No, if the IRS believes that a transaction presents a potential compliance risk in ICAP, this does not automatically lead to an examination. ICAP includes an optional issue resolution process that allows the multinational enterprise (MNE) and the relevant tax administrations to reach an agreement within the ICAP process on the tax treatment of a covered transaction. This process can determine whether any tax adjustments are needed for the covered period(s) or for future periods. The IRS will consider engaging in issue resolution on a case-by-case basis, taking into account factors such as the materiality of the potential adjustment, the complexity of the transaction, and the extent to which there is agreement on the underlying facts of the transaction. Issues that cannot be resolved in ICAP may be addressed through other traditional dispute resolution processes, such as a bilateral/multilateral advance pricing agreement (APA) or examinations.
Sources:
IRM Part 4. Examining Process. Chapter 51. LB&I Case Management. Section 2. LB&I Administrative Guidance
IRM Part 4. Examining Process. Chapter 46. LB&I Examination Process. Section 3. Planning the Examination
IRM Part 4. Examining Process. Chapter 60. International Procedures. Section 11. International Compliance Assurance Program
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