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Business Tax

IRS Adds Fuel Credits, Research Issues to Compliance Campaigns

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

The IRS Large Business and International (LB&I) division has announced two new compliance campaigns. The new campaigns focus on fuel tax credits and research issues.

Background.

On January 31, 2017, LB&I announced the identification and selection of 13 initial compliance campaigns. With the new compliance campaigns, LB&I essentially shifted to examinations based on compliance issues that LB&I determined presented greater levels of compliance risk, thereby improving return selection. The IRS initially selected 13 compliance issues when it rolled out this strategy. See IRS rolls out Large Business and International campaign audit strategy (02/02/2017).

Since the initial 13 campaign announcement, LB&I has added additional campaigns, see IRS adds five new issues to LB&I’s campaign audit strategy (11/09/2018) and LB&I adds, updates compliance campaigns on its list of active campaigns (11/25/2019).

New compliance campaigns.

The new compliance campaigns focus on fuel credits and research issues. The fuel tax campaign will concentrate on taxpayers who received fuel mixture credits under Code Sec. 6426 but did not treat the credits as a reduction in their excise tax liability under Code Sec. 4081.

The campaign announcement mentions the Federal Circuit’s decision in Sunoco Inc., (CA Fed Cir 2018) 122 AFTR 2d ¶2018-5389, as the impetus for this campaign. In Sunoco , the Federal Circuit determined that any reduction in excise tax liability resulting from the Code Sec. 6426 credit correspondingly reduces the deduction against income tax. According to the campaign announcement, the goal of this campaign is to bring into compliance taxpayers who maintain a position contrary to the decision in Sunoco.

The research issues campaign will address research credit and research and experimental expenditures issues. According to the campaign announcement, research credit and research and experimental expenditures under Code Sec. 41 and Code Sec. 174 are some of the most prevalent tax issues within LB&I.

This campaign will employ various audit techniques including issue-based examinations, form updates, and requests for guidance. LB&I will consider other audit techniques as the campaign progresses.

According to the campaign announcement, this campaign’s objective is to promote voluntary compliance, focus resources on the highest risk research issues and increase consistency of examinations.

To continue your research on credits and payments allowable for biodiesel mixtures, alternative fuels, and alternative fuel mixtures, see FTC 2d/FIN ¶ W-1500 et seq.; FTC 2d/FIN ¶ W-1700 et seq.; United States Tax Reporter Excise ¶ 64,264 et seq.; United States Tax Reporter Excise ¶ 64,274 et seq; For the credit for increasing research activities, see FTC 2d/FIN ¶ L-15300 et seq.; United States Tax Reporter ¶ 414 et seq.

 

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