A U.S. government watchdog is questioning whether the Internal Revenue Service can demonstrate that one of its flagship cooperative compliance programs for large corporations delivers sufficient value for the resources devoted to it.
In an audit released on August 5, 2026, the Treasury Inspector General for Tax Administration (TIGTA) concluded that the IRS lacks effective financial metrics to assess the efficiency and effectiveness of its Compliance Assurance Process (CAP).
The issue is particularly significant because CAP uses highly skilled IRS Large Business and International (LB&I) personnel while providing participating corporations with real-time engagement and potentially earlier tax certainty.
TIGTA’s central question is straightforward: do the benefits of CAP justify its cost?
According to the watchdog, the IRS currently cannot provide a sufficiently quantitative answer.
What Is the Compliance Assurance Process?
CAP is a voluntary IRS program designed for large corporate taxpayers.
Unlike a traditional tax examination that generally takes place after a return has been filed, CAP allows the IRS and participating taxpayers to identify and address material tax issues in real time, including before the relevant tax return is filed.
The objectives include improving compliance, increasing transparency and cooperation, reducing administrative burden and providing taxpayers with greater tax certainty.
The program was piloted in 2005 and became permanent in 2011. It was subsequently recalibrated for Tax Year 2019.
There were 123 CAP participants in Tax Year 2023.
For Tax Year 2025, eligibility was expanded to include privately held C-corporations, foreign-owned corporations and publicly traded corporations.
The IRS Cannot Quantify CAP’s Financial Impact
TIGTA’s principal criticism concerns measurement.
According to the report, the IRS does not have financial metrics tracking the total proposed dollar adjustments resulting from issues addressed during the CAP pre-filing period.
It similarly lacks metrics tracking total dollar adjustments during post-filing CAP reviews and does not measure overall cost savings attributable to the program.
Most importantly, the IRS does not currently conduct a comprehensive cost-benefit analysis of CAP.
Existing IRS metrics include matters such as no-change rates, agreed-to disposal percentages, staffing levels, hours and case cycle times. TIGTA acknowledged that these measures can provide information about the program, but concluded that they do not quantify CAP’s financial impact on tax compliance.
CAP Costs Around $10.7 Million Per Year in Labor
The resource question is significant.
Using IRS budget and CAP data, TIGTA estimated that the program used an average of 76 full-time equivalents annually between Fiscal Years 2019 and 2025, with estimated average annual labor costs of approximately $10.7 million.
For Fiscal Year 2025 alone, estimated CAP labor costs reached approximately $14.4 million.
These figures cover labor costs only.
TIGTA noted that they do not capture other potential costs, including the opportunity cost of assigning experienced LB&I revenue agents to CAP instead of traditional examinations where measurable tax adjustments may be proposed.
That opportunity cost has become particularly relevant following reductions in the IRS workforce.
Should CAP Participants Pay a User Fee?
Perhaps the most controversial recommendation concerns who should pay for the program.
CAP participation is voluntary and currently carries no user fee.
TIGTA argues that the program provides identifiable benefits to participating corporations, including earlier tax certainty, real-time review of transactions and potentially lower administrative burdens compared with traditional examinations.
The watchdog therefore recommended that the IRS reevaluate whether CAP participants should be charged a user fee.
Its argument is effectively that specialized services primarily benefiting participating corporations should potentially be funded, at least partly, by those participants rather than entirely through general IRS resources.
The IRS disagreed.
IRS management argued that CAP does not provide a “special benefit” for purposes of the applicable user-fee framework because CAP replaces, rather than supplements, a traditional post-filing examination and is available to taxpayers meeting the eligibility criteria.
TIGTA maintained its position, pointing to the specific benefits the IRS itself identifies for CAP participants and the program’s approximately $10.7 million average annual labor cost.
Tax Certainty Is Not Always Arriving on Time
The audit also raises questions about whether CAP is consistently achieving one of its central objectives: resolving tax issues quickly enough to provide meaningful pre-filing certainty.
Under the program, taxpayers may receive a full acceptance letter where material issues have been disclosed and resolved, or a partial acceptance letter where issues remain outstanding.
TIGTA found that almost half of CAP taxpayers did not receive a full acceptance letter for Tax Years 2019 through 2023.
Case closure delays were also significant.
As of March 2025, 83% of Tax Year 2023 CAP cases remained open, according to the report.
The IRS attributed the large number of open cases to factors including implementation of new tax legislation, data-intensive issues, personnel turnover and the treatment of certain Bridge Phase cases.
Is CAP More Efficient Than a Traditional Audit?
There is evidence pointing in CAP’s favor — but TIGTA says the picture remains incomplete.
Closed CAP and Compliance Maintenance cases for Tax Years 2019 through 2022 generally required fewer hours and had shorter cycle times than traditional post-filing examinations involving similarly sized LB&I taxpayers.
For example, closed Tax Year 2019 CAP cases required approximately 20% fewer hours than comparable traditional examinations closed during 2019.
However, TIGTA cautioned that this comparison includes only closed CAP cases.
Many open CAP cases had already exceeded the average hours associated with traditional examinations. In addition, CAP participants are generally presumed to be relatively compliant taxpayers, meaning their examinations might reasonably be expected to require fewer resources.
TIGTA also found that some time associated with applications and risk assessments is not fully captured in CAP case data.
Consequently, the available figures do not yet establish conclusively whether CAP is more resource-efficient overall.
Taxpayers Participating in CAP Appear to Value It
The report does not suggest that CAP lacks value.
Participant feedback has in fact been strongly positive.
Between Tax Years 2019 and 2023, more than 90% of survey respondents rated CAP positively each year, while nearly all respondents said they would recommend the program to other organizations.
This highlights an important distinction in the debate.
The question raised by TIGTA is not simply whether participating corporations value CAP. The question is whether the IRS can demonstrate and quantify the program’s broader benefits to tax administration relative to its costs.
TIGTA Makes Four Recommendations
TIGTA recommended that the IRS:
- develop quantitative metrics to evaluate CAP’s effectiveness, including comparisons with traditional examinations and cost-benefit analysis;
- reevaluate whether CAP participants should pay a user fee;
- identify the causes of partial acceptance letters and delayed case closures and develop strategies for improving closure times; and
- introduce tracking to determine whether fully disclosed issues are resolved within the program’s 90-day target.
The IRS agreed with three of the four recommendations.
It plans to introduce new CAP reporting, conduct comparisons between CAP cases and traditional examinations, examine the causes of delayed closures and improve tracking of issue-resolution periods.
The IRS did not agree to reconsider a CAP user fee.
Why This Matters
The report raises a broader policy question around cooperative compliance and tax assurance programs.
Real-time engagement between tax authorities and large businesses can potentially prevent disputes before they arise, increase transparency and give both sides earlier certainty. Those benefits may not always translate directly into additional tax assessments.
At the same time, such programs require significant resources from tax administrations — including some of their most experienced personnel.
The policy question is therefore not simply whether cooperative compliance “works.”
It is whether authorities can measure its value, demonstrate that scarce enforcement resources are being used efficiently and determine who should ultimately bear the cost of providing enhanced tax certainty.
For the IRS, TIGTA’s report suggests that this evidence is not yet sufficiently developed.
FAQ
What is the IRS Compliance Assurance Process?
CAP is a voluntary IRS program under the Large Business and International Division through which eligible corporate taxpayers work with the IRS to identify and resolve material tax issues in real time, including before filing their tax returns.
How much does CAP cost?
TIGTA estimated average CAP labor costs of approximately $10.7 million annually from Fiscal Years 2019 through 2025, based on an average of 76 full-time equivalents. The estimate does not include all potential costs or opportunity costs.
Does TIGTA say CAP should be abolished?
No. TIGTA’s report focuses on the need for better quantitative measurement, cost-benefit analysis, improved case closure and consideration of user fees. It does not recommend abolishing CAP.
Does TIGTA want corporations to pay for CAP?
TIGTA recommended that the IRS reevaluate charging CAP participants a user fee because participation is voluntary and provides specific benefits such as earlier tax certainty. The IRS disagreed with this recommendation.
Is CAP faster than a normal IRS examination?
Closed CAP cases reviewed by TIGTA generally required fewer hours and shorter cycle times than comparable traditional examinations. However, many CAP cases remained open, and some had already exceeded traditional examination hours, making an overall efficiency comparison difficult.
What happens next?
The IRS agreed to improve quantitative reporting, compare CAP with traditional examinations, analyze the causes of delayed case closures and improve tracking of issue-resolution periods. It did not agree to reconsider imposing a user fee.
Source: Treasury Inspector General for Tax Administration, A Cost-Benefit Analysis Is Needed for the Compliance Assurance Process, Report No. 2026-308-036, August 5, 2026.