In a memorandum released July 25, 2025, the IRS's Large Business and International division (LB&I) outlined changes to the examination process of large corporations. In the memorandum, the IRS (1) announced that the Acknowledgement of Facts (AOF) Information Document Request (IDR) process is being phased out at the end of 2025, (2) clarified that the Accelerated Issue Resolution (AIR) program can be used for Large Corporate Compliance (LCC) program cases and (3) updated the coordination and approval process for denying Fast Track Settlement (FTS) requests.

AOF

The AOF IDR serves as a formal recognition by the taxpayer of certain facts or information that the IRS has gathered during its review of the taxpayer's financial records and tax returns. Its purpose is to make sure all relevant facts are known and mutually agreed upon before a Form 5701, Notice of Proposed Adjustment (NOPA), is issued.

The IRS is eliminating the AOF IDR process beginning in 2026. Taxpayers have the option to use the AOF IDR process until the end of 2025. Whether or not the process is used, the IRS "will continue to conduct issue discussions, share the proposed tax determination, and solicit feedback on the taxpayer's position before issuing a final NOPA," according to the memorandum.

AIR

AIR is a program offered by the IRS to expedite the resolution of certain issues that arise during tax examinations, particularly for issues that are straightforward and can be quickly addressed.

The memorandum clarifies that AIR can be used in LCC cases. According to the memorandum, there has been confusion because language in Revenue Procedure 94-67 has not been updated to reflect LCC as the successor program to the Coordinated Examination Program. The IRS confirmed in the memorandum that LCC remains an appropriate work stream for AIR.

FTS

FTS is an optional alternative dispute resolution program that allows taxpayers with unagreed issues in at least one open tax year under examination to work together with Exam and the IRS Independent Office of Appeals (Appeals) to resolve outstanding disputed factual and legal issues while the case is still in Exam's jurisdiction. In early 2025, the IRS issued an Announcement on the FTS (see Tax Alert 2025-0272). The memorandum supersedes the earlier guidance and includes all the changes announced previously as well as additional updates.

The memorandum requires senior directors to inform the LB&I Deputy Commissioner of a proposed FTS denial before notifying the taxpayer. If the FTS issue is owned by an Issue Manager different than the Case Manager, then the respective Directors of Field Operations must coordinate with each other regarding a proposed denial before informing the taxpayer. Finally, the memorandum reiterates that the decision to accept or reject an FTS request is a business decision, not a legal decision.

Implications

Each change announced in the memorandum is designed to improve the efficiency of large corporate examinations by streamlining processes, encouraging timely resolution of issues, and providing certainty earlier in the examination process.

Taxpayers have long been wary of the AOF IDR process because it requires agreeing with facts before understanding how the IRS will apply the facts to the law. For many taxpayers that plan to go to IRS Appeals, it is more efficient and sensible to address facts in the context of their protest rather than in response to the AOF IDR. In most cases, the AOF IDR does not affect the resolution at IRS Appeals and eliminating this process will cut out the largely procedural burden of developing, reviewing and responding to the AOF IDR.

The AIR program is designed to help the IRS and taxpayers become more current on cases by applying the resolution of the same or similar issues from one tax period to another filed tax period. The memorandum clarifies the availability of the program despite the change in nomenclature from the CEP to the LCC, again providing certainty to taxpayers.

The final change is a continuation of the IRS's efforts to reinvigorate FTS. The additional coordination and higher-level approvals before denying a taxpayer's FTS request should encourage IRS agents to participate in the program. Increased participation should lead to more timely resolution of cases and resource savings for both taxpayers and the IRS, which becomes especially important as IRS compliance resources decline.