IRS Unveils New Guidance to Streamline Corporate Audits

On July 11, 2025, the IRS released a memo targeting audits of large corporate taxpayers, marking a significant modernization in how the agency approaches complex corporate tax examinations. This update, addressed to employees in the IRS Large Business and International (LB&I) Division, aims to reduce administrative burdens, improve efficiency, and make dispute resolution more accessible for taxpayers.

Phasing Out the “Acknowledgment of Facts” Process

One of the headline changes is the planned elimination of the “acknowledgment of facts” (AOF) information request starting in 2026. The AOF was him him him him him him while the group of him him him him him him him him him him him him him him him him him him him him to establish agreement on important facts between the IRS and taxpayers prior to issuing a notice of proposed adjustment. However, as the agency acknowledges in its new memo, participation from taxpayers in this process has been minimal. Many have found AOF to be cumbersome and of little value, arguing that the factual summaries provided are hard to evaluate without knowing how the IRS intends to apply the law. Bowing to this feedback, the IRS will phase out the AOF, hoping to foster a more streamlined and transparent audit process.

Expanding Accelerated Issue Resolution

The amended guidance also clarifies how the accelerated issue resolution (AIR) process applies, particularly in large corporate cases. The AIR procedure allows issues resolved during one audit cycle to be applied to other tax years for the same taxpayer. By making it clear that this process extends to substantial corporate cases, the IRS hopes to resolve recurring issues more efficiently and reduce redundant disputes in future audits.

Updates to Fast Track Settlement Procedures

Finally, the IRS has updated its fast track settlement program procedures. This program is designed to help taxpayers resolve disputes with the IRS quickly, ideally avoiding litigation. Under the new guidance, if IRS directors wish to deny a taxpayer’s request to participate in the fast track program, they must first notify the division’s deputy commissioner, adding an extra layer of oversight to ensure fairer access to alternative dispute resolution.

What This Means for Corporate Taxpayers

For large businesses, these changes are welcome news, promising shorter audits and improved opportunities to settle tax disputes amicably. Corporate taxpayers should consult with their advisors about how these changes might impact ongoing and future IRS examinations, as the agency seems committed to a more responsive and less adversarial audit environment.

The IRS's latest guidance demonstrates a willingness to adapt based on taxpayer feedback. By eliminating outdated processes and expanding successful programs, the agency is taking meaningful steps toward a more efficient tax system for large businesses.

 Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

All That You Wanted to Know About Form 706NA - Part I

 On Tuesday, August 15, 2017 we posted Issues Concerning Filing a Form 706NA? where we discussed that deceased nonresidents who were not American citizens are subject to U.S. estate taxation with respect to their U.S.-situated assets. We also discussed that Many foreigners owning property or assets in the United States are in violation of 706-NA filing requirements because of a number of misunderstandings. The basic rule is pretty clear-if a foreign decedent has assets in the United States with a gross value in excess of $60,000, the estate is supposed to file a tax return with the Internal Revenue Service. 

Now we are supplementing this posting with a discussion regarding Form 706 NA in a 3 part series, which we have titled All That You Wanted to Know About Form 706NA. PART 1: 

In the area of estate tax compliance, many of us have prepared Form 706’s, the estate tax return for US citizens and domiciliaries.  To be sure, this form is quite voluminous and can take a while to fill out but there are very few mysteries beyond schedule E; what percentage of an asset might be includable in an estate, the value of an annuity, what debts and expenses are deductible, the calculation of the marital deduction, and the generation-skipping tax computation. 

The Form 706NA, however, preparation of the tax return for the estate of the nonresident alien owning property in the United States, can present a more daunting task.

Form 706NA is deceptively simple- two pages- how difficult could it be to prepare? For 32 years as a senior attorney at the IRS, our Estate Tax Attorney Robert S. Blumenfeld audited these tax returns, and he can tell you that they are more fraught with more potential mystery than the Sphinx. 

Let's look at line 1 where it requests  the decedent's name. Many foreign decedents come from countries where people have hyphenated names, especially the spouses. So is the correct name Maria Smith or Maria Smith- Gonzalez? It is often best to go back to the country where the decedent lived and use the name which drops the post hyphenated portion. Most of the tax returns that he has seen or prepared, are based it on this concept.

The next box asked for the decedent’s tax identification number. Virtually all American citizens born in the United States are assigned SS#’s at birth so there is no problem. In the case of a nonresident alien (N/A), there is no tax identification number so we enter “N/A-nonresident alien” inbox two. 

This creates the second problem. If the estate has to pay any transfer tax, when the return is filed, there is no module (TIN or SS#) into which the IRS can place the payments. Ergo, the IRS has a fund called “unpostables” where money paid to the IRS lacks an identification number with which to associate it. Therefore, if you file a Form 706NA which shows tax, be certain to keep a copy of the front of the check and photostat the endorsement after the check is negotiated. This is the least difficult way to associate the payment with the tax return. Absent keeping these two identification benchmarks, it could take many months for the IRS to agree that the payment in the unpostable module should be associated with a particular estate.

Decedent’s domicile and citizenship are very critical. The United States currently has circa 20 estate/gift tax treaties with foreign countries, many of which are in Europe. 

A non-resident alien from a non-treaty country receives an estate tax exemption (unified credit) of $13,000 which basically means that the first $60,000 is not taxed. The unified credit for treaty based countries can reach a figure of $5.5 million free of tax. In addition to this, in each instance where one represents a nonresident alien decedent, it is critical to find out whether this is a country which has such a treaty with the United States. 

Next, it is critical to determine the citizenship and domicile of the decedent. When one peruses the individual treaties, one will note that some treaties are based on domicile, others on citizenship.  A German citizen domiciled in say Mexico would not be able to utilize the German treaty because that particular treaty is predicated on domicile. A Mexican citizen however, domiciled in Germany, could enjoy the full benefit of the US/German treaty. Ergo, a German living in Mexico would have a $60,000 exemption from tax while a Mexican domiciled in Germany would have a $5.5 million exemption.

Have a US Estate Tax Problem?

Estate Tax Problems Require

an Experienced Estate Tax Attorney 

 

Contact the Tax Lawyers at

Marini & Associates, P.A.

 

 for a FREE Tax Consultation Contact US at

www.TaxAid.com or www.OVDPLaw.com

or Toll Free at 888-8TaxAid (888 882-9243).

Robert S. Blumenfeld  - 

 Estate Tax Counsel

Mr. Blumenfeld concentrates his practice in the areas of International Tax and Estate Planning, Probate Law, and Representation of Resident and Non-Resident Aliens before the IRS.

Prior to joining Marini & Associates, P.A., he spent 32 years as the Senior Attorney with the Internal Revenue Service (IRS), Office of Deputy Commissioner, International.

While with the IRS, he examined approximately 2,000 Estate Tax Returns and litigated various international and tax issues associated with these returns.As a result of his experience, he has extensive knowledge of the issues associated with and the preparation of U.S. Estate Tax Returns for Resident and Non-Resident Aliens, Gift Tax Returns, Form 706QDT and Qualified Domestic Trusts.

  

 

When Taxpayers Do Not Cooperate With IRS' Request For Support of Expenses on Form 433-A

When taxpayers fall behind on their federal taxes, they often hope for alternatives to harsh collection tactics. But a recent Tax Court case involving an Iowa couple, Chad and Tina Mackland, is a strong reminder: the IRS will expect real cooperation before granting relief (Mackland, T.C. Memo. 2025-69).

The Macklands owed taxes for two years but hadn’t paid. When the IRS tried, unsuccessfully to collect, it issued them a notice proposing a levy on their assets. In response, the couple requested a Collection Due Process (CDP) hearing and said they wanted an installment agreement. They explained that they were facing serious health and employment problems and hoped to use their home equity to pay off the debt, though a federal tax lien was complicating matters.

The IRS Appeals officer handling their case asked the Macklands for updated financial records and proof of hardship, basic steps in considering any payment plan. But the Macklands never supplied the documents the IRS needed, despite having nine months to do so.

With no new information, the Appeals officer went ahead and sustained the proposed levy. Unsatisfied, the Macklands took the matter to Tax Court, claiming the IRS official had been too harsh and asking the court to force the IRS to give them the payment plan they wanted.

The Tax Court disagreed with the Macklands. The court said the IRS officer had actually shown “extreme forbearance” and gave the couple ample time and opportunity to cooperate. Because the Macklands didn’t provide the documents or evidence the IRS requested, the court found that the IRS acted reasonably in moving forward with the collection action.

What does this mean for taxpayers?

If you’re seeking relief from the IRS, whether it’s an installment agreement, an offer in compromise, or another option, you have to meet them halfway. That means promptly providing all requested forms and financial documentation. 

Courts are unlikely to side with a taxpayer who fails to cooperate, and the IRS can move forward with levies or other collection actions if you do not play your part.

 Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

New Int'l Tax Rules Are Worse When Computing State Income Taxes

According to Law360, the new federal tax law's broader tax base for international income could magnify foreign commerce discrimination concerns that are already present in states that conformed to prior iterations of the federal tax code.

The budget reconciliation bill's replacement of global intangible low-taxed income with "net CFC tested income" will expand the amount of foreign income that can be subject to state tax without offering the higher amount of foreign tax credits that will be available at the federal level. Tax practitioners suggested that states that follow the new NCTI rules will risk running into more constitutional hurdles than they did when conforming to GILTI.

Since states don't take into consideration foreign tax credits, their provisions for taxing foreign-sourced income are different from computing federal taxable income.

The GILTI regime was one of a handful of international provisions in the 2017 Tax Cuts and Jobs Act that were intended to prevent companies from taking advantage of a new exemption on most foreign profits and migrating their intangible income offshore. But despite its name, the measure doesn't actually target intangible income. Rather, the law uses a proxy based on the percentage of income over tangible, depreciable assets.

According to the GILTI statute's mechanics, if the earnings of a controlled foreign corporation, or CFC, exceed 10% of its depreciable tangible assets, technically, its qualified business asset investment, that income, is pulled into the U.S. for taxation. But it also receives a 50% deduction under Internal Revenue Code Section 250, resulting in a 10.5% rate, compared with the 21% overall corporate tax rate.

Tax practitioners and business groups have been concerned about state taxation of GILTI and how state apportionment formulas don't properly account for the activities of CFCs that generated the income. States that don't provide any sales factor representation for GILTI can distort the amount of income that's subject to tax at the state level.

The NCTI rules, which take effect in 2026, broaden the tax base of the CFC-generated income and reduce some deductions, such as cutting the Section 250 deduction from 50% to 40%, while also loosening restrictions on foreign tax credits. But because states don't typically recognize foreign tax credits, states that conform to the new NCTI regime will expand the amount of international income they are taxing without the offsetting reductions that businesses can take at the federal level.

Currently, 21 states tax some portion of GILTI, according to a July 9 report from the Tax Foundation authored by Jared Walczak, the foundation's vice president of state projects. Fifteen states, including Colorado, New Jersey and New York, plus the District of Columbia, will automatically couple with the federal NCTI system based on their rolling conformity with the federal code, according to the report.

Absent changes to their conformity laws, 11 states and D.C. will tax 60% of NCTI because of the lower Section 250 deduction, according to the report. Nine other states currently tax 5% to 30% of GILTI, the report said.

Bruce Fort, senior counsel at the Multistate Tax Commission, said during a presentation at the intergovernmental agency's annual meeting in July that he expects debates about state taxation of NCTI to percolate among state lawmakers, given how different the system looks from GILTI.

Tax practitioners have argued that the states' taxation of GILTI poses constitutional concerns given the U.S. Supreme Court's 1992 decision in Kraft General Foods Inc. v. Iowa Department of Revenue. In that case, the high court ruled that Iowa had discriminated against companies' foreign subsidiaries by declining to give their dividends the same deduction granted to domestic subsidiaries.

Need International Tax Planning Advice?

 Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

 

Deemed CFCs and Restoration of the Prohibition on Downward Attribution: What Just Happened?

If you're a cross-border corporate tax advisor or even remotely involved in international structures, you’ve probably been watching with equal parts frustration and relief as Congress rewrote the rules on “Deemed CFCs” and attribution. Let’s break down what just changed, why it matters, and what the world looks like for closely-held and multinational businesses heading into 2026.

The Downward Attribution Mess: How It Started

First, a bit of background for the non-tax nerds among us—though, trust me, if you made it this far, you probably are one.

A controlled foreign corporation (CFC) is a foreign company that meets certain U.S. ownership thresholds. If enough (at least 50%) of its shares are owned, directly, indirectly, or constructively (through complex family and group rules), by U.S. persons who each own at least 10%, that corporation becomes a CFC. Why does this matter? U.S. “U.S. shareholders” (those crossing the 10% bar) must pick up a share of that CFC’s income on their U.S. returns. Painful reporting and, sometimes, real tax dollars follow.

For decades, the rules prohibited “downward attribution.” This meant you couldn’t treat shares owned by a foreign corporation as if a U.S. corporation below it in the structure owned those shares. Minority U.S. shareholders weren’t at risk if a foreign parent held the rest.

Enter the Tax Cuts and Jobs Act (TCJA) of 2017, which quietly repealed that prohibition. Suddenly, a U.S. subsidiary could be treated as owning stock in its foreign “siblings” just because their common parent was foreign. Suddenly, way more foreign corporations got swept into CFC status (“Deemed CFCs”), and random U.S. persons were tagged as U.S. shareholders required to report and sometimes pay tax—even if they didn’t really have control or access to the info.

Imagine you’re a U.S. minority shareholder in your family’s foreign company, living blissfully unaware in Miami: overnight, you’re taxed and forced into reporting on a company you don’t even control, purely because of family ties and convoluted rules.

The Fallout: Treasury’s Whack-a-Mole

As the shock set in, both practitioners and the Treasury Department scrambled to patch the leaks. Notice after revenue procedure after notice tried to smooth the hardest edges. Some relief was granted (especially when there was no real U.S. control, or for certain passive shareholders), but the system was a compliance nightmare. Multi-national public corporations found bizarre results. Closely held companies dreaded the letter from their CPA. Even large U.S. public companies, like Altria with its stake in AB InBev, found themselves facing tax bills and reporting chores for subsidiaries they didn’t control in the slightest.

The 2025 Fix: Enter the One Big Beautiful Bill Act (OBBBA)

After years of handwringing and horror stories, Congress finally acted in 2025. The One Big Beautiful Bill Act (OBBBA) restored the old regime: downward attribution from foreign to U.S. shareholders is once again forbidden starting January 1, 2026.

What does this mean in plain English? If you’re a U.S. person, you’re no longer treated as owning shares held by a foreign parent. Deemed CFCs—foreign companies pulled into the U.S. tax net solely by this attribution—won’t exist anymore for most purposes.

But, if you’re a large multinational using complex “sandwich” structures, don’t get too comfortable. OBBBA carves out a new category: “foreign-controlled U.S. shareholders” and “foreign-controlled CFCs.” Here, if a U.S. person is more than 50% controlled by a foreign parent, downward attribution can still apply in limited ways, but only to make sure big players don’t dodge the rules by moving pieces around. This is a sophisticated fix, designed to snare the real tax avoiders but leave private companies and minority shareholders alone.

What’s Next for Taxpayers

For most privately held businesses, family groups, and minority shareholders, the burden lifts as of 2026: less paperwork, less risk of surprise tax bills, fewer stressful conversations with foreign relatives about information-sharing.

But, if you were swept up in the Deemed CFC dragnet since 2018, you’re not off the hook for reporting and tax that accrued during that time. Old rules still apply for those years.

Regulations that were put in place to administer Deemed CFCs will be withdrawn or rewritten. Some loopholes or weird results (like those involving portfolio interest withholding) still linger, so expect more guidance soon.

What to Watch

·         If you’re in a closely held company with international family members: Life should get much simpler, but double-check your structure ahead of the 2026 changeover.

·         If you’re in a multinational group: The compliance headache isn’t over, especially if you might fit the new “foreign-controlled” carve-out.

·         If you claimed a Section 962 election (corporate rates for individuals): Distributions from former Deemed CFCs will follow the special rules, but unpaid earnings and profits may still need careful tracking.

The Bottom Line

The return of section 958(b)(4) marks a big step toward sanity for cross-border business owners. No more Deemed CFCs for most. The maze of corporate and family attribution rules is (mostly) back where it belongs. Large multinationals can expect some continued scrutiny, but for the vast majority of U.S. taxpayers with international ties, the world is simpler, and that’s a good thing.

Need International Tax Planning Advice?

 Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

 

Sources:

1.      https://www.taxnotes.com/tax-notes-today-federal/controlled-foreign-corporations-cfcs/faux-cfcs-and-restoration-prohibition-downward-attribution/2025/07/21/7srvwhttps://www.taxnotes.com/tax-notes-today-federal/controlled-foreign-corporations-cfcs/faux-cfcs-and-restoration-prohibition-downward-attribution/2025/07/21/7srvw

2.      https://www.mayerbrown.com/en/insights/publications/2025/07/one-big-beautiful-bill-act-introduces-significant-domestic-and-international-tax-changes    

3.      https://www.grantthornton.com/insights/alerts/tax/2025/flash/favorable-obbba-changes-for-multinationals      

4.      https://news.bloombergtax.com/tax-management-international/repeal-of-the-repeal-cfc-downward-attribution-rules-are-revised       

5.       https://insightplus.bakermckenzie.com/bm/tax/united-states-repeal-of-the-repeal-cfc-downward-attribution-rules-are-revised