes permits better targeting of exam resources to areas of identified risk. Over the past few years, the IRS has developed several tools to help the examination function operate more efficiently and effectively. Schedule M-3 (Net Income (Loss) Reconciliation for Corporations with Total Assets of $10 Million of More) is one such tool; it was designed to provide greater transparency regarding book-tax differences, thereby permitting the IRS to focus attention and resources on higher risk areas. A second example is the IRS's e-filing mandate for corporate tax returns; by affording the IRS quicker and more centralized access to return information, the survey and risk identification process can occur more efficiently.

         With regard to the M-3, TEI invites a discussion about how M-3 data have affected the IRS's currency initiative, especially in light of recent published reports that M-3 data have fallen short of expectations. See Crystal Tandon, Schedule M-3 Data Show Compliance Problems, 2007 TNT 240-4 (Dec. 13, 2007) (almost one-third of the schedules filed for tax years 2004 and 2005 contained errors, including (1) failure to tie Part 1, Line 4 to the appropriate financial statement amount, (2) omission of supporting schedules for Parts 1 and 2, (3) failure to disclose specific items, and (4)...