The IRS's Large Business and International division (LB&I) announced (IR-2025-84) that the application period for the Compliance Assurance Process (CAP) program for tax year 2026 runs from September 3, 2025 to October 31, 2025.

The IRS is continuing with the changes made to the program for the 2025 cycle. For that year, eligibility was expanded to privately held domestic and foreign corporations with audited financial statements. Further, the IRS created an exception to the requirement that an applicant have only one open tax year if the year remains open because of an outstanding IRA issue. For the 2026 cycle, the IRS added an exception to the open-year rule for CHIPS Act tax issues.

The IRS will notify participants in February 2026 if they are accepted into the program.

Requirements for 2026 CAP program

CAP, a cooperative pre-filing program available to certain large taxpayers, began as a pilot program in 2005 and was made permanent in 2011. It generally allows the IRS and taxpayers to agree on the treatment of various tax issues before a return is filed. To be eligible for the 2026 CAP program, applicants must have assets of $10 million or more and not be under investigation by, or in litigation with, the IRS or any other government agency that would limit the IRS's access to current tax records. In addition, the applicant must be:

• A US publicly traded corporation that is legally required to submit SEC Forms 10-K, 10-Q and 8K

Or

• A privately held C corporation (including foreign-owned) with audited financial statements that are prepared in accordance with US Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS), or another permissible method, as deemed appropriate by the IRS, and:
• Are specific to the taxpayer applying to the CAP program (related entity and/or parent audited financial statements will not be allowed)
• Contain an unqualified audit opinion from an independent auditor
• Have net income or loss per the audited financial statements that reconciles to the Schedule M-3 Line 4(a), worldwide consolidated net income (loss))

Taxpayers currently in CAP cannot have more than one filed return and one unfiled return open on the first day of the applicant's CAP year. There are some exceptions to this requirement, including a pending Advance Pricing Agreement.

New applicants can have no more than three tax years open on the first day of the applicant's tax year (and they must agree that the open years will close no later than 12 months after the first day of its tax year).

The 2025 CAP program had been updated to (1) allow privately-held C corporations, including foreign-owned, to apply to the program, (2) make the Bridge Plus Phase permanent, (3) require the new Form 14234-E, Cross-Border Activities Questionnaire (CBAQ), to cover specific international issues, and (4) except taxpayers with certain Inflation Reduction Act (IRA) issues from the limit on open tax years (see Tax Alert 2024-1572).

Implications

The IRS is continuing its commitment to CAP and its goal to increase access to prefiling and tax certainty programs. The added flexibility around CHIPS Act issues, in addition to IRA issues and the expansion of the eligibility, should draw more taxpayers into the program.