IRS unveils draft schedule, instructions for uncertain tax positions reporting proposal

The Internal Revenue Service on April 19 released a draft schedule (Schedule UTP) and instructions that provide additional details on its proposal announced in January (Announcement 2010-9) to require certain companies to report their uncertain tax positions annually on their business tax returns.

The draft schedule and instructions contain numerous explanations and examples that clarify the requirements described in Announcement 2010-9. We will provide guidance soon regarding these clarifications. Comments on the proposed reporting requirement as well as the draft schedule and instructions must be submitted to the IRS by June 1, 2010.

Also on April 19, the IRS released Announcement 2010-30, which describes the content of the draft Schedule UTP and accompanying instructions. According to the announcement, the reporting requirement will apply beginning with the 2010 tax year to taxpayers with both uncertain tax positions and assets equal to or exceeding $10 million if:

- The taxpayer or a related party issued audited financial statements and
- The taxpayer is required to file a Form 1120, U.S. Corporation Income Return; a Form 1120 L, U.S. Life Insurance Company Income Tax Return; a Form 1120 PC, U.S. Property and Casualty Insurance Company Income Tax Return; or a Form 1120 F, U.S. Income Tax Return of a Foreign Corporation.

There is temporary relief from the reporting requirement for Form 1120 filers other than those identified above (such as real estate investment trusts or regulated investment companies), passthrough entities, and tax-exempt organizations. These entities will not have to report uncertain tax positions for the 2010 tax year. The IRS will determine the timing of the requirement to file Schedule UTP for these entities after comments have been received and considered.