The IRS’s Large Business & International (LB&I) division oversees corporations, partnerships, and high-wealth individuals with assets typically exceeding $10 million. These taxpayers often engage in complex financial structures, international operations, and transfer pricing activities. As a result, audits can become lengthy, resource-intensive, and unpredictable.
Stay informed with TaxProNext as the IRS issues critical interim guidance (IR-2025-77, dated July 25, 2025) to enhance the Large Business and International (LB&I) examination process.These updates aim to improve audit efficiency, promote a taxpayer-centric approach, and accelerate issue resolution timelines. In this Blog,we cover key IRS updates to LB&I audits, their business impact, and how TaxProNext helps you stay compliant.
Key Updates from the IRS Interim Guidance
1.1 Phasing Out AOF IDR by 2026
- The Acknowledgement of Facts (AOF) Information Document Request (IDR) process will be eliminated in 2026, after a stakeholder feedback period through December 31, 2025.
- Until then, taxpayers can choose whether to elect or decline the AOF process; decisions and discussions are recorded in the case file. Despite removal, collaboration remains mandatory.
1.2 Expanded Use of Accelerated Issue Resolution (AIR)
- Accelerated Issue Resolution (AIR) previously in Coordinated Examination Program cases, now applies broadly to Large Corporate Compliance situations. AIR agreements can apply resolved issues across multiple tax periods.
- Accelerated Issue Resolution (AIR) previously in Coordinated Examination Program cases, now applies broadly to Large Corporate Compliance situations. AIR agreements can apply resolved issues accros multiple tax periods.
- Requires thorough prior issue evaluation and mandatory counsel involvement before implementation.
1.3 Strengthening Fast Track Settlement (FTS) Protocols
- Fast Track Settlement (FTS) is being encouraged for early resolution, with additional internal oversight before denying FTS requests.
- Denials now require senior-director review and DFO concurrence, with formal written memos per Exhibit 4.51.4-2.
Why These Changes Matter for TaxProNext Clients
- Accelerate audit closure: Reduced procedural steps and clearer dispute resolution cut down case cycle times.
- Improve tax certainty: Earlier resolution through AIR or FTS helps lower interest expense and future adjustments.
- Enhance transparency & collaboration: Clearer communication throughout the process helps maintain planning continuity.
Impact on Multinational Corporations
- The IRS updates bring significant advantages for multinational corporations, especially those with:
- Cross-border transactions
- Intercompany pricing structures
- Global intellectual property arrangements
- Key benefits include:
- Clearer IRS protocols for international tax issues
- Faster resolution mechanisms that reduce audit timelines
- AIR applicability across multiple tax years, limiting repeated exposure to the same issue
- Streamlined responses to IRS queries, improving efficiency in complex, multi-jurisdictional environments
- Reduced interest and penalty risks through early resolution via Fast Track Settlement (FTS)
- Minimized litigation and stronger regulatory alignment through proactive cooperation
How TaxProNext Supports Your Compliance Strategy
- Audit preparation and representation
- Provide guidance on whether to opt in/out of AOF through 2025.
- Ensure detailed documentation of decisions and issue discussions.
- Issue resolution planning
- Help assess eligibility for AIR agreements across multiple tax years.
- Coordinate legal counsel support for large business cases.
- FTS strategy and submission support
- Advise clients best positioned for Fast Track Settlement.
- Support the preparation of Form 14017 and ensure meeting internal IRS thresholds.
- Proactive advocacy
- Engage with IRS exam teams early to align expectations.
- Assist in feedback submission through the LB&I Policy Gateway before December 31, 2025.
Compliance Best Practices: TaxProNext Checklist
To fully leverage the IRS interim guidance, TaxProNext recommends these best practices:
- Keep all supporting documentation updated and ready for audit
- Strategize early on whether to opt out of AOF in 2025
- Engage legal counsel early when considering AIR
- Identify potential FTS cases before audit closure
- Record all interactions with IRS examiners for transparency
- Submit feedback to the IRS via LB&I Policy Gateway before December 31, 2025
Conclusion
The IRS’s interim guidance (IR-2025-77, July 25, 2025) signals a pivotal shift in LB&I audits, streamlining processes, reinforcing collaboration, and accelerating issue resolution. TaxProNext is prepared to guide corporate taxpayers through these transitions, helping reduce audit cycles, cost exposure, and uncertainty. Let us align your strategy with the new IRS directives for optimal outcomes.
Why TaxProNext Is Your Ideal Partner
- Expert navigators in LB&I regulations: including IRMs 4.46.x and 4.51.x.
- Tailored audit and resolution planning: whether through AIR, FTS, or traditional appeal paths.
- Dedicated support during feedback and policy transition: guiding clients through the optional AOF phase-out period.
Need help implementing these IRS updates? Contact TaxProNext for tailored guidance aligned with your audit and compliance needs.
FAQs on IRS Interim Guidance & TaxProNext Services
Q1: What is AOF IDR, and why is it being eliminated?
A: AOF IDR served to establish agreed facts pre-NOPA, but feedback shows it added delay without added value. It's phased out by 2026 with an optional transition in 2025.
Q2: How does AIR benefit large corporate clients?
A: Once an issue is resolved in one tax year, AIR allows consistent application to other years, reducing duplicative audits when the taxpayer agrees.
Q3: Is FTS appropriate for every large business audit?
A: FTS fits cases nearing completion with limited unresolved issues, a written taxpayer position, and demonstrated willingness to compromise. Several issue types (e.g., litigation matters) are excluded.
Q4: How can clients provide feedback on these IRS changes?
A: Feedback is welcome via the LB&I Policy Gateway or by emailing LBI.Policy.Feedback@irs.gov through December 31, 2025
