Resolving contentious issues through the IIR Program

By Rosemary Sereti, CPA, MST, Washington

Editor: Jacob Puhl, J.D., LL.M.

The Industry Issue Resolution (IIR) Program is one of many compliance programs the IRS uses to assist taxpayers in resolving contentious tax issues. Other programs the IRS uses to resolve those issues include the Compliance Assurance Process (CAP), the Pre-Filing Agreement Program, and private letter rulings. The IIR Program is a strategic alternative to these tools, but it generally requires taxpayers to partner with their competitors.

The "going it alone approach" to issue resolution may be appropriate in certain scenarios, but the IIR Program was designed to resolve issues that affect a larger number of taxpayers. While some taxpayers may be reluctant to team with competitors, the IIR approach to issue resolution is a strength-in-numbers strategy. Using it as a tool to avoid protracted examinations, the IRS has over the years expanded the scope of the IIR Program to help taxpayers and the IRS resolve contentious issues affecting large groups of diverse taxpayers.


Since it issued Notice 2000-65, the IRS has been resolving contentious and industry-specific tax issues via the IIR Program. The IRS originally announced the program on a pilot basis but made it permanent in Notice 2002-20. With the release of that notice, the IRS not only made the IIR Program permanent, but it also expanded the program's scope.

Originally, the IRS limited the scope of the IIR Program to one category of taxpayer. According to Notice 2000-65, the Service's stated objective of the pilot program was to establish a procedure to address tax issues on a prefiling basis by providing guidance on issues that were common to a significant number of Large and Mid-Size Business (the former LMSB, subsequently renamed Large Business & International (LB&I)) taxpayers. With the issuance of Notice 2002-20, the IRS expanded the IIR Program to allow for the consideration of issues for all business taxpayers to include large, midsize, and small businesses. Not long after this notice was issued, it was superseded by Rev. Proc. 2003-36, which served as the primary guidance for the IIR Program for over a decade.

For over 15 years, the IRS limited the scope of the IIR Program and only considered business taxpayers' issues. The IRS augmented this policy with the issuance of Rev. Proc. 2016-19. In that procedure, the IRS opened the program to entities under the jurisdiction of the Tax Exempt & Government Entities (TE/GE) Division. Notwithstanding this scope expansion, the IRS retained the change to submission procedures that it made in Rev. Proc. 2003-36. In that procedure, the IRS changed the process by allowing issues to be submitted at any time under the IIR Program. Prior to Rev. Proc. 2003-36, Notice 2002-20 required issues to be submitted for consideration by April 30, 2002.

Types of issues

Over the 18-year evolution of the IIR Program, the IRS has issued guidance for 32 IIR Program submissions. The guidance is available via an IIR webpage (available at While the IRS has referred to the program as the Industry Issue Resolution Program, five of the 32 issues for which the IRS has published guidance are unrelated to any particular industry. For example, the IRS accepted and issued guidance for two issues that related to employment tax matters. One of those matters pertained to circumstances for which facsimile signatures had been authorized for use instead of an original signature on employment tax forms. The second employment tax matter for which the IRS published guidance pertained to the reporting of employment taxes in the context of mergers, consolidations, and certain acquisitions.

The other 27 areas are readily associated with particular industries. Stakeholders with interests in the auto and trucking industry used the program more than any other industry. A detailed analysis of the IIR Program webpage reveals that 22% of the issue categories for which the IRS has published IIR guidance have related to tax matters in auto and trucking. Other stakeholders in certain industries (e.g., restaurants, cable TV, banking, power generation, and insurance) have each sought and received guidance in more than one instance. Other stakeholders with interests in golf courses, pipeline construction, oil and gas, motion pictures, and telecommunications have sought and received guidance from the IRS using the IIR Program at least once.

Although a diverse group of industries has sought guidance through the IIR Program, requesters have tended to seek guidance about capitalization matters more frequently than any other issue category. Capitalization matters make up 38% of the 32 issues for which industry stakeholders have sought and received guidance. While the IRS published guidance in 21 instances for depreciation, depletion, amortization, and general capitalization matters for four industries, it has also published guidance more than once for three other issue categories (i.e., bad debts, excise taxes, and insurance reserves). Finally, six issues were unique in that the IRS issued guidance one time for those issue categories.

In Rev. Proc. 2016-19, the IRS not only stipulated the types of issues that are appropriate for the IIR Program, but also indicated the types of issues for which it will not provide any guidance. The IRS will not consider an issue unless it is under the jurisdiction of the LB&I, Small Business/Self Employed (SB/SE), or TE/GE operating divisions. The IRS stated that the issue must not involve transactions that lack a bona fide business purpose or transactions with a significant purpose of improperly reducing or avoiding federal taxes. The IRS also will not consider issues involving transfer pricing or international tax treaties. Finally, the issues must not be unique to one entity or a small number of entities.

Submission requirements and selection criteria

According to Rev. Proc. 2016-19, a requester may submit a request for the IRS to consider an issue at any time during a calendar year. A requester should represent a significant number of entities and should specifically represent a cross section of the entities that have experience with the issue that is the subject of the IIR request. In Rev. Proc. 2016-19, the IRS provided an example of a request scenario. In that example, the IRS identified the requester (a retail industry group), which represented a significant number of large, nationwide retailers as well as independent retailers. While the requester in the example did not represent all retailers, the issue in the example (i.e., Sec. 263(a) capitalization) was common to all member retailers.

Once the requester and the represented taxpayers have been identified and a conclusion has been reached that the issue clearly affects a large group of taxpayers, a submission document must be prepared. While the IRS does not require a particular format for a submission document, a request should be emailed to the IRS and include the following elements:

  • An issue statement;
  • A description of why the issue is appropriate for the IIR Program;
  • An explanation of the need for guidance;
  • An estimate of the number of entities affected by the issue and a description of how the requester relates to those entities; and
  • The name and telephone number of an individual to contact if additional information is needed.

Regarding the description of why the issue is appropriate for the IIR Program, Rev. Proc. 2016-19 lists six characteristics that the IRS will consider. According to the revenue procedure, an issue is appropriate for the program if it has two or more of six characteristics. Four of the characteristics pertain to the facts of the issue: the issue requires extensive factual development; the proper tax treatment of a common factual situation is uncertain; the uncertainty results in frequent, and often repetitive, examinations of the same issue; and collaboration would facilitate proper resolution of the tax issues and would promote an understanding of the views and business practices of the affected taxpayers.

In addition to the fact-related characteristics mentioned above, the IRS considers two exam-related characteristics appropriate for consideration under the IIR Program. The first is that frequent and repetitive examinations require significant resources of both the IRS and affected parties. The second is the issue is significant and impacts a large number of entities.

Recommendations for resolution

In addition to including the elements discussed above in the submission request, the requester may also include a recommendation as to how the issue may be resolved. Before including such a recommendation, one should review the published guidance that has been issued for the 32 IIR submissions on the IIR Program website.

The IRS has issued 44 guidance documents for the 32 IIR submissions noted above. Revenue procedures have been the most frequently used mode of guidance, and LB&I directives and revenue rulings have also frequently been used.

Continued controversy mitigation

To date, the majority of the tax issues included in the IIR Program have been for LB&I taxpayers. As it continues to focus limited resources on areas of noncompliance, the IRS will likely continue to offer the IIR Program as a controversy mitigation tool. From LB&I's perspective, the program has been one of the various treatment streams available to successfully resolve a campaign compliance issue that affects a large number of stakeholders.

With the expansion of the IIR Program to other operating divisions within the IRS, it is important that taxpayers and their advisers not only understand what types of issues are appropriate for the program, but also to be open to partnering with the IRS to resolve tax issues with it.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional adviser. Deloitte, its affiliates and related entities, shall not be responsible for any loss sustained by any person who relies on this publication.


Jacob Puhl, J.D., LL.M., is a former manager at Deloitte Tax LLP in Washington.

For additional information about these items, contact Alex Brosseau, CPA, MST at 202-661-4532 or

Unless otherwise noted, contributors are members of or associated with Deloitte Tax LLP.

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