1 IRS Circular 230 Required Notice- -IRS q regulations require that - PDF document

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IRS Circular 230 Required Notice- -IRS q regulations require that we inform you g q y that to the extent this communication contains any statement regarding federal taxes, that statement was not written or intended to be used, and it cannot be used, by any person (i) for the purpose of avoiding federal tax penalties that may be imposed on that person or (ii) to promote market or recommend to may be imposed on that person, or (ii) to promote, market or recommend to another party any transaction or matter addressed herein. 2

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IRS “ roundtable”  What’s coming out of the IRS stakeholders on the research credit?  How things should change during an exam of the hi h ld h d i f h research credit?  What to expect going forward?  What to expect going forward? IRS Roundtable 4

IRS Roundtable 5

IMT vs. IPG Issue Management Team Issue Practice Group  Mandate for local exam  Advisor to the local exam t team  Not a mandate  Tech. Advisors making  All IMT members had to determination based on high g reapply reapply level facts  Research credit is organized  Too much time held up in under general business the process by a few the process by a few credits credits individuals  Providing guidance but also  IRS felt too much time a avenue for taxpayer wasted and reorganized in wasted and reorganized in elevation l i August 2012 6

Proposed S olutions  Core Research  Core Research Areas to Reduce Audit Time  Areas generally >80%  Areas generally >80% R&E R&E  Factors generally indicative of Core Research  Limitations Exist Limitations Exist  Goal: Reduce time spent by IRS examination team and taxpayers on areas where there should be limited disagreement on qualifying should be limited disagreement on qualifying activities. IRS Roundtable 7

Pharma Industry  Administrative guidance S tage 1: Preclinical shortly  Would override ATG W ld id ATG S tage 2: Clinical Trial S tage  S tage 1 & S tage 2: “ Core Research Research” S tage 3: Regulatory Review  Certification of expenses?  S  S tage 3 & S tage 3 & S tage 4 are not tage 4 are not S S tage 4: Post tage 4: Post Approval assumed “ Non Qualified” 8

Proposed S olutions  Quality Assurance Process for Practitioners  Practitioners to provide a level of quality in assessing new clients.  Provide a checklist at the beginning of the exam of all the areas covered in their analysis.  Goal: Establish quality and thoroughness of G l E bli h li d h h f the practitioners’ analysis. IRS Roundtable 9

Proposed S olutions  S tandard “ Flow of Work” for a research credit exam  Modeled after a Phase/ Gate process  Once you clear a gate, that phase is agreed O l t th t h i d upon and closed, preventing backtracking  Keep both parties committed and accountable Keep both parties committed and accountable  Promote communication between the taxpayer and IRS throughout the exam  Goal: S et a standardized process to create accountability through the exam. Possible an appendix to the QEP an appendix to the QEP . IRS Roundtable 10

Proposed S olutions  S ummary Claim S heet  Minimum Documentation Requirements  What does this look like?  Taxpayers and the IRS need a list of mutually acceptable documentation acceptable documentation.  Hotline Number  Joint Education  Joint Education  Acceptable documentation, if no time records  Central research credit processing Central research credit processing IRS Roundtable 11

Next Webinar December 4th  Bayer Part I: S ampling  Dow/ UCC: S upplies  HP: Gross Receipts  Davenport: S oftware Development  Bayer Part II: S ubstantial Variance Rule 12

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