Pre-Filing and Pre-Audit Resolution Options for Large Business and International Taxpayers

The Internal Revenue Service (IRS) offers a variety of options to large business and international taxpayers that need to resolve tax controversies at the pre-filing or pre-audit stage. These options are specifically tailored to taxpayers that fall under the jurisdiction of the IRS’s Large Business and International (LB&I) Division, which has oversight of businesses with $10 million in assets or more. While these taxpayers have several potential options, it is imperative to choose the best option under the circumstances at hand—and this requires the insights of a highly experienced Texas business tax attorney.

6 Options for Resolving High-Stakes Tax Controversies at the Pre-Filing or Pre-Audit Stage

The IRS’s LB&I Division has established six primary options for resolving high-stakes tax controversies at the pre-filing or pre-audit stage. These options are:

Requesting a Private Letter Ruling (PLR)

Large businesses can request a private letter ruling (PLR) to obtain a determination of “the tax treatment of [a] specific situation” from the IRS’s Office of Chief Counsel. The user fee is $30,000 in most cases, and is nonrefundable unless the Office of Chief Counsel declines to issue a PLR.

Along with payment of the user fee, other requirements for requesting a PLR include:

• The issue for which the PLR is being requested must not be the subject of an ongoing IRS audit;
• The issue must not be the subject of ongoing litigation with the IRS; and,
• The issue must not “be clearly or adequately addressed by statute, regulations, court decisions or authority published in the Internal Revenue Bulletin.”

The specific procedures for requesting a PLR and additional information about the process are covered in Revenue Procedure 2022-1. Requesting a PLR can make sense when a large business is considering a novel tax strategy or encounters a complex tax issue that is not clearly addressed by existing authority. Private letter ruling requests can be used to resolve post-filing issues that have the potential to trigger IRS audits or IRS litigation as well.

Requesting a Determination Letter

While PLRs are used to proactively resolve novel tax issues, determination letters are used to obtain certainty in circumstances that are addressed by “clearly established rules.” Requesting a determination letter is exclusively an option at the pre-filing stage, and the letter “represents an agreement on treatment of the transaction [at issue].”

The user fee for requesting a determination letter is $275, and the specific procedures for requesting a determination letter are addressed in Revenue Procedure 2022-1 as well.

Entering Into a Pre-Filing Agreement (PFA)

Large businesses can request a pre-filing agreement (PFA) to obtain certainty regarding “factual issues that fall under well-settled tax law principles.” Similar to requesting a determination letter, entering into a PFA is exclusively an option at the pre-filing stage.

The IRS advises that requesting a PFA is appropriate if, “you seek an agreement on issues likely to be disputed in post-filing audits.” The IRS also advises that, “[t]o fully maximize the benefits of a PFA and reach resolution . . . before the due date of the tax return [in question], the PFA request needs to be submitted as early as reasonably possible.”

Depending on the nature of the issue that leads to the need for a PFA, large business taxpayers can either request an agreement for a single year or an agreement that is valid for up to four additional tax years. In the latter scenario, the PFA will be classified as a non-statutory agreement, which means that it is subject to any applicable future changes to the Internal Revenue Code.

Entering Into an Advance Pricing Agreement (APA)

Entering into an advance pricing agreement (APA) is an option for large businesses seeking “tax certainty and the avoidance of a transfer pricing dispute with the IRS and one or more treaty partner administrations by securing an agreement on a transfer pricing methodology.” The user fee is $113,500 for most initial requests, with reduced user fees for amendments and renewals.

As the high user fee suggests, seeking an APA is typically reserved for high-value and highly complex transactions that present significant risks for scrutiny and enforcement in the U.S. or abroad. Additional information is available in Revenue Procedure 2015-41, and working closely with a highly experienced Texas business tax attorney is essential.

The Compliance Assurance Process (CAP)

The compliance assurance process (CAP) provides a means for “the IRS and the taxpayer [to] work together to achieve tax compliance by resolving issues prior to the filing of [a] tax return.” There are no user fees for the CAP; however, rather than providing pre-filing certainty, the CAP is intended to “substantially shorten the length of the [taxpayer’s] post-filing examination.”

Large business taxpayers can only apply for the CAP at certain times of the year. The application period for the upcoming 2026 CAP program is from September 3, 2025 to October 31, 2025.

The Industry Issue Resolution Program (IIR)

The IRS’s industry issue resolution program (IIR) is intended as a tool for proactively resolving tax issues that affect multiple similarly situated businesses. Similar to the CAP, the IIR does not have a user fee, as the goal of the program is to save time and costs for affected businesses and the IRS on a go-forward basis. As the IRS advises, seeking a resolution through the IIR may be a viable option if, “[y]ou and others (in your industry or even across industry lines) would benefit from having a team of IRS professionals review the issue and provide guidance.”

Request a Call with Experienced Texas Business Tax Attorney Lawrence Brown

If you would like more information about any of the pre-filing or pre-audit resolution options discussed above, we invite you to get in touch. Lawrence Brown is a highly experienced Texas business tax attorney who has helped numerous large and sophisticated clients favorably resolve complex tax issues with the IRS. To request a confidential consultation with Mr. Brown, please call 888-870-0025 or let us know how to reach you online today.