On January 16, 2024, the IRS Large Business and International division announced a new compliance campaign: the IRS Sports Industry Campaign. While the announcement is recent and certain details are not yet available, let’s discuss the general direction of this IRS new compliance tax enforcement effort.
IRS Sports Industry Campaign: Background Information
In the mid-2010s, after extensive tax planning, the IRS decided to restructure LB&I in a way that would focus the division on issue-based examinations and compliance campaign processes. The idea was to let LB&I itself decide which compliance issues presented the most risk and required a response in the form of one or multiple treatment streams to achieve compliance objectives. The IRS came to the conclusion that this was the most efficient approach that assured the best use of IRS knowledge and appropriately deployed the right resources to address specific noncompliance issues.
The first thirteen campaigns were announced by LB&I on January 13, 2017. Then, the IRS added eleven campaigns on November 3, 2017, five campaigns on March 13, 2018, six campaigns on May 21, 2018, five campaigns on July 2, 2018, five campaigns on September 10, 2018, five campaigns on October 30, 2018, and so on. The IRS Sports Industry campaign is the latest one to be announced at the time of this writing.
IRS Sports Industry Campaign: What Does the IRS Say?
The IRS stated that it will conduct its Sports Industry Losses campaign to identify partnerships within the sports industry that report significant tax losses in order to determine whether the income and deductions driving the losses are reported in compliance with the applicable sections of the Internal Revenue Code.
IRS Sports Industry Campaign: Main Target
It is clear from the announcement that the IRS now decided to target sports teams for the losses that they are reporting. It is indeed true — in the industry renowned for its high profits, the reporting of losses may look suspicious.
However, when one looks at the fact that it is sports-related partnerships who report much of the losses, it becomes clear that the IRS is really after the beneficial owners of these partnerships. Who are their owners? Ultra high-net-worth individuals, who are at the center of the IRS newly-funded (by the Inflation Reduction Act) effort to bridge the so-called “tax gap”.
Contact Sherayzen Law Office for Professional Tax Help
If you have been contacted by the IRS as part of this campaign, contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers around the world with their US tax compliance issues, and we can help you!