1 IRS Circular 230 Required Notice- -IRS q regulations require that - - PDF document

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IRS Circular 230 Required Notice--IRS regulations require that we inform you q g q y that to the extent this communication contains any statement regarding federal taxes, that statement was not written or intended to be used, and it cannot be used, by any person (i) for the purpose of avoiding federal tax penalties that may be imposed on that person or (ii) to promote market or recommend to may be imposed on that person, or (ii) to promote, market or recommend to another party any transaction or matter addressed herein.

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IRS “ roundtable”

 What’s coming out of the IRS

stakeholders on the research credit? hi h

ld

h d i f h

 How things should change during an exam of the

research credit?

 What to expect going forward?  What to expect going forward?

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IMT vs. IPG

Issue Management Team Issue Practice Group

 Mandate for local exam t  Advisor to the local exam team  Tech. Advisors making determination based on high  Not a mandate  All IMT members had to reapply g level facts  Too much time held up in the process by a few reapply  Research credit is organized under general business credits the process by a few individuals  IRS felt too much time wasted and reorganized in credits  Providing guidance but also a avenue for taxpayer l i wasted and reorganized in August 2012 elevation

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Proposed S

• lutions

 Core Research

 Core Research Areas to Reduce Audit Time  Areas generally >80%

R&E

 Areas generally >80%

R&E

 Factors generally indicative of Core Research  Limitations Exist

Limitations Exist

 Goal: Reduce time spent by IRS

examination team and taxpayers on areas where there should be limited disagreement on qualifying should be limited disagreement on qualifying activities.

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Pharma Industry

 Administrative guidance

shortly

W ld id ATG

S tage 1: Preclinical

 Would override ATG

 S

tage 1 & S tage 2: “ Core Research”

S tage 2: Clinical Trial S tage

Research

 Certification of expenses?  S

tage 3 & S tage 4 are not

S tage 3: Regulatory Review S tage 4: Post

 S

tage 3 & S tage 4 are not assumed “ Non Qualified”

S tage 4: Post Approval

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Proposed S

• lutions

 Quality Assurance Process for Practitioners

 Practitioners to provide a level of quality in

assessing new clients.

 Provide a checklist at the beginning of the

exam of all the areas covered in their analysis. G l E bli h li d h h f

 Goal: Establish quality and thoroughness of

the practitioners’ analysis.

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Proposed S

• lutions

 S

tandard “ Flow of Work” for a research credit exam

 Modeled after a Phase/ Gate process

O l t th t h i d

 Once you clear a gate, that phase is agreed

upon and closed, preventing backtracking

 Keep both parties committed and accountable

Keep both parties committed and accountable

 Promote communication between the taxpayer

and IRS throughout the exam  Goal: S

et a standardized process to create accountability through the exam. Possible an appendix to the QEP an appendix to the QEP .

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Proposed S

• lutions

 S

ummary Claim S heet

 Minimum Documentation Requirements

 What does this look like?  Taxpayers and the IRS

need a list of mutually acceptable documentation acceptable documentation.

 Hotline Number  Joint Education  Joint Education  Acceptable documentation, if no time records  Central research credit processing

Central research credit processing

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Next Webinar December 4th

 Bayer Part I: S

ampling

 Dow/ UCC: S

upplies

 HP: Gross Receipts  Davenport: S

• ftware Development

 Bayer Part II: S

ubstantial Variance Rule

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