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these positions would appear to be contrary to the Service’s position that such transactions or tax reporting is either immaterial in relation to the return or is not effective to pursue. As suggested in our comments above, there are significantly less costly and burdensome ways to discern this insight, to the extent the IRS wants to gain a better understanding of the administrative practices to which it and its agents have contributed.

The currently proposed threshold ($10 million in total assets) is too low. Furthermore, the announcement’s ultimate scope (i.e., the potential that business returns, other than Form 1120, might be covered by the announcement at a later date – such as pass-through returns) creates the likelihood that a significant and unwarranted burden will fall upon entities that represent low tax avoidance risk.

The IRS already has at its disposal several years of collected disclosures (e.g., reportable

transactions; Schedules M-3 and related schedules; and Forms 8275).

Taxpayers have put

significant time information, the


effort into


ought to be

providing these disclosures. Based able to craft a more precise disclosure

upon this considerable requirement that would

compel taxpayers to disclose the types risk. We recommend the IRS consider described within the announcement.

of transactions the IRS feels this alternative to the overly

represent true tax avoidance broad proposed requirement

The current threshold amount needs to be increased, as was discussed above, to at least $50 million in assets. An alternative and preferable disclosure trigger would be to combine asset size with annual revenues. As described in more detail above, we recommend a conjunctive test under which only taxpayers that had total assets in excess of $50 million AND annual gross receipts in excess of $100 million be subject to the UTP reporting requirement.

If Form 1120 filers are to be required to file Schedule UTP, we agree that, for fairness, Form 1120-F filers also should be subject to the requirement. There currently is uncertainty, however, regarding how the proposed $10 million asset threshold would apply to Form 1120-F filers. The draft instructions provide that Form 1120-F filers should meet the $10 million asset threshold if “the higher of the beginning or end of year total assets amounts reported on Schedule L of Form 1120-F . . . is at least $10 million.” There are two ambiguities regarding the application of this threshold to Form 1120-F filers.

The first ambiguity relates to whether the asset threshold applies based on a foreign filer’s U.S. or worldwide assets. For ease of reporting, Form 1120-F filers are given the option of reporting the balance sheet on Schedule L in terms of either worldwide assets or U.S. assets. The AICPA recommends that, regardless of whether a foreign filer chooses to complete Schedule L based on its U.S. or worldwide assets, foreign filers with U.S. assets of less than $10 million should not be required to file Schedule UTP. Foreign filers with small U.S. businesses will face the same


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