IRS Enhances International Tax Compliance Unit

August 6, 2010 International Tax CooperationTaxation in USA

Douglas Shulman, Chair of the OECD’s Forum on Tax AdministrationThe US Internal Revenue Service is taking further steps to improve international tax administration issues, through the creation of a department focused on emerging tax compliance issues and transfer pricing practices.

On October 1st the Internal Revenue Service (IRS) will rename and restructure its Large and Mid-Size Business Division (LMSB) to create a centralized unit for the improvement of international tax compliance standards. The new department will be called the Large Business and Internal Division (LB&I). The LB&I will inherit all LMSB assets and staff, and will be enlarged with an additional 175 economists, tax examiners, technical staff and transfer pricing experts. On August 4th Doug Shulman, Commissioner of the IRS, announced the creation of the new Division, saying “The realigned organization will let us focus on high-risk international compliance issues and handle these cases with greater consistency and efficiency as we continue to increase our work in this area.”

The LB&I will head the IRS’s investigation into identifying and reacting to emerging international compliance issues, and is envisioned to become the Government’s center for transfer pricing research and tax assessment. It is expected that the new division will lead to greater institutional efficiency by bringing together the IRS’s primary international tax compliance experts with a greater availability of resources. The new organization is expected to have significant power in coordinating IRS field staff, especially in the transfer pricing sector. The LB&I will also be officially charged with implementing the recently enacted Foreign Account Tax Compliance Act (FATCA), which aims to improve the standards of international information reporting, along with increasing tax transparency and compliance.

The LB&I will be headed by Heather Maloy, Commissioner of the current LMSB. Michael Danilack and Paul DeNard will serve as Deputy Commissioners. The unit will also have a Transfer Pricing Director and Chief Economist, who will both be charged with determining the IRS’s economic position regarding contemporary transfer pricing practices.

Photo by OECD