IRS Division for Large and Midsize Businesses Begins Operations

Since its overhaul was mandated by Congress in the IRS Restructuring and Reform Act of 1998, the IRS has made considerable progress putting the various parts of its reorganization plan into place. A major component of the IRS restructuring was its split into four major operating divisions, replacing the regional office structure (see “Modernization Update: New IRS Up and Running,” JofA, Mar.00, page 72). The first of these to begin operations was the Tax Exempt and Government Entities Division in December 1999. The next one the IRS rolled out was the Large and Mid-Size Business Division (LMSB).

Commissioner Larry Langdon directs the LMSB, which will serve 210,000 corporations and partnerships with at least $5 million in assets. According to the IRS, these businesses pay $712 billion annually in taxes. The IRS hopes organizing the LMSB into five specific industry groups will allow the agency to build greater expertise and improve service. Those sections are as follows.

• Communications, Technology and Media. This section, headquartered in the San Francisco Bay area, is responsible for approximately 500 large businesses and 13,600 midsize businesses. It covers telecommunications, software and hardware development, broadcasting, publishing, sports franchises, hotels, gaming and other entertainment and recreational services.
• Financial Services and Healthcare. Headquartered in Manhattan, this section serves 5,000 large businesses and 41,600 midsize businesses. It covers industries such as commercial banking, savings and loans, securities and other financial services, health care and insurance.
• Heavy Manufacturing, Construction and Transportation. Tax law specialists in the areas of air and ground transportation, the aerospace and automotive industries, shipping, construction and real estate staff this section, which is headquartered in central New Jersey. Initially, it will serve nearly 103,000 taxpayers—1,500 of which are large businesses. The highly competitive and cyclical global environment in which these industries operate is extremely sensitive to fluctuations in interest rates.
• Natural Resources. Headquartered in Houston, this section serves 1,300 large businesses and 16,100 midsize businesses nationwide. It covers industries such as petroleum, mining, forest products, utilities and chemical engineering. The IRS expects significant growth in these industries from overseas activities and mergers among utilities, giving rise to very complex tax issues.
• Retailers, Food and Pharmaceuticals. This industry group, headquartered in Chicago, serves 1,000 large businesses and 28,200 midsize businesses. It includes food and beverage, retailing, pharmaceutical, agricultural commodities and farm industries—all of which have similar financial reporting and growth patterns.