IRS Extends Comment Period on Proposal on Uncertain Company Tax Positions, Seeks Comment on How Consolidated Groups Should Report

The IRS has extended the comment period from March 29, 2010 to June 1, 2010 on a proposed schedule requiring corporate filers to provide information about their FIN 48 and other uncertain tax positions that affect their federal income tax liability. Announcement 2010-17. The schedule would require a company to annually disclose a concise description of each uncertain tax position for which the company or a related entity has recorded a reserve in its financial statements and the maximum amount of potential federal tax exposure if the company’s position is not sustained. Announcement 2010-9. In addition to specific matters in the original announcement, the IRS invited comment on how members of a consolidated group for financial statement or tax return purposes should report uncertain tax positions.

In recent remarks, IRS Commissioner Douglas Schulman explained that concise description means a few sentences on the nature of the issue, and not pages of factual description or legal analysis. The sufficiency of a description will depend on the taxpayer’s particular facts and the nature of the underlying transaction. As currently contemplated, this concise description will include the rationale for the position and a concise general statement of the reasons for determining that the position is an uncertain tax position.Reporting uncertain tax positions would be required at the time a return is filed by companies that have a financial statement prepared under FIN 48 or other similar accounting standards reflecting uncertain tax positions and assets over $10 million. The schedule would be filed with the Form 1120, U.S. Corporation Income Tax Return, or other business tax returns.

In announcing the extended comment period, the IRS said that the target date for releasing a draft schedule based on the proposal described in Announcement 2010-9 is early April 2010. The IRS plans to require the filing of the new schedule for returns relating to the calendar year 2010 and for fiscal years that begin in 2010. The schedule will not be implemented for 2009 tax returns filed in 2010.

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