IRS Faces Stiff Hiring Challenges, Ex-Officials Say – Jonathan Curry, Tax Notes ($). “An 87,000-employee hiring spree for the IRS sounds great on paper, but actually getting that many new workers through the door is another matter, according to two former officials.”
‘Bringing on new personnel will probably be the most significant challenge the IRS is facing on what to do with this new funding,’ former IRS Chief Counsel Michael J. Desmond, now at Gibson, Dunn & Crutcher LLP, predicted November 3 on a webcast sponsored by RSM US LLP.
David Kautter of RSM, who served as acting IRS commissioner and Treasury assistant secretary for tax policy during the Trump administration, noted that the agency is competing for talent in a ‘very tight labor market.’ He especially questioned how the IRS would be able to hire the enforcement personnel needed to provide closer scrutiny of complex business returns and high-net-worth taxpayers.
Speaking of hiring enforcement folks...
IRS Criminal Investigation Planning More Hiring in Fiscal 2023 - Naomi Jagoda, Bloomberg ($):
The IRS Criminal Investigation division is expecting a ‘more significant’ hiring increase in the current fiscal year, division chief Jim Lee said on a press call Thursday.
Lee said CI’s goal is to hire about 360 special agents—law enforcement officers who investigate tax and financial crimes—plus 150 additional personnel. The division, on average, loses about 150 special agents and about 100 other personnel annually to attrition, he said.
IRS Commissioner Charles Rettig told lawmakers on May 18th that his agency would focus new funding on enforcing wealthier taxpayers and businesses to pony up. Coverage of that speech is here.
‘Hundreds’ of Crypto Cases Coming, IRS Criminal Chief Says - David Jolly, Bloomberg ($):
The IRS’s Criminal Investigation division is building “hundreds” of crypto cases, and many of them will soon be public, division chief Jim Lee said Thursday.
The cases involve areas like ‘off-ramping’ transactions, in which digital assets are exchanged for fiat currency, as well as people being paid in crypto and not reporting, Lee said during a press call.
‘In the last three years I’ve really seen a shift’ in digital asset investigations, Lee said. Previously, most were related to money-laundering, he said, but tax cases now make up about half the mix.
IRS Looking for Real Tax Crime in Virtual Reality – Nathan Richman, Tax Notes ($):
[IRS Criminal Investigation division Chief Jim] Lee noted his plan to hire 360 special agents in the coming year and added that he hopes to bring on 150 other CI employees as well. While the Inflation Reduction Act isn’t the only source of funding for CI, more hiring will remain the top priority, he said.
In fiscal year 2022, IRS Criminal Investigation initiated more than 2,550 criminal investigations, identified over $31 billion from tax and financial crimes, and obtained a 90.6% conviction rate on cases accepted for prosecution.
Treasury Releases More Requests for Comment on Energy Provisions - Naomi Jagoda, Bloomberg ($):
The Treasury Department and IRS on Thursday released three more requests for comment on the clean-energy provisions in the tax and climate law.
The new notices seek stakeholder feedback on tax credit provisions concerning commercial clean vehicles and alternative fuel vehicle refueling property, carbon capture, and clean hydrogen and clean fuel production.
- The IRS request for comment to the qualified commercial clean vehicles provisions and the alternative fuel vehicle refueling property is here.
- The IRS request for comment to the credit for carbon capture is here.
- The IRS request for comment to the credit for the production of clean hydrogen and the clean fuel production credit is here.
Treasury and IRS Ask for More Input on Energy Tax Credits – Alexander Rifaat, Tax Notes ($):
Treasury and the IRS have made clarifying the rules on the energy tax credits a top priority, with most of the provisions stipulating a December 31 deadline for the government to issue guidance.
TE/GE Addresses Inflation Reduction Act Tax Provisions – Fred Stokeld, Tax Notes ($). “The IRS Tax-Exempt and Government Entities Division is working to implement tax provisions of the Inflation Reduction Act (P.L. 117-169) that fall under its jurisdiction, according to the head of TE/GE.”
Further down the article:
One provision allows exempt organizations and state and local governments to claim refundable clean energy credits. [TE/GE Commissioner Edward] Killen said TE/GE is developing a filing regime so those entities can claim the credit.
‘That is something that we’re focused on,’ Killen said. ‘We have a lot of attention on that so that we can get to a place where we can appropriately communicate to that community’ what the expectations will be regarding filing.
Labor Rules Will Unlock IRA Tax Credits' Full Value - Nicole Elliott and Timothy Taylor (Analysis), Law360 Tax Authority ($):
The Inflation Reduction Act significantly changes the tax code to incent companies to invest in energy security, reduce carbon emissions and increase energy innovation. But to maximize the value of the tax credits contained in the IRA, companies must follow specific labor rules.
These rules include paying specific workers a prevailing wage and employing a certain number of registered apprentices. A transition period offers companies some breathing room on the labor rules until the government issues implementation guidance.
Rettig Downplays Immediate Effect of Paper-Scanning Tech – Jonathan Curry, Tax Notes ($):
The IRS is pressing ahead with plans to roll out paper-scanning technology next year, but those efforts are going to be limited once the filing season gets underway, according to IRS Commissioner Charles Rettig.
Thanks to the extra funding from the Inflation Reduction Act (P.L. 117-169), the IRS will start using scanning technology to process some paper individual income and employment tax returns in early 2023, Rettig told National Taxpayer Advocate Erin Collins in a memo dated October 31.
Further down the article:
The IRS won’t be passively waiting to see if the paper-scanning technology pans out, Rettig said. The agency is also working to bolster its online capabilities to facilitate fully digital communication between itself and taxpayers, he said, which should reduce the amount of mailed correspondence that needs to be processed.
Threat of Trade War Looms Over ‘Made in America’ EV Tax Credit – Alexander Rifaat, Tax Notes ($):
In an attempt to kick-start America’s clean energy transition and bolster domestic manufacturing, could the Biden administration inadvertently ignite a trade war?
Over the past several weeks, concerns have grown regarding the clean vehicle tax credit in the recently enacted Inflation Reduction Act (P.L. 117-169), with both allies and foes voicing opposition to the provision’s domestic content requirements.
Inside the push to (finally) reform marijuana banking laws - Brendan Pedersen and John Bresnahan, Punchbowl News ($):
We wanted to spend some time unpacking one of the more interesting legislative items that is likely to be in the mix during the lame-duck session — the Secure and Fair Enforcement Banking Act.
In its current form, SAFE Banking would provide a 'safe harbor' for regulated financial institutions to work with legal cannabis companies. For years now, SAFE Banking’s chief obstacle has been getting through the Senate. More than ever before, it looks like that may change after Nov. 8.
An explanation of the bill is here.
QIs Will Have Time to Review Final Agreement, Official Says – Kiarra Strocko, Tax Notes ($):
The IRS and Treasury have ensured that qualified intermediaries will have sufficient time to examine the final QI agreement and prepare for renewals despite the January 1, 2023, effective date.
Speaking November 3 at a virtual tax conference hosted by Kaplan Financial Education, Edith Edusei Poku, a compliance specialist in Treasury's QI program, said that the IRS will retroactively apply the agreement to the effective date so that QIs have the opportunity to review the final agreement and decide whether to renew or terminate it. She added that QIs will not be ‘breaking their status, so long as the open season is still in effect.’
Fla. Justices Hint That Rentals Can Limit Property Tax Break – Paul Williams, Law360 Tax Authority ($):
Two Florida Supreme Court justices sounded favorable Thursday toward reducing the homestead exemption of a residence with rooms that were rented out for years but grappled with defining exactly when rentals can limit the property tax benefit for primary residences.
Chief Justice Carlos G. Muñiz said during oral arguments that the upstairs portions of a home that were consistently rented out, including one room leased to the same tenant for nearly two decades, could meet ‘a reasonable definition’ of being used for commercial purposes. But he questioned where the court should demarcate when using parts of a home for purposes other than as a primary residence warrants a reduction in the homestead exemption.
A Look At Pa. Gov. Wolf's Tax Policy At End Of His Tenure – Jaqueline McCool, Law360 Tax Authority ($). “Pennsylvania Gov. Tom Wolf, who will soon complete the maximum two terms a governor can serve in the commonwealth, leaves behind a legacy of tax changes that focused on making the state a more desirable place for business.”
Retailers Flag Issues With Colorado’s New Delivery Tax Proposal – Donna Borak, Bloomberg ($):
Colorado retailers and businesses on Thursday raised their serious concerns about a draft plan by the state’s revenue agency for companies to collect a new delivery surcharge on items shipped to customers.
Consumers across Colorado began paying the $.27 cent surcharge on goods shipped to their doorsteps by services such as Amazon and Instacart starting on July 1 before the Colorado Department of Revenue released its draft final rule on the new tax program.
Florida High Court Weighs Rentals in Homestead Tax Exemption Case - Jeffery Leon, Bloomberg ($). “Florida’s highest court heard oral arguments Thursday about whether a Florida homeowner can fully claim a homestead property-tax exemption despite renting out rooms in his home, an act that’s become increasingly common with the rise of online lodging and rental portals.”
IRS Misleading Supreme Court Over Tax Dispute, Whirlpool Says - Michael Rapoport, Bloomberg ($):
Appliance manufacturer Whirlpool is arguing that the IRS is mischaracterizing and downplaying its tax dispute with the company over foreign income, in an attempt to keep the Supreme Court from weighing in on the matter.
The IRS has urged the high court to dismiss Whirlpool’s challenge to a lower-court ruling that the company owes taxes on $45 million in income from a Luxembourg subsidiary. But the agency’s arguments rest on ‘a patently revisionist history of the case’ and ‘a blatant misreading of the statute,’ Whirlpool said Wednesday in a brief replying to the IRS’s arguments. The Supreme Court hasn’t yet decided whether to take the case.
Midterms Unlikely To Revive Debate Over Int'l Taxes In US – Dylan Moroses, Law360 Tax Authority ($):
The midterm elections are unlikely to jump-start Congress into considering changes needed to align the U.S. international tax regime with an OECD minimum tax, but the outcome will influence how lawmakers prepare for a debate involving global reforms and expiring tax cuts in the years to come.
From the “no longer a third rail issue” file:
Manchin calls for deal on Social Security, Medicare, Medicaid in new Congress – Alexander Bolton, The Hill:
Centrist Sen. Joe Manchin (D-W.Va.) on Thursday called for a broad bipartisan deal to protect the solvency of Social Security, Medicare and Medicaid, popular programs that face serious funding issues over the next few decades…
The Social Security Administration announced last year that it is not projected to have the funds to pay full benefits past 2033.
In February, Manchin proposed addressing that shortfall by increasing the amount of income subject to taxation to fund Social Security from $147,000 to $400,000.
For those who don’t know, the ‘third rail’ reference is about someone touching the additional rail that supplies electricity to a metro train, which would be fatal. In political parlance, it refers to a lawmaker acting on an issue that will end their political career. Proposals to modify entitlements used to be considered a ‘third rail’ topic. Apparently, that is no longer the case.
Happy National Candy Day! Never mind the fact that Halloween was just a few days ago. Eat!
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