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IRS Updates Statistics on TaxPayers Reporting Uncertain Tax Positions

The Internal Revenue Service has released statistics on taxpayers reporting uncertain tax positions on Schedule UTP (Uncertain Tax Position Statement) for the 2011 tax year in Schedule UTP TY2011 Filing Statistics. Schedule UTP is filed by certain corporate taxpayers to provide the IRS with information about tax positions that affect their U.S. federal income tax liabilities. Public or privately held corporations that issue or are included in audited financial statements and that file a Form 1120, Form 1120-F, Form 1120-L, or Form 1120-PC, must report their uncertain tax positions on Schedule UTP if they satisfy the total asset threshold. Under a five-year phase-in that started with the 2010 tax year, public and privately held companies with audited financial statements that file Forms 1120, 1102-F, 1120-L, or 1120-PC and have total assets equal to or exceeding $100 million must file Schedule UTP. The total asset threshold will be reduced to $50 million starting with 2012 tax years and to $10 million starting with 2014 tax years.

 

Schedule UTP TY 2011 filing statistics as of June 2013 include the following.

  • 1,862 taxpayers have filed Schedule UTP for TY2011.  This includes primarily calendar year filers and fiscal year filers of Sch. UTP through Feb. 2013.  This count has been validated to remove duplicate filings and filings with no tax positions disclosed on Schedule UTP. The count will increase as fiscal year filers continue to be received.
  • 72% of all returns filed with Schedule UTP were filed by IC taxpayers.
  • 4,634 tax positions have been disclosed on Schedule UTPs for TY 2011.
    • Includes 1,035 prior-year positions reported on Part II.
  • Returns filed by CIC taxpayers with a Schedule UTP averaged 4.0 uncertain tax positions per Schedule, while returns filed by IC taxpayers with a Schedule UTP averaged 2.2 positions per Schedule.
  • 47% of all Schedule UTP returns filed included only one uncertain tax position.

For comparison, Schedule UTP TY2010 Filing Statistics include the following. 

  • 2,143 taxpayers filed Schedule UTP for TY2010.
  • 71% of all returns filed with Schedule UTP were filed by IC taxpayers.
  • 4,882 tax positions were disclosed on Schedule UTPs for TY 2010.
  • Returns filed by CIC taxpayers with a Schedule UTP averaged 3.6 uncertain tax positions per Schedule, while returns filed by IC taxpayers with a Schedule UTP averaged 2.0 positions per Schedule.
  • 53% of all Schedule UTP returns filed included only one uncertain tax position.
  • The top three code sections reported by UTP filers are IRC 41, 482 and 162. Analysis of UTP filers’ concise descriptions revealed that the third highest primary IRC section is actually IRC 263 capitalization.
  • Transfer Pricing and Research Credits comprise 44% of all disclosed uncertain tax positions.

                      Top UTPs                     

   2010  

   2011  

 % Research Credit IRC 41

 22%

 23%

 % Transfer Pricing IRC 482

 22%

 21%

 % Capitalization IRC 263

 7%

 6%

According to the IRS notice, the top three code sections reported by UTP filers are IRC 41, 482 and 162. Analysis of UTP filers’ concise descriptions, however, revealed that the third highest primary IRC section is actually IRC 263 capitalization.

Explore how accounting for uncertain tax positions can help smooth out tax liabilities and improve financial statement transparency in A Closer Look at Accounting for Income Taxes. Requirements and common pitfalls of complying with ASC 740 are also identified in the white paper.

Please contact John Monahan at jmonahan@taxops.com or 720.227.0060 with questions regarding Schedule UTP.

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