White House and Key Republicans Issue Tax Reform Guidelines; No Border Tax
Key lawmakers and Administration officials on July 27 issued a joint statement on tax reform that outlines several broad policy goals and specifically ends further consideration of the contentious border adjustment tax (BAT). As proposed in the House GOP tax reform blueprint, the BAT sought to impose a 20 percent tax on all imports and exempt all exports.
"While we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it and have decided to set this policy aside in order to advance tax reform," the statement says. It explains, "We are now confident that, without transitioning to a new domestic consumption-based tax system, there is a viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the U.S. tax base."
Under Senate budget reconciliation rules, the vehicle the GOP leadership has said will drive home tax reform, legislation must be revenue neutral over a 10-year budget period. Eliminating the BAT means finding a new source of funding proposed tax cuts. Those sources may include restrictions on, or the elimination of, a number of provisions that directly affect NSA members or their clients.
More broadly, the statement says that the policy goal remains, "a plan that reduces tax rates as much as possible, allows unprecedented capital expensing, places a priority on permanence, and creates a system that encourages American companies to bring back jobs and profits trapped overseas."
The statement was jointly issued by Treasury Secretary Steve Mnuchin, National Economic Policy Council Director Gary Cohn, Senate Majority Leader Mitch McConnell (R-KY), House Speaker Paul Ryan (R-WI), Senate Finance Committee Chairman Orrin Hatch (R-UT) and House Ways and Means Committee Chairman Kevin Brady (R-TX). All six have been working for months to negotiate an agreement on the parameters of a tax reform plan.
Although the talks between GOP leaders and White House officials will continue, the six officials say in today's statement that "the time has arrived for the two tax-writing committees to develop and draft legislation."
A more-detailed plan, if not draft legislative language, is expected to emerge in September, followed by action in the tax committees. The statement said that, "Our expectation is for this legislation to move through the committees this fall, under regular order, followed by consideration on the House and Senate floors. As the committees work toward this end, our hope is that our friends on the other side of the aisle will participate in this effort."
The full text of the statement is available here.
ACA Payments Due Despite Executive Order, IRS Says
Taxpayers remain liable for Affordable Care Act shared responsibility payments regardless of President Donald Trump's Jan. 20 executive order directing agencies to reduce potential burdens created by the law, the IRS said in multiple information letters.
Letters released during the second quarter of 2017 responded to queries on taxation of employer-provided life insurance and nonqualified deferred compensation, retirement account rollovers when a financial institution fails, and other items. Information letter INFO 2017-0010, furnished by the IRS national office, said that the Jan. 20 executive order to minimize economic burden of the Affordable Care Act doesn't change the law; it merely directs agencies to exercise their permitted authority to reduce potential burdens. The ACA legislative provisions, including imposition of the employer shared responsibility for failure to comply, remain in force until changed by Congress.
INFO 2017-0010 is available here.
IRS Updates Due Dates, Extensions for Tax and Information Returns
The IRS has issued regulations updating the due dates and time extensions for filing certain tax returns and information returns to reflect recent laws.
The changes are set out in final and temporary regulations (T.D. 9821) issued July 18 and will bring those dates into agreement with requirements in Section 2006 of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 and Section 201 of the Protecting Americans from Tax Hikes Act of 2015.
The final and temporary rules:
- Amend Treasury regulations to account for the due dates for the income tax returns of C corporations specified by Section 2006(a) of the Surface Transportation Act.
- Amend Treasury regulations to implement Section 2006(b)(2) of the Surface Transportation Act and provide consistency for automatic extensions for non-bankruptcy estates and trusts filing Form 1041, U.S. Income Tax Return for Estates and Trusts.
- Amend Treasury regulations to implement Section 2006(b)(4) through (b)(8) of the Surface Transportation Act and provide consistency for automatic extensions for tax-exempt organizations filing specified returns.
- Make conforming amendments to reflect that the due date for forms—Form W-2, Wage and Tax Statement, and others in that series; Form W-3, Transmittal of Wage and Tax Statements; and Form 1099-MISC, Miscellaneous Income—that report non-employee compensation is Jan. 31 of the calendar year following the calendar year for which the information is being reported, as enacted by Section 201 of the PATH Act.
The IRS also issued proposed rules (REG-128483-15) that cross-reference the temporary regulations.
The final and temporary rules are available here.
IRS Finalizes Plan to Increase EA Exam Fee
The IRS will charge $81 for each part of the enrolled agent exam next year, after the agency finalized its proposal for the higher fee, which the IRS said covers its cost of providing the service. The IRS also said the third-party contractor that administers the exam would raise its service charge for each section of the three-part test called the special enrollment examination: $100.94 for the May 2017 to February 2019 testing periods and $103.97 for May 2019 to February 2020. The price was $98 for each part of the exam during the May 2016 to February 2017 period.
The new price is to take effect March 1, 2018.
The final rules are available from the Federal Register here.
IRS Pilot Program Offering Virtual Appeals Conferences
Taxpayers and their representatives can use virtual technology to remotely attend IRS Appeals conferences beginning August 1.
The IRS Office of Appeals announced the virtual conference pilot program in a July 24 news release (IR-2017-122). The agency said the program will use a secure, web-based screen-sharing platform to connect with taxpayers and provide an alternative to those who prefer face-to-face interaction over a phone call. "Taxpayers who choose the web-based option will be able to get face-to-face service remotely," IRS Chief of Appeals Donna Hansberry said in the July 24 news release. "In the future, the technology may give taxpayers greater options in engaging with Appeals and could allow us the flexibility to serve taxpayers virtually from any location using mobile devices or computers."
Readers may recall that the IRS last fall revised the Internal Revenue Manual to instruct Appeals officers to conduct all conferences by phone unless a taxpayer requests a face-to-face meeting and the case meets certain criteria. Practitioners have complained that the revision has made it more difficult for taxpayers to get an in-person conference, even when requested.
The IRS told Bloomberg BNA in a July 24 email that the virtual conferencing pilot isn't a replacement for in-person conferences. "Appeals continues to make in-person conferences available in appropriate cases."
The IRS plans to assess the pilot program after it begins August 1. This assessment will evaluate taxpayer satisfaction with the technology, the agency said. The Office of Appeals is testing the pilot with a limited number of employees. Only employees who are part of the pilot will have the ability to offer the web-based virtual conferencing option, the agency said.
The IRS News Release is available here.
IRS Asks Court To Allow PTIN Fee During Appeal of Case
The Department of Justice asked a federal district court July 24 to let the IRS resume charging a fee for tax preparer identification numbers as the agency decides whether to appeal an order that barred it from collecting payment. The motion was filed regarding the decision in Steele v. United States, D.D.C., No. 1:14-cv-01523.
The court filing said that, if the IRS appeals and wins its case, the public "will be irreparably harmed" because the agency would not have collected the fee for any PTINs issued during the appeals process. Unless the court granted restitution to the government, there would be "no after-the-fact recourse to recover the likely tens of millions of dollars of fees that would be uncollected from PTIN holders," the DOJ filing said. Additionally, "funds appropriated for other programs would have to be re-directed and thus would be unavailable to provide other taxpayer services," the motion said.
NSAlert readers will recall that in the Steele case, the court decided the IRS did not have the authority to charge the PTIN fee and further directed that all such fees should be refunded. The motion came weeks after the IRS reopened the PTIN program without a mechanism to collect payment. The agency temporarily shut down the program to make the changes in response to the June 1 order.
IRS to Boost ID Security for Business, Trust, Estate Filers; Individual ID Thefts Down
IRS Commissioner John Koskinen announced on July 25 that, so far for 2017, individuals reporting identity theft have declined sharply compared to the same time in 2016 and 2015. In the first five months of 2017, about 107,000 taxpayers reported being victims of identity theft, compared to the same period in 2016, when 204,000 filed victim reports. That's about 97,000 fewer victims – representing a drop of 47 percent. For comparison, there were nearly 297,000 identity theft victims during the first five months of 2015. Koskinen attributed the drop to safeguards put in place due to the efforts of the IRS and its Security Summit partners. The information was also announced in an agency press release, IR-2017-123.
Koskinen cautioned that the IRS has seen an increase in identity theft involving business-related tax returns. So far for 2017, the IRS has identified approximately 10,000 business returns as potential identity theft through June 1, compared to about 4,000 for calendar year 2016, and 350 for calendar year 2015. As a result, the IRS is instituting additional measures designed to reduce business-related tax return fraud.
Payment history, parent company information, and tax filing history are among the new documentation materials the IRS may request from practitioners when they file business, trust, or estate returns for the 2018 tax season. The IRS will also ask for the name and Social Security number of the individual who signs the tax documents and additional information based on deductions claimed, the agency said in the news release.
The affected returns include: Form 1120, U.S. Corporation Income Tax Return; Form 1120S, U.S. Income Tax Return for an S Corporation; Form 1041, U.S. Income Tax Return for Estates and Trusts; and Schedule K-1, Partner's Share of Income, Deductions, Credits, etc., according to the release.
"This shows that identity thieves are constantly working to come up with new ways to get around the barriers we've put up. That's why we're working to put more taxpayer protections in place for the 2018 filing season coming up. We'll be sharing more of those details at a press conference later this fall," Koskinen said.IR-2017-123 is available at here