The IRS Large Business and International (LB&I) division announced the start of the application period for the 2025 CAP program. The application period runs from Sept. 4, 2024, through Oct. 31, 2024. The IRS will inform applicants if they have been accepted into the program in February 2025.
Much of the 2025 CAP program is the same as 2024. However, the LB&I division announced some notable updates, including the following.
- The criteria for eligible applicants have been expanded. Previously, in addition to other requirements, applicants had to be U.S. publicly held corporations. For the 2025 CAP program, the IRS will accept applications from privately held C corporations including foreign owned corporations. Privately held corporation applicants will be required to submit audited financial statements specific to the taxpayer applying to the CAP program prepared in accordance with U.S. GAAP, International Financial Reporting Standards, or another permissible method.
- The number of allowed open examination years has been modified for new applicants. Current participants in the CAP program can have no more than one filed return and one unfiled return open to examination on the first day of the CAP applicant’s tax year. A new exception to the closed/open year eligibility requirement is that a tax year that remains open only because of an outstanding Inflation Reduction Act of 2022 tax issue will not be counted as an open filed return for purposes of the CAP eligibility return criterion. Additionally, for a new applicant currently under examination to be eligible for participation in the CAP program, the applicant can have no more than three tax years open for examination on the first day of the CAP applicant’s tax year, and the applicant and its current examination team must confirm that it is feasible that these open years could close no more than 12 months after the CAP applicant’s tax year.
- The Bridge Plus pilot, which was introduced in 2023 and replaced the Bridge process, will become permanent starting with the 2025 CAP cycle. Because the Bridge Plus process does not begin until a taxpayer’s tax year has ended, the projected start time for 2025 Bridge Plus would be Spring of 2026 for calendar year-end taxpayers.
- Prior to the start of the application process for the 2024 CAP program, the LB&I division released a draft of Form 14234-E, “Cross Border Activities Questionnaire (CBAQ),” which was a voluntary part of an applicant’s submission and intended to gather information related to specific international issues. For the 2025 program, new applicants are required to submit Form 14234-E as an additional application document.
Crowe observation
As part of its strategic operating plan initiatives, the IRS asked for comments on how to increase early resolution of compliance issues, including whether the CAP program should be expanded to include any taxpayer with financial statements audited by a third party as well as partnerships. While privately held C corporations have been added to the program, partnerships have not to date.
Looking ahead
Taxpayers that participate in the CAP program have identified significant benefits, but the CAP program is not suitable for most taxpayers. Taxpayers interested in participating in the 2025 CAP program should consult with their tax advisers to determine whether the CAP program would be a good fit for them, as well as whether the taxpayer is eligible to apply.
