"Uncertain Tax Position?

[SunTaxMan]

I see this new regulation.

I am wondering how you define "Uncertain Tax Position." I am also wondering how IRS would phrase the definition. Seems like an awfully vague focus; read that as wide, WIDE latitude in audit and enforcement potential.

Comments?

[jainen]

>>Seems like an awfully vague focus; read that as wide, WIDE latitude in audit and enforcement potential<<

I presume you mean the proposal in Announcement 2010-9, not a new reg as such. The IRS is considering whether to require large corporations to disclose uncertain tax positions.

"Uncertain tax position" is a long-standing accounting term with a pretty particular meaning under generally accepted accounting standards. The announcement defines it in terms of those standards, "a tax position relating to a specific federal tax return for which a taxpayer is required to reserve an amount under FIN 48." It goes on to include the books of "a related domestic or foreign entity" that is not subject to FIN 48 but follows similar rules such as International Financial Reporting Standards (IFRS) or country-specific rules. The proposal apparently is directed only at large corporations, over ten million dollars. I doubt any of them consider it to be even a little bit vague.

In my opinion, this is more restrictive than Circular 230 currently allows, because it uses the "more likely than not" (one out of two) standard, rather than "realistic possibility" (one out of three). My understanding is that this refers only to the technical merits of the position based on published authority. It seems to me the new proposal is looking at situations in which a corporation could take a more aggressive position on its tax return than it would in its own books. That's not against the law, but the IRS is suggesting a bit of disclosure concerning it. As I said, there's nothing vague about it--the big corporations know exactly what this means.