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FEI Commends IRS For Reconsidering Policy On Access To Tax Accrual Workpapers
January 22, 2008
FEI Summary
On Jan. 22, 2008, FEI’s Committee on Taxation (COT) sent a letter to Linda Stiff, acting commissioner, Internal Revenue Service (IRS) and Eric Solomon, assistant secretary for Tax Policy, U.S. Department of Treasury, commending the IRS for reconsidering a matter relating to IRS access to tax accrual workpapers.
The letter follows on an earlier letter sent in September, 2007 in which COT asked the IRS to reconsider its then-position on whether certain tax accrual workpapers fell within the IRS’ ‘policy of restraint.’
Previously, IRS chief Counsel Notice 2007-015 stated that effective tax rate reconciliation workpapers are neither ‘tax accrual workpapers’ not ‘audit workpapers’ as those terms are defined in the Internal Revenue Manual (IRM) and thus were considered by the IRS to be "tax reconciliation workpapers" which were NOT within the scope of the IRS policy of restraint.
COT had pointed out in its September letter, as described in the more recent letter:
· “the conclusions reached in [Notice 2007-015] ignored the fact that the preparation of an effective tax rate reconciliation satisfies a U.S. GAAP financial reporting requirement and that neither the effective tax rate reconciliation nor the underlying workpapers constitute workpapers used in assembling and compiling financial data preparatory to placing it on a tax return," which is how tax reconciliation workpapers are defined in the IRM,” and
· “irrespective of the intent of the Notice 2007-015, it created a perception that the existing IRS policy of restraint in requesting access to tax accrual workpapers was being diminished and that, based on feedback from FEI member companies, field agents appeared to perceive the Notice as an invitation to be more aggressive with respect to tax accrual workpapers covered under the policy of restraint. “
COT’s letter filed on January 22 takes note of the fact that the IRS revoked Notice 2007-015, as announced on Dec. 31, 2007 in Chief Counsel Notice 2008-008. On Dec. 31, 2007, IRS announced in Chief Counsel Notice 2008-008 the revocation of Chief Counsel Notice 2007-015.
The letter, signed by COT Chair David A. Heywood, states: “We commend the IRS for its consideration of the concerns expressed by taxpayers and tax professionals regarding effective tax rate reconciliation workpapers and support the decision to withdraw Notice 2007-015.”
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