[Federal Register Volume 75, Number 174 (Thursday, September 9, 2010)]
[Proposed Rules]
[Pages 54802-54804]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-22624]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-119046-10]
RIN 1545-BJ54


Requirement of a Statement Disclosing Uncertain Tax Positions

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

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SUMMARY: This document contains proposed regulations allowing the IRS 
to require corporations to file a schedule disclosing uncertain tax 
positions related to the tax return as required by the IRS. This 
document also provides notice of a public hearing on these proposed 
regulations.

DATES: Written or electronic comments must be received by October 12, 
2010. Outlines of topics to be discussed at the public hearing 
scheduled for October 15, 2010, at 10 a.m., must be received by October 
12, 2010.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-119046-10), room 
5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-
119046-10), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue, NW., Washington, DC, or sent electronically via the Federal 
eRulemaking Portal at http://www.regulations.gov (IRS REG-119046-10). 
The public hearing will be held in the IRS Auditorium, Internal Revenue 
Building, 1111 Constitution Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Kathryn Zuba at (202) 622-3400; concerning submissions of comments, the 
public hearing, and to be placed on the building access list to attend 
the public hearing, Oluwafunmilayo Taylor of the Publications and 
Regulations Branch at (202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: 

Background

    This document contains proposed amendments to the Income Tax 
Regulations (26 CFR part 1) under section 6012 relating to the returns 
of income corporations are required to file. Section 6011 provides that 
persons liable for a tax imposed by Title 26 shall

[[Page 54803]]

make a return when required by regulations prescribed by the Secretary 
of the Treasury according to the forms and regulations prescribed by 
the Secretary. Treasury Regulation Sec.  1.6011-1 requires every person 
liable for income tax to make such returns as are required by 
regulation. Section 6012 requires corporations subject to an income tax 
to make a return with respect to that tax. Treasury Regulation Sec.  
1.6012-2 sets out the corporations that are required to file returns 
and the form those returns must take.
    In Announcement 2010-9, 2010-7 I.R.B. 408, and Announcement 2010-
17, 2010-13 I.R.B. 515, the IRS announced it was developing a schedule 
requiring certain taxpayers to report uncertain tax positions on their 
tax returns. The IRS released the draft schedule, Schedule UTP, 
accompanied by draft instructions that provide a further explanation of 
the IRS's proposal in conjunction with Announcement 2010-30, IRB 2010-
19. That announcement invited public comment by June 1, 2010, on the 
draft schedule and instructions, which would be finalized after the IRS 
received and considered the comments regarding the overall proposal and 
the draft schedule and instructions.
    The draft schedule and instructions provide that, beginning with 
the 2010 tax year, certain corporations with both uncertain tax 
positions and assets equal to or exceeding $10 million will be required 
to file Schedule UTP if they or a related party issued audited 
financial statements. The draft schedule and instructions stated that, 
for 2010 tax years, the IRS will require corporations filing the 
following returns to file Schedule UTP: Form 1120, U.S. Corporation 
Income Tax Return; Form 1120 L, U.S. Life Insurance Company Income Tax 
Return; Form 1120 PC, U.S. Property and Casualty Insurance Company 
Income Tax Return; and Form 1120 F, U.S. Income Tax Return of a Foreign 
Corporation. The draft schedule and instructions do not require a 
Schedule UTP from any other Form 1120 series filers, pass-through 
entities, or tax-exempt organizations in 2010 tax years.
    A substantial number of public comments have been received 
regarding the draft schedule. The IRS and Treasury Department are 
currently reviewing the comments and anticipate publishing a final 
Schedule UTP in sufficient time to allow taxpayers to comply with the 
proposed effective date of these regulations.

Explanation of Provisions

    These proposed regulations require corporations to file a Schedule 
UTP consistent with the forms, instructions, and other appropriate 
guidance provided by the IRS. As explained in Announcement 2010-9, the 
United States federal income tax system relies on taxpayers to make a 
self-assessment of tax and to file returns that show the facts upon 
which tax liability may be determined and assessed. Section 601.103 of 
the Procedure and Administration Regulations. To discharge its 
obligation to fairly and uniformly administer the tax laws, the IRS 
must be able to quickly and efficiently identify those returns, and the 
issues underlying those returns, that present a significant risk of 
noncompliance with the Internal Revenue Code.
    Existing corporate tax returns do not currently require that 
taxpayers separately identify and explain the uncertain tax positions 
that are identified in the process of complying with generally accepted 
accounting principles. Instead, to identify uncertain tax positions the 
IRS must select a return for audit and expend a substantial amount of 
effort by revenue agents to determine what uncertain tax positions 
might relate to the return.
    Corporations that prepare financial statements are required by 
generally accepted accounting principles to identify and quantify all 
uncertain tax positions as described in Financial Accounting Standards 
Board, Interpretation No. 48, Accounting for Uncertainty in Income 
Taxes (June 2006) (FIN 48). FIN 48 is now codified in FASB ASC Topic 
740-10 Income Taxes. Income Taxes, Accounting Standards Codification 
Subtopic 740-10 (Fin. Accounting Standards Bd. 2010). Other 
corporations that file returns of income in the United States may be 
subject to other requirements regarding accounting for uncertain tax 
positions. For example, corporations may be subject to other generally 
accepted accounting standards, including International Financial 
Reporting Standards and country-specific generally accepted accounting 
standards.
    Congress, through the Internal Revenue Code, has given the IRS 
broad authority and discretion to specify the form and content of 
returns, so long as the IRS promulgates regulations requiring persons 
made liable for a tax to file those returns. This regulation will 
authorize the IRS to require certain corporations, as set out in forms, 
publications, or instructions, or other guidance, to provide 
information concerning uncertain tax positions concurrent with the 
filing of a return. This information will aid the IRS in identifying 
those returns that pose the most significant risks of noncompliance and 
in selecting issues for examination. The IRS intends to implement the 
authority provided in this regulation initially by issuing a schedule 
and explanatory publication that require those corporations that 
prepare audited financial statements to file a schedule identifying and 
describing the uncertain tax positions, as described in FIN 48 and 
other generally accepted accounting standards, that relate to the tax 
liability reported on the return.

Proposed Effective/Applicability Date

    When adopted as a final regulation, this rule will apply to returns 
filed for tax years beginning after December 15, 2009, and ending after 
the date of publication of these rules as final regulations in the 
Federal Register.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required.
    This regulation will only affect taxpayers that prepare or are 
required to issue audited financial statements. Small entities rarely 
prepare or are required to issue audited financial statements due to 
the expense involved. It is hereby certified that this regulation will 
not have a significant economic impact on a substantial number of small 
entities pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 
6). Accordingly, a regulatory flexibility analysis is not required.
    Pursuant to section 7805(f) of the Internal Revenue Code, this 
notice of proposed rulemaking will be submitted to the Chief Counsel 
for Advocacy of the Small Business Administration for comment on their 
impact on small business.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written (a signed original and eight 
(8) copies) or electronic comments that are submitted timely to the 
IRS. The IRS and the Treasury Department request comments on the 
substance of the proposed regulations, as well as on the clarity of the 
proposed rules and how they can be made easier to understand. All 
comments submitted by the public will be made available for public 
inspection and copying. A public hearing has been scheduled for October 
15, 2010, beginning at 10 a.m. in the IRS Auditorium, of the Internal 
Revenue

[[Page 54804]]

Building, 1111 Constitution Avenue, NW., Washington, DC. Due to 
building security procedures, visitors must enter at the Constitution 
Avenue entrance. In addition, all visitors must present photo 
identifications to enter the building. Because of access restrictions, 
visitors will not be admitted beyond the immediate entrance area more 
than 30 minutes before the hearing starts. For information about having 
your name placed on the building access list to attend the hearing, see 
the FOR FURTHER INFORMATION CONTACT section of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments at the hearing must submit electronic or 
written comments and an outline of the topics to be discussed and the 
time to be devoted to each topic (signed original and eight (8) copies) 
by October 12, 2010. A period of 10 minutes will be allotted to each 
person for making comments. An agenda showing the scheduling of the 
speakers will be prepared after the deadline for receiving outlines has 
passed. Copies of the agenda will be available free of charge at the 
hearing.

Drafting Information

    The principal author of these regulations is Kathryn Zuba of the 
Office of the Associate Chief Counsel (Procedure and Administration).

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 is amended by adding 
an entry in numerical order to read as follows:

    Authority:  26 U.S.C. 7805 * * *

    Section 1.6012-2 is also issued under the authority of 26 U.S.C. 
6011 and 6012.

    Par. 2. Section 1.6012-2 is amended by adding paragraphs (a)(4) and 
(a)(5) to read as follows:


Sec.  1.6012-2  Corporations required to make returns of income.

    (a) * * *
    (4) Disclosure of uncertain tax positions. A corporation required 
to make a return under this section shall attach Schedule UTP, 
Uncertain Tax Position Statement, or any successor form, to such 
return, in accordance with forms, instructions, or other appropriate 
guidance provided by the IRS.
    (5) Effective/applicability date. Paragraph (a)(4) of this section 
applies to returns filed for tax years beginning after December 15, 
2009, and ending after the date of publication of the adoption of these 
rules as final regulations in the Federal Register.
* * * * *

Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2010-22624 Filed 9-7-10; 4:15 pm]
BILLING CODE 4830-01-P