IRS Issues New Procedures for Large Corporate Audit Disclosures

IRS Issues New Procedures for Large Corporate Audit Disclosures



For decades, large corporate taxpayers under continuous audit have been able to make disclosures under Revenue Procedure 94-69 at the beginning of an examination to notify the Internal Revenue Service (IRS) of adjustments (both positive and negative) to their tax returns and thereby obtain protection from various penalties and obviate the need to file a formal amended tax return. In 2020, the IRS questioned the continuing utility of this disclosure process and invited comments on said process. With the new Revenue Procedure 2022-39, the IRS has moved the largest corporate taxpayers into a new era of voluntary disclosure. This is a significant development for impacted taxpayers.

In Depth


Revenue Procedure 94-69 applied to taxpayers subject to the IRS’s Coordinated Examination Program (CEP)—essentially large corporate taxpayers under continuous IRS examination. The idea was to permit taxpayers to provide a written statement to the IRS at the beginning of an examination “of all items that would result in adjustments if the taxpayer, in lieu of furnishing a written statement, filed a properly completed amended return.” This statement would act as a “qualified amended return”; no formal return or IRS form is required to effectuate the disclosure. The result of making the voluntary disclosure was the avoidance of IRC Section 6662(b)(1) and (2) penalties premised on negligence, the disregard of tax rules and regulations and a substantial understatement of income. The statement could also act as an “adequate disclosure” made on Forms 8275 and 8275-R, as appropriate.

The standard practice of eligible taxpayers was not only to disclose adjustments that would be subject to additional tax, but also to disclose affirmative claims that would be incorporated into the final examination report. This was an extremely useful tool for busy tax departments to avoid having to prepare a formal amended return for affirmative changes to items of income, deduction and credit. And from all appearances and reports, the practice worked extremely well for both taxpayers and IRS examination teams.

In 2000, the IRS eliminated the CEP and introduced the Coordinated Industry Case (CIC) Program. The IRS extended the use of Revenue Procedure 94-69 to CIC taxpayers.

In May 2019, the IRS replaced the CIC Program with the Large Corporate Compliance (LCC) Program, effective for audits of tax years 2017 and later. Unlike the CEP and CIC Program, the LCC Program is not a continuous examination program but rather employs automatic application of data analytics to determine those corporate taxpayers that pose the highest compliance risk.

With scant resources and a shift from a continuous IRS audit paradigm of the nation’s largest taxpayers, the technical foundation upon which Revenue Procedure 94-69 was based became unsteady. The IRS therefore announced that, as a transition from the CEP to the CIC Program, Revenue Procedure 94-69 would continue to apply to any taxpayer that is in both the CIC Program (for years prior to 2017) and the new LCC Program (for the 2017 tax year). However, the procedure would not apply to taxpayers who were not historical CIC taxpayers.

Because of the popularity of the practice, in August 2020, the IRS solicited comments from taxpayers and tax professionals about what to do. After receiving substantial comments, the IRS has now issued Revenue Procedure 2022-39 to replace Revenue Procedure 94-69.


Revenue Procedure 2022-39 provides new procedures for taxpayers to file a qualified amended return and to avoid certain civil tax penalties by disclosing errors and omissions that were not known at the time of filing the return.

Who Is Eligible?

Taxpayers are selected for examination under the LCC Program or the Large Partnership Compliance Program (LPC) (or a successor program) if, on the date on which the IRS first contacts the taxpayer concerning an examination, at least four of the taxpayer’s income tax returns for the five taxable years preceding the taxable year at issue are (or were) under examination under the LCC Program, the CIC Program, the LPC or a successor program. Ineligible taxpayers must follow the qualified amended return rules set forth in Treasury Regulation § 1.6664-2(c)(3).

How to Make a Disclosure?

To avoid the imposition of a civil tax penalty for negligence or disregard of rules or regulations and the substantial understatement penalty under IRC Section 6662(b), the eligible taxpayer must complete Form 15307, Post-Filing Disclosure for Specified Large Business Taxpayers (or a successor form), and provide it to the IRS personnel conducting the examination no later than 30 days from the date when the IRS notifies the taxpayer to provide the form or another date agreed to in writing with the IRS.

The description of the item disclosed to the IRS is considered adequate if it consists of information that reasonably informs the IRS of the identity of the item, its amount and the nature of the controversy or potential controversy. Each disclosed adjustment must be stated separately, and no netting of adjustments is allowed. The taxpayer does not need to provide the IRS with a recomputation of the tax for the adjusted and disclosed item unless the item relates to tax credits. The taxpayer may also disclose information for purposes of establishing the reasonable basis of a position.

Form 15307 requires the disclosure of certain specific information. The taxpayer must identify whether it filed a Schedule UTP, Uncertain Tax Position Return Statement, Form 8275 or Form 8275-R with its original return. Some of the required information includes:

  • Adjustment Type—ordinary income, capital gain/loss, IRC Section 1231 gain/loss, ordinary gain/loss dividends received deduction, expense deduction, tax credits or other type
  • Timing—permanent, temporary, temporary (one to three years), temporary (three to 10 years) or other timing
  • Effect on Other Years
  • Page and Line on the Tax Return
  • Increase or Decrease to Taxable Income
  • Increase or Decrease to Tax Credits.

Form 15307 provides three examples of acceptable disclosures and two examples of unacceptable disclosures. Additionally, relevant supporting documentation should be provided for disclosures made on the form. The form must be signed under penalties of perjury.

The Result of Disclosure

Any amounts of additional tax with respect to an item disclosed on Form 15307 will be treated as an amount shown on a qualified amended return. As such, the IRS will not assert a penalty pursuant to IRC Sections 6662(b)(1) and (2). Any additional tax resulting from the disclosure will be subject to the deficiency procedures in IRC Sections 6212 and 6213 or the partnership audit provisions in IRC Section 6221 through 6241.

Failure to provide complete information in accordance with the form’s instructions will not provide penalty protection. The IRS will inform a taxpayer if it determines that a disclosure is inadequate.

Interestingly, Revenue Procedure 2022-39 does not mention the ability of taxpayers to make favorable tax adjustments by virtue of the IRS’s new procedure. However, it is clear from the face of Form 15307 (and the examples in the instructions) that taxpayers can make adjustments that reduce income tax. This is consistent with IRS Publication 5125, which provides that taxpayers subject to examination by the Large Business and International Division may make informal claims for refund to their exam team within 30 calendar days of the opening conference so long as such claims satisfy the standards of Treasury Regulation § 301.6402-2. The instructions to Form 15307 reference these two sources when stating that relevant supporting documents for disclosures should be provided. This indicates that a favorable disclosure, so long as it contains the information sufficient to satisfy the regulation, will operate as an informal claim for refund. This is a huge benefit to taxpayers as it sanctions the making of favorable adjustments without the need to file a formal amended tax return.

When Is Revenue Procedure 2022-39 Effective?

Eligible taxpayers can begin using the new disclosure procedure for examinations that began after November 16, 2022.

Practice Points: We have been reporting on the demise of Revenue Procedure 94-69 for quite some time. Taxpayers have appreciated the ability to adjust their return positions without the inconvenience and expense of filing a formal amended return. And over the years, the practice morphed into the disclosure of both affirmative adjustments (that decreased tax liability) and negative adjustments (that increased tax liability).

New Revenue Procedure 2022-39 changes the landscape for disclosures at the beginning of an examination. Taxpayers and practitioners need to be aware of these changes and ensure they fully and accurately disclose on Form 15307 to obtain the protections afforded by a qualified amended return. Additionally, taxpayers wishing to make favorable tax adjustments on Form 15307 should take care to ensure that disclosures contain sufficient information to constitute a refund claim under existing guidance.