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Tax Window Stays Open

The high court's decision not to review the Textron case cements IRS access to tax work papers and could prove far-reaching.

By Dave Lindorff | Updated on August 02, 2010

Most business people and business lobbyists are quick to complain that federal government agencies and regulators are woefully inefficient. In the case of the Internal Revenue Service, companies may want to be careful what they wish for. The agency appears to be on the verge of expanding its authority in the wake of the U.S. Supreme Court’s May decision not to review an appeals court decision in United States v. Textron that gave the IRS broad power to demand access to tax accrual work papers that haven’t been prepared specifically for litigation purposes. The IRS has proposed new regulations requiring public companies with assets of more than $10 million to file reports describing any uncertain tax positions and stating the amount of potential taxes at issue.

In a comment letter filed with the IRS in May, attorneys Fred Chilton and Rod Donnelly of McDermott Will & Emery noted that the IRS claims the new rule, to be called Schedule UTP, Form 1120, will improve “auditing efficiency,” particularly as it relates to auditing tax shelters.

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