"News Analysis: Demystifying the End of LB&I Tiering"Tax Notes Today
George Hani discusses the expected replacement of the IRS Large Business and International Division's (LB&I) tiered issue structure. Hani said that treating the tiered system as if it has been retired ignores that some types of cases -- such as foreign tax credit generators and transfer pricing issues -- are still being litigated under the guidelines created by the old tiers. But he agreed that tiering is "dying a silent death because the intense coordination is being ignored in practice." Similarly, issues put on monitoring status are dormant because that placement indicates that there will be no more guidance to the field, he said.
From the audit perspective, tiering became irrelevant for many issues because caused taxpayers to adjust their return positions based on the audit techniques prescribed by LB&I, so many taxpayers were able to avoid recurrence, Hani explained. But rather than abandoning the structure outright, it seems the government is letting the tiered system run its course, he said, noting that issues that are the subject of continuing disputes, like the research credit, will be addressed by an issue practice group (IPG).
Hani said the lack of detailed information on IPGs can be problematic for taxpayers and practitioners dealing with previously tiered issues in an exam. But he said that allowing IPGs to function as an elective resource without becoming involved in the audit process will give exam teams more independence and restore a more decentralized approach. Hani said the lack of details may be deliberate to allow flexibility. "I can see IPGs evolving for some period of time as LB&I figures out what works and what doesn't," he said.