IRS Institutes LB&I Directive Creating New Process for Research Issue Review

March 2020

Last month, the IRS issued a notice creating a Research Issues Campaign to review research credit and deduction claims for Large Business and International Division (LB&I) taxpayers. In May 2019, the IRS's LB&I division also implemented data analytics to identify the largest and most complex corporate taxpayers. The Large Corporate Compliance (LCC) program replaced the Coordinated Industry Case (CIC) program. Most recently, on March 10, 2020, the IRS issued a Directive on the Centralized Risking of Research Issues under IRC §§ 41 & 174 (Risk Directive).


Detail

The Risk Directive creates a Research Risk Review Team (RT) composed of subject matter experts, engineers, revenue agents, and other specialists. The RT will focus its efforts on identifying high-risk returns. However, the Directive provides only general guidance as to what constitutes a high-risk return, whether regarding industry, credit amount, prior audit history, or third-party service provider. The intent behind the RT is that it will function as a knowledge and resource bank for field employees and result in increased focus and more centralized management of audits.

The Directive applies to LB&I exams of Industry Cases, LCC cases, and all claims and amended returns. It does not apply to Research Issues Campaign Inventory and Compliance Assurance Process (CAP) cases. The Directive will apply to any new research issues identified on or after April 1, 2020, as well as any subsequent year or related return pickup with a research issue under exam and claims or amended returns received during an examination. Claims currently under audit may be wrapped into evaluation under this new Directive if the audit is expanded to include research issues identified after March 31, 2020.
 
 


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