I.R.S Tax Transactions for Tax Shelters

The Internal Revenue Service would require large corporations to reveal basic information about their tax transactions, a surprise move intended to root out questionable or illegal tax shelters.

Under the plan, companies with assets of at least $10 million that also file broader disclosures with the Securities and Exchange Commission would be required each year to provide the I.R.S. with information about tax transactions that might be challenged by the agency.

The I.R.S. rule piggybacks a Financial Accounting and Standards Board regulation known as Fin 48, which addresses “accounting for uncertainty in income taxes,” and will affect most companies. They will be required to disclose what their total tax bill might be if the I.R.S. were to challenge any of their transactions and to provide short summaries of each one even if the transactions are not currently deemed illegal by the I.R.S.

Corporate tax lawyers and experts were stunned by the announcement.

“This is a massive, very important shift,” an accounting and tax expert in New York. “Corporations have treated audits as a game of ‘come see what you can find, we’re not going to volunteer stuff,’ and now the balance of power will shift to the I.R.S.”

The disclosure rule would not affect corporate filings until at least 2011, Douglas H. Shulman, the I.R.S. commissioner, said in an interview in New York at a meeting of the New York State Bar Association’s tax section.

The I.R.S. spends a quarter of its time in routine corporate audits simply trying to ferret out issues, “That is inefficient and a terrible waste of time,” and “The goal is simple: to cut down on the time it takes to find an issue and to complete an audit.”