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                                                                                                        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 country-specific accounting standards,       related party of the subsidiary, records a 
Code unless otherwise noted.                   including a modified version of any of       liability for unrecognized tax benefits in 
                                               the above (for example, modified             an audited financial statement with 
Future Developments                            GAAP).                                       respect to one of the subsidiary’s tax 
For the latest information about               If the corporation evaluates a tax           positions in its former group’s prior 
developments related to Schedule UTP           position and determines that it meets        return, the subsidiary should report the 
(Form 1120) and its instructions, such         the recognition threshold for uncertain      tax position on Part II of the 
as legislation enacted after they were         tax benefits in an interim audited           Schedule UTP filed with its current tax 
published, go to IRS.gov/ScheduleUTP.          financial statement issued before the tax    return, if it files a separate return. If the 
                                               position is taken on a return, the           subsidiary is included in the return of 
General Instructions                           corporation need not report the tax          another consolidated group that is 
                                               position to which the tax benefit relates    required to file Schedule UTP, the 
Purpose of Schedule                            on Schedule UTP.                             common parent of that consolidated 
                                                                                            group should report the tax position on 
Schedule UTP asks for information              A tax position is based on the unit of       Part II of the Schedule UTP filed with the 
about tax positions that affect the U.S.       account used to prepare the audited          group’s current tax return.
federal income tax liabilities of certain      financial statements in which the liability 
corporations that issue or are included        for an unrecognized tax benefit is           Concise description of tax position. 
in audited financial statements and have       recorded (or in which the tax benefit        A corporation that reports a tax position 
assets that equal or exceed $10 million.       was recognized because of an                 in either Part I or Part II is required to 
                                               expectation to litigate). A tax position     provide a description of each tax 
Reporting Uncertain                            taken on a tax return is a tax position      position in Part III. See Examples 13 
                                               that would result in an adjustment to a      through 16, later.
Tax Positions                                  line item on that tax return if the position Consistency with financial statement 
on Schedule UTP                                is not sustained. If multiple tax positions  reporting.  The analysis of whether a 
Tax positions to be reported.                  affect a single line item on a tax return,   liability for unrecognized tax benefits 
Schedule UTP requires the reporting of         report each tax position separately on       has been recorded for the purpose of 
each U.S. federal income tax position          Schedule UTP. See Tax position taken         completing Schedule UTP is 
taken by an applicable corporation on          on a tax return, later.                      determined by reference to the tax 
its U.S. federal income tax return for         Reporting current year and prior             benefit recognition decisions made by 
which two conditions are satisfied.            year tax positions. Tax positions            the corporation or a related party for 
1. The corporation has taken a tax             taken by the corporation on the current      audited financial statement purposes. If 
position on its U.S. federal income tax        year’s tax return are reported in Part I.    the corporation or a related party 
return for the current tax year or for a       Tax positions taken by the corporation       determined that, under applicable 
prior tax year.                                on a prior year’s tax return are reported    accounting standards, either the tax 
                                               on Part II. A corporation is not required    benefit could be recognized for a tax 
2. Either the corporation or a related                                                      position taken on a tax return because 
                                               to report a tax position it has taken in a 
party has recorded a liability for                                                          the amount was immaterial for audited 
                                               prior tax year if the corporation reported 
unrecognized tax benefits with respect                                                      financial statement purposes, or that a 
                                               that tax position on a Schedule UTP 
to that tax position for U.S. federal                                                       tax position satisfied the recognition and 
                                               filed with a prior year tax return. If a 
income tax in audited financial                                                             measurement process under Financial 
                                               transaction results in tax positions taken 
statements, or the corporation or related                                                   Accounting Standards Board (FASB) 
                                               on more than one tax return, the tax 
party recognized the tax benefit for that                                                   Accounting Standards Codification 
                                               positions must be reported on Part I of 
tax position because the corporation                                                        (ASC) Subtopic 740-10, then the 
                                               the Schedule UTP attached to each tax 
expects to litigate the position.                                                           corporation need not report the tax 
                                               return in which a tax position is taken 
A tax position for which a liability for       regardless of whether the transaction or     position on Schedule UTP. For a 
unrecognized tax benefits was recorded         a tax position resulting from the            corporation subject to FASB ASC 
(or for which a tax benefit was                transaction was disclosed in a               740-10, a tax position is recognized, 
recognized because of an expectation           Schedule UTP filed with a prior year’s       and therefore need not be reported on 
to litigate) must be reported on               tax return. See Example 7 and                Schedule UTP, if it meets the 
Schedule UTP regardless of whether             Example 8, later. Do not report a tax        recognition and measurement process 
the audited financial statements are           position on Schedule UTP before the          for evaluating tax positions in the 
prepared based on U.S. generally               tax year in which the tax position is        corporation's financial statements.
accepted accounting principles (GAAP),         taken on a tax return by the corporation.    Transition rule.  A corporation is not 
International Financial Reporting              If, after a subsidiary member leaves a       required to report on Schedule UTP a 
Standards (IFRS), or other                     consolidated group, the subsidiary, or a     tax position taken in a tax year 

Dec 13, 2022                                            Cat. No. 55028G

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beginning before January 1, 2010, even       Form 1120-L or Form 1120-PC, is at          entered alone or in tandem, indicate the 
if a liability for unrecognized tax benefits least $10 million.                          recording of a liability for unrecognized 
is recorded with respect to that tax                                                     tax benefits are (1) an increase in a 
position in audited financial statements     Form 1120-F.       The assets of a          current or non-current liability for income 
issued in 2010 or later. See Example 9,      corporation filing a Form 1120-F equal      taxes, interest or penalties payable, or a 
later. In addition, a corporation is not     or exceed $10 million if the higher of the  reduction of a current or non-current 
required to report accruals of interest      beginning or end of year total worldwide    receivable for income taxes and/or 
and penalties on an unrecognized tax         assets of the corporation reported on       interest with respect to the tax position; 
benefit recorded with respect to a tax       Form 1120-F, Schedule L, line 17,           or (2) a reduction in a deferred tax asset 
position taken on a pre-2010 tax return.     would be at least $10 million if the        or an increase in a deferred tax liability 
                                             corporation were to prepare a               with respect to the tax position. 
Periods covered.  File Schedule UTP          Schedule L on a worldwide basis.            Liabilities for unrecognized tax benefits 
with the corporation’s current year's tax 
return.                                      Affiliated groups. An affiliated group      are created when a tax position taken 
                                             of corporations filing a consolidated       on a return does not satisfy the 
                                             return will file one Schedule UTP for the   recognition and measurement process 
Who Must File                                affiliated group. The affiliated group      for evaluating tax benefits on the 
A corporation must file Schedule UTP         need not identify the member of the         financial statements under ASC 740-10. 
for the current tax year if:                 group to which the tax position relates,    A tax position that is not “more likely 
1. The corporation files Form 1120,          or which member recorded the liability      than not” to be sustained based on its 
U.S. Corporation Income Tax Return;          for unrecognized tax benefits for the tax   technical merits, or a tax position that is 
Form 1120-F, U.S. Income Tax Return          position. Any affiliate that files its U.S. more likely than not to be sustained but 
of a Foreign Corporation; Form 1120-L,       federal income tax return separately and    less than 50 percent likely of being 
U.S. Life Insurance Company Income           satisfies the requirements set forth        realized upon ultimate settlement, is 
Tax Return; or Form 1120-PC, U.S.            above must file a Schedule UTP with its     recorded as a liability for unrecognized 
Property and Casualty Insurance              return setting forth its own tax positions. tax benefits under ASC 740-10.
Company Income Tax Return;                                                               The initial recording of a liability for 
                                             Definitions and Special Rules
2. The corporation has assets that           Note. All examples in these instructions    unrecognized tax benefits will trigger 
equal or exceed $10 million;                 assume the calendar year is the             reporting of a tax position taken on a 
3. The corporation or a related party        reporting year both for U.S. federal        return. However, subsequent 
issued audited financial statements          income tax and financial statement          unrecognized tax benefit increases or 
reporting all or a portion of the            purposes and the independent auditor’s      decreases with respect to the tax 
corporation’s operations for all or a        opinion on the audited financial            position will not.
portion of the corporation’s tax year; and   statements is issued before the filing of   If a corporation is included in multiple 
4. The corporation has one or more           the tax return.                             audited financial statements, the 
                                                                                         corporation must report a tax position on 
tax positions that must be reported on       Audited financial statements.               Schedule UTP if a liability for 
Schedule UTP.                                Audited financial statements mean           unrecognized tax benefits for that 
Do not file a blank Schedule UTP if          financial statements on which an            position was recorded in any of those 
there are no tax positions to be             independent auditor has expressed an        audited financial statements.
reported.                                    opinion, whether qualified, unqualified, 
                                             disclaimed, or adverse, under GAAP,         Example 1. General rule regarding 
Attach Schedule UTP to the                                                               recording a liability for unrecognized 
                                             IFRS, or another country-specific 
corporation's income tax return. Do not                                                  tax benefits. A corporation recorded a 
                                             accounting standard, including a 
file it separately. A taxpayer that files a                                              liability for unrecognized tax benefits in 
                                             modified version of any of the above (for 
protective Form 1120, 1120-F, 1120-L,                                                    its 2020 audited financial statements 
                                             example, modified GAAP). Compiled or 
or 1120-PC must also file Schedule UTP                                                   relating to a tax position taken on its tax 
                                             reviewed financial statements are not 
if it satisfies the four requirements set                                                return for the 2020 tax year. The 
                                             audited financial statements.
forth above.                                                                             corporation filed its 2020 tax return on 
                                             Record a liability for unrecognized         October 15, 2021. The corporation 
A corporation required to file               tax benefits.   A corporation or a related  reported the 2020 tax position on Part I 
Schedule UTP must also check “Yes” to        party records a liability for unrecognized  of Schedule UTP and filed 
Form 1120, Schedule K, Question 14;          tax benefits for a U.S. federal income      Schedule UTP with its 2020 tax return. If 
Form 1120-F, Additional Information,         tax position when a liability for           the corporation increases its liability for 
Question AA; Form 1120-L,                    unrecognized tax benefits for U.S.          unrecognized tax benefits with respect 
Schedule M, Question 15; or Form             federal income tax, interest, or penalties  to the tax position taken on its 2020 tax 
1120-PC, Schedule I, Question 13.            with respect to that position is recorded   return in its 2022 audited financial 
Computation of assets that equal or          in the audited financial statements of the  statements, the corporation is not 
exceed $10 million. For the following        corporation or a related party. A liability required to report the 2020 tax position 
corporate income tax returns:                for an unrecognized tax benefit is          again on its 2022 tax return as a result 
                                             recorded when an uncertain tax position     of the 2022 increase in the 
Forms 1120, 1120-L, and 1120-PC.             or ASC 740-10 liability is stated           unrecognized tax benefit.
A corporation’s assets equal or exceed       anywhere in a corporation’s or related 
$10 million if the amount reported on        party’s financial statements, including     Example 2. Reporting 
page 1, item D of Form 1120, or the          footnotes and any other disclosures,        unrecognized tax benefits in 
higher of the beginning or end of year       and may be indicated by any of several      subsequent years. A corporation 
total assets reported on Schedule L of       types of accounting journal entries.        claimed a deduction in 2020 and 
                                             Some of the types of entries that,          determined under applicable accounting 

                                                                -2-                      Instructions for Schedule UTP (Form 1120)

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standards that it could recognize the full  tax position is one which the corporation     amortize an expense, affects line items 
benefit of the position. In 2022, the IRS   or a related party determines the             on each year’s return in which the tax 
began an examination of the 2020 tax        probability of settling with the IRS to be    position is taken during the period of 
return and decided to examine whether       less than 50% and, under applicable           amortization. Whether these tax 
the deduction was proper. The               accounting standards, the tax benefit         positions taken on a return are reported 
corporation subsequently reevaluated        was recorded in the audited financial         on Schedule UTP for a particular tax 
the tax position and recorded a liability   statements because the corporation            year, and when they are reported, 
for unrecognized tax benefits for that      intends to litigate the tax position and      depends on whether and when a liability 
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.   recorded. See Example 7 and 
and recorded an unrecognized tax            Example 5. Tax benefit                        Example 8, later.
benefit with respect to that tax position.  recognized after a change in 
                                                                                          Note. The use of a net operating loss 
The corporation must report the tax         circumstances based on expectation 
                                                                                          (NOL) or a credit carryforward is a tax 
position on Schedule UTP filed with its     to litigate. A corporation takes a tax 
                                                                                          position taken on a tax return. A 
2022 tax return even if the IRS identifies  position on its 2020 tax return for which 
                                                                                          corporation must report the use of an 
the tax position for examination prior to   a tax benefit is recognized because the 
                                                                                          NOL or credit carryforward as a tax 
the recording of the unrecognized tax       corporation determined the tax position       position taken on the return even if the 
benefit.                                    is correct. Circumstances change, and         corporation has previously reported the 
Related party.  A related party is any      in 2022 the corporation determined that 
                                                                                          tax position that created or added to the 
entity that has a relationship to the       the tax position was uncertain, but did 
                                                                                          NOL or credit carryforward on 
corporation that is described in section    not derecognize the tax benefit because 
                                                                                          Schedule UTP. See Example 10, later.
267(b), 318(a), or 707(b), or any entity    of its expectation to litigate the position. 
that is included in consolidated audited    That is, the corporation or a related         Unit of account. A unit of account is 
financial statements in which the           party determines the probability of           the level of detail used in analyzing a tax 
corporation is also included.               settling with the IRS to be less than 50%     position, taking into account both the 
                                            and, under applicable accounting              level at which the taxpayer prepares 
Example 3. Related party general 
                                            standards, the tax benefit was recorded       and supports the tax return and the level 
rule. Corporation A is a corporation 
                                            because the corporation intends to            at which the taxpayer anticipates 
filing Form 1120 that has $160 million of 
                                            litigate the tax position and has             addressing the issue with the IRS. The 
assets. Corporation B is a foreign 
                                            determined that it is more likely than not    unit of account used by a GAAP or 
corporation not doing business in the 
                                            to prevail on the merits in the litigation.   modified GAAP taxpayer for reporting a 
United States and is a related party to 
                                            The corporation must report that              tax position on Schedule UTP must be 
Corporation A. Corporations A and B 
                                            position on Part II of the Schedule UTP       the same unit of account used by the 
issue their own audited financial 
                                            filed with the 2022 tax return either if it   taxpayer for GAAP or modified GAAP.
statements. Corporation A takes a tax 
                                            records a liability for an unrecognized 
position on its tax return. If Corporation                                                In the case of audited financial 
                                            tax benefit or if it records a tax benefit 
B records an unrecognized tax benefit                                                     statements prepared under accounting 
                                            because it expects to litigate, even if 
with respect to that tax position in its                                                  standards other than GAAP or modified 
                                            that decision to record or not record the 
own audited financial statements, even                                                    GAAP, a corporation that issues audited 
                                            tax benefit occurs because of a change 
though Corporation A does not, then                                                       financial statements with a unit of 
                                            in circumstances in a later year.
that tax position must be reported by                                                     account that is based upon the entire 
Corporation A on its Schedule UTP.          Tax position taken on a tax return.         A tax year may not use that unit of account 
Example 4. Liability for                    tax position taken on a tax return means      for Schedule UTP. The corporation must 
unrecognized tax benefits recorded          a tax position that would result in an        instead identify a unit of account based 
in consolidated financial statements.       adjustment to a line item on any              on similar principles applicable to GAAP 
Corporation C files a tax return and has    schedule or form attached to the tax          or modified GAAP taxpayers, or use any 
assets of $160 million. Corporations C      return (or would be included in a section     other level of detail that is consistently 
and D issue consolidated audited            481(a) adjustment) if the position is not     applied if that identification is 
financial statements, but they do not file  sustained. If multiple tax positions affect   reasonably expected to apprise the IRS 
a consolidated tax return. Corporation C    a single line item on a tax return, each      of the identity and nature of the issue 
takes a tax position for which a liability  tax position is a separate tax position       underlying the tax position taken on the 
for unrecognized tax benefits was           taken on a tax return. For example, a tax     tax return.
recorded in the consolidated financial      position that is reported on a line item      Example 6. Unit of account. 
statements of Corporations C and D.         on Form 5471 is a tax position taken on       Corporation A and Corporation B each 
The tax position taken by Corporation C     a return, even though an adjustment to        have two individual research projects 
on its tax return must be reported on its   that line item might not result in the        and each anticipates claiming a 
Schedule UTP because a liability for        payment of any additional tax.                research and development credit arising 
unrecognized tax benefits was recorded      A single decision about how to report         out of their projects. Corporation A 
for its tax position in the consolidated    an item of income, gain, loss, deduction,     chooses each individual research 
financial statements in which               or credit may affect line items in multiple   project as the unit of account for GAAP 
Corporation C was included.                 years’ returns. If so, that decision can      financial reporting purposes, since the 
                                            result in a tax position taken on each        corporation accumulates information for 
Tax benefit recognized based on ex-         affected year’s return. For example, a        the tax return about the projects at the 
pectation to litigate. A corporation        decision to amortize an expense rather        project level and expects the IRS to 
must report on Schedule UTP a tax           than currently deduct that expense, or a      address the issues during an 
position taken on its return for which an   decision to currently deduct rather than      examination of each project separately. 
income tax benefit was recorded if the 

Instructions for Schedule UTP (Form 1120)                -3-

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Corporation B determines that the            Form 8275 or Form 8275-R need not be       2019. The corporation recognized the 
appropriate unit of account for GAAP         filed to avoid certain accuracy-related    tax benefits for the positions taken in tax 
financial reporting purposes is the          penalties with respect to that tax         years 2020 through 2023. The 
functional expenditures, based on the        position.                                  corporation has taken a tax position in 
amount of its expenditures, the                                                         each of the 5 tax years because, on 
anticipated credits to be claimed, its       For tax positions contrary to a rule       each year’s tax return, there would be 
previous experience, and the advice of       otherwise reportable on Form 8275, you     an adjustment to a line item on that 
its tax advisors. Based on the unit of       must identify the statutory provision on   return if the position taken in that year’s 
account used for financial reporting         Schedule UTP, Parts I and II, in column    return is not sustained. The tax position 
purposes, Corporation A must use each        (b); and the revenue ruling, revenue       taken in the 2019 tax year must be 
project as its unit of account for           procedure, or other guidance in column     reported on Part I of Schedule UTP filed 
Schedule UTP reporting, and                  (c). For tax positions contrary to a       with the 2019 tax return. None of the 
Corporation B must use functional            regulation otherwise reportable on Form    2020 to 2023 tax positions must be 
expenditures as its unit of account for      8275-R, you must identify the statutory    reported on Schedule UTP because the 
Schedule UTP reporting, regarding the        provision on Schedule UTP, Parts I and     corporation recognized the tax benefits 
research and development credit.             II, column (b); and enter the full         with respect to those tax positions.
                                             regulation citation in column (d) (see 
Ranking Tax Positions by Size                Specific Instructions, later). For all tax Example 8. Multiple year 
The corporation must rank by size each       positions otherwise reportable on Form     positions. A corporation incurred an 
tax position listed in Parts I and II. See   8275 or Form 8275-R, the concise           expenditure in 2018 and took the 
the instructions for Part I, column (h),     description of UTPs on Schedule UTP,       position that the expenditure may be 
regarding coding to be used to rank the      Part III must include all the information  amortized over 15 years beginning on 
corporation’s tax positions.                 required under those forms.                its 2018 tax return. During the course of 
                                                                                        reviewing its tax positions for purposes 
Size. The size of each tax position is               Failure to provide a complete      of evaluating tax benefit recognition for 
determined on an annual basis and is         !       and accurate disclosure of the     U.S. federal income taxes for its 2018 
the amount of unrecognized U.S.              CAUTION tax position on Schedule UTP 
                                                                                        audited financial statements, the 
federal income tax benefits recorded for     will not satisfy the section 6662          corporation determined that it was 
that position. If an unrecognized tax        adequate disclosure requirements for       uncertain whether any deduction or 
benefit is recorded for multiple tax         Form 8275, 8275-R, or tax positions        amortization of this expenditure is 
positions, then a reasonable allocation      reported on Schedule UTP.                  allowable. In the 2018 audited financial 
of that unrecognized tax benefit among                                                  statements, the corporation recorded a 
the tax positions to which it relates must   Amended Returns                            liability for unrecognized tax benefits 
be made in determining the size of each      A complete and accurate disclosure of a    with respect to the amortization 
tax position.                                tax position on Schedule UTP, Form         deduction to be claimed in each tax 
If an amount of interest or penalties        8275, or Form 8275-R must be included      year. The corporation has taken a tax 
relating to a tax position is not identified in an amended return that is filed to      position in each of the 15 tax years 
in the books and records as being            claim the benefit of the tax positions     because on each year’s tax return there 
associated with that position, then that     reported on these disclosure forms. If an  would be an adjustment to a line item on 
amount of interest and penalties is not      amended return is filed to carryover       that return if the position taken in that 
included in the size of a tax position       attributes such as net operating losses    year is not sustained. The corporation 
used to rank that position or compute        or tax credits arising from tax positions  reported the 2018 tax position on Part I 
whether the position is a major tax          reported in prior filings, the disclosure  of Schedule UTP for the 2018 tax year. 
position.                                    forms do not need to be completed.         In addition, the tax position to be taken 
                                             Instead, attach a statement to the         in each of the 2019 to 2032 tax years 
Expectation to litigate. Do not              amended return that identifies each tax    must be reported on Part I of the 
determine a size for positions listed        position, the amount, the nature of the    Schedule UTP filed with the tax return 
because of an expectation to litigate.       disclosure, the form used to report the    for the respective tax year in which the 
See the instructions for Parts I and II,     disclosure, and the tax year in which the  tax position was taken. The result would 
column (h), regarding ranking of these       tax position originates.                   be the same if, instead of recording the 
positions.                                                                              liability for unrecognized tax benefits in 
Affiliated groups. The determination         Comprehensive Examples                     2018 for all of the tax positions taken in 
of the size of a tax position taken on a     Example 7. Multiple year                   each of the 15 years, the corporation 
tax return by an affiliated group filing a   positions. A corporation incurred an       records a liability for unrecognized tax 
consolidated return is to be determined      expenditure in 2019 and claimed the        benefits in each year that specifically 
at the affiliated group level for all        entire amount as a deduction on its        relates to the tax position taken on the 
members of the affiliated group.             2019 return. During the course of          return for that year.
Coordination With Other                      reviewing its tax positions for purposes   Example 9. Transition rule.       The 
                                             of evaluating whether to recognize a       facts are the same as in Example 8 
Reporting Requirements                       benefit for uncertain tax positions for    except that the corporation incurred the 
A complete and accurate disclosure of a      U.S. federal income taxes for its 2019     expenditure and recorded the liability for 
tax position on the appropriate year’s       audited financial statements, the          unrecognized tax benefits in 2009. The 
Schedule UTP will be treated as if the       corporation determined it was uncertain    corporation has taken a tax position in 
corporation filed a Form 8275,               whether the expenditure should instead     each of the 15 tax years (2009 through 
Disclosure Statement, or Form 8275-R,        be amortized over 5 years and records      2023) because on each year’s tax return 
Regulation Disclosure Statement,             a liability for unrecognized tax benefits  there would be an adjustment to a line 
regarding the tax position. A separate       with respect to the position taken in      item on that return if the position taken 

                                                        -4-                             Instructions for Schedule UTP (Form 1120)

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in that year is not sustained. However,      Example 12. Corporate merger.               Column (b). Primary IRC Sections
the corporation was not required to          On June 30, 2022, MergerCo merges 
report the tax position taken in the 2009    into AcquiringCo, in a transaction in       Provide the primary IRC sections (up to 
tax year because it was taken in a tax       which AcquiringCo survives.                 three) relating to the tax position. Enter 
year beginning before January 1, 2010.       MergerCo's tax year ends on that date.      one primary IRC section in each box (for 
The corporation reports the tax position     After the merger, AcquiringCo records       example, “61,” “108,” “263A,” etc.). Do 
taken in each of the 2010 to 2023 tax        an unrecognized tax benefit with            not include descriptive references or 
years on Part I of the Schedule UTP          respect to a tax position that is taken on  any other text such as “IRC,” “Section,” 
filed with its tax return for the respective MergerCo's final return in its audited      or “IRC Sec.” Beneath each primary IRC 
tax year in which the position was taken.    financial statements. That tax position     section, you may enter the applicable 
Example 10. Creation and use of              must be reported on Part I of the           IRC subsections (for example, (f)(2)(A)
net operating loss (NOL).  A                 Schedule UTP filed with MergerCo's          (ii)), using the preprinted parentheses. If 
corporation incurred a $50 expenditure       2022 tax return even though the             there are more than four subsection 
in 2018 and claimed the entire amount        unrecognized tax benefit was recorded       components, list only the first four.
as a deduction on its 2018 tax return.       by AcquiringCo. AcquiringCo should not 
The deduction increases the                  report the tax position on the              Column (c). Rev. Rul. (RR), Rev. 
corporation’s NOL carryforward from          Schedule UTP filed with its 2022 tax 
                                                                                         Proc. (RP), etc.
$100 to $150. The corporation used the       return because MergerCo's final return 
entire $150 NOL carryforward on its          is a prior year tax return on which the tax If you are disclosing a tax position 
2019 tax return. Claiming the $50            position was reported.                      contrary to a rule (such as a statutory 
deduction in 2018 is a tax position taken                                                provision or IRS Revenue Ruling) 
in the 2018 tax year because the             Specific Instructions                       otherwise reportable on Form 8275, you 
position would result in an adjustment to                                                must identify the rule in column (c). 
a line item on the 2018 tax return if the    Part I. Uncertain Tax                       Enter the authoritative source using the 
position is not sustained. The deduction                                                 abbreviation listed below and the 
in 2019 of the NOL carried forward from      Positions for the Current                   applicable numeric reference. Do not 
2018 is a tax position taken on the 2019     Tax Year                                    include a space between the letters and 
tax return, because the position would                                                   numbers (for example, “RR2021–02”).
result in an adjustment to a line item on    When To Complete Part I
the 2019 tax return if the position is not   Complete Part I to report tax positions 
sustained. The corporation recorded a        taken by the corporation on its current     Abbreviation    Authoritative Source
liability for unrecognized tax benefits      tax return.                                 RP              Revenue Procedure
with respect to its 2018 tax position in its                                             RR              Revenue Ruling
2018 audited financial statements.           Information From Related Parties            NOT             Notice
Because the corporation recorded a                                                       CT              Court Decision
liability for an unrecognized tax benefit    Check the box at the top of Part I if the 
with respect to the tax position taken in    corporation was unable to obtain 
2018, it reported the 2018 tax position      sufficient information from one or more     Column (d). Regulation Section
on the Schedule UTP filed with its 2018      related parties and was therefore unable 
tax return. Even though it reported the      to determine whether a tax position         If you are disclosing a tax position 
tax position in its 2018 tax return, the     taken on its current year’s tax return is   contrary to a Treasury regulation 
corporation should also report the 2019      required to be reported in Part I of this   otherwise reportable on Form 8275-R, 
tax position on the Schedule UTP filed       schedule.                                   enter the regulation section in the box 
with its tax return for the 2019 tax year                                                (for example, “1.482-7”). In the 
                                                                                         preprinted parentheses beneath each 
because the deduction of the NOL             Column (a). UTP No.                         regulation section number, enter all 
carried forward from 2018 is a tax 
                                                                                         designations of smaller units (lettered or 
position taken on the 2019 tax return        Enter a number in column (a) for each       numbered subsections, paragraphs, 
that would result in an adjustment to a      tax position reported. The UTP numbers      subparagraphs, and clauses) to which 
line item on the 2019 tax return if the      on Part I, column (a), include a            the contrary position relates (for 
position is not sustained.                   preprinted “C” prefix to indicate that they example, “(d)(1)(iii)”).
Example 11. Amended return.             A    are positions for the current tax year. A 
corporation takes a tax position that        corresponding UTP number with the 
generates excess foreign tax credits         letter “C” prefix will be used on Part III  Column (e). Timing Codes
(FTC) for the 2022 tax year. The tax         for reporting the description of the tax 
position is reported on Part I, No. C1, of   position. Begin with the number 1, do       Check “T” for temporary differences, “P” 
the Schedule UTP attached to the             not skip any whole numbers, do not          for permanent differences, or check 
corporation's 2022 tax return. The           enter extraneous characters, and do not     both “T” and “P” for a tax position that 
corporation files Form 1120X for tax         duplicate any numbers (for example,         creates both a temporary and 
year 2021 to claim the benefits of the       C1, C2, C3, where the letters “C” are       permanent difference. Categorization as 
unused credits on its 2021 tax return.       preprinted on the schedule and the          a temporary difference, permanent 
The corporation should attach a              numbers are entered). Each tax position     difference, or both must be consistent 
statement to the 2021 amended return         taken on a return is considered a           with the accounting standards used to 
indicating that the FTC carryback arose      separate UTP. Do not group or combine       prepare the audited financial 
from the tax position disclosed in tax       multiple tax positions together.            statements.
year 2022, Schedule UTP, Part I, UTP 
No. C1.

Instructions for Schedule UTP (Form 1120)                -5-

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Column (f). Pass-Through Entity               Enter “T1” for the transfer pricing           for prior tax years. A corresponding UTP 
EIN                                           position, “G2” for the expectation to         number with a letter “P” prefix will be 
                                              litigate position, and “G3” for the second    used on Part III for reporting the 
If the tax position taken by the              other tax position.                           description of the tax position. Do not 
corporation relates to a tax position of a                                                  skip any whole numbers, do not enter 
pass-through entity, enter the employer       Columns (i) Through (k)                       extraneous characters, and do not 
identification number (EIN) of the                                                          duplicate any numbers (for example, 
pass-through entity to which the tax          Identify the location of the tax position     P4, P5, P6, where the letters “P” are 
position relates. For example, if the         and amount of the income tax benefits         preprinted on the schedule and the 
corporation is a partner in a partnership     (see the definition of size earlier)          numbers are entered). Each tax position 
and the tax position involves the             reported on the tax return. Enter the         taken on a return is considered a 
partner’s distributive share of an item of    form number or schedule and the line          separate UTP. Do not group or combine 
income, gain, loss, deduction, or credit      number in columns (i) and (j) and the         multiple tax positions together.
of the partnership, enter the EIN of the      amount of the item in column (k). For an 
partnership. A pass-through entity is any     expense item, report in column (k) the        Column (b). Primary IRC Sections
entity listed in section 1(h)(10). If the tax amount reported on the line of the form, 
position is not related to a tax position of  schedule, or attached statement that          See the instructions for Part I, column 
a pass-through entity, leave this blank.      includes the tax position taken.              (b).
Enter “F” if the pass-through entity is a 
foreign entity that does not have an EIN.     If the tax position relates to an item of     Column (c). Rev. Rule, Rev. Proc., 
                                              deferred income or unearned revenue,          etc.
Column (g). Major Tax Position                report in columns (i) and (j) the schedule 
(Item or Groups of Items)                     or form and line number where the item        See the instructions for Part I, column 
                                              is reported (for example, Sch. M-3,           (c).
Check this box if the relative size of the    line 20, or Sch. L, line 21). Report in 
tax position is greater than or equal to      column (k) the amount reported on the 
                                                                                            Column (d). Regulation Section
0.10 (10%). The relative size of a tax        line of the form, schedule, or attached 
position is the amount computed by            statement that includes the tax position 
                                                                                            See the instructions for Part I, column 
dividing the size of that position by the     taken.
                                                                                            (d).
sum of all of the sizes for all of the tax 
positions listed on Parts I and II.           Part II. Uncertain Tax 
                                                                                            Column (e). Timing Codes
Disregard expectation to litigate             Positions for Prior Tax 
positions for column (g) purposes. 
                                              Years                                         See the instructions for Part I, column 
Round amounts using rules similar to 
                                                                                            (e).
the rules in the Instructions for Form        When To Complete Part II
1120 (or the instructions for the             Complete Part II to report tax positions      Column (f). Pass-Through Entity 
applicable tax return) for rounding dollar    taken by the corporation in a prior tax 
amounts.                                      year that have not been reported on a         EIN
                                              Schedule UTP filed with a prior year’s 
Column (h). Ranking of Tax                    tax return. Do not report a tax position      See the instructions for Part I, column 
Position                                      taken in a tax year beginning before          (f).
                                              January 1, 2010. See Transition rule 
Enter a letter and a ranking number for       under Reporting Uncertain Tax                 Column (g). Major Tax Position
each tax position. Use the letter T for       Positions on Schedule UTP, earlier.
transfer pricing positions and the letter                                                   See the instructions for Part I, column 
G for all other tax positions.                Information From Related Parties              (g).

Rank all tax positions in Parts I and II                                                    Column (h). Ranking of Tax 
                                              Check the box at the top of Part II if the 
together, regardless of type. Include                                                       Position
                                              corporation was unable to obtain 
amounts of deferred income in 
                                              sufficient information from one or more 
determining the ranking of tax positions.                                                   See the instructions for Part I, column 
                                              related parties and was therefore unable 
Starting with the largest size, assign the                                                  (h).
                                              to determine whether a tax position 
number 1 to the largest, the number 2 to 
                                              taken on its prior year's tax return is 
the next largest, and so on, in order. 
                                              required to be reported in Part II of this 
This number is the ranking number for                                                       Columns (i) Through (k)
                                              schedule.
the tax position. Expectation to litigate 
positions may be assigned any ranking                                                       See the instructions for Part I, columns 
number.                                       Column (a). UTP No.                           (i) through (k).

For example, the corporation has one          Continue the numeric sequence based           Column (l). Year of Tax Position
transfer pricing tax position and two         on the last UTP number entered on Part 
other tax positions. The transfer pricing     I. For example, if the last UTP listed on     List the prior tax year in which the tax 
position is the largest and one of the        Part I is 3, enter 4 for the first UTP listed position was taken and the last month 
other tax positions is an expectation to      in Part II. The UTP numbers on Part II,       and day of that tax year, using a six-digit 
litigate position. The expectation to         column (a), include a preprinted “P”          number. For example, enter 202212 for 
litigate position is assigned a rank of 2.    prefix to indicate that they are positions    tax years ending December 31, 2022, 

                                                                  -6-                    Instructions for Schedule UTP (Form 1120)

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and 202209 for tax years ending              “Available upon request” is not an        Facts. The corporation is a member 
September 30, 2022.                          adequate description.                     of Venture LLC, which is treated as a 
                                             A concise description should not          U.S. partnership for tax purposes. 
Part III. Concise                            include an assessment of the hazards of   During the tax year, Venture LLC raised 
Description of UTPs                          a tax position or an analysis of the      funds through (i) admitting a new 
                                             support for or against the tax position.  member for a cash contribution and (ii) 
When To Complete Part III                                                              borrowing funds from a financial 
                                                                                       institution, using a loan partially 
Part III must be completed for every tax     Examples of Concise Descriptions 
                                                                                       guaranteed by the corporation. Also 
position listed in Part I and Part II. Enter for Hypothetical Fact Patterns            during the tax year, Venture LLC made 
the corresponding UTP number from 
                                                                                       a cash distribution to the corporation 
Part I, column (a) (for example, C1, C2,     The following examples set out a          that caused its membership interest in 
C3) or Part II, column (a) (for example,     description of hypothetical facts and the Venture LLC to be reduced from 25% to 
P4, P5, P6), related to the description.     uncertainties about a tax position that   2%. The corporation has taken the 
Concise description.      For                would be reportable on Schedule UTP.      position that the cash distribution is 
Schedule UTP to be considered                Following each set of hypothetical facts, properly characterized as a nontaxable 
complete, the corporation must include       which would not be disclosed on the       distribution that does not exceed its 
a description of the relevant facts          schedule, are examples of insufficient    basis in its Venture LLC interest, but has 
affecting the tax treatment of the           and sufficient disclosures. In each       established an unrecognized tax benefit 
position and information that can            hypothetical example, the sufficient      for financial accounting purposes, 
reasonably be expected to apprise the        description would be reported in Part III recognizing that the transaction might 
IRS of the identity of the tax position,     to disclose that hypothetical case.       be recharacterized as a taxable sale of 
and the nature of the issue for which the    Example 13.  Allocation of costs          a portion of its Venture LLC interest 
tax position is being disclosed.             between uncompleted and                   under section 707(a)(2).
A “description of the relevant facts         completed acquisitions.                   Insufficient disclosure. The 
affecting the tax treatment of the 
position” should include all information     Facts. The corporation investigated       corporation received a nontaxable cash 
pertaining to the nature of the              and negotiated several potential          distribution during the tax year.
uncertainty related to the tax position.     business acquisitions during the tax      Sufficient concise description. 
For example, if a corporation's tax          year. One of the transactions was         The corporation is a member of Venture 
position is to claim a current year          completed during the tax year, but all    LLC, which is treated as a U.S. 
deduction for the cost of fixing the roof    other negotiations failed and the other   partnership for tax purposes. The 
of a building, the description should        potential transactions were abandoned     corporation received a cash distribution 
indicate why it was determined that the      during the tax year. The corporation      during the year from Venture LLC. The 
work was performed to keep the asset         deducted costs of investigating and       issue is the potential application of 
in normal operating condition and why        partially negotiating potential business  section 707(a)(2) to recharacterize the 
the costs do not improve or extend the       acquisitions that were not completed      distribution as a sale of a portion of the 
useful life of the asset.                    and capitalized costs allocable to one    corporation's Venture LLC interest.
                                             business acquisition that was 
The “identity of the tax position”           completed. The corporation established    Example 15.  Qualified Research 
should provide information that further      an unrecognized tax benefit for financial expenditures.
defines the primary IRC section(s), rule,    accounting purposes in recognition of     Facts. The company incurred 
or regulation section listed in Parts I and  the possibility that the amount of costs  in-house expenses for researching and 
II of Schedule UTP, such as the              allocated to the uncompleted acquisition  developing new product line X. An 
identification of a 15-year depreciable      attempts was excessive.                   analysis was performed to determine 
life assigned to land improvement 
assets under section 168 or indicating       Insufficient disclosure.  The             which of the activities performed by the 
that a request has been filed in             corporation incurred costs during the tax company's employees constituted 
accordance with Rev. Rul. 90-38 to           year for investigating business           qualified services related to this new 
change from an erroneous method of           acquisitions.                             product line. The company claimed 
accounting for advanced payments.                                                      qualified research expenses for services 
                                             Sufficient concise description.           performed in the new product 
Information concerning “the nature of        The corporation incurred costs of         engineering and manufacturing 
the issue for which the tax position is      completing one business acquisition       departments, as well as certain other 
being disclosed” can include a factual       and also incurred costs investigating     departments that directly support these 
description of the legal issues              and partially negotiating potential       departments. The corporation 
presented. It should identify, for           business acquisitions that were not       established an unrecognized tax benefit 
example, the specific entity, country, or    completed. The costs were allocated       for financial accounting purposes in 
transaction to which the tax position        between the completed and                 recognition of the possibility that some 
relates, the character of income, the        uncompleted acquisitions. The issue is    of these costs may not meet the 
type of expense or credit, the               whether the allocation of costs between   definition of qualified research 
relationship of the tax position to other    uncompleted acquisitions and the          expenditures.
assets or activities, and whether the        completed acquisition is appropriate.
uncertainty relates to computational                                                   Insufficient disclosure.  The 
issues, substantiation issues, sampling      Example 14.  Recharacterization of        corporation incurred research 
methodologies, or legal interpretation.      distribution as a sale.                   expenditures and claimed a credit for 
Stating that a concise description is                                                  increasing research activities.

Instructions for Schedule UTP (Form 1120)                  -7-

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Sufficient concise description.        Region A pursuant to a license of         Insufficient disclosure  The 
The corporation incurred costs for the technology and marketing intangibles      taxpayer has a licensing agreement with 
research and development of new        from its publicly traded U.S. parent      a foreign subsidiary that is supported by 
product line X. The company performed  corporation. The amount of the royalties  a transfer pricing study.
surveys and conducted interviews with  paid for the use of the U.S. parent 
the new product engineering,           corporation's technology and marketing    Sufficient concise description. 
manufacturing, and support department  intangibles was determined based on a     Pursuant to a licensing agreement, 
employees in order to determine the    transfer pricing study. For financial     taxpayer transferred technology and 
qualifying in-house research           accounting purposes, the U.S. parent      marketing intangibles for the 
expenditures. The issue is whether     corporation established an                manufacturing and sale of Product Z in 
these in-house service costs meet the  unrecognized tax benefit in recognition   Region A to its Country Y subsidiary. 
definition of qualified research       of the possibility that the amount of the The issue is whether the amount of 
expenditures.                          royalties would be subject to an          taxpayer's royalty income for the Region 
                                       adjustment under section 482              A technology and marketing intangibles 
Example 16.   Transfer pricing.                                                  for Product Z will be increased pursuant 
                                       increasing its U.S. tax liability.
                                                                                 to section 482, thereby increasing its 
Facts. A Country Y corporation 
                                                                                 U.S. tax liability.
manufactures and sells Product Z in 

                                       -8-                                       Instructions for Schedule UTP (Form 1120)