Obrazac 1120 Upute za raspored UTP
Upute za raspored UTP (obrazac 1120) (Rev. Decembar 2019.)
Upute za raspored UTP (obrazac 1120), izjava o neizvjesnoj poreznoj poziciji
Povezani obrasci
- Obrazac 1120 Raspored UTP - Izjava o neizvjesnom poreznom položaju
Department of the Treasury
Internal Revenue Service
Instructions for
Schedule UTP (Form 1120)
(Rev. December 2022)
Uncertain Tax Position Statement
Section references are to the Internal Revenue
Code unless otherwise noted.
country-specific accounting standards,
including a modified version of any of
the above (for example, modified
GAAP).
If the corporation evaluates a tax
position and determines that it meets
the recognition threshold for uncertain
tax benefits in an interim audited
financial statement issued before the tax
position is taken on a return, the
corporation need not report the tax
position to which the tax benefit relates
on Schedule UTP.
A tax position is based on the unit of
account used to prepare the audited
financial statements in which the liability
for an unrecognized tax benefit is
recorded (or in which the tax benefit
was recognized because of an
related party of the subsidiary, records a
liability for unrecognized tax benefits in
an audited financial statement with
respect to one of the subsidiary’s tax
positions in its former group’s prior
return, the subsidiary should report the
tax position on Part II of the
Future Developments
For the latest information about
developments related to Schedule UTP
(Form 1120) and its instructions, such
as legislation enacted after they were
Schedule UTP filed with its current tax
return, if it files a separate return. If the
subsidiary is included in the return of
another consolidated group that is
required to file Schedule UTP, the
common parent of that consolidated
group should report the tax position on
Part II of the Schedule UTP filed with the
group’s current tax return.
Concise description of tax position.
A corporation that reports a tax position
in either Part I or Part II is required to
provide a description of each tax
position in Part III. See Examples 13
General Instructions
Purpose of Schedule
Schedule UTP asks for information
about tax positions that affect the U.S.
federal income tax liabilities of certain
corporations that issue or are included
in audited financial statements and have
assets that equal or exceed $10 million.
expectation to litigate). A tax position
taken on a tax return is a tax position
that would result in an adjustment to a
line item on that tax return if the position
is not sustained. If multiple tax positions
affect a single line item on a tax return,
report each tax position separately on
Schedule UTP. See Tax position taken
on a tax return, later.
Reporting Uncertain
Tax Positions
Consistency with financial statement
reporting. The analysis of whether a
liability for unrecognized tax benefits
has been recorded for the purpose of
completing Schedule UTP is
on Schedule UTP
Tax positions to be reported.
Schedule UTP requires the reporting of
each U.S. federal income tax position
taken by an applicable corporation on
its U.S. federal income tax return for
which two conditions are satisfied.
determined by reference to the tax
benefit recognition decisions made by
the corporation or a related party for
audited financial statement purposes. If
the corporation or a related party
determined that, under applicable
accounting standards, either the tax
benefit could be recognized for a tax
position taken on a tax return because
the amount was immaterial for audited
financial statement purposes, or that a
tax position satisfied the recognition and
measurement process under Financial
Accounting Standards Board (FASB)
Accounting Standards Codification
(ASC) Subtopic 740-10, then the
corporation need not report the tax
position on Schedule UTP. For a
Reporting current year and prior
year tax positions. Tax positions
taken by the corporation on the current
year’s tax return are reported in Part I.
Tax positions taken by the corporation
on a prior year’s tax return are reported
on Part II. A corporation is not required
to report a tax position it has taken in a
prior tax year if the corporation reported
that tax position on a Schedule UTP
filed with a prior year tax return. If a
transaction results in tax positions taken
on more than one tax return, the tax
positions must be reported on Part I of
the Schedule UTP attached to each tax
return in which a tax position is taken
regardless of whether the transaction or
a tax position resulting from the
1. The corporation has taken a tax
position on its U.S. federal income tax
return for the current tax year or for a
prior tax year.
2. Either the corporation or a related
party has recorded a liability for
unrecognized tax benefits with respect
to that tax position for U.S. federal
income tax in audited financial
statements, or the corporation or related
party recognized the tax benefit for that
tax position because the corporation
expects to litigate the position.
A tax position for which a liability for
unrecognized tax benefits was recorded
(or for which a tax benefit was
corporation subject to FASB ASC
740-10, a tax position is recognized,
and therefore need not be reported on
Schedule UTP, if it meets the
transaction was disclosed in a
Schedule UTP filed with a prior year’s
recognized because of an expectation
to litigate) must be reported on
recognition and measurement process
for evaluating tax positions in the
corporation's financial statements.
Example 8, later. Do not report a tax
position on Schedule UTP before the
tax year in which the tax position is
taken on a tax return by the corporation.
Schedule UTP regardless of whether
the audited financial statements are
prepared based on U.S. generally
accepted accounting principles (GAAP),
International Financial Reporting
Standards (IFRS), or other
Transition rule. A corporation is not
required to report on Schedule UTP a
tax position taken in a tax year
If, after a subsidiary member leaves a
consolidated group, the subsidiary, or a
Dec 13, 2022
Cat. No. 55028G
beginning before January 1, 2010, even
Form 1120-L or Form 1120-PC, is at
entered alone or in tandem, indicate the
recording of a liability for unrecognized
tax benefits are (1) an increase in a
current or non-current liability for income
taxes, interest or penalties payable, or a
reduction of a current or non-current
receivable for income taxes and/or
interest with respect to the tax position;
or (2) a reduction in a deferred tax asset
or an increase in a deferred tax liability
with respect to the tax position.
if a liability for unrecognized tax benefits least $10 million.
is recorded with respect to that tax
Form 1120-F. The assets of a
position in audited financial statements
later. In addition, a corporation is not
required to report accruals of interest
and penalties on an unrecognized tax
benefit recorded with respect to a tax
position taken on a pre-2010 tax return.
Periods covered. File Schedule UTP
with the corporation’s current year's tax
return.
corporation filing a Form 1120-F equal
or exceed $10 million if the higher of the
beginning or end of year total worldwide
assets of the corporation reported on
Form 1120-F, Schedule L, line 17,
would be at least $10 million if the
corporation were to prepare a
Schedule L on a worldwide basis.
Liabilities for unrecognized tax benefits
are created when a tax position taken
on a return does not satisfy the
Affiliated groups. An affiliated group
of corporations filing a consolidated
return will file one Schedule UTP for the
affiliated group. The affiliated group
need not identify the member of the
group to which the tax position relates,
or which member recorded the liability
for unrecognized tax benefits for the tax
position. Any affiliate that files its U.S.
federal income tax return separately and
satisfies the requirements set forth
above must file a Schedule UTP with its
return setting forth its own tax positions.
recognition and measurement process
for evaluating tax benefits on the
Who Must File
A corporation must file Schedule UTP
for the current tax year if:
financial statements under ASC 740-10.
A tax position that is not “more likely
than not” to be sustained based on its
technical merits, or a tax position that is
more likely than not to be sustained but
less than 50 percent likely of being
realized upon ultimate settlement, is
recorded as a liability for unrecognized
tax benefits under ASC 740-10.
1. The corporation files Form 1120,
U.S. Corporation Income Tax Return;
Form 1120-F, U.S. Income Tax Return
of a Foreign Corporation; Form 1120-L,
U.S. Life Insurance Company Income
Tax Return; or Form 1120-PC, U.S.
Property and Casualty Insurance
Company Income Tax Return;
The initial recording of a liability for
unrecognized tax benefits will trigger
reporting of a tax position taken on a
return. However, subsequent
Definitions and Special Rules
Note. All examples in these instructions
assume the calendar year is the
reporting year both for U.S. federal
income tax and financial statement
purposes and the independent auditor’s
opinion on the audited financial
statements is issued before the filing of
the tax return.
2. The corporation has assets that
equal or exceed $10 million;
3. The corporation or a related party
issued audited financial statements
reporting all or a portion of the
unrecognized tax benefit increases or
decreases with respect to the tax
position will not.
corporation’s operations for all or a
portion of the corporation’s tax year; and
If a corporation is included in multiple
audited financial statements, the
corporation must report a tax position on
Schedule UTP if a liability for
4. The corporation has one or more
tax positions that must be reported on
Schedule UTP.
Do not file a blank Schedule UTP if
there are no tax positions to be
reported.
Audited financial statements.
Audited financial statements mean
financial statements on which an
independent auditor has expressed an
opinion, whether qualified, unqualified,
disclaimed, or adverse, under GAAP,
IFRS, or another country-specific
accounting standard, including a
modified version of any of the above (for
example, modified GAAP). Compiled or
reviewed financial statements are not
audited financial statements.
unrecognized tax benefits for that
position was recorded in any of those
audited financial statements.
Example 1. General rule regarding
recording a liability for unrecognized
tax benefits. A corporation recorded a
liability for unrecognized tax benefits in
its 2020 audited financial statements
relating to a tax position taken on its tax
return for the 2020 tax year. The
Attach Schedule UTP to the
corporation's income tax return. Do not
file it separately. A taxpayer that files a
protective Form 1120, 1120-F, 1120-L,
or 1120-PC must also file Schedule UTP
if it satisfies the four requirements set
forth above.
corporation filed its 2020 tax return on
October 15, 2021. The corporation
reported the 2020 tax position on Part I
of Schedule UTP and filed
Record a liability for unrecognized
tax benefits. A corporation or a related
party records a liability for unrecognized
tax benefits for a U.S. federal income
tax position when a liability for
A corporation required to file
Schedule UTP must also check “Yes” to
Form 1120, Schedule K, Question 14;
Form 1120-F, Additional Information,
Question AA; Form 1120-L,
Schedule UTP with its 2020 tax return. If
the corporation increases its liability for
unrecognized tax benefits with respect
to the tax position taken on its 2020 tax
return in its 2022 audited financial
statements, the corporation is not
required to report the 2020 tax position
again on its 2022 tax return as a result
of the 2022 increase in the
unrecognized tax benefits for U.S.
federal income tax, interest, or penalties
with respect to that position is recorded
in the audited financial statements of the
corporation or a related party. A liability
for an unrecognized tax benefit is
Schedule M, Question 15; or Form
1120-PC, Schedule I, Question 13.
Computation of assets that equal or
exceed $10 million. For the following
corporate income tax returns:
recorded when an uncertain tax position
or ASC 740-10 liability is stated
Forms 1120, 1120-L, and 1120-PC.
A corporation’s assets equal or exceed
$10 million if the amount reported on
page 1, item D of Form 1120, or the
higher of the beginning or end of year
total assets reported on Schedule L of
unrecognized tax benefit.
anywhere in a corporation’s or related
party’s financial statements, including
footnotes and any other disclosures,
and may be indicated by any of several
types of accounting journal entries.
Some of the types of entries that,
Example 2. Reporting
unrecognized tax benefits in
subsequent years. A corporation
claimed a deduction in 2020 and
determined under applicable accounting
Instructions for Schedule UTP (Form 1120)
-2-
standards that it could recognize the full
benefit of the position. In 2022, the IRS
began an examination of the 2020 tax
return and decided to examine whether
the deduction was proper. The
tax position is one which the corporation amortize an expense, affects line items
or a related party determines the
on each year’s return in which the tax
position is taken during the period of
amortization. Whether these tax
probability of settling with the IRS to be
less than 50% and, under applicable
accounting standards, the tax benefit
was recorded in the audited financial
statements because the corporation
intends to litigate the tax position and
positions taken on a return are reported
on Schedule UTP for a particular tax
year, and when they are reported,
depends on whether and when a liability
corporation subsequently reevaluated
the tax position and recorded a liability
for unrecognized tax benefits for that
position in 2022. The corporation has
has determined that it is more likely than for unrecognized tax benefits is
taken a tax position in its 2020 tax return not to prevail on the merits in litigation.
Example 8, later.
and recorded an unrecognized tax
Example 5. Tax benefit
benefit with respect to that tax position.
recognized after a change in
Note. The use of a net operating loss
(NOL) or a credit carryforward is a tax
position taken on a tax return. A
The corporation must report the tax
circumstances based on expectation
position on Schedule UTP filed with its
to litigate. A corporation takes a tax
2022 tax return even if the IRS identifies
position on its 2020 tax return for which
corporation must report the use of an
NOL or credit carryforward as a tax
position taken on the return even if the
corporation has previously reported the
tax position that created or added to the
NOL or credit carryforward on
the tax position for examination prior to
a tax benefit is recognized because the
the recording of the unrecognized tax
corporation determined the tax position
benefit.
is correct. Circumstances change, and
in 2022 the corporation determined that
the tax position was uncertain, but did
not derecognize the tax benefit because
of its expectation to litigate the position.
That is, the corporation or a related
party determines the probability of
settling with the IRS to be less than 50%
and, under applicable accounting
Related party. A related party is any
entity that has a relationship to the
corporation that is described in section
267(b), 318(a), or 707(b), or any entity
that is included in consolidated audited
financial statements in which the
corporation is also included.
Unit of account. A unit of account is
the level of detail used in analyzing a tax
position, taking into account both the
level at which the taxpayer prepares
and supports the tax return and the level
at which the taxpayer anticipates
Example 3. Related party general
rule. Corporation A is a corporation
filing Form 1120 that has $160 million of
assets. Corporation B is a foreign
standards, the tax benefit was recorded
because the corporation intends to
litigate the tax position and has
addressing the issue with the IRS. The
unit of account used by a GAAP or
modified GAAP taxpayer for reporting a
tax position on Schedule UTP must be
the same unit of account used by the
taxpayer for GAAP or modified GAAP.
determined that it is more likely than not
to prevail on the merits in the litigation.
The corporation must report that
corporation not doing business in the
United States and is a related party to
Corporation A. Corporations A and B
issue their own audited financial
position on Part II of the Schedule UTP
filed with the 2022 tax return either if it
records a liability for an unrecognized
tax benefit or if it records a tax benefit
because it expects to litigate, even if
that decision to record or not record the
tax benefit occurs because of a change
in circumstances in a later year.
statements. Corporation A takes a tax
position on its tax return. If Corporation
B records an unrecognized tax benefit
with respect to that tax position in its
own audited financial statements, even
though Corporation A does not, then
that tax position must be reported by
Corporation A on its Schedule UTP.
In the case of audited financial
statements prepared under accounting
standards other than GAAP or modified
GAAP, a corporation that issues audited
financial statements with a unit of
account that is based upon the entire
tax year may not use that unit of account
for Schedule UTP. The corporation must
instead identify a unit of account based
on similar principles applicable to GAAP
or modified GAAP taxpayers, or use any
other level of detail that is consistently
applied if that identification is
Tax position taken on a tax return. A
tax position taken on a tax return means
a tax position that would result in an
adjustment to a line item on any
Example 4. Liability for
unrecognized tax benefits recorded
in consolidated financial statements.
Corporation C files a tax return and has
assets of $160 million. Corporations C
and D issue consolidated audited
financial statements, but they do not file
a consolidated tax return. Corporation C
takes a tax position for which a liability
for unrecognized tax benefits was
recorded in the consolidated financial
statements of Corporations C and D.
The tax position taken by Corporation C
on its tax return must be reported on its
Schedule UTP because a liability for
unrecognized tax benefits was recorded
for its tax position in the consolidated
financial statements in which
schedule or form attached to the tax
return (or would be included in a section
481(a) adjustment) if the position is not
sustained. If multiple tax positions affect
a single line item on a tax return, each
tax position is a separate tax position
taken on a tax return. For example, a tax
position that is reported on a line item
on Form 5471 is a tax position taken on
a return, even though an adjustment to
that line item might not result in the
payment of any additional tax.
reasonably expected to apprise the IRS
of the identity and nature of the issue
underlying the tax position taken on the
tax return.
Example 6. Unit of account.
Corporation A and Corporation B each
have two individual research projects
and each anticipates claiming a
research and development credit arising
out of their projects. Corporation A
chooses each individual research
project as the unit of account for GAAP
financial reporting purposes, since the
corporation accumulates information for
the tax return about the projects at the
project level and expects the IRS to
address the issues during an
A single decision about how to report
an item of income, gain, loss, deduction,
or credit may affect line items in multiple
years’ returns. If so, that decision can
result in a tax position taken on each
affected year’s return. For example, a
decision to amortize an expense rather
than currently deduct that expense, or a
decision to currently deduct rather than
Corporation C was included.
Tax benefit recognized based on ex-
pectation to litigate. A corporation
must report on Schedule UTP a tax
position taken on its return for which an
income tax benefit was recorded if the
examination of each project separately.
Instructions for Schedule UTP (Form 1120)
-3-
Corporation B determines that the
appropriate unit of account for GAAP
financial reporting purposes is the
functional expenditures, based on the
amount of its expenditures, the
Form 8275 or Form 8275-R need not be 2019. The corporation recognized the
filed to avoid certain accuracy-related
penalties with respect to that tax
position.
tax benefits for the positions taken in tax
years 2020 through 2023. The
corporation has taken a tax position in
each of the 5 tax years because, on
each year’s tax return, there would be
an adjustment to a line item on that
return if the position taken in that year’s
return is not sustained. The tax position
taken in the 2019 tax year must be
reported on Part I of Schedule UTP filed
with the 2019 tax return. None of the
2020 to 2023 tax positions must be
reported on Schedule UTP because the
corporation recognized the tax benefits
with respect to those tax positions.
For tax positions contrary to a rule
otherwise reportable on Form 8275, you
must identify the statutory provision on
Schedule UTP, Parts I and II, in column
(b); and the revenue ruling, revenue
procedure, or other guidance in column
(c). For tax positions contrary to a
anticipated credits to be claimed, its
previous experience, and the advice of
its tax advisors. Based on the unit of
account used for financial reporting
purposes, Corporation A must use each
project as its unit of account for
Schedule UTP reporting, and
regulation otherwise reportable on Form
8275-R, you must identify the statutory
provision on Schedule UTP, Parts I and
II, column (b); and enter the full
Corporation B must use functional
expenditures as its unit of account for
Schedule UTP reporting, regarding the
research and development credit.
regulation citation in column (d) (see
Specific Instructions, later). For all tax
positions otherwise reportable on Form
8275 or Form 8275-R, the concise
description of UTPs on Schedule UTP,
Part III must include all the information
required under those forms.
Example 8. Multiple year
Ranking Tax Positions by Size
positions. A corporation incurred an
expenditure in 2018 and took the
The corporation must rank by size each
tax position listed in Parts I and II. See
the instructions for Part I, column (h),
regarding coding to be used to rank the
corporation’s tax positions.
position that the expenditure may be
amortized over 15 years beginning on
its 2018 tax return. During the course of
reviewing its tax positions for purposes
of evaluating tax benefit recognition for
U.S. federal income taxes for its 2018
audited financial statements, the
Failure to provide a complete
Size. The size of each tax position is
determined on an annual basis and is
the amount of unrecognized U.S.
and accurate disclosure of the
!
CAUTION
tax position on Schedule UTP
will not satisfy the section 6662
adequate disclosure requirements for
Form 8275, 8275-R, or tax positions
reported on Schedule UTP.
federal income tax benefits recorded for
that position. If an unrecognized tax
benefit is recorded for multiple tax
positions, then a reasonable allocation
of that unrecognized tax benefit among
the tax positions to which it relates must
corporation determined that it was
uncertain whether any deduction or
amortization of this expenditure is
allowable. In the 2018 audited financial
statements, the corporation recorded a
liability for unrecognized tax benefits
with respect to the amortization
Amended Returns
be made in determining the size of each A complete and accurate disclosure of a
tax position.
tax position on Schedule UTP, Form
8275, or Form 8275-R must be included
in an amended return that is filed to
claim the benefit of the tax positions
reported on these disclosure forms. If an
amended return is filed to carryover
attributes such as net operating losses
or tax credits arising from tax positions
reported in prior filings, the disclosure
forms do not need to be completed.
Instead, attach a statement to the
amended return that identifies each tax
position, the amount, the nature of the
disclosure, the form used to report the
disclosure, and the tax year in which the
tax position originates.
deduction to be claimed in each tax
year. The corporation has taken a tax
position in each of the 15 tax years
because on each year’s tax return there
would be an adjustment to a line item on
that return if the position taken in that
year is not sustained. The corporation
reported the 2018 tax position on Part I
of Schedule UTP for the 2018 tax year.
In addition, the tax position to be taken
in each of the 2019 to 2032 tax years
must be reported on Part I of the
If an amount of interest or penalties
relating to a tax position is not identified
in the books and records as being
associated with that position, then that
amount of interest and penalties is not
included in the size of a tax position
used to rank that position or compute
whether the position is a major tax
position.
Expectation to litigate. Do not
determine a size for positions listed
because of an expectation to litigate.
See the instructions for Parts I and II,
column (h), regarding ranking of these
positions.
Schedule UTP filed with the tax return
for the respective tax year in which the
tax position was taken. The result would
be the same if, instead of recording the
liability for unrecognized tax benefits in
2018 for all of the tax positions taken in
each of the 15 years, the corporation
records a liability for unrecognized tax
benefits in each year that specifically
relates to the tax position taken on the
return for that year.
Example 9. Transition rule. The
facts are the same as in Example 8
except that the corporation incurred the
expenditure and recorded the liability for
unrecognized tax benefits in 2009. The
corporation has taken a tax position in
each of the 15 tax years (2009 through
2023) because on each year’s tax return
there would be an adjustment to a line
item on that return if the position taken
Comprehensive Examples
Affiliated groups. The determination
of the size of a tax position taken on a
tax return by an affiliated group filing a
consolidated return is to be determined
at the affiliated group level for all
Example 7. Multiple year
positions. A corporation incurred an
expenditure in 2019 and claimed the
entire amount as a deduction on its
2019 return. During the course of
reviewing its tax positions for purposes
of evaluating whether to recognize a
benefit for uncertain tax positions for
U.S. federal income taxes for its 2019
audited financial statements, the
members of the affiliated group.
Coordination With Other
Reporting Requirements
A complete and accurate disclosure of a
tax position on the appropriate year’s
Schedule UTP will be treated as if the
corporation filed a Form 8275,
corporation determined it was uncertain
whether the expenditure should instead
be amortized over 5 years and records
a liability for unrecognized tax benefits
with respect to the position taken in
Disclosure Statement, or Form 8275-R,
Regulation Disclosure Statement,
regarding the tax position. A separate
Instructions for Schedule UTP (Form 1120)
-4-
in that year is not sustained. However,
the corporation was not required to
report the tax position taken in the 2009
tax year because it was taken in a tax
year beginning before January 1, 2010.
The corporation reports the tax position
taken in each of the 2010 to 2023 tax
years on Part I of the Schedule UTP
filed with its tax return for the respective
Example 12. Corporate merger.
On June 30, 2022, MergerCo merges
into AcquiringCo, in a transaction in
which AcquiringCo survives.
Column (b). Primary IRC Sections
Provide the primary IRC sections (up to
three) relating to the tax position. Enter
one primary IRC section in each box (for
example, “61,” “108,” “263A,” etc.). Do
not include descriptive references or
any other text such as “IRC,” “Section,”
or “IRC Sec.” Beneath each primary IRC
section, you may enter the applicable
IRC subsections (for example, (f)(2)(A)
(ii)), using the preprinted parentheses. If
there are more than four subsection
components, list only the first four.
MergerCo's tax year ends on that date.
After the merger, AcquiringCo records
an unrecognized tax benefit with
respect to a tax position that is taken on
MergerCo's final return in its audited
tax year in which the position was taken. financial statements. That tax position
must be reported on Part I of the
Example 10. Creation and use of
Schedule UTP filed with MergerCo's
net operating loss (NOL). A
2022 tax return even though the
corporation incurred a $50 expenditure
unrecognized tax benefit was recorded
in 2018 and claimed the entire amount
by AcquiringCo. AcquiringCo should not
as a deduction on its 2018 tax return.
report the tax position on the
The deduction increases the
Column (c). Rev. Rul. (RR), Rev.
Proc. (RP), etc.
Schedule UTP filed with its 2022 tax
corporation’s NOL carryforward from
return because MergerCo's final return
$100 to $150. The corporation used the
is a prior year tax return on which the tax
entire $150 NOL carryforward on its
If you are disclosing a tax position
contrary to a rule (such as a statutory
provision or IRS Revenue Ruling)
otherwise reportable on Form 8275, you
must identify the rule in column (c).
Enter the authoritative source using the
abbreviation listed below and the
position was reported.
2019 tax return. Claiming the $50
deduction in 2018 is a tax position taken
in the 2018 tax year because the
Specific Instructions
position would result in an adjustment to
a line item on the 2018 tax return if the
Part I. Uncertain Tax
position is not sustained. The deduction
Positions for the Current
in 2019 of the NOL carried forward from
applicable numeric reference. Do not
include a space between the letters and
numbers (for example, “RR2021–02”).
Tax Year
2018 is a tax position taken on the 2019
tax return, because the position would
When To Complete Part I
Complete Part I to report tax positions
taken by the corporation on its current
tax return.
result in an adjustment to a line item on
the 2019 tax return if the position is not
sustained. The corporation recorded a
liability for unrecognized tax benefits
with respect to its 2018 tax position in its
2018 audited financial statements.
Because the corporation recorded a
liability for an unrecognized tax benefit
with respect to the tax position taken in
2018, it reported the 2018 tax position
on the Schedule UTP filed with its 2018
tax return. Even though it reported the
tax position in its 2018 tax return, the
corporation should also report the 2019
tax position on the Schedule UTP filed
with its tax return for the 2019 tax year
because the deduction of the NOL
carried forward from 2018 is a tax
position taken on the 2019 tax return
that would result in an adjustment to a
line item on the 2019 tax return if the
position is not sustained.
Abbreviation
RP
RR
NOT
CT
Authoritative Source
Revenue Procedure
Revenue Ruling
Notice
Information From Related Parties
Court Decision
Check the box at the top of Part I if the
corporation was unable to obtain
sufficient information from one or more
related parties and was therefore unable
to determine whether a tax position
taken on its current year’s tax return is
required to be reported in Part I of this
schedule.
Column (d). Regulation Section
If you are disclosing a tax position
contrary to a Treasury regulation
otherwise reportable on Form 8275-R,
enter the regulation section in the box
(for example, “1.482-7”). In the
preprinted parentheses beneath each
regulation section number, enter all
designations of smaller units (lettered or
numbered subsections, paragraphs,
subparagraphs, and clauses) to which
the contrary position relates (for
example, “(d)(1)(iii)”).
Column (a). UTP No.
Enter a number in column (a) for each
tax position reported. The UTP numbers
on Part I, column (a), include a
preprinted “C” prefix to indicate that they
are positions for the current tax year. A
corresponding UTP number with the
letter “C” prefix will be used on Part III
for reporting the description of the tax
position. Begin with the number 1, do
not skip any whole numbers, do not
enter extraneous characters, and do not
duplicate any numbers (for example,
C1, C2, C3, where the letters “C” are
preprinted on the schedule and the
numbers are entered). Each tax position
taken on a return is considered a
Example 11. Amended return. A
corporation takes a tax position that
generates excess foreign tax credits
(FTC) for the 2022 tax year. The tax
position is reported on Part I, No. C1, of
the Schedule UTP attached to the
corporation's 2022 tax return. The
corporation files Form 1120X for tax
year 2021 to claim the benefits of the
unused credits on its 2021 tax return.
The corporation should attach a
statement to the 2021 amended return
indicating that the FTC carryback arose
from the tax position disclosed in tax
year 2022, Schedule UTP, Part I, UTP
No. C1.
Column (e). Timing Codes
Check “T” for temporary differences, “P”
for permanent differences, or check
both “T” and “P” for a tax position that
creates both a temporary and
permanent difference. Categorization as
a temporary difference, permanent
difference, or both must be consistent
with the accounting standards used to
prepare the audited financial
separate UTP. Do not group or combine
multiple tax positions together.
statements.
Instructions for Schedule UTP (Form 1120)
-5-
Enter “T1” for the transfer pricing
position, “G2” for the expectation to
for prior tax years. A corresponding UTP
number with a letter “P” prefix will be
Column (f). Pass-Through Entity
EIN
litigate position, and “G3” for the second used on Part III for reporting the
other tax position.
description of the tax position. Do not
skip any whole numbers, do not enter
extraneous characters, and do not
duplicate any numbers (for example,
P4, P5, P6, where the letters “P” are
preprinted on the schedule and the
numbers are entered). Each tax position
taken on a return is considered a
separate UTP. Do not group or combine
multiple tax positions together.
If the tax position taken by the
corporation relates to a tax position of a
pass-through entity, enter the employer
identification number (EIN) of the
Columns (i) Through (k)
pass-through entity to which the tax
position relates. For example, if the
corporation is a partner in a partnership
and the tax position involves the
Identify the location of the tax position
and amount of the income tax benefits
reported on the tax return. Enter the
form number or schedule and the line
number in columns (i) and (j) and the
amount of the item in column (k). For an
expense item, report in column (k) the
amount reported on the line of the form,
schedule, or attached statement that
includes the tax position taken.
partner’s distributive share of an item of
income, gain, loss, deduction, or credit
of the partnership, enter the EIN of the
partnership. A pass-through entity is any
entity listed in section 1(h)(10). If the tax
position is not related to a tax position of
a pass-through entity, leave this blank.
Enter “F” if the pass-through entity is a
foreign entity that does not have an EIN.
Column (b). Primary IRC Sections
See the instructions for Part I, column
(b).
If the tax position relates to an item of
deferred income or unearned revenue,
report in columns (i) and (j) the schedule
or form and line number where the item
is reported (for example, Sch. M-3,
line 20, or Sch. L, line 21). Report in
column (k) the amount reported on the
line of the form, schedule, or attached
statement that includes the tax position
taken.
Column (c). Rev. Rule, Rev. Proc.,
etc.
Column (g). Major Tax Position
(Item or Groups of Items)
See the instructions for Part I, column
(c).
Check this box if the relative size of the
tax position is greater than or equal to
0.10 (10%). The relative size of a tax
position is the amount computed by
dividing the size of that position by the
sum of all of the sizes for all of the tax
positions listed on Parts I and II.
Disregard expectation to litigate
positions for column (g) purposes.
Round amounts using rules similar to
the rules in the Instructions for Form
1120 (or the instructions for the
applicable tax return) for rounding dollar
amounts.
Column (d). Regulation Section
See the instructions for Part I, column
(d).
Part II. Uncertain Tax
Positions for Prior Tax
Years
Column (e). Timing Codes
See the instructions for Part I, column
(e).
When To Complete Part II
Complete Part II to report tax positions
taken by the corporation in a prior tax
year that have not been reported on a
Schedule UTP filed with a prior year’s
tax return. Do not report a tax position
taken in a tax year beginning before
January 1, 2010. See Transition rule
under Reporting Uncertain Tax
Column (f). Pass-Through Entity
EIN
See the instructions for Part I, column
(f).
Column (h). Ranking of Tax
Position
Column (g). Major Tax Position
Enter a letter and a ranking number for
each tax position. Use the letter T for
transfer pricing positions and the letter
G for all other tax positions.
Positions on Schedule UTP, earlier.
See the instructions for Part I, column
(g).
Information From Related Parties
Rank all tax positions in Parts I and II
together, regardless of type. Include
amounts of deferred income in
Column (h). Ranking of Tax
Position
Check the box at the top of Part II if the
corporation was unable to obtain
sufficient information from one or more
related parties and was therefore unable
to determine whether a tax position
taken on its prior year's tax return is
required to be reported in Part II of this
schedule.
determining the ranking of tax positions.
Starting with the largest size, assign the
number 1 to the largest, the number 2 to
the next largest, and so on, in order.
This number is the ranking number for
the tax position. Expectation to litigate
positions may be assigned any ranking
number.
See the instructions for Part I, column
(h).
Columns (i) Through (k)
See the instructions for Part I, columns
(i) through (k).
Column (a). UTP No.
For example, the corporation has one Continue the numeric sequence based
Column (l). Year of Tax Position
transfer pricing tax position and two
other tax positions. The transfer pricing
position is the largest and one of the
other tax positions is an expectation to
litigate position. The expectation to
litigate position is assigned a rank of 2.
on the last UTP number entered on Part
I. For example, if the last UTP listed on
Part I is 3, enter 4 for the first UTP listed
in Part II. The UTP numbers on Part II,
column (a), include a preprinted “P”
prefix to indicate that they are positions
List the prior tax year in which the tax
position was taken and the last month
and day of that tax year, using a six-digit
number. For example, enter 202212 for
tax years ending December 31, 2022,
Instructions for Schedule UTP (Form 1120)
-6-
and 202209 for tax years ending
September 30, 2022.
“Available upon request” is not an
adequate description.
A concise description should not
include an assessment of the hazards of
a tax position or an analysis of the
support for or against the tax position.
Facts. The corporation is a member
of Venture LLC, which is treated as a
U.S. partnership for tax purposes.
During the tax year, Venture LLC raised
funds through (i) admitting a new
Part III. Concise
Description of UTPs
member for a cash contribution and (ii)
borrowing funds from a financial
When To Complete Part III
institution, using a loan partially
Part III must be completed for every tax
position listed in Part I and Part II. Enter
the corresponding UTP number from
Part I, column (a) (for example, C1, C2,
C3) or Part II, column (a) (for example,
P4, P5, P6), related to the description.
Examples of Concise Descriptions
for Hypothetical Fact Patterns
guaranteed by the corporation. Also
during the tax year, Venture LLC made
a cash distribution to the corporation
that caused its membership interest in
Venture LLC to be reduced from 25% to
2%. The corporation has taken the
position that the cash distribution is
properly characterized as a nontaxable
distribution that does not exceed its
basis in its Venture LLC interest, but has
established an unrecognized tax benefit
for financial accounting purposes,
recognizing that the transaction might
be recharacterized as a taxable sale of
a portion of its Venture LLC interest
under section 707(a)(2).
The following examples set out a
description of hypothetical facts and the
uncertainties about a tax position that
would be reportable on Schedule UTP.
Following each set of hypothetical facts,
which would not be disclosed on the
schedule, are examples of insufficient
and sufficient disclosures. In each
hypothetical example, the sufficient
description would be reported in Part III
to disclose that hypothetical case.
Concise description. For
Schedule UTP to be considered
complete, the corporation must include
a description of the relevant facts
affecting the tax treatment of the
position and information that can
reasonably be expected to apprise the
IRS of the identity of the tax position,
and the nature of the issue for which the
tax position is being disclosed.
Example 13. Allocation of costs
between uncompleted and
completed acquisitions.
A “description of the relevant facts
affecting the tax treatment of the
position” should include all information
pertaining to the nature of the
Insufficient disclosure. The
corporation received a nontaxable cash
distribution during the tax year.
Facts. The corporation investigated
and negotiated several potential
business acquisitions during the tax
year. One of the transactions was
completed during the tax year, but all
other negotiations failed and the other
potential transactions were abandoned
during the tax year. The corporation
deducted costs of investigating and
partially negotiating potential business
acquisitions that were not completed
and capitalized costs allocable to one
business acquisition that was
uncertainty related to the tax position.
For example, if a corporation's tax
position is to claim a current year
deduction for the cost of fixing the roof
of a building, the description should
indicate why it was determined that the
work was performed to keep the asset
in normal operating condition and why
the costs do not improve or extend the
useful life of the asset.
Sufficient concise description.
The corporation is a member of Venture
LLC, which is treated as a U.S.
partnership for tax purposes. The
corporation received a cash distribution
during the year from Venture LLC. The
issue is the potential application of
section 707(a)(2) to recharacterize the
distribution as a sale of a portion of the
corporation's Venture LLC interest.
The “identity of the tax position”
should provide information that further
defines the primary IRC section(s), rule,
or regulation section listed in Parts I and
II of Schedule UTP, such as the
Example 15. Qualified Research
completed. The corporation established
an unrecognized tax benefit for financial
accounting purposes in recognition of
the possibility that the amount of costs
allocated to the uncompleted acquisition
attempts was excessive.
expenditures.
Facts. The company incurred
in-house expenses for researching and
developing new product line X. An
analysis was performed to determine
which of the activities performed by the
company's employees constituted
qualified services related to this new
product line. The company claimed
qualified research expenses for services
performed in the new product
identification of a 15-year depreciable
life assigned to land improvement
assets under section 168 or indicating
that a request has been filed in
Insufficient disclosure. The
corporation incurred costs during the tax
year for investigating business
acquisitions.
accordance with Rev. Rul. 90-38 to
change from an erroneous method of
accounting for advanced payments.
Sufficient concise description.
The corporation incurred costs of
completing one business acquisition
and also incurred costs investigating
and partially negotiating potential
business acquisitions that were not
completed. The costs were allocated
between the completed and
Information concerning “the nature of
the issue for which the tax position is
being disclosed” can include a factual
description of the legal issues
engineering and manufacturing
departments, as well as certain other
departments that directly support these
departments. The corporation
presented. It should identify, for
established an unrecognized tax benefit
for financial accounting purposes in
recognition of the possibility that some
of these costs may not meet the
definition of qualified research
example, the specific entity, country, or
transaction to which the tax position
relates, the character of income, the
type of expense or credit, the
uncompleted acquisitions. The issue is
whether the allocation of costs between
uncompleted acquisitions and the
completed acquisition is appropriate.
Example 14. Recharacterization of
distribution as a sale.
relationship of the tax position to other
assets or activities, and whether the
uncertainty relates to computational
issues, substantiation issues, sampling
methodologies, or legal interpretation.
Stating that a concise description is
expenditures.
Insufficient disclosure. The
corporation incurred research
expenditures and claimed a credit for
increasing research activities.
Instructions for Schedule UTP (Form 1120)
-7-
Sufficient concise description.
The corporation incurred costs for the
research and development of new
product line X. The company performed
surveys and conducted interviews with
the new product engineering,
Region A pursuant to a license of
technology and marketing intangibles
from its publicly traded U.S. parent
Insufficient disclosure The
taxpayer has a licensing agreement with
a foreign subsidiary that is supported by
corporation. The amount of the royalties a transfer pricing study.
paid for the use of the U.S. parent
Sufficient concise description.
corporation's technology and marketing
intangibles was determined based on a
transfer pricing study. For financial
accounting purposes, the U.S. parent
corporation established an
Pursuant to a licensing agreement,
taxpayer transferred technology and
marketing intangibles for the
manufacturing, and support department
employees in order to determine the
qualifying in-house research
manufacturing and sale of Product Z in
Region A to its Country Y subsidiary.
The issue is whether the amount of
taxpayer's royalty income for the Region
A technology and marketing intangibles
for Product Z will be increased pursuant
to section 482, thereby increasing its
U.S. tax liability.
expenditures. The issue is whether
these in-house service costs meet the
definition of qualified research
unrecognized tax benefit in recognition
of the possibility that the amount of the
royalties would be subject to an
adjustment under section 482
expenditures.
Example 16. Transfer pricing.
increasing its U.S. tax liability.
Facts. A Country Y corporation
manufactures and sells Product Z in
Instructions for Schedule UTP (Form 1120)
-8-