IRS Announces It Will Require the Disclosure of Uncertain Tax Positions

In a speech today before the New York State Bar Association, IRS Commissioner Douglas Shulman announced that, for certain corporations and other business taxpayers, it will require disclosure of uncertain tax positions on tax returns, but that it is otherwise retaining its policy of restraint on requesting tax accrual workpapers. In Announcement 2010-9 (Jan. 26, 2010), which was released contemporaneously with the text of the Commissioner’s speech, the IRS stated that the new requirement would apply to corporations and other business taxpayers who have assets of more than $10 million and who prepare (or are included in) financial statements for which U.S. federal income tax reserves are determined under FIN 48 or other similar accounting standards.

Taxpayers impacted by the Announcement will be required to annually disclose uncertain tax positions with their tax returns. Uncertain tax positions include those for which a reserve must be established under FIN 48 or other accounting standards, as well as other positions related to the determination of any federal income tax liability for which a taxpayer (or a related entity under Internal Revenue Code § 267(b), 318(a) or 707(b)) has not recorded a tax reserve because: (1) the taxpayer expects to litigate the position; or (2) the taxpayer has determined that the IRS has a general administrative practice not to examine the position.