Corporations have short period to apply for IRS CAP program

By Sally P. Schreiber, J.D.

Corporations that want to participate in the Compliance Assurance Process (CAP) for the 2020 program year must apply between Sept. 16 and Oct. 31, the IRS announced on Thursday (IR-2019-154). This year marks the first time since 2015 that new applicants have been allowed to apply to participate in the CAP program. The IRS also announced expansions to the program.

Corporations that are accepted into the program can work with the IRS to resolve tax issues before filing their tax returns. The CAP program was developed by the Large Business and International Division. The program accepts participants for one year at a time and requires corporations to execute a memorandum of understanding each year.

To qualify for the program, a corporation must:

  • Have assets of $10 million or more;
  • Be a U.S. publicly traded corporation with a legal requirement to prepare and submit SEC Forms 10-K, 10-Q, and 8-K; and
  • Not be under investigation by, or in litigation with, any government agency that would limit the IRS’s access to current tax records.

To participate in CAP, corporations must adhere to CAP program limits on the number of open years. For 2020, the IRS expanded the list of open-year exceptions and developed a process for new applicants that are currently under IRS examination. If a corporation is currently under examination, it must not have more than one filed return and one unfiled return open on the first day of the applicant’s CAP year. For a new applicant currently under examination to be eligible to participate, the current cycle must be closed and the subsequent cycle not started on the first day of the applicant’s CAP year.

Because the CAP program requires openness and transparency between the IRS and participants, the program is not available to corporations that fail to exhibit cooperative behavior. Examples of uncooperative behavior include not meeting information document request deadlines or providing incomplete responses; not participating in meaningful or good-faith issue resolution discussions; not thoroughly disclosing a material issue in a timely manner; not disclosing a tax shelter or listed transaction; not disclosing an investigation or litigation that limits IRS access to current corporate records; filing claims or requesting appeals frequently; and not following the terms of the CAP program.

Sally P. Schreiber, J.D., (Sally.Schreiber@aicpa-cima.com) is a Tax Adviser senior editor.

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