For each entity in the consolidated group that acted as an Issuing Bank, a Merchant/Acquiring Bank or both during the years under examination, please respond to the following questions to the extent applicable for each year under examination:
A. Interchange Fees
Each of the following questions refers to Interchange or similar fees received by the Issuing Bank.
1. Did the entity calculate the amount of Interchange or similar fee income to defer for tax purposes? If so, please provide a detailed explanation of how that deferral was calculated, including under what authority (e.g. IRC § 1272(a)(6)).
2. Please provide a complete copy of any OID deferral calculations, including in electronic format any models used, for Interchange or similar fee income for each year under examination.
3. Please explain how the OID calculator model determines the current period taxable OID amount with respect to Interchange or similar fees for the years under examination.
4. Please explain how the OID calculator model handles bad debts with respect to Interchange or similar fees for the years under examination.
5. Please explain how the OID calculator model handles fraud and other losses with respect to Interchange or similar for the years under examination.
6. How are the Interchange or similar fees billed or accrued factored into the associated OID prepayment speed assumption?
7. Please furnish detailed computation workpapers reconciling any reported book/tax differences attributable to reporting Interchange or similar fees for the taxable years under examination.
8. Please furnish detailed computation workpapers to support any IRC § 481(a) amount for Interchange or similar fees as reported on Form(s) 3115, the tax return, any amended return or any subsequent return for each year under examination.
B. Merchant Discount Fees
Each of the following questions refers to Merchant Discount or similar fees received by the Merchant/Acquiring Bank.
1. Did the entity calculate the amount of Merchant Discount or similar fee income to defer for tax purposes? If so, please provide a detailed explanation of how that deferral was calculated, including under what authority (e.g. IRC § 1272(a)(6)).
2. Please provide a complete copy of any OID deferral calculations, including in electronic format any models used, for Merchant Discount or similar fee income for each year under examination.
3. Please explain how the OID calculator model determines the current period taxable OID amount with respect to Merchant Discount or similar fees for the years under examination.
4. Please explain how the OID calculator model handles bad debts with respect to Merchant Discount or similar fees for the years under examination.
5. Please explain how the OID calculator model handles fraud and other losses with respect to Merchant Discount or similar fees for the years under examination.
6. How are the Merchant Discount or similar fees billed or accrued factored into the associated OID prepayment speed assumption?
7. Please furnish detailed computation workpapers reconciling any reported book/tax differences attributable to reporting Merchant Discount or similar fees for the taxable years under examination.
8. Please furnish detailed computation workpapers to support any IRC § 481(a) amount for Merchant Discount or similar fees as reported on Form(s) 3115, the tax return, any amended return or any subsequent return for each year under examination.
C. Miscellaneous Questions
1. What other billed or accrued credit card fees (e.g., annual fees, cash advance fees, grace period interest, late fees, non-sufficient funds fees, over-the-limit fees, etc.) are used in the OID calculator model to determine a payment rate and the ending balance of the credit card receivables?
2. For each line of business that the entity calculated a separate OID deferral amount, please provide representative samples of the input and output sheets associated with the OID calculator model for each year under examination. Please reconcile the output sheets to any OID deferral taken on the tax return for each year under examination.
Please provide the requested data in magnetic media format as well as hard copy.
IDR Discussed with Taxpayer: _________________________
Response Date: _________________
Receipt acknowledged By Company: __________________
(Initials) (Date)
Date received by Examination Team: ___________________
(Initials) (Date)
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