Part II - Service Management Information Section (Examination Program LCC and LPC cases)

Purpose of Part II - This section provides information regarding the taxpayer, its organization and structure, including the relationships of its entities, and business purposes. Part II also contains instructions to the team and various procedures to be followed during the examination.

Taxpayer orientation - The taxpayer should be requested to provide an orientation that will provide much of this information needed for this section. This information should include a thorough overview of business activities, operational structure, accounting systems, and a global tax organizational chart.

Additional Information– Part II provides information for the team members regarding their specific assignments, the role of the case and issue manager(s) and TC, scope of the examination and when necessary, special examination techniques. Information provided in Part II will allow team members to be able to make the best use of their time. They will know their role in the examination, how to proceed with the assignment and, if called for, what information to develop for other team members.

Information Regarding Taxpayer – This section includes:

A summary of the organization's acquisitions, mergers, or liquidations.

A description of accounting and internal control systems. This should show accounting and record keeping centers where primary and summary records are maintained and establish the location where records are available for examination.

A brief description of the organizational structure. An organizational chart is considered helpful in keeping team members aware of the structure and interrelationships of taxpayer's components. This becomes extremely important where assistance or support group are involved since it assists them in coordinating their efforts with other components of the examination.

The record retention limitation agreement under Rev. Proc. 98-25.

Titles and frequency of reports to regulatory agencies

Public or other sources of information

Information regarding key taxpayer, effectively controlled entities, and divisions or branches, etc. This would include a list of branches, plants, divisions, and entities not to be examined with an explanation why they should not be examined. This listing and analysis should include comments regarding relative size, last year examined and last year an on-site inspection/examination was conducted as well as information regarding the location of business activities and major product lines. It should include a description of any foreign subsidiaries including details of what books and records are overseas along with their locations and the responsible employees.

Instructions to Team Members - This section includes instructions related to the following subjects:

Standard for workpapers (size, IMS accuracy, etc.)

Use of IMS for paperless case files.

Indexing of workpapers and final report. This will include the use of the Standard Audit Index Numbering (SAIN) method of indexing workpapers (See IRM Exhibit 4.46.6-1, LB&I Corporate SAIN Codes) and the mandatory workpaper naming convention (see IRM 4.46.6.2 , Workpaper Organization and Considerations).

Routing of requests for information to and from the taxpayer

Procedures for requesting conferences with the taxpayer

Maintaining a folder of summary topics (planning file) and related background material to be used in preparation for the post-examination critique

Procedures for monitoring time

Development of examination procedures, presentation of issues and preparation of the report

Procedures for requesting information

Procedures for requesting accountants' workpapers

Written communication procedures

Requirements associated with confidentiality privileges relating to taxpayer communications

Instructions for documentation of examining officer's activity and interest abatement

Requirements associated with confidentiality of taxpayer information/taxpayer privacy

Awareness of Unauthorized Access (UNAX) requirements

Procedures related to third party contacts

Awareness of taxpayer rights

Examiner verification requirements related to providing the taxpayer with official employee identification information

Information for Team Members – The following types of information would be beneficial to all team members:

Brief outline of case and issue manager(s)’ planned activities

Brief outline of team coordinator’s activities

Industry practices and issues common to this type of industry

Special examination features to be used

Projected travel expenses (optional)

Outline of compliance and filing checks, procedures, and special techniques to be used:

Examine internal audit reports

Check for "grass roots" lobbying expenses

Review travel and entertainment of officers, where applicable

Verify requirements of Corporate Executive Compliance Program

Review management letters from CPA firm and responses thereto, where applicable

Verify required return filing compliance. (See IRM 4.46.3.5 , Compliance Checks Summary.)

Examination Assignments – A schedule of examination assignments will be prepared showing the planned order of the examination focusing on the priority of the identified issues. Examiners should use this schedule as a guide in preparing examination procedures in order to ensure the highest degree of coordination of the examination.

Modifications allowed - Part II should be completed for all LCC examinations. However, there are situations when parts of it may be abbreviated or omitted at the discretion of the case manager (in collaboration with the issue manager(s)) such as subsequent LCC examination cycles involving the same case and issue managers or team coordinator. Much of the data will be the same as in the prior cycle and can be copied over to the new examination plan.