Understanding IRC section 199 & IRS Audits
Many companies have sought deductions under IRC Section 199. Recently, the IRS has been cracking down on these deductions. The impact of section 199 has become a top priority issue for many companies. New guidance and documentation procedures are now essential. The new rule can result in billions of dollars of savings for companies or reap significant penalties on companies not in compliance with the law. The Knowledge Congress is assembling a panel of distinguished professionals and key regulators to provide guidance to organizations that will be primarily affected by this section. The speakers will present their expert opinions in a two-hour webinar.
SEGMENT 1: Sandy Frost, Domestic Production, Section 199, Technical Advisor, Internal Revenue Service (IRS) - Best practices for when an audit is opened - Significant of a clearly defined “item” - Substantiation of the “in whole or significant part test” - Tying numbers to the return - Impact on deduction for other adjustments made on the return during the examination SEGMENT 2: Scott Vance, Principal, Income Tax and Accounting Group, KPMG LLP - Information document requests (IDRs): What do they ask for and how should taxpayers respond? - Allocation of receipts and cost of goods sold (COGS) – regulatory and systems considerations - Allocation of expenses under section 861 methodology – selection of methodology - Non-section 199 issues collateral to section 199 (e.g., methods of accounting) - Structural issues – expanded affiliated groups; consolidated groups; passthrough entities - Selected special industry issues – construction/architecture & engineering; software; film; agricultural and horticultural cooperatives; natural resources/energy SEGMENT 3: James L. Atkinson, Of Counsel, Miller & Chevalier - Before you even file the return: document everything and get an objective assessment of your section 199 positions - Getting started with the audit: making an effective opening presentation to the IRS - Issues arising under the W-2 wage limitation: independent contractors, common paymasters, and partnerships - Multi-party contracts: who gets the deduction, and how do you convince the IRS? - The role of the National Office and IRS Counsel in the audit process - Issues arising in 2008 in connection with the interaction of section 199 with the bonus depreciation available for 2008 SEGMENT 4: Beth M. Benko, Partner, Tax Services, National Tax Department, Ernst & Young LLP - Section 199 as a Tier I Issue; moving from IRS minimum audit checks to more detailed and taxpayer-specific IDRs (information document request). - Common issues examining agents and taxpayers are struggling with on audit, including “benefits and burdens of ownership”, “definition of item”, “substantial in nature”, “W-2 wages related to DPGR”, “costs related to receipts recognized in a pre-199 year”, and “methods under Section 861.” As part of this discussion, a comment related to whether the IRS plans to issue any interpretive guidance (i.e., guidance interpreting its regulations) would be appropriate. - Documentation and data requirements – is there a feasible approach? - Issues arising from the MLTN (more likely than not) standards of FIN 48 and Section 6694. - Legislative outlook; is Section 199 in danger of repeal?
Who Should Attend:
- Tax Officers - Finance Officers - Accounting Firms - Auditing Firms - Publicly Traded Companies
Sandy Frost is the Large and Mid Sized Business technical advisor for Section 199, Domestic Production Deduction at the Internal Revenue Service. She has been working as the technical advisor since its enactment in October of 2004. This involvement has included working on guidance with the service’s National Office, external stakeholders and internal agents. She provides training and case assistance for agents working Section 199 issues.
Sandy is a Certified Public Accountant. She holds a Masters of Science degree in Accounting and a Masters or Arts degree in International Business.
Sandy Frost is the Large and Mid Sized Business technical advisor for Section 199, Domestic Production Deduction at the Internal …
Scott Vance is a Principal in the Income Tax and Accounting Group of KPMG LLP's Washington National Tax Practice in Washington, D.C. He has 15 years experience dealing with a variety of federal tax issues, including section 199, income and expense recognition, inventory valuation, and capitalization and cost recovery.
Scott Vance is a Principal in the Income Tax and Accounting Group of KPMG LLP's Washington National Tax Practice in …
James L. Atkinson practices in the area of federal income taxation, with a focus on tax accounting issues. Mr. Atkinson has significant policy-level experience with federal tax administration. Prior to joining Miller & Chevalier in 2003, Mr. Atkinson held a number of senior leadership positions with the Internal Revenue Service’s National Office, including Assistant to the Commissioner and, most recently, Associate Chief Counsel (Income Tax & Accounting). As Associate Chief Counsel, Mr. Atkinson was the senior executive in charge of a division of over one hundred attorneys, having responsibility for nearly all aspects of the IRS’s development and administration of a wide range of tax accounting issues, including accounting methods and periods; the determination, characterization, and timing of income and deductions; capitalization; inventory accounting; like-kind exchange transactions; and many other areas. He also has taught Federal Tax Accounting as an Adjunct Professor of Law at the Georgetown University Law Center.
Mr. Atkinson’s recent publications include “Domestic Production Deduction Audits: Getting Started,” 116 Tax Notes 1037, (December 10, 2007); “The IRS Takes Aim at Gift Card Sales,” 116 Tax Notes 949, (September 10, 2007) (with Dwight Mersereau); “The Production Deduction Final Regulations: A Step Forward,” BNA Daily Tax Report No. 122, J-1 (June 26, 2006); “IRS Further Expands Capitalization Requirement for Environmental Cleanup Costs, “ BNA Daily Report for Executives, Vol. 05, No. 220, November 16, 2005 (with Dwight M. Mersereau); "Some Assembly Required: Treasury Provides First Round of Guidance on the Domestic Manufacturers’ Deduction," 57 Tax Executive 138 (March/April 2005); "The Final INDOPCO Regulations: A Primer," 56 Tax Executive 222 (May/June 2004).
He is a frequent speaker to such groups as the Tax Executives Institute, the Southern Federal Tax Institute, the American Petroleum Institute, the American Bar Association, and others.
Mr. Atkinson received his J.D., summa cum laude, from the University of Illinois College of Law, where he was a member of the University of Illinois Law Review and the Order of the Coif. He received his B.A., summa cum laude, from the Honors College of the University of South Carolina, where he was a member of Phi Beta Kappa.
Areas of Concentration
- Tax Audits and Administrative
- Tax Accounting
- Tax Regulation
- University of South Carolina, 1987 B.A.
- University of Illinois College of Law, 1990 J.D.
James L. Atkinson practices in the area of federal income taxation, with a focus on tax accounting issues. Mr. Atkinson …
Beth M. Benko is a member of the Accounting Methods and Inventory group of Ernst & Young LLP's National Tax Department. She focuses on representing taxpayers in controversies pending before the Internal Revenue Service and assisting them with federal tax planning, including changes to their methods of accounting.
Beth has over a decade of tax experience with an emphasis on tax accounting issues, including the accrual of income and deductions, capitalization, inventory accounting, and Section 199. Beth is a frequent speaker on tax accounting topics, including Section 199, and is a co-author of the BNA Tax Management Portfolio titled Section 199: Deduction Relating to Income Attributable to Domestic Production Activities.
Beth has a B.S. in Business Administration from Bowling Green State University and a J.D. from the College of William and Mary. She is a Certified Public Accountant in Ohio and the District of Columbia. Beth is currently a member of the American Bar Association Tax Section's Tax Accounting Committee. She is also an adjunct professor in the LL.M. program at Georgetown University.
Beth M. Benko is a member of the Accounting Methods and Inventory group of Ernst & Young LLP's National Tax …
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