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measurement of tax positions for which a company has reached the recognition standard under FIN 48 and therefore has concluded that its tax position has at least a more likely than not likelihood of confidence.

By relying upon financial reporting determinations to drive tax reporting requirements, certain potential consistency and fairness concerns arise, beginning most fundamentally with the differing potential treatment of U.S. generally accepted accounting principles (GAAP) filers as compared to International Financial Reporting Standards (IFRS) or other comprehensive basis of accounting (OCBOA) filers and extending to financial reporting judgments and considerations which vary even among companies within particular industries and of comparable scale.

Additionally, by requiring taxpayers and tax return preparers to essentially lay out potential audit issues on the disclosure form, concerns about abrogation of privilege become a significant issue. While we expect that privilege is actually invoked in a relatively small number of circumstances, it will still generate considerable contentiousness among and between clients, their auditors and their tax advisors and return preparers. Moreover, the differences in the precision with which uncertain tax positions are required to be reported under different accounting systems (e.g., U.S. GAAP, IFRS, “other country-GAAP”) potentially creates artificial differences in the risk profile disclosed to the IRS. This will inevitably create frustration and a sense of unfairness for those who think their financial statement process disadvantages them relative to their peers and competitors. This tension has the potential to undermine the public’s perception of fairness and consistency - two of the key drivers behind the IRS proposal.

Many small, privately held entities do not employ in-house personnel who have expertise in performing FIN 48 analyses and calculations. This situation will likely result in inadequate disclosures of required information on IRS-mandated disclosure forms unless these entities spend additional amounts to have an external advisor prepare the disclosures for them. Small taxpayers are especially concerned about the increased cost of both audits and tax return preparation. They are also very concerned that their “foot-faults” or inadvertent omissions will expose them to additional IRS liabilities and scrutiny that will increase the time and cost that they must devote to the new disclosure regime.

In this regard, the AICPA believes the $10 million asset threshold should be significantly elevated. We urge the adoption of a rule that would only apply the UTP reporting requirement to large taxpayers. We, therefore, recommend that a conjunctive test under which only taxpayers that had total assets of in excess of $50 million AND annual gross receipts in excess of $100 million be subject to this requirement. The Service used a similar conjunctive threshold when it established a method for distinguishing between large and small taxpayers for the simplified deduction method for the Section 199 deduction established by Treas. Reg. § 1.199-4(e).

Tax-Exempt Entities. We note with approval the exclusion of tax-exempt entities from the requirement to file a Schedule UTP for the 2010 tax year. We urge the permanent exclusion of tax-exempt entities from the filing requirement. As a broad principle, we think that these entities

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