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In this article, Jenner & Block Partner Geoffrey M. Davis analyzes Internal Revenue Service Schedule UTP, which was finalized in September 2010, to be used by business taxpayers in their required reporting of often sensitive, uncertain U.S. federal income tax positions to the IRS. A five-year phase-in of Schedule UTP’s implementation starts with this tax season, beginning with corporations having a gross asset size of $100 million or more.
For the largest public taxpayers, Mr. Davis notes, “Schedule UTP is an incremental step forward in the disclosure of information concerning uncertain tax positions.” However, for non-public corporations, he continues, “Schedule UTP may represent an uncomfortably quick move toward a wide-open approach, exposing their most sensitive tax positions.” Mr. Davis recommends that tax staff involve outside counsel in the process of preparing their company’s Schedule UTP disclosures, as he cautions, “Schedule UTP responses will need to be crafted carefully in terms of what is said, how it is prepared, and by whom. Responding to an audit request concerning Schedule UTP will require a great deal of care to maintain privileges and other protections for the underlying issues.”