Top corporate US tax issues: R&D, overseas taxes

WASHINGTON, March 21 Wed Mar 21, 2012 6:14pm EDT

WASHINGTON, March 21 (Reuters) - The research and development tax credit and 'transfer pricing' are the two top worries being reported to the U.S. Internal Revenue Service by companies on a new form known as "Schedule UTP" that took effect just last year, the IRS said on Wednesday.

The R&D tax credit has been a leading area of dispute between companies and the IRS for years. Transfer pricing is a strategy involving multinational corporations that shift profits to low-tax jurisdictions from high-tax ones.

The IRS is requiring corporations to use the new form to report to the tax-collecting agency any tax positions that they view as "uncertain" or vulnerable to challenge by the IRS.

IRS Commissioner Doug Shulman said at a congressional hearing that, since the beginning of the year, about 1,900 businesses have filed "Schedule UTP" information.

"A lot of the large business issues are international issues - the most serious one is transfer pricing. That's where we're shifting our large business operation," Shulman said.

Nineteen percent of all issues disclosed involved transfer pricing, he said.

This is an area of frequent and intense international tax disputes between businesses and the agency.

Corporations with more than $100 million in assets started reporting their uncertain positions on Schedule UTP last year with their returns for the 2010 tax year.

Separately, Shulman also criticized Congress for not providing the IRS with funding to implement President Barack Obama's healthcare system overhaul, set to take effect in 2014.

The IRS needs funds to harmonize its technology with new state insurance exchanges and it requested $8.2 million to cover the individual mandate portion of the overhaul.

"Whether you like the policy or not, when laws are passed you need to implement them," he said. (Reporting By Patrick Temple-West; Editing by Kevin Drawbaugh, Gary Hill)