Suppt Stmnt _1545-2312_

SUPPORTING STATEMENT

Internal Revenue Service

Compliance Assurance Process (CAP) Application

Form 14234 and Sub-forms:
14234-A, 14234-B, 14234-C, 14234-D, 14234-E, and 14234-F

OMB Control No. 1545-2312

9. CIRCUMSTANCES NECESSITATING COLLECTION OF INFORMATION

The Compliance Assurance Process (CAP) is a strictly voluntary program available to Large Business and International Division (LB&I) taxpayers that meet the selection criteria. CAP is a real-time review of completed business transactions during the CAP year with the goal of providing certainty of the tax return within 60 days of the filing. Taxpayers in CAP are required to be cooperative and transparent and report all material issues and items related to completed business transactions to the review team.

All taxpayers applying to the CAP program must submit the following forms: Form 14234 CAP Application, Form 14234-A CAP Research Credit Questionnaire if there are research credit items or expenditures, and Form 14234-C Taxpayer Initial Issues List. In addition, new taxpayer applicants will submit Form 14234-B Material Intercompany Transactions Template (MITT, Form 14234-D Tax Control Framework Questionnaire and the Form 14234-E Cross Border Activities Questionnaire. Returning taxpayers to the CAP program will submit the Form 14234-B and the Form 14234-E, as risking documents, on a stipulated schedule as per the instructions.

Form 14234 CAP Application is a voluntary form that an eligible taxpayer is required to submit to apply for participation in the Compliance Assurance Process (CAP).

Form 14234-A CAP Research Credit Questionnaire requests information for risk assessment and planning for the research credit and research expenditures, if present, when the taxpayer applies to the Compliance Assurance Process (CAP) Program. Form 14234 directs applicable taxpayers to Form 14234-A.

Form 14234-B Material Intercompany Transactions Template (MITT) is used by the IRS for risk assessment purposes to review material cross-border transactions between the taxpayer and foreign related parties. A new taxpayer applicant submits Form 14234-B as an application document. A returning CAP taxpayer submits the Form 14234-B on a stipulated schedule as per the instructions.

Form 14234-C Taxpayer Initial Issues List is an application form to disclose material taxpayer identified issues to the IRS.

Form 14234-D Tax Control Framework Questionnaire is an application document that provides the IRS with an understanding of the company’s tax governance processes and the system of internal controls that ensure the accuracy and completeness of the federal income tax returns, information reporting, tax reporting data and other tax-related disclosures. A new taxpayer must complete this form. A returning taxpayer would only submit this form if there were a major change in the company’s tax governance policies or in the company’s system of internal controls.

Form 14234-E CAP Cross Border Activities Questionnaire is used by the IRS for risk assessment purposes to review a taxpayer's material cross border activities transactions (other

than transfer pricing) in the CAP year. A new taxpayer applicant submits Form 14234-E as an application document. A returning CAP taxpayer submits the Form 14234-B on a stipulated schedule as per the instructions.

Form 14234-F Post-Filing Representation by Taxpayer requires that the corporate officer, authorized to sign the tax return of the CAP taxpayer, attest that all material issues from the pre-filing review have been disclosed and resolved, and all resolved issues are reported as agreed on the company’s tax return.

The collection of information is authorized by 26 USC 6011.

9. USE OF DATA

Information on Form 14234 series will be used by the Internal Revenue Service (IRS) and LB&I industry executives to determine which taxpayers meet the selection criteria and should be accepted into the voluntary program for the year, and for risking those accepted taxpayers.

9. USE OF IMPROVED INFORMATION TECHNOLOGY TO REDUCE BURDEN

Form 14234 series is available electronically on irs.gov. IRS collects the forms electronically through an email secure messaging system.

9. EFFORTS TO IDENTIFY DUPLICATION

The information obtained through this collection is unique and is not already available for use or adaptation from another source.

9. METHODS TO MINIMIZE BURDEN ON SMALL BUSINESSES OR OTHER SMALL ENTITIES

This information collection does not apply to small businesses or small entities.

9. CONSEQUENCES OF LESS FREQUENT COLLECTION ON FEDERAL PROGRAMS OR POLICY ACTIVITIES

Less frequent collection of data required to be disclosed on Form 14234 would inhibit timely review of transactions; timely tax and financial reporting certainty; and resource and time efficiencies for both the taxpayer and the IRS.

9. SPECIAL CIRCUMSTANCES REQUIRING DATA COLLECTION TO BE INCONSISTENT WITH GUIDELINES IN 5 CFR 1320.5(d)(2)

There are no special circumstances requiring data collection to be inconsistent with Guidelines in 5 CFR 1320.5(d)(2).

9. CONSULTATION WITH INDIVIDUALS OUTSIDE OF THE AGENCY ON AVAILABILITY OF DATA, FREQUENCY OF COLLECTION, CLARITY OF INSTRUCTIONS AND FORMS, AND DATA ELEMENTS

In response to the Federal Register notice dated October 13, 2022 (87 FR 62184), we did not receive comments during the comment period regarding Form 14234.

9. EXPLANATION OF DECISION TO PROVIDE ANY PAYMENT OR GIFT TO RESPONDENTS

No payment or gift has been provided to any respondents.

9. ASSURANCE OF CONFIDENTIALITY OF RESPONSES

Generally, tax returns and tax return information are confidential as required by 26 USC 6103.

9. JUSTIFICATION OF SENSITIVE QUESTIONS

A privacy impact assessment (PIA) has been conducted for information collected under this request as part of the “Office of Tax Shelter Analysis Application (OTSA)” system and a Privacy Act System of Records notice (SORN) has been issued for this system under Treasury/IRS 42.021-- Compliance Programs and Project Files, Treasury/IRS 42.001-- Examination Administrative Files, Treasury/IRS 42.008-- Audit Information Management System, and Treasury/IRS 34.037-- IRS Audit Trail and Security Records System. The Department of Treasury PIAs can be found at https://www.irs.gov/privacy-disclosure/privacy-impact-assessments-pia.

Title 26 USC 6109 requires inclusion of identifying numbers in returns, statements, or other documents for securing proper identification of persons required to make such returns, statements, or documents and is the authority for social security numbers (SSNs) in IRS systems.

9. ESTIMATED BURDEN OF INFORMATION COLLECTION

Form 14234, Compliance Assurance Process (CAP) Application: is a strictly voluntary program available to Large Business and International Division (LB&I) taxpayers that meet the selection criteria. CAP is a real-time review of completed business transactions during the CAP year with the goal of providing certainty of the tax return within 90 days of the filing.

The burden estimate is as follows:

Authorities	Form	Number of Responses	Hours per Response	Total Hours
6011	Form 14234	125	3.47	434
6011	Form 14234-A	125	13.67	1,709
6011	Form 14234-B	125	6.23	779
6011	Form 14234-C	125	1.62	203
6011	Form 14234-D	125	2.94	368
6011	Form 14234-E	125	7.75	969
TD 9891	Form 14234-F	125	1.76	220
	Totals	875		4,682

9. ESTIMATED TOTAL ANNUAL COST BURDEN TO RESPONDENTS

To ensure more accuracy and consistency across its information collections, IRS is currently in the process of revising the methodology it uses to estimate burden and costs. Once this methodology is complete, IRS will update this information collection to reflect a more precise estimate of burden and costs.

9. ESTIMATED ANNUALIZED COST TO THE FEDERAL GOVERNMENT

Cost estimate for product development is based on a model that considers the following three cost factors for each information product: aggregate labor costs for development, including annualized startup expenses, operating and maintenance expenses, and distribution of the product that collects the information. The costs to the Federal government will vary depending on whether the IRS will incur printing or copying costs for all the materials. These costs do not include any activities such as taxpayer assistance and enforcement. IRS estimates have determined that the cost of developing, printing, distribution and overhead for the form is $95,641.

9. REASONS FOR CHANGE IN BURDEN

IRS is revising the OMB submission to add two new CAP compliance forms Form 14234-E and Form 14234-F. This is increasing the burden due to Agency Discretion by 1,189 hours. IRS has revised the burden evaluation for the collection. This increases the burden due to Agency Estimate by 1,909 hours.

	Requested	Program Change Due to Statue	Program Change Due to Agency Discretion	Change Due to Adjustment in Agency Estimate	Previously Approved
Annual Number of Responses	125	0	250	500	125
Annual IC Time Burden (Hours)	1,584	0	1,189	1,909	1,584

9. PLANS FOR TABULATION, STATISTICAL ANALYSIS AND PUBLICATION

There are no plans for tabulation, statistical analysis and publication.

9. REASONS WHY DISPLAYING THE OMB EXPIRATION DATE IS INAPPROPRIATE

IRS believes that displaying the OMB expiration date is inappropriate because it could cause confusion by leading taxpayers to believe that the regulation sunsets as of the expiration date. Taxpayers are not likely to be aware that the IRS intends to request renewal of OMB approval and obtain a new expiration date before the old one expires.

9. EXCEPTIONS TO THE CERTIFICATION STATEMENT

There are no exceptions to the certification statement.

Note: The following paragraph applies to all the collections of information in this submission:

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.