The IRS has issued new guidance to its Large Business and International Division (LB&I) in an attempt to expedite audits.
The interim guidance, released on July 23, 2025, outlines procedural changes that will further "customer-driven, effective and efficient examination resolutions," including the elimination of the Acknowledgment of Facts (AOF) Information Document Request (IDR), a push for increased use of its Fast Track Settlements (FTS) program and clarification of when Accelerated Issue Resolution (AIR) is allowed.
- AOF IDR. Under current policy, at the close of an examination, the agent issues an AOF IDR, which ensures all relevant facts are mutually agreed upon before a Notice of Proposed Adjustment (NOPA) is issued. The guidance notes that many taxpayers refuse to respond to the AOF IDR, and the process adds time to the exam. In Holland & Knight's experience, taxpayers respond and advise of the facts omitted by the examination team (Exam). But that doesn't always result in a revised draft of the NOPA. Under the new guidelines, the AOF process will be phased out through Jan. 1, 2026. For the rest of 2025, a taxpayer will be able to elect into or to decline participation.
- FTS. Since February 2025, the IRS has worked to encourage broader use of the FTS program. In FTS, an Appeals officer mediates between Exam and a taxpayer before the case reaches Appeals. Exam must agree to any resolution, which sometimes deters taxpayers from seeking FTS. But when taxpayers want to pursue FTS, Exam often denies the request with no explanation. The new guidelines require more internal review before the IRS denies a taxpayer's request to pursue FTS.
- AIR. AIR allows LB&I taxpayers to resolve similar issues from multiple tax years and then apply the same treatment to future years. See Rev. Proc. 94-67. The new guidelines clarify that AIR procedures are available to large corporations. This can be a very effective and cost-efficient way to resolve recurring issues.
These procedural changes come as the IRS continues to shrink amid the Trump Administration's cuts to the federal bureaucracy. The National Taxpayer Advocate estimates nearly 20 percent of the LB&I division will have left the IRS by the end of 2025. Perhaps the IRS is working more efficiently with fewer personnel. Public comments may be submitted through Dec. 31, 2025.
