As a result of FIN 48, Accounting for Uncertainty in Income Taxes, companies will need to determine whether their uncertain income tax positions are more likely than not to be sustained on merits. FIN 48 will be effective for fiscal years beginning after Dec. 15, 2006. Reed Smith’s state tax practice offers complete services to help your tax department cope with FIN 48.
Monitoring Uncertain Tax Positions
You don’t want to find out about important law or policy change one quarter too late.
Once we understand the variables relevant to recognition and measurement of your most important and uncertain tax positions, we can monitor those variables, alert you to any changes, and help you evaluate the effect of the change on prior recognition or measurement determinations.
For your most sensitive positions, we also can periodically (and anonymously) interview officials in government, allowing you to anticipate important changes and to comply with FIN 48’s requirement that a company disclose any uncertain position that could significantly change in the next 12 months.
We will provide a quarterly report on these positions we are monitoring. This report will identify any changes and describe how, in our view, they may affect recognition and measurement—in time for you to calibrate your FIN 48 analysis.
We can help you eliminate uncertainty through voluntary compliance agreements, ruling requests, and FOIA requests.
We can help make your tax positions less uncertain. For example, a revenue department may have issued a ruling to another taxpayer on your particular position. In many cases, rulings are often available only pursuant to a request made under open government laws. Reed Smith can make that request for you—effectively and anonymously.
If no ruling exists, consider requesting a ruling on an uncertain tax position. Often, a taxing jurisdiction will discuss the issue anonymously with us before we make the request.
Finally, if nexus is your issue, consider voluntary compliance. You may be able to cut several years off a FIN 48 nexus reserve by entering into a voluntary disclosure agreement with a jurisdiction where you have not been filing. Again, Reed Smith can help you do this effectively and anonymously. We can even help coordinate a multi-state approach to minimize the risks associated with state sharing of information.
We can provide opinions on unit of account, recognition, and measurement.
Reed Smith can, of course, provide you and your auditors with an independent evaluation of your issue. But we can also help you establish and support an appropriate unit of account. Furthermore, our team can help calibrate your measurement based on our evaluation of the merits of the legal issues, and our experience and knowledge concerning settlements of the issues.
In certain cases, working with a law firm on a particularly sensitive issue can increase the likelihood that the research and analysis of your exposures will remain confidential under the attorney/client privilege and attorney/work product doctrines. This, however, is a fact-sensitive area that varies from state to state, so confidentiality and privilege must be evaluated on a case-by-case basis.
Multi-state, Federal and International Scope
We can serve your needs in any jurisdiction.
Our team of lawyers and accountants has experience at the federal level and in all the major U.S. jurisdictions. In minor jurisdictions, if we don’t already have the requisite experience, we routinely consult and coordinate with local counsel, with whom we have established, successful relationships. Our goal is to provide tax directors a one-stop shop, and complete, coordinated, high-quality service to ease the burden and mitigate the risk related to FIN 48.