## IRS Streamlines Large Business Audits: Key Changes for 2025 and Beyond

On July 23, 2025, the Internal Revenue Service (IRS) unveiled interim guidance designed to reshape audit procedures within its Large Business & International (LB&I) division. These adjustments, detailed in the IRS memorandum available here, are primarily focused on accelerating audit timelines and optimizing resource allocation. The changes introduce modifications to three core processes, impacting how large corporations and international entities navigate tax examinations.

### Eliminating the Acknowledgement of Facts (AOF) Request

A meaningful shift involves the phasing out of the Acknowledgement of Facts (AOF) Facts Document Request (IDR). Previously, the AOF served as a mechanism to establish mutual agreement on factual matters *before* the IRS issued a Notice of Proposed Adjustment (NOPA). This process, unique in that it couldn’t be compelled through an IRS summons if a taxpayer declined to participate, is now voluntary for the remainder of 2025 and will be completely discontinued in 2026. This change reflects a move towards a more streamlined approach, reducing administrative overhead. Consider this analogous to a pre-negotiation phase in a contract dispute – the IRS is now opting to move directly into outlining its position.

### Expanding Accelerated Issue Resolution (AIR) applicability

the IRS has clarified that the Accelerated Issue Resolution (AIR) program now extends to Large corporate Compliance (LCC) cases. AIR provides a pathway for taxpayers to reach a closing agreement with the IRS, applying the resolution of a specific tax issue across multiple tax years. This is particularly valuable for companies facing consistent interpretations of tax law across different reporting periods. For context, the IRS Internal Revenue Manual section 4.46.5.4.2.4 (dated December 13, 2018) provides further detail on AIR, accessible here. This expansion of AIR’s scope offers a potentially efficient route to resolving complex tax matters.

### Enhanced Review of Fast track Settlement (FTS) Requests

Updates to the Fast Track settlement (FTS) pilot program now mandate an additional layer of review before the IRS can deny a taxpayer’s application for participation. This added scrutiny aims to ensure fairness and consistency in the FTS process, providing taxpayers with a more robust possibility to resolve disputes quickly. The FTS program, designed for expedited settlements, now includes a safeguard against potentially arbitrary denials.

### Strategic Implications for LB&I Taxpayers

Taxpayers currently undergoing LB&I audits have a window of opportunity to evaluate the potential benefits of participating in the AOF process before its elimination at the end of 2025. A careful assessment, in consultation with tax counsel, is crucial to determine if engaging in the AOF aligns with their overall audit strategy.

Furthermore, the IRS’s growing emphasis on option dispute resolution (ADR) mechanisms – like AIR and FTS – presents opportunities for efficient resolution. Given recent congressional debates surrounding IRS funding and the potential for continued budgetary constraints, exploring these ADR options may prove particularly favorable. According to a recent report by the Taxpayer Advocate Service, ADR programs have demonstrated a success rate of over 70% in resolving disputes without formal litigation. Therefore,proactive engagement with tax advisors to assess the viability of AIR or FTS is highly recommended for LB&I taxpayers seeking to minimize audit-related costs and uncertainties.
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