Open Year Criteria – For the 2025 CAP cycle, we are continuing the open year eligibility criteria of allowing only one open filed return and one open unfiled return on the first day of the CAP applicant's tax year. There are several exceptions to this requirement (e.g., pending Advance Pricing Agreement resolution or Competent Authority Assistance, etc.). Inflation Reduction Act (IRA) – The IRA added significant and novel provisions to the tax Code, including the Corporate Alternative Minimum Tax (CAMT), the excise tax on stock buy backs and several clean energy credits. These provisions will require a review for impacted taxpayers of the 2023 CAP calendar tax years and the fiscal CAP tax years ending in 2024. In recognition that these reviews may initially extend beyond the CAP timelines, we will be adding a new exception to the closed/open year eligibility requirement, such that a tax year that remains open only because of an outstanding IRA tax issue will not be counted as an open filed return on the first day of the applicant’s CAP year for purposes of the CAP Eligibility return criterion. Eligibility Criteria for New Applicants – For a new applicant currently under examination to be eligible for participation in the CAP Program, the applicant can have no more than three tax years open for examination on the first day of the CAP applicant's tax year. The examination team would determine (and the accepted applicant would concur by signing the CAP MOU) that it is feasible these open years could close from the examination group no later than 12 months after the first day of the CAP applicant's tax year for continued eligibility. Expansion of Eligibility Criteria for Applicants – For the 2025 CAP cycle we have modified the applicant eligibility criteria. In addition to considering publicly held C-corporations, the IRS will accept applications from privately held C-corporations including foreign owned. Privately held applicants will be required to submit audited financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS) or another permissible method, as deemed appropriate by the IRS. The audited financial statements must be specific to the taxpayer applying to the CAP Program. As such, related entity and/ or parent audited financial statements will not be allowed. Bridge Plus Phase – Bridge Plus will become permanent starting with the 2025 CAP cycle. The Bridge Plus taxpayer will be required to provide a book-to-tax reconciliation, credit utilization and other supporting documentation shortly after their audited financial statements are finalized. An IRS team will risk assess the documents. The taxpayer will submit a draft return 30 days before the filing of their tax return with the IRS. The IRS team will review the draft return for consistency with the taxpayer's previously submitted documentation. If the draft return is consistent with the documentation previously provided, the taxpayer will be instructed, accordingly, to file the tax return. If the filed tax return is consistent with the previously submitted documentation and the draft return, the taxpayer will be issued an appropriate acceptance letter. Form 14234-E Cross Border Activities Questionnaire (CBAQ) – The Tax Cuts and Jobs Act (TCJA) of 2017 has greatly contributed to the scope and complexity of international issues that CAP teams and taxpayers have had to consider in recent years. To address these complexities, we are building on the success that the CAP program has seen with respect to other complicated issues. For example, with the CAP Research Credit Questionnaire (CRCQ) and the Material Intercompany Transactions Template (MITT), we have been able to identify the research credit and intercompany transaction issues that warrant the application of time and resources and deselect those that do not. Thereby, we have been able to plan for the sufficient resources for timely review and resolution. Accordingly, the newly approved Form 14234-E Cross Border Activities Questionnaire (CBAQ), has been developed to address specified international issues. A draft version of the CBAQ was previously shared with CAP taxpayers for their awareness and input. New applicants for the 2025 CAP cycle will be required to submit Form 14234-E CBAQ as an additional application document. As per the instructions, returning applicants will submit Form 14234-E CBAQ on a specified schedule, 90 days after the prior tax year end, and simultaneously with the tax return filing. In addition, an interim CBAQ must be submitted within 30 days after the completion of any material transaction or activity identified in the CBAQ.
