SECTION 2. BACKGROUND

.01 In Notice 2000–12, 2000–9 I.R.B. 727, the Service announced a pilot program for LMSB PFAs, under which LMSB taxpayers could request examination and resolution of specific issues relating to returns they expected to file between September and December, 2000. The purpose of the pilot program was to determine if taxpayers and Service personnel could resolve, prior to the time for filing the taxpayers’ returns, issues that were likely to be disputed in post-filing audits. The Service anticipated that if such issues could be resolved through cooperation of the parties, the results would benefit both taxpayers and the Service.

.02 In evaluating the pilot program, the Service, with considerable input from the participating taxpayers, has concluded that LMSB PFAs allowed taxpayers to file more compliant returns within prescribed time frames, were cost efficient, decreased taxpayer compliance burdens, and conserved Service resources. Accordingly, the Service will offer the LMSB PFA program on a permanent basis.

February 26, 2001 746 2001–9 I.R.B.

LMSB PFA with respect to an international issue that is absent from this list.

(1) the valuation of specified assets, but not a retrospective change in the method of valuation or a determination of appropriate valuation methodology;

(2) the proper SIC or NAIC classification code(s) for the taxpayer’s line(s) of business;

(3) whether the taxpayer’s apportionment of deductions, including general and administrative expenses, that are related to all gross income properly reflects the factual relationship between deductions and gross income as required by § 1.861–8(f)(5);

(4) whether, as a factual matter, an expense relates to fewer than all members of an affiliated group for purposes of § 1.861–14T(c)(2);

(5) the verification of amounts of foreign taxes paid and the applicable exchange rates, but not whether such taxes are creditable; and

(6) whether the taxpayer must recapture a dual consolidated loss following a triggering event under § 1503(d).

.06 Excluded issues. The Service generally will not enter into an LMSB PFA on the following types of issues:

(1) Transfer pricing issues that are addressed under the Advance Pricing Agreement program (Rev. Proc. 96–53, 1996–2 C.B. 375); (2) Issues for which the taxpayer has filed a request for Competent Authority assistance;

(3) Issues that can be resolved by requesting a change in method of accounting on Form 3115, Application for Change in Accounting Method ;

(4) Issues of reasonable cause, due diligence, good faith, clear and convincing evidence, or any other similar standard under Subtitle F (Procedure and Administration) of the Internal Revenue Code;

(5) Issues involving the applicability of any penalty or criminal sanction;

(6) Issues that are, or will be, the subject of a pending or contemplated request for a private letter ruling, accounting method change request, determination letter or technical advice memorandum;