Prohibition of Tax Audits Based Solely on Merchant Category Codes (MCC)
This Act aims to protect businesses from tax audits initiated primarily based on classification codes (MCCs) used by payment card organizations. This means the IRS cannot use the MCC code, which describes the type of business activity, as the main reason to start an audit. For citizens running businesses, this increases confidence that their card transactions will not automatically trigger an audit without other, more substantial grounds.
Key points
Tax changes: The Internal Revenue Service (IRS) is prohibited from initiating tax audits primarily based on Merchant Category Codes (MCCs).
MCCs are classification codes assigned by payment card organizations to categorize the goods or services provided by a merchant.
The IRS must issue an annual public report detailing how many times each MCC was associated with initiated audits, even if it was not the primary reason.
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