At the New York University Annual Tax Controversy Forum on June 15, 2012, representatives from two enforcement divisions of the I.R.S. stated that there needs to be more attention paid to pass-through entities, such as LLCs and S Corporations. Faris Fink, I.R.S. Commissioner for Small Business and Special Entities (SB/SE) stated (Tax Notes pay-wall link) “this is going to be a growing area as far as our coverage goes. We recognize the compliance risk with flow-throughs.” Michael Danilack, Deputy Commissioner (International) for Large Business and International (LB&I) echoed the need for emphasis on pass-through entities. The I.R.S. officials’ remarks identify the expansion of pass-through entities as the form of choice for many entrepreneurs; it is only natural that as more businesses recognize the benefits of avoiding entity-level tax, more enforcement resources will shift to these types of entities.

Mr. Danilack also remarked on the future of the Tiered Issues program that is being phased out — “We see the tiered issue program . . . [sic] as going away.” The Tiered Issue program is intended to be replaced with Issue Practice Groups, with the hoped for result that LB&I teams will be able to focus on general issues without the negative implications associated with the tiered process.