In Revenue Procedure 2016-30, the IRS has updated the procedures for the Large Business & International (LB&I) Division's "Pre-Filing Agreement" (PFA) program, including significant increases in the user fee. The user fee will increase from $50,000 to $134,300 for PFAs requested on or after June 3, 2016, with a further increase to $218,600 effective in 2017. The new Revenue Procedure also expands the scope of eligible PFA issues to include those involving automatic consent for a change in an accounting method.

The PFA program, as its name implies, allows LB&I taxpayers to request that the IRS examine an issue that could be disputed in post-filing audits before the taxpayer's return is filed. Revenue Procedure 2009-14, which made the PFA program permanent, previously set forth the framework for a taxpayer and the IRS to cooperatively resolve the issues accepted into the program (see Tax Alert 2009-10).

Revenue Procedure 2016-30, effective for PFAs received on or after May 4, 2016, revises and supersedes Revenue Procedure 2009-14. Notably, it increases the user fee for taxpayers selected to participate in the PFA program from $50,000 to $134,300 for PFA requests submitted on or after June 3, 2016 (30 days after the release of the revenue procedure). The user fee further increases to $218,600 for PFA requests submitted on or after January 1, 2017.

Revenue Procedure 2016-30 also expands the scope of PFAs to include issues relating to changes in methods of accounting requested pursuant to the automatic consent procedures of Revenue Procedure 2015-13. Under prior guidance, if the IRS had issued a letter ruling granting consent to make a non-automatic change under Revenue Procedure 2015-13, or its predecessor or successor, a taxpayer could request and the IRS could enter into a PFA with respect to the approved change in method of accounting. This guidance extends the applicability of the PFA program to also include method changes in which the taxpayer timely filed the required copy of Form 3115 to request an automatic change under Section 6.03(1)(a)(i)(B), 6.03(1)(a)(ii), or 6.03(1)(a)(iii) of Revenue Procedure 2015-13, or its predecessors or successors. A PFA may include determinations described in Section 12 of Revenue Procedure 2015-13 or a similar provision of its predecessor or successor. Thus, for example, a taxpayer may request and the IRS may enter into a PFA for the amount of the Section 481(a) adjustment and the implementation of the change in method of accounting in accordance with all the applicable provisions for the change in method of accounting.

Additional revisions in Revenue Procedure 2016-30 include amendments to the language to refer to LB&I (to reflect the name change from Large & Mid-Size Business that occurred after the issuance of Revenue Procedure 2009-14), modifications with respect to where to submit PFA requests and how to pay the user fee, and updated cross-references to various other IRS revenue procedures and guidance.

Implications

The significant user fee increases for PFAs in Revenue Procedure 2016-30 are consistent with other user fee increases for other IRS programs over the past several years, including for private letter rulings. It is possible that the IRS will continue to add or increase user fees for additional IRS programs, particularly in light of its ongoing budget and resource constraints. Taxpayers that are interested in a PFA should consider submitting the request prior to June 3, 2016, or January 1, 2017, as practical, to avoid the significant user fee increases in Revenue Procedure 2016-30.

By allowing taxpayers to request PFAs for properly filed automatic accounting method changes, the IRS now provides a procedural mechanism for taxpayers to obtain a greater degree of confidence that Section 481(a) adjustments and methodologies included in those automatic changes will be respected in the future by exam agents. This makes available the possibility of additional comfort for taxpayers that would have liked to receive an advance consent ruling (i.e., non-automatic method change) but were required to file under the automatic change procedures because the method change was listed in Revenue Procedure 2015-14.

Note: Revenue Procedure 2016-29, the successor to Revenue Procedure 2015-14, was published on May 5, 2016, and will be the subject of a Tax Alert in the near future.

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