Final Regs Issued Requiring Uncertain Tax Position Disclosure Statement

On December 13, the IRS issued final regulations requiring some corporations to file a Schedule UTP, disclosing their uncertain tax positions when filing a return (T.D. 9510). The final regulations adopt regulations proposed in September (REG-119046-10), with one change relating to the effective date. For prior coverage, see “IRS Issues Proposed Regs Requiring Disclosure of Uncertain Tax Positions.”

In January 2010, the IRS announced that it planned to start requiring certain corporate taxpayers to disclose uncertain tax positions annually in their federal income tax returns. For the 2010 tax year, corporations filing Form 1120, insurance companies filing Form 1120-L or 1120-PC, and foreign corporations filing Form 1120-F must disclosure their uncertain tax positions on Schedule UTP when the company or a related party issued audited financial statements and when the company has both (1) one or more uncertain tax positions that must be reported on Schedule UTP (as defined by the IRS in the instructions for Schedule UTP) and (2) total assets equal to or in excess of $100 million. The total asset threshold will be reduced to $50 million in 2012 tax years and to $10 million starting with 2014 tax years. The IRS is considering whether to extend UTP reporting to other taxpayers beyond those noted above for 2011 or later years.

The final regulations are effective upon their publication in the Federal Register.

AICPA Concerns

Throughout the unveiling of the IRS’ uncertain tax position reporting plan, the AICPA has raised numerous concerns and made many specific recommendations regarding the IRS’ original proposal. These concerns include:

  • The burden that will be placed on smaller taxpayers when the plan is fully phased-in in 2014 because the threshold was not increased;
  • The potential burden the plan may place in future years on pass-through entities and tax-exempt organizations;
  • Duplicative reporting and the ultimate benefit to the government of the information received.

The AICPA will continue to raise appropriate issues with the IRS on this matter and push for a study period as outlined in its initial comment letter, according to Edward Karl, AICPA vice president–Taxation. It will continue to communicate the concerns and advocate for its members regarding the disclosure of uncertain tax positions, Karl said.

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