Highlights and updates for the CAP 2026 application period

Open Year Criteria – For the 2026 CAP cycle, we are continuing the open year eligibility criteria of allowing only one open filed return and one open unfiled return on the first day of the CAP applicant's tax year. There are several exceptions to this requirement (e.g., pending Advance Pricing Agreement resolution or Competent Authority Assistance, etc.).

Inflation Reduction Act (IRA) and Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act – The IRA and CHIPS Act added significant and novel provisions to the tax code, including the Corporate Alternative Minimum Tax (CAMT), the excise tax on stock buybacks, and several clean energy credits, which will require a review for impacted taxpayers. In recognition that these reviews may initially extend beyond the CAP timelines, we added an exception to the closed/open year eligibility requirement, such that a tax year that remains open only because of an outstanding IRA and/or CHIPS Act tax issue will not be counted as an open filed return on the first day of the applicant’s CAP year for purposes of the CAP Eligibility return criterion.

Eligibility Criteria for New Applicants – For a new applicant currently under examination to be eligible for participation in the program, the applicant can have no more than three tax years open for examination on the first day of the CAP applicant's tax year. The examination team would determine if it is feasible these open years could close from the examination group no later than 12 months after the first day of the CAP applicant's tax year for continued eligibility (and the accepted applicant would then concur by signing the CAP MOU).

Expansion of Eligibility Criteria for Applicants – For the 2026 CAP cycle, we are continuing to utilize the expanded criteria announced last year. In addition to considering publicly held C corporations, the IRS will accept applications from privately held C corporations, including foreign owned. Privately held applicants will be required to submit audited financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS) or another permissible method, as deemed appropriate by the IRS. The audited financial statements must be specific to the taxpayer applying to the CAP program. As such, related entity and/or parent audited financial statements will not be allowed. The audited financial statements must contain an unqualified audit opinion from an independent auditor. Additionally, the net income or loss per the audited financial statements must reconcile to the Schedule M-3 Line 4(a), worldwide consolidated net income (loss).