IRS Accepting Applicants for the 2024 Compliance Assurance Process

The IRS recently announced the opening of the application period for the 2024 Compliance Assurance Process (CAP) program. Applications will be accepted from September 6 until October 31, 2023, and the IRS will inform applicants if they are accepted into the program in February 2024.

CAP was launched as a pilot program in 2005 and made permanent in 2011. As stated by the IRS, CAP helps large corporate taxpayers improve federal tax compliance. While CAP is not suitable for every taxpayer, it is designed to deliver significant benefits to taxpayers and the IRS by:

• Resolving issues before filing and providing tax certainty sooner;
• Allowing real-time review of transactions and promoting voluntary compliance;
• Providing resource and time savings to both the IRS and taxpayers;
• Complementing current corporate governance and accountability;
• Reducing the need to amend state tax returns; and
• Providing earlier identification of new and potentially emerging issues.

To be eligible to apply for CAP, applicants must:

• Have assets of $10 million or more;
• Be a U.S. publicly traded corporation with a legal requirement to prepare and submit SEC Forms 10-K, 10-Q, and 8-K, or an entity accepted into CAP since 2020 that agrees to provide the IRS quarterly and audited financial statements; 
• Not be under investigation by, or in litigation with, any government agency that would limit the IRS's access to current tax records.

If currently in the CAP program, applicants may not have more than one filed return and one unfiled return open on the first day of the applicant’s CAP year.

For new applicants, applicants currently under examination may have no more than three tax years open for examination on the first day of the applicant’s CAP year, and the examination team determines that these open years will close from the examination group no later than 12 months after the first day of the applicant’s CAP year if accepted.

The application is available on the CAP Program webpage and should be submitted to the Account Coordinator or Case Manager assigned to the case for returning applicants, or emailed to the CAP Program mailbox for new applicants. 

A taxpayer accepted for CAP will be provided a copy of the CAP Memorandum of Understanding (MOU) and must sign the MOU and return to the Account Coordinator by the requested date to secure participation in the program.

If accepted, a taxpayer will participate in the CAP Phase and, at the IRS’s discretion, may go through the CAP Maintenance and Bridge phases during its time in the CAP program.

The CAP Phase is when the taxpayer and the IRS work contemporaneously to achieve compliance and certainty by resolving all or most tax positions prior to the filing of a tax return. The Compliance Maintenance Phase  is when the IRS, at its discretion, will adjust the level of review of the tax year based on the complexity and number of issues. Finally, the Bridge Phase is for taxpayers whose risk of noncompliance does not warrant the continual use of LB&I examination resources, when the taxpayer may submit a request for a pre-filing agreement for specific issues on which it wants certainty, but the IRS will otherwise not review any issues and will not provide any assurance.

For additional information, visit the CAP Frequently Asked Questions webpage or contact your BDO advisor.