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Robert Kovacev Discusses IRS Noncompliance Initiatives Focused on Large Corporations in Tax Notes

"IRS's New Corporate Crackdown Won't Be Resolved Overnight"

Tax Notes

Robert Kovacev discusses a new effort by the Internal Revenue Service (IRS) to address noncompliance by large corporations, which could be the start of a long, drawn-out fight between the agency and its targets. The IRS announced on October 20 the launch of a trio of corporate tax compliance initiatives as part of its second quarterly update on the spending of its Inflation Reduction Act (IRA) funding and implementation of new priorities. This includes the IRS reaching out to 150 U.S. subsidiaries of foreign corporations with "compliance alerts" to give them a chance to revise their aggressive tax positions. If a corporation receives an alert, that suggests that they "may well be on the receiving end of an IRS transfer pricing audit in the near future," Kovacev said. "I expect such a corporation would immediately review its transfer pricing position," he continued. "If the corporation believes its position is justified, and the IRS cannot be persuaded of that fact, then a years-long legal battle becomes very likely." According to Kovacev, the new initiatives coming out of the IRS are an important way for the agency to show that it is using IRA funding the way its backers in Congress want. "But announcing an initiative is the easy part," Kovacev said. "It will be years before we know whether these initiatives will actually bear fruit."