On January 26, 2010, IRS Commissioner Douglas Shulman unveiled a new initiative that would require business taxpayers to report uncertain tax positions on their annual tax returns. According to Announcement 2010-9 (Jan. 26, 2010), corporations and other business taxpayers with total assets in excess of $10 million would be required to disclose uncertain tax positions that reflect U.S. federal income tax reserves determined under FIN 48 or other similar accounting standards. The initiative would require disclosure of a position for which a financial statement tax reserve must be established, as well as any other position for which no such tax reserve is required because either, the taxpayer expects to litigate the position, or the taxpayer has determined that the IRS has a general administrative practice not to examine the position. Umm, wow.
In the Announcement, the IRS claims that it will continue its current policy of restraint regarding requests for tax accrual workpapers during the course of examinations, although it reminds taxpayers that it has authority to compel the production of such information under United States v. Arthur Young, 465 U.S. 805, 815 (1984). The IRS plans to issue proposed regulations and may seek legislation imposing a penalty for failure to file a schedule or to make adequate disclosure. The IRS intends to publish the new schedule as quickly as possible and has invited public comments on the initiative to be submitted by March 29, 2010. Will state departments of revenue take the position that they have the authority to follow suit without state legislation? We will be watching.