Imagine this: Prior to the Buffalo Bills' home-opener against the Miami Dolphins, the Bills were required to provide the Dolphins with the entire Bills playbook. Imagine that the Dolphins' head coach then required the Bills' head coach to give him the first 20 plays the Bills plan to run, along with an explanation of why they want to run those plays.

Sounds crazy, right? But this is essentially what the Internal Revenue Service has proposed, and is moving forward with, in relation to certain corporate taxpayers.

On Jan. 26 of this year, the IRS released Announcement 2010-9, followed by 2010-17 and 2010-30, proposing a new and somewhat controversial disclosure regime under which certain business taxpayers will be required to disclose Uncertain Tax Positions (UTPs) on their annual corporate tax returns.

IRS Commissioner Douglas Shulman, the primary author and promoter of this new initiative - while attending the New York State Bar Association's Tax Session Annual Meeting earlier this year - commented that this disclosure regime marks the most recent step in a long series of measures aimed at tax governance and transparency. It should be noted that, since the ratification of the 16th Constitutional Amendment in 1913, the U.S. tax system has been based on the concept of self-assessment, which is already transparent. As reported in the Aug. 24, 2010, issue of The New York Times, Mr. Shulman said: "We are moving away from what I would describe as a contentious relationship, where we spend too much of our time identifying issues, to one where we know the issues from the outset and spend our time engaging on appropriate issues."

On the surface, Mr. Shulman's statement might appear to make sense to some. Who can deny the value of a map when attempting to navigate oneself to a desired destination? The problem as I see it is that Mr. Shulman has lost his way to his desired destination. The proclaimed destination of the IRS is greater transparency. However, based on this initiative, I would suggest that the real destination of the IRS appears to be increased tax collections with less effort on the part of the revenue agents.

"Adversary" is defined as one that contends with, opposes or resists. By its very nature, the revenue agent/taxpayer relationship is an adversarial one. Two parties having opposing objectives and positions. When a corporation takes an uncertain tax filing position, the corporation is motivated to assemble the appropriate facts and circumstances to justify a position that minimizes their tax liability; conversely, the IRS is motivated to assume a posture to maximize tax collections. The new UTP regime is likely to disrupt the natural balance of this adversarial - yet healthy - environment.

The UTP rules require certain corporate taxpayers to file a new schedule with a "concise description" of each UTP. The professional tax community is commonly referring to it as a Road Map to Audit Issues. Some have said the additional disclosures may flirt with legally privileged information. Certain tax attorneys fear that corporate executives may withhold information from their CPAs who are charged with assessing a company's finances. It has long been the belief that taxpayers with informed and skilled advisors have been one of the tenants necessary to uphold the integrity of the U.S. tax system. If the new UTP disclosure requirements indeed begin to pierce legally privileged information, the likelihood greatly increases that corporate executives will refrain from consulting with their advisors and begin making filing position decisions in a less-informed manner. The unintended consequence of the new regime may very well be the complete opposite of its original intent. Corporate taxpayers may be forced to opt for the lesser of two evils - a less-informed filing position vs. the risk of having to divulge legally privileged information on the new Schedule UTP.

As prescribed in IRS Announcement 2010-9, the concise description of each UTP will include:

• The Code sections potentially implicated by the position;

• A description of the taxable year or years to which the position relates;

• A statement that the position involves an item of income, gain, loss, deduction or credit against tax;

• A statement that the position involves a permanent inclusion or exclusion or any item, the timing of the item or both;

• A statement whether the position involves a determination of the value of any property or right; and

• A statement whether the position involves a computation of basis.

In addition, the schedule will require a taxpayer to specify the entire amount of U.S. federal income tax that would be due if the position were disallowed in its entirety on audit.

The new UTP regulations go into effect beginning with 2009 tax returns filed in 2010.

Speculation as to why this new UTP regime is being advanced includes the IRS' inability to provide adequate guidance in many technical areas. Despite the IRS' attempts to stay current, the IRS is faced with the daunting task of requests for guidance on a plethora of issues emanating from the continual enactment of tax legislation by Congress.

Further, in the current federal environment where balancing the budget becomes more difficult with each passing day, IRS agents are being given little choice but to become more aggressive on audits.

I am not looking forward to the day when an IRS audit under this new UTP regime occurs. Most CPAs who represent clients have become accustomed to revenue agents trying to extract payments from clients simply for nuisance value. But I am very disturbed by the thought of a revenue agent entering the room holding the "concise description" I was mandated to draft on a Schedule UTP, saying, "Would the taxpayer like to pay the entire tax that they disclosed they would owe if we disallow this position, or would you like to begin negotiating a lesser amount right now?"

Equally distressing is the thought that this could be the beginning of a slippery slope where smaller businesses and individuals may become subject to the same concept of "opening their playbooks" to the IRS.

Unfortunately, that will be the day in which the system of taxing citizens of the United States becomes a bit more broken.

Joseph Falbo Jr. is a tax partner with the Williamsville and Niagara Falls offices of Tronconi Segarra & Associates LLP. E-mail him at jfalbo@tsacpa.com.