Heather Malloy, commissioner, Large Business and International (LB&I) Division, at the IRS, explained how knowledge management is going to be vital for the development of taxpayer-official relationships.
Addressing delegates on day two of the Tax Executive Institute’s annual conference in San Francisco, Malloy said: “Law and accounting firms are on top of the latest developments in tax law and it is about time the IRS gets to this level too.”
“At the moment we operate with a tiered issue process. This needs to change. We will implementing a system where information is shared across the department at all levels,” said Malloy.
Malloy explained that the first step in introducing this new system began this year with the launch of a small number of issue practice groups.
“These groups include two or three full time technical advisers and a handful of examiners who participate on a part time basis. The aim is to share knowledge and build all of our understanding of particular issues,” said Malloy.
Priorities for year ahead
The commissioner also told delegates what the main priorities for the department are over the coming year.
“Just like all the businesses represented here at this event, the IRS is trying to do more with less and this reflects in our strategy for the next 12 months,” said Malloy.
The head of the LB&I said her department will only select the best tax returns to work on, treat these returns more efficiently and effectively, and resolve any issues wherever appropriate.
Despite these proposals sounding decidedly vague, Malloy explained that restrictions on resource are limiting the amount of work the department can undertake.
“We need to use our resources more wisely and take advantage of our expertise,” said Malloy.
Transfer pricing
The commissioner also explained the benefits of August’s transfer pricing reshuffle within the IRS.
The Service is bringing its advance pricing agreement (APA) and mutual agreement procedure (MAP) programmes into LB&I’s international operation. They had been part of the Office of Chief Counsel. The two programmes will be under the direction of Sam Maruca, the IRS’s new transfer pricing director in the LB&I.
The APA programme enables taxpayers to complete pre-filing agreements with the authorities on transfer pricing, while the MAP programme allows for the bilateral resolution of transfer pricing disputes with US treaty partners.
“By merging all of this together, we hope to have the ideal model for a transfer pricing audit within the year,” said Malloy.
Best practice
Malloy concluded her address by explaining that the IRS will be, wherever possible, to resolve issues without seeking litigation.
“One of my aims is to clearly define expectations so that taxpayers and officials know how to behave in an audit and what their options are in resolving the matter,” said Malloy.
