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FIN 48: Accounting for uncertainty in income taxes
– This is the Financial Accounting Standards Board’s (“FASB”) interpretation regarding the fair value measurement of financial liabilities related to income tax positions.
FIN 48: Accounting for uncertainty in income taxes
– The purpose is to require disclosure of uncertain income tax positions in the organization’s financial statements.
– FIN 48 only requires disclosure in financial statements, however, Schedule D of the 2008 Form 990 requires a “verbatim” disclosure of FIN 48 footnotes.
• Any position that has less than a more-likely-than-not level of confidence.
• As such, FIN 48 does not require disclosure of any positions for which there is a greater than 50% likelihood upon examination, appeals or litigation, the position will be upheld.
The real impact is the Form 990 disclosure. The instructions to Schedule D provide:
An organization “must provide the text of the footnote to its financial statements, if applicable, regarding the organization’s liability for uncertain tax positions under FIN 48. This includes, for example, the description of the liability for unrelated business income tax, or tax that may be assessed as a result of the revocation of exempt status. Any portion of the FIN 48 footnote that addresses only the filing organization’s liability must be provided verbatim.”
It is important to avoid positions requiring FIN 48 disclosures.
Financial Statements – in our experience, accounting firms have been very conservative, generally refusing to acknowledge that a position is certain without an opinion letter.
FIN 48 does not require an opinion from counsel, however, the practical reality is that many accounting firms seem to require this before signing financial statements without a disclosure.
If there is a position that your organization has taken that does not clearly meet the more-likely-than-not standard, consider obtaining a tax opinion before your annual audit and be prepared to provide the opinion to your auditor during the audit process.