Accounting
How accounting firms are working to stay independent
In an accounting profession swirling with acquisitions and private equity investments, California-based Sensiba has decided to remain independent — a choice the Top 100 Firm makes over and over again.
“Every couple of years, it’s a decision,” explained managing partner John Sensiba. “Multiple offers a day come and partners always consider: Are we doing the right thing by our people and clients? So far the answer is yes.”
A whole cohort of firms would answer the same way, continuing to grow their practices organically and through strategic acquisitions while opting out of the capital offered by private equity or larger firms seeking their own buying opportunities.
Most would also agree that not having access to the capital and resources provided by larger entities requires independent firms to be very strategic — continuously outlining, communicating and executing on plans — to remain competitive.
At Bellevue, Nebraska-based leadership consulting firm ConvergenceCoaching, partner Tamera Loerzel and her team coach many firm leaders on just that.
“What we are learning and seeing from these firms, from managing partners, one of the things they tell us is, ‘Are we the only ones; are we crazy? Are we insane for not looking at other options other firms are looking at?’ [We say,] ‘No, you are not the only one, you are not crazy,'” she shared.
Of course, many firms still do their due diligence on scoping out the current market. What they see is a trend of merger and acquisition activity and private equity investments into accounting firms — including many Top 100 Firms in recent years — that was kicked off by Top 25 Firm EisnerAmper’s deal with TowerBrook Capital Partners in 2021.
Further highlighting the profession’s new direction, research and advocacy group The Accounting MOVE Project released a report late last year on how private equity investment is impacting employees.
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Firms that do accept private equity must set up alternative practice structures, splitting their attest and nonattest sides so the audit and assurance practice complies with state laws regarding CPA ownership.
This PE-dictated restructuring has been happening so often that the American Institute of CPAs’ Professional Ethics Executive Committee set up a group, the Alternative Practice Structures Task Force, earlier this year to revise its independence rules, and recently released revised language for stakeholders to consider.
So while Loerzel validates her clients’ sanity in remaining independent, she does advise that they keep an eye on the profession’s changing dynamics.
“Having a really clear direction, unified approach, and linked arms in where they are headed, doesn’t mean they are not going to have conversations and stay aware of what is happening in the market,” she explained. “Partners wonder, ‘Is this the right financial answer for us; if we get the right offer, do we take it?’ Sometimes it’s a blanket no. But [they should] pay attention to what the market is doing, it helps to focus, and know what their approach is. They need to be educated and have a clear vision and direction.”
Large or in charge?
One potential drawback firms see in merging or receiving outside investment is giving up control.
“For us, we want to remain our own bosses,” explained Sara Dayton, managing partner of Buffalo, New York-based Lumsden McCormick. “To us, that’s our main focus.”
One way the firm, which was founded in 1952 and currently has about $30 million in revenue and 145 employees, accomplishes this is with its mandatory retirement policy, according to Dayton.
“We’ve made it through a few generations, with a lot of young partners and a lot of energy,” she explained. “We have a required 65-and-out on retirement. We don’t have those older partners who are waiting to retire before the next level can move up. We have it in the partnership agreement, so there’s an ability for younger people to become partner. It’s made us stronger and led to a great plan for succession.”
Succession is a top concern for any independent firm relying on an internal transition, including Houston-based Abip CPAs.
“There would be nothing better for me than to transition ownership to our staff, our current senior managers and partners who have helped build the firm,” shared managing partner Scott Irvine. “I have a great leadership team behind me. Internal succession, for us, requires a lot of coaching, a lot of mentoring, a lot of faith in the people that are coming up behind us. It would be easy to talk to private equity and cash out a majority upfront. It’s very safe, I get it — very attractive. There’s an old adage of taking care of the people that helped you get here…. There’s nothing better than having the firm continue to move forward under different leadership, for however long it can continue. That’s the ultimate goal, to see if we build that team, those individuals, and get them ready to take on that challenge and responsibility.”
Since the firm was founded in 2005, it has grown from eight people to over 200, and added four other Texas offices to its Houston headquarters location.
The firm’s two decades in the burgeoning Houston market has given it a unique vantage point to PE’s ballooning influence, where, according to Irvine, “The majority of our competitors that used to fight over the midmarket space have been gobbled up by national, regional firms or private equity.”
“There are a lot of national firms and private equity wanting to get into Texas,” he observed. “We have some of the fastest-growing cities — Austin, San Antonio, Houston, Dallas — we’re looking to get into Dallas … Because of the consolidation of national firms and private equity coming in, it has widened the result to our benefit. There’s a large gap in the area, the middle-market area we service. I see it more as an opportunity for firms like us. Our clients don’t want to use a national firm, with national firm rates; they’re not big enough, and they feel they don’t get the service they get with a local firm.”
In fact, a Top 25 Firm’s acquisition of a Houston-based Top 100 Firm in 2021 directly benefited Abip.
“When [the Top 25 Firm] came into Houston and bought … a very good local, regional firm, within one to two years, we had a lot of the legacy clients now onboarding in earnest,” Irvine recalled. “With the [Top 25 Firm’s] rates and model, they were jumping ship because they didn’t feel they were getting the service they were used to; they didn’t want to pay the national rates, and they were looking for options.”
The wider market movement has also boosted the firm, Irvine reports. “We see that a lot with these acquisitions and mergers,” he continued. “It really created a situation for us, both in Houston and San Antonio — we look back at accounting, the top 25 firms from 15 to 20 years ago, the majority of those outside the Big Four nationals here were large local firms. Now we look at it, and its predominantly national firms, and only a handful of large local firms like we are. It gives us, in my opinion, a competitive advantage in our local markets.”
The pluses of private equity
The competitive bar has been raised in general for firms now contending with the influx of capital in the profession.
“No doubt, private equity coming into our space has accelerated the pace of change because of the environment,” said Stacie Kwaiser, CEO of Top 50 Firm Rehmann, which has remained independent. “It’s not a bad thing. We have to change faster to meet the needs of our workforce and clients. It’s allowing us to stay focused on our culture and our values … It’s a great thing for the profession; it’s allowed us to believe we have the opportunity to change faster, and to change as a profession. To me, that’s what they are promoting. I believe we have a strategy to move forward with change at a faster pace. I don’t think private equity is a bad thing for us and the profession.”
Allan Koltin, CEO of Koltin Consulting Group,
“PE firms raised the bar on our profession,” Koltin said. “They’re making it more competitive. They’re making tougher decisions faster. They’re taking the partnership model and making it work better.”
Sensiba also refers to private equity as a motivating factor. “We’re disrupting ourselves before disruption hits our profession in a more meaningful way,” he explained, in outlining his firm’s strategic priority, which was echoed by other independent firms: operational excellence. “We talk to friends who have taken investments and that’s exactly what private equity does, they come in and try to make operations excellent, bring in the rigor and discipline to maximize profitability. We do that without outside investment.”
Talent and tech
Talent and technology are foundational elements to these improvements, and for the first, independent firms can have the edge over higher-funded firms in attracting like-minded individuals.
“Partners are very strong in wanting to stay independent — it’s a message we send to employees and future partners,” explained Tom Johnson, partner at Minnesota-based Regional Leader Boulay. “It really has an impact on their decision; they want to be with Boulay. There’s a certain person who wants to be closer to ownership and decision-making, a little more control over their careers. Why we are staying independent is the people factor, having the control over their ability to practice in the profession, and not having some foreign entity deciding what we are going to do.”
While Boulay is a 90-year-old firm, its success over that near-century is due to embracing change, explained Johnson, though that’s sometimes easier said than done.
He identified “willingness of people to change,” as a top challenge to the firm’s long independence. “The No. 1 challenge is partners being willing to dive into the change — changing their behaviors while changing firm behaviors.”
For Boulay and its 315 employees across three offices, this is driven by its “process of moving from a compliance environment to a relationship environment,” Johnson explained. “The technology is going to do more of the work, and we have a differentiation of the relationship: consulting, advice giving. Those are the main transformational things.”
The wider availability of cutting-edge technology can also serve to level the playing field between independent firms and other firms’ deeper pockets.
“The resources they have, what they can spend on technology, what they spend on personnel, their own R&D, looking at software specific to them — we can’t do that,” acknowledged Abip’s Irvine. “We have to maximize every dollar and be very calculated. It hasn’t made us worse than our competitors by leveraging common brands out there — CCH, Thomson Reuters. They do a good job of continuing to advance technology, as AI becomes bigger and bigger.”
Independent firms must also invest in their people, which many are doing through dedicated professional development initiatives.
“In terms of associate experience, we continue to build strong development programs for associates at all levels in all divisions of the firm, to continue to offer firmwide mobility,” shared Rehmann’s Kwaiser. “Just overall, we are continuing to invest in a culture focused on the values of putting people first.”
Loerzel also stressed the importance of a people-first approach.
“Firms being successful are really clear in moving forward with programs and investing in a flexible culture, an open culture, mentorship,” she said, sharing an adage she believes holds true to thriving independent firms: “Culture is how employees feel on a Sunday night.”
Lumsden McCormick follows that logic with its workplace flexibility. “In trying to keep people, one of the main things is to remain hybrid,” Dayton shared. “There are no requirements for employees to return to the office if they want to work remotely. It has helped us bring in and retain people.”
Growing forward
In a profession action-packed with M&A, independent firms are making their own acquisitions to keep pace.
“We want to grow,” shared Dayton. “As part of that strategy, we are always looking if there are other firms to acquire.”
Rehmann has also made a series of acquisitions over the last few years.
“The M&A market shut down for us for three to five years” due to private equity competition, said Sensiba, but, “It’s really opened up in the last year or so for those that want the stability of an independent firm. No judgment one way or another, it’s just a choice. We’ve had mostly organic growth over the last few years, and then were priced out of the [M&A] market because of private equity. But over the last year or so we are having meaningful conversations for significant additions to the firm.”
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Abip has conducted about 15 acquisitions over its 20-year existence, and Irvine identified some advantages that an independent firm has in that arena over larger would-be buyers.
“If they get with us, it’s not the same as with private equity or national firms,” he explained. “You are joining with a firm very similar to you, so the integration process, the transition for clients, is much easier. You can say, when joining another local firm, you have similar rates and values as we have, similar customer service, offer the same service lines. What regional and national firms are offering, it resonates with a lot of firms like us, they’re worried about: ‘Are clients going to go from A to C clients? Are they just buying us to get some clients and [get] the other ones out? What’s going to happen to employees, are they going to be able to adapt to a national firm?’ There are a lot of unknowns in going with a national firm, or with private equity that is still in its infancy stage and unfolding. We can give the answers of how those unknowns can be resolved. I don’t think national firms and private equity firms can.”
One understood component of private equity ownership is financial accountability. “From a private equity standpoint, there is a lot of pressure to meet performance metrics, to invest in certain things,” said Dayton. “We don’t have those kinds of required goals in the same way that cause stress to our people.”
Independent firms should broadcast these advantages, advised Loerzel. “There’s lots of noise in the market, for talent and clients,” she said. “If you don’t have a real clear position and messaging, and are not communicating that in conversations, in writing, in recruiting documents, client communications, it can leave people wondering. Hire smart staff, smart team members who know what’s going on and where to plant roots to build their careers. You have to be really clear about your position and where you’re headed — it’s a competitive differentiator. If you’re not doing that, it leads to uncertainty.”
Abip has successfully alerted clients and staff to its continued mission. “It is very possible to grow a firm independently without including a national firm or private equity, depending on the city,” Irvine said. “What we’ve found is it’s refreshing for clients, to stay independent … . We are giving the feel and touch that’s more personal, in my opinion, than what a national firm can give. There’s just no replacement for being local.”
Loerzel also identified a common trait she’s witnessed in independent firms.
“One of the big ones is being committed to leave a legacy,” she shared. “They are about leaving something for the next generation, building something and really enjoying building something to leave something for the next generation of leaders. One characteristic attribute is generosity. It takes time and effort, blood, sweat and tears, and investment to build a firm like that and not take the dollar signs everyone is talking about with private equity and M&A. Generosity as a leadership team, often led by the managing partner, is something we see top down in firms committed to remain independent. They have a vision for their future and really know where they want to head.”
Keeping options open
While committed to a vision, many independent firms advocate being open to possibilities and weighing the pros and cons of any option to merge or sell.
“You figure out, with all the benefits of private equity, there’s a rigor to managing it,” Sensiba said. “To treat the business like a business and less like a traditional services firm, where you are waiting for the phone to ring or growing because you exist.”
While Sensiba continues to make the choice of independence, the decision is based on continual evaluation — which in itself can be a stressor.
“There’s a psychological challenge: Why is everyone else doing it and not me?” shared Sensiba. “What am I missing? But beyond that, we’ve been so fortunate. It’s been so good for all of us. As the market cools, it will really determine whether we have the steam to continue to grow as an independent firm. It’s a good test for all of us.”
And while the market looms large in any decisions, Sensiba reiterated the importance of staying true to the independent mindset guiding so many firms that have chosen that path.
“Everybody has different needs and desires — there is no right or wrong answer, but determine the right answer for yourself,” Sensiba advised. “If you’re the only one not doing the selling, you question: Is it the right thing? Don’t let your values be determined by others’ decisions.”
Ross Lindhout
The Financial Accounting Standards Board met this week to discuss its projects on accounting for transfers of cryptocurrency assets and enhancing the disclosures around certain digital assets, such as stablecoins.
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During Wednesday’s meeting, FASB’s board made certain tentative decisions, according to a
At a future meeting, the board plans to consider clarifying the derecognition guidance for crypto transfer arrangements to assess whether the control of a crypto asset has been transferred.
FASB also began deliberations on the
The board decided to provide illustrative examples in Topic 230, Statement of Cash Flows, to clarify whether certain digital assets such as stablecoins can meet the definition of cash equivalents. It also decided to include the following concepts in the illustrative examples:
- Interpretive explanations that link to the current cash equivalents definition;
- The amount and composition of reserve assets; and,
- The nature of qualifying on-demand, contractual cash redemption rights directly with the issuer.
FASB plans to clarify that an entity should consider compliance with relevant laws and regulations when it’s creating a policy concerning which assets that satisfy the Master Glossary definition of the term “cash equivalents“ will be treated as cash equivalents.
“I agree with the staff suggestion to look at examples,” said FASB vice chair Hillary Salo. “From my perspective, I think that is going to help level the playing field. People have been making reasonable judgments. I agree with that. And I think that this is really going to help show those goalposts or guardrails of what types of stablecoins would be in the scope of cash equivalents, and which ones would not be in the scope of cash equivalents. I certainly appreciate that approach, and I think it has the least potential impact of unintended consequences, because I do agree with my fellow board members that we shouldn’t be changing the definition of cash equivalents, and it’s a high bar to get into the cash equivalent definition.”
“I’m definitely supportive of not changing the definition of cash equivalents,” said FASB chair Richard Jones. “I believe that’s settled GAAP in a way, and we’re not really seeing a call to change it for broader issues. I am supportive of the example-based approach. The challenge with examples, though, is everybody’s going to want their exact pattern, but that’s not what we’re doing.”
The examples will explain the rationale for how digital assets such as stablecoins do or do not qualify as cash equivalents and give a roadmap for other types of digital assets with varying fact patterns to be able to apply.
“We really don’t want to be as a board facing a situation where something was a cash equivalent and then no longer is at a later date,” said Jones. “That’s not good for anyone, so keeping it as a high bar with certain rigid criteria, I think, is fine.”
Stablecoins are supposed to be pegged to fiat currencies such as U.S. dollars and thus provide more stability to investors. “In my view, while a stablecoin may meet the accounting definition established for cash equivalents, not every one of those stablecoins in the cash equivalent classification represents the same level of risk,” said FASB member Joyce Joseph.
She noted that the capital markets recognize the distinctions and have established a Stablecoin Stability Assessment Framework to evaluate a stablecoin’s ability to maintain its peg to a fiat currency. Such assessments look at the legal and regulatory framework associated with the stablecoin, and provide investors with information that could enable them to do forward-looking assessments about the stability of the stablecoin.
“However, for an investor to consider and utilize such information for a company analysis the financial statement disclosures would need to include information about the stablecoin itself,” Joseph added. “In outreach, the staff learned that investors supported classifying certain stablecoins as cash equivalents when transparent information is available about the entities at which the reserve assets are held. Therefore, in my view, taking all of this into consideration a relevant and informative company disclosure would include providing investors with the name of the stablecoin and the amount of the stablecoin that is classified as a cash equivalent, so investors can independently assess the liquidity risks more meaningfully and more comprehensively by utilizing broader information that is available in the capital markets and its emerging information.”
Such information could include the issuer, reserves, governance and management, she noted, so investors would get a more holistic look at the risks that holding the stablecoin would entail for a given company.
The board decided to require all entities to disclose the significant classes and related amounts of cash equivalents on an annual basis for each period that a statement of financial position is presented.
Entities should apply the amendments related to the classification of certain digital assets as cash equivalents on a modified prospective basis as of the beginning of the annual reporting period in the year of adoption.
FASB decided that entities should apply the amendments related to the disclosure of the significant classes and amounts of cash equivalents on a prospective basis as of the date of the most recent statement of financial position presented in the period of adoption.
The board will allow early adoption in both interim and annual reporting periods in which financial statements have not been issued or made available for issuance.
FASB also decided to permit entities to adopt the amendments to be illustrated in the examples related to the classification of certain digital assets as cash equivalents without the need to perform a preferability assessment as described in Topic 250, Accounting Changes and Error Corrections.
The board directed the staff to draft a proposed accounting standards update to be voted on by written ballot. The proposed update will have a 90-day comment period.
Senators introduced several pieces of tax-related legislation this week, including measures aimed at improving customer service at the Internal Revenue Service, cracking down on tax evasion and curbing the carried interest tax break, in addition to efforts in the House to repeal the Corporate Transparency Act.
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Senators Bill Cassidy, R-Louisiana, and Mark Warner, D-Virginia, teamed up on introducing a bipartisan bill, the
The bill would establish a dashboard to inform taxpayers of backlogs and wait times; expand electronic access to information and refunds; expand callback technology and online accounts; and inform individuals facing economic hardship about collection alternatives.
“Taxpayers deserve a simple, stress-free experience when dealing with the IRS,” Cassidy said in a statement Wednesday. “This bill makes the process quicker and easier for taxpayers to get the information they need.”
He also mentioned the bill during a
“I’m happy to meet with the team … and do all I can to make it as good as you want it to be,” said Bisignano.
“My bill would equip the IRS with the legislative mandate to create an online dashboard so that taxpayers can monitor average call wait time and budget time accordingly,” said Cassidy. He noted that the bill would allow a callback for taxpayers that might need to wait longer than five minutes to speak to a representative, and establish a program to identify and support taxpayers struggling to make ends meet by providing information about alternative payment methods, such as installments, partial payments and offers in compromise.
“I know people are kind of desperate and don’t know where to turn for cash, so I think this could really ease anxiety,” he added. “This legislation is bipartisan and is likely to pass this Congress.”
Cassidy and Warner
“Taxpayers shouldn’t have to jump through hoops to get basic answers from the IRS — and in the last year, those challenges have only gotten worse,” Warner said in a statement. “I am glad to reintroduce this bipartisan legislation on Tax Day to ease some of this frustration by increasing clear communication and making IRS resources more readily available.”
Stop CHEATERS Act
Also on Tax Day, a group of Senate Democrats and an independent who usually caucuses with Democrats teamed up to introduce the Stop Corporations and High Earners from Avoiding Taxes and Enforce the Rules Strictly (Stop CHEATERS) Act.
Senate Finance Committee ranking member Ron Wyden, D-Oregon, joined with Senators Angus King, I-Maine, Elizabeth Warren, D-Massachusetts, Tim Kaine, D-Virginia, and Sheldon Whitehouse, D-Rhode Island. The bill would provide additional funding for the IRS to strengthen and expand tax collection services and systems and crack down on tax cheating by the wealthy.
“Wealthy tax cheats and scofflaw corporations are stealing billions and billions from the American people by refusing to pay what they legally owe, and far too many of them are getting a free pass because Republicans gutted the enforcement capacity of the IRS,” Wyden said in a statement. “A rich tax cheat who shelters mountains of cash among a web of shell companies and passthroughs is likelier to be struck by lightning than face an IRS audit, and Republicans want to keep it that way. This bill is about making sure the IRS has the resources it needs to go after wealthy tax cheats while improving customer service for the vast majority of American taxpayers who follow the law every year.”
Earlier this week. Wyden also
The Stop CHEATERS Act would provide the IRS with additional funding for tax enforcement focused upon high-income tax evasion, technology operations support, systems modernization, and taxpayer services like free tax-payer assistance.
“As Congress seeks ways to fund much-needed policy priorities and address our growing national debt, there is one common sense solution that should have unanimous bipartisan support: let’s enforce the tax laws already on the books,” said King in a statement. “Our legislation will make sure the IRS has the resources it needs to confront the gap between taxes owed and taxes paid – while ensuring that our tax enforcement professionals are focused on the high-income earners who account for the most tax evasion. This is a serious problem with an easy solution; let’s pass this legislation and make sure every American pays what they owe in taxes.”
Carried interest
Wyden, King and Whitehouse also teamed up on another bill Thursday to close the carried interest tax break for hedge fund managers that
Carried interest is a form of compensation received by a fund manager in exchange for investment management services, according to a
Under the bill, the
“Our tax code is rigged to favor ultra-wealthy investors who know how to game the system to dodge paying a fair share, and there is no better example of how it works in practice than the carried interest loophole,” Wyden said in a statement. “For several decades now we’ve had a tax system that rewards the accumulation of wealth by the rich while punishing middle-class wage earners, and the effect of that system has been the strangulation of prosperity and opportunity for everybody but the ultra-wealthy. There are a lot of problems to fix to restore fairness and common sense to our tax code, and closing the carried interest loophole is a great place to start.”
Repealing Corporate Transparency Act
The House Financial Services Committee is also planning to markup a bill next Tuesday that would fully repeal the Corporate Transparency Act, which has already been significantly
If enacted, the repeal would eliminate beneficial ownership reporting requirements, removing a transparency measure designed to help law enforcement and national security officials identify who is behind U.S. companies.
“This repeal would turn the United States back into one of the easiest places in the world to set up anonymous shell companies, something Congress worked for years to fix,” said Erica Hanichak, deputy director of the FACT Coalition, in a statement. “These entities are routinely used to facilitate corruption, financial crime, and abuse. Rolling back the CTA doesn’t just weaken transparency, it signals to bad actors around the world that the U.S. is once again open for illicit business.”
The Internal Revenue Service rarely penalizes taxpayers who have high balances in foreign bank accounts and fail to file the proper forms, according to a new report.
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The
Taxpayers with specified foreign financial assets that meet a certain dollar threshold are also required to report the information to the IRS by filing Form 8938. Failure to file the form can result in penalties of up to $60,000. However, TIGTA’s previous reports have demonstrated that the IRS rarely enforces these penalties.
The IRS created an Offshore Private Banking Campaign initiative to address tax noncompliance related to taxpayers’ failure to file Form 8938 and information reporting associated with offshore banking accounts, but it’s had limited success.
Even though the initiative identified hundreds of individual taxpayers with significant foreign bank account deposits who failed to file Forms 8938, the campaign only resulted in relatively few taxpayer examinations and a small number of nonfiling penalties. The campaign identified 405 taxpayers with significant foreign account balances who appeared to be noncompliant with their FATCA reporting requirements.
The IRS used two ways to address the 405 noncompliant taxpayers: referral for examinations and the issuance of letters to them.
- 164 taxpayers (who had an average unreported foreign account balance of $1.3 billion) were referred for possible examination, but only 12 of the 164 were examined, with five having $39.7 million in additional tax and $80,000 in penalties assessed.
- 241 noncompliant taxpayers (who had an average unreported account balance of $377 million) received a combination of 225 educational letters (requiring no response from the taxpayers) and 16 soft letters (requiring taxpayers to respond). None of the 241 taxpayers were assessed the initial $10,000 FATCA nonfiling penalty.
“While taxpayers can hold offshore banking accounts for a number of legitimate reasons, some taxpayers have also used them to hide income and evade taxes,” said the report.
Significant assets and income are factors considered by the IRS when assessing whether taxpayers intentionally evaded their tax responsibilities, the report noted. Given the large size of the average unreported foreign account balances, these taxpayers probably have higher levels of sophistication and an awareness of their obligation to comply with the law.
TIGTA believes the IRS needs to establish specific performance measures to determine the effectiveness of the FATCA program. “If the IRS does not plan to enforce the FATCA provisions even where obvious noncompliance is identified, it should at least quantify the enforcement impact of its efforts,” said the report. “This will ensure that IRS decision makers have the information they need to determine if the FATCA program is worth the investment and improves taxpayer compliance.
TIGTA made three recommendations in the report, including revising Campaign 896 processes to include assessing FATCA failure to file penalties; assessing the viability of using Form 1099 data to identify Form 8938 nonfilers; and implementing additional performance measures to give decision makers comprehensive information about the effectiveness of the FATCA program. The IRS disagreed with two of TIGTA’s recommendations and partially agreed with the remaining recommendation. IRS officials didn’t agree to assess penalties in Campaign 896 or with implementing performance measures to assess the effectiveness of the FATCA program.
“From our perspective, TIGTA’s conclusions regarding IRS Campaign 896 are based, in part, on a misguided premise and overgeneralizations, including the treatment of ‘potential noncompliance’ as tantamount to ‘egregious noncompliance’ that warrants a monetary penalty without contemplating the variety of justifications that may exempt a taxpayer from having to file Form 8938,” wrote Mabeline Baldwin, acting commissioner of the IRS’s Large Business and International Division, in response to the report.
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