Given the extremely limited source of resources available to the IRS in recent years, it's not surprising that it is exploring all sorts of avenues to increase its efficiency, particularly relying on corporate taxpayers to self report questionable tax positions. Under the banner of "corporate governance" and "transparency," the Service issued a series of proposals in 2010 requiring disclosure of uncertain tax positions ("UTPs") by corporate taxpayers. The Service essentially piggybacked on the recently imposed 2006 audit requirements that reserves be posted for contingent tax liabilities (i.e., tax positions that could later not be sustained, and therefore had to be paid), by requiring such reserves to be disclosed on the financial statements for corporations. Disclosure of questionable tax positions would normally be mandated by legislation under the federal Internal Revenue Code (the "Code") or compelled through civil tax provisions that impose penalties if positions are not disclosed. However, the Service relied on neither, assuming that its authority under the "returns" provisions of the Code was sufficient. The author is extremely critical of the Service using its powers under the Code for non-tax policy measures, including corporate governance, and opines that unintended consequences usu- ally result from such endeavors.
Kathryn Kennedy, IRS's Recent Uncertain Tax Positions Initiative: A Tangle of Accounting, Tax and Privilege Issues, 9 DePaul Bus. & Comm. L.J. 401 (2011)