IRS Directors “Own” Shelters

With the new Industry Issue Focus initiative of its Large and Mid-Size Business Division, the IRS is poised to concentrate more resources on its top enforcement priorities, which are weighted toward business and industry. The new strategy gives IRS directors compliance “ownership” of each of 14 Tier 1 issues, plus listed transactions. The latter category numbers 31 types of deals subject to scrutiny. The initiative also identifies 11 Tier 2 issues involving fewer taxpayers and smaller amounts, but with each also getting its own director. The expanded list, released in mid-March, includes two Tier 1 tax shelters the IRS had not previously identified as ripe for compliance attention: distressed asset/debt and redemption bogus optional basis. Also in Tier 1 are the section 199 deduction for domestic production activities, backdated stock options and offshore transfer of intangibles. Many of the issues are headed by IRS directors with responsibility for financial and industrial sectors, said Rob Hanson, a partner in Ernst & Young’s Federal Services Group.

“The IRS very much is moving toward an industry focus,” he said.

The new configuration is intended to promote consistency in enforcement, give IRS industry directors line management authority over significant cases and sub-industries and help the IRS keep pace with evolving abusive tax strategies. For more, see www.irs.gov/businesses/article/0,,id=167377,00.html.