Tax News & Views IRS Chief Announcement Roundup

November 11, 2022

Biden to nominate new IRS chief – Jay Heflin, Eide Bailly:

President Joe Biden is expected to nominate Danny Werfel to be the next IRS Commissioner.

The nomination comes as the current IRS Commissioner, Charles Rettig, is scheduled to retire on November 12th. Douglas O’Donnell has been named Acting IRS Commissioner and will head the agency after Rettig’s term ends.

Biden Taps Government Vet Daniel Werfel to Lead IRS – Jonathan Curry, Tax Notes ($):

Werfel, who will need to be confirmed by the Senate, has held various government posts across presidential administrations throughout his career, primarily in the Office of Management and Budget. However, he briefly served as acting IRS commissioner in 2013.

Currently, Werfel works as a managing director of the Boston Consulting Group, where he focuses on 'all aspects of organizational change for a variety of firms around the world,' according to a statement from Treasury Secretary Janet Yellen announcing the pick.

Biden to Nominate Danny Werfel as Next IRS Commissioner – Nancy Cook, Bloomberg ($):

The goal is to confirm a new leader for the agency before Jan. 1 when Democrats may no longer control both chambers of Congress following the midterm elections.

This likely means a confirmation hearing and all the procedural rigmarole that goes with knighting a new commissioner will happen during the lame duck session. 

Biden Picks Daniel Werfel to Run IRS – Richard Rubin, Wall Street Journal ($). “Mr. Werfel, if confirmed by the Senate for a term ending in 2027…”


IRS Statement — IRS Commissioner Charles Rettig’s final message – IRS:

We are on the brink of an exciting new era for the IRS, one that is desperately needed to transform the agency to improve taxpayer service and ensure fairness in tax compliance.

Four years ago, I proudly took the oath of office to become the 49th Commissioner of the Internal Revenue Service. Throughout my term, I have been honored, privileged and most humbled by the opportunity to serve. I became Commissioner out of a deep appreciation for the IRS, its workforce and our country.

Departing Rettig Expects IRS to Successfully Utilize New Funds - Naomi Jagoda, Bloomberg ($):

IRS Commissioner Chuck Rettig, whose term ends Saturday, issued a farewell statement Thursday in which he expressed confidence that the agency will be able to successfully implement the $80 billion in multiyear funding provided to it in the tax-and-climate law.

‘Make no mistake, the IRS has a great deal of hard work ahead to deliver on the high expectations this historic funding will provide,’ Rettig said. ‘But I have great confidence IRS employees are up to the task – and will deliver for the nation as they have countless times before in the history of our agency.’

Rettig is referring to the $80 billion that was assigned to the IRS in the Inflation Reduction Act. The agency is expected to receive the money in chunks over a ten year period – it didn’t receive the funding in one fell swoop.

Still, the agency might not receive all of the money if Republicans take control of Congress. House Republicans have vowed to cut-off the funding – it’s one of their top priorities. But it remains to be seen if such a move would pass the Senate and be signed into law by President Biden. 


W&M Republicans Expect ‘Onslaught’ of IRS, Other Investigations – Doug Sword, Tax Notes ($). “House Republicans are ready, in the wake of an apparent midterm election win, to launch investigations into the Biden administration, with the IRS likely to get more than its share of attention.”

Cutting off the $80 billion for the IRS and ProPublica getting private taxpayer info likely top this list. 


Melanie Krause to serve as Acting Deputy Commissioner for Services and Enforcement – Association of Former Internal Revenue Executives:

With the Commissioner’s term ending Saturday, it’s vital that we keep our work moving forward during this critical period. As I prepare to step in as Acting Commissioner, I want to make sure we have a fully staffed senior leadership team in place. With that in mind, I’m pleased to announce that Melanie Krause will step in behind me and serve as Acting Deputy Commissioner for Services and Enforcement.


Requiring More Detail on UTPs May Mean Fewer Companies Disclose – Chandra Wallace, Tax Notes ($):

The IRS says proposed updates to requirements for reporting uncertain tax positions are intended to increase the information provided, but tax professionals worry companies may now skip UTP reporting altogether.

The IRS released a new draft Schedule UTP and accompanying instructions because the information it receives from taxpayers on the existing schedule is often inadequate, according to Holly Paz, acting commissioner of the IRS Large Business and International Division.

‘Our experience has been that many current UTP descriptions are insufficient and unhelpful, and as a result, we have to do a soft letter follow-up’ to obtain necessary information, Paz said November 10 at the Bank & Capital Markets Tax Institute in Orlando, Florida. For the 2019 filing year, nearly 40 percent of UTP submissions were deficient, she added.


IRS ‘Family Glitch’ Fix Expands Obamacare Subsidies for Some - Sara Hansard, Bloomberg ($):

Employees will be able to switch from family health coverage to self-only coverage to take advantage of new “family glitch” rules under a notice issued Thursday by the IRS.

The notice (Notice 2022-41) pertains to tax code Section 125 cafeteria plans under which participants can choose benefits such as health plans or cash. The guidance is effective for changes on or after Jan. 1, 2023. The Department of the Treasury and the IRS plan to change the income tax regulations to be consistent with the provisions in the notice, it said.


Conservation Tax Notice Ruling Likely to Hit IRS Data Collection - Aysha Bagchi, Bloomberg ($):

The IRS’s data collection and enforcement will likely be hobbled by a US Tax Court ruling that blocked the agency from imposing certain penalties for understating taxes tied to a conservation tax arrangement.

The Tax Court concluded on Wednesday that penalties against Green Valley Investors LLC and three other companies for understating taxes related to an IRS reportable transaction weren’t appropriate because the agency didn’t properly create the reporting requirement. The IRS should have gone through the Administrative Procedure Act process of giving notice and responding to public comments on the IRS Notice 2017-10 requirement, the court held.


New Guidance Project on Basis Adjustments Spurs Speculation – Kristen Parillo, Tax Notes ($). “A new item on the Treasury-IRS priority guidance plan regarding the abusive use of partnerships for inappropriate basis adjustments has left some practitioners wondering what form the guidance will take and what it will address.”


IRS Announces New Amounts for Energy Production Credit – Tax Notes ($). “The IRS has announced (Announcement 2022-23) new renewable electricity production credit amounts under section 45 to reflect changes implemented by the Inflation Reduction Act of 2022 (IRA, P.L. 117-169) in how the credits are calculated for qualified facilities placed in service after December 31, 2021.”


Stimulus checks and other payments: IRS sending letters to millions as deadline looms - Jeremy Tanner and Nexstar Media Wire, The Hill:

If you receive a letter from the Internal Revenue Service don’t panic, it could mean there is money waiting to be claimed.

The IRS announced in mid-October that it is trying to contact over 9 million people who are still owed stimulus payments, the Earned Income Tax Credit, or the Child Tax Credit.


Tax writers returning to pileup of unfinished business - Laura Weiss, CQ ($):

Talks on a potential year-end tax package are expected to ramp up as lawmakers return to Washington next week.

It’s not yet clear where the midterm election results will leave lawmakers’ appetite for a deal. But top tax writers have consistently shown interest in clearing the table of outstanding issues that have lingered for months.

Possible tax bills in the lame duck:

Most likely: A Retirement bill that could be added to legislation that funds the federal government beyond December 16th, or possibly a stand-alone bill.

Less likely: A year-end tax bill that would include a provision allowing R&D costs to be expensed and, possibly, modifications to the Child Tax Credit. D.C. folks closely monitoring the fate of a year-end tax bill say it would be hard to pass if there is any modification to the Child Tax Credit. The reason is because passage would require the support of at least ten Senate Republicans and there doesn't seem to be that many of them who would back modifying the Child Tax Credit. Also, if modifications for the Child Tax Credit are absent from the bill, then support from Democrats takes a hit. 


Landmark Retirement Bills See Opportunity in Lame-Duck Congress - Austin Ramsey, Bloomberg ($):

Workplace retirement policy will be on the minds of lawmakers returning to Capitol Hill next week, as a deadline to pass major retirement access and administrative relief legislation looms.

At least three different bills introduced this legislative session form the rough outline of a package dubbed ‘SECURE Act 2.0’ that congressional staffers are trying to consolidate and attach to a government spending bill expected to be voted on in December.

As stated above, retirement legislation could be added to the bill that would fund the federal government beyond December 16th, but nothing is set in stone just yet. 


Difficult Trade-Offs Make Policy Consensus on Child Tax Credit Elusive – Garrett Watson and Alex Durante, Tax Foundation:

As we near this year’s 'lame duck' session of Congress, there has been renewed interest in child tax credit reform as part of a broader tax deal. One year after the expanded child tax credit originally enacted as part of the American Rescue Plan expired, policymakers are no closer to a consensus on where the child tax credit should go moving forward.

Bottom line: It’s expensive to expand and/or extend the Child Tax Credit. Some members of Congress will never agree to modifying the provision because they say it would exacerbate inflation. Plus, they hate kids (just kidding).


Biden touts Democratic wins, talks of compromise with GOP – Daniela Altimari and Niels Lesniewski, Roll Call. "[President] Biden said he is open to working with Republicans, including California Rep. Kevin McCarthy, the likely speaker of the House in a GOP majority, though he said he had not dealt with him much and might be meeting with him later Wednesday."

‘I think there is growing pressure on the part of the American people, expecting both parties and all elements of both parties to work out their substantive differences,’ he said. ‘And not just 'I'm not going to do that because it would benefit that party.'’

Further down the article:

The president noted that he retains the veto pen to stop efforts by Republicans in Congress to overturn parts of his agenda that are already law, including climate and infrastructure investments.

Important to note: Biden didn’t say he would veto legislation enacted under his predecessor, who signed into law the 2017 tax reform bill. There is expected to be an effort in the next Congress to extend these measures beyond their current expiration dates.  


House panel urges Supreme Court to allow access to Trump returns – Michael Macagnone, Roll Call:

The Supreme Court should not keep former President Donald Trump’s tax returns from Ways and Means Chairman Richard E. Neal, House attorneys told the justices in a filing Thursday.

The House urged the justices to reject Trump’s emergency request to pause lower court rulings that would allow the Massachusetts Democrat who leads the tax-writing committee to access personal tax records of the former president and several of his businesses.


Federal Judge in Texas Strikes Down Biden Student-Loan Forgiveness Program – Gabriel Rubin and Andrew Restuccia, Wall Street Journal ($). “A federal judge in Texas on Thursday struck down the Biden administration’s student-debt forgiveness plan, imperiling a key administration priority that would have canceled up to $20,000 in student loans for tens of millions of borrowers.”


State Voters Mostly Want Fewer, But More Equitable Taxes - Donna Borak, Bloomberg ($):

Diverse tax moods spanned the country. In California, voters turned down a tax on millionaires to raise money for the transition to electric vehicles, while those in Massachusetts endorsed a surcharge on roughly 21,000 taxpayers earning more than $1 million. Colorado voters overwhelmingly went for reducing the state income tax rate, again, but also favored raising taxes on high incomes to pay for school meals. In Arizona, votes are still being counted on whether to make tax increases tougher by requiring supermajority voter support instead of a simple majority.


Connecticut Expects $571 Million More Revenue This Fiscal Year - Martin Braun, Bloomberg ($). “Connecticut expects to collect $571 million more general fund revenue in the current fiscal as sales and investment income tax collections improve, according to estimates by the legislature’s Office of Fiscal Analysis.”


Mo. Voters OK Legalizing, Taxing Cannabis – Michael Nunes, Law360 Tax Authority ($). “Missouri voters passed a ballot measure to amend the state's constitution to legalize the retail sale of cannabis and levy a 6% tax on recreational sales.”


Global Tax Deal Keeps Status Quo Post-Midterm Elections - Isabel Gottlieb, Bloomberg ($):

US implementation of a 2021 deal to overhaul global tax rules may not make fast progress after the midterm elections, regardless of which party controls Congress.

A GOP-led House is likely to spend more time challenging Treasury Secretary Janet Yellen on how the deal came together and its economic impact while Democrats may lack momentum to move parts of the deal.


From the 'I thought the election was over' file: 

The path to 218: Why Democrats aren’t out of the race for the House yet – Stephen Shepard, Politico:

Republicans still have a wider path to the House majority than Democrats — but it’s narrowed a lot over the past 24 hours.

As the vote count continues, particularly in mail-heavy Western states, Democrats continue to win most of the contested races, keeping them in the hunt and meaning news organizations won’t declare a winner in the overall fight for the chamber.

Control of the Senate is also a question mark. 

Lawmakers are expected to do little until election results are known: 

Congress paralyzed by unresolved midterm races – Burgess Everett and Sarah Ferris, Politico:

Welcome to government in limbo.

Control of both chambers of Congress is uncalled, and House Democrats’ long-simmering leadership reckoning is temporarily on hold. Two pivotal Senate races are being tabulated with molasses-like speed. If Democrats don’t win both of them, another Georgia runoff in December could determine control of the chamber

And Congress is returning to Washington next week for high-stakes post-election legislating, with the unpredictability affecting plans for what could be a stressful session regardless of the midterm outcome.

Moving legislation could wait until it is known who will control the next Congress, which begins in January. Run-off elections are scheduled for early December, which means lawmakers could have very little time to pass legislation before the new Congress begins.


Salute! It’s Veterans Day! Buy a military member ice cream today because it is also National Sundae Day!

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