On June 17, 2025, the Internal Revenue Service ("IRS") announced improvements to its Pre-Filing Agreement ("PFA") program. The IRS press release is available here.
The PFA program allows Large Business & International ("LB&I") taxpayers to resolve potential tax issues with the IRS before filing their tax return. Pursuant to Revenue Procedure 2016-30, a taxpayer seeking a PFA applies for the program, pays the user fee ($181,500), and, if accepted into the program, the IRS and the taxpayer work together to reach an agreement on the treatment of a specific issue(s) that will be reported on the taxpayer's return. Generally, the IRS will consider entering into a PFA on any issue that requires either a determination of facts or the application of well-established legal principles to known facts, and regarding a "methodology used by a taxpayer to determine the appropriate amount of an item of income, allowance, deduction, or credit." For example, potential PFA candidates include issues involving research credits, worthless stock deductions, effectively connected income and permanent establishment.
The improvements announced by the IRS are intended to make the program more user-friendly including a redesigned PFA web page with program statistics found here. Also, the IRS announced a dedicated web page of suitable PFA issues found here. No substantive changes to the PFA program itself are being made at this time.
Practice point: The PFA program may be a helpful tool to help large taxpayers avoid controversy with the IRS before a position is reported on the return. The statistics provided by the IRS indicate that research credit and worthless stock deduction issues were the most common issues addressed through the PFA program over the last five years. Although the PFA program is not right for all issues, if you have an issue listed on the IRS website and you would like assurance in how the IRS will analyze the issue before you report it on your return (and potentially be subject to civil tax penalties), consider asking your tax professional if a PFA may be right for you.
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