IRS Large Business & International (LB&I) Division adds compliance campaigns related to Puerto Rico Act 22, sections 1060 and 338(h)(10) reporting

The IRS Large Business & International Division (LB&I) has expanded its list of compliance campaigns to include two new campaigns. 

The LB&I launched its “campaign” program in 2017 to maximize its resources in achieving its compliance objectives. The program identifies specific tax issues that present compliance risks (“campaigns”) and develops “treatment streams” to remedy the identified risk areas (e.g., issue-based examinations and soft letters encouraging voluntary self-correction). Currently, LB&I has identified 60 campaigns, such as the Tax Cuts and Jobs Act (TCJA) campaign, Form 1042/1042-S Compliance, and FIRPTA Reporting Compliance for Non-Resident Aliens. The full list can be found here.

On Jan. 29, 2021, the LB&I division added two new active campaigns to this list. 

One campaign relates to Puerto Rico Act 22, targeting taxpayers who have claimed benefits under such act but have not met the residency requirements or source rules involving possessions under Internal Revenue Code (IRC) Section 937. The campaign also addresses individuals who may have met such requirements, but are erroneously reporting U.S. source income as Puerto Rico income to avoid U.S. taxation. 

The other campaign relates to LB&I entities that either do not report IRC Section 1060 transactions on Form 8594 or IRC Section 338(h)(10) transactions on Form 8893, or where the reporting is inconsistent with the other party’s reporting of the transaction.

As the campaigns target a wide range of international tax issues, we recommend contacting your tax advisors to understand how to handle the identified international tax compliance areas targeted by LB&I.

To learn more about CohnReznick’s International Tax Practice, please visit our web page.

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