Tax News & Views Comments Welcomed Roundup

May 8, 2023

IRS Welcomes Feedback on $80 Billion Plan, Official Says - Naomi Jagoda, Bloomberg ($):

The IRS welcomes feedback from practitioners on its plan for spending its $80 billion in multiyear funds, an agency official said Friday at a conference hosted by the American Bar Association’s tax section in Washington.

Bridget Roberts, acting transformation and strategy officer in the IRS Transformation and Strategy Office, said practitioners should tell the IRS ‘where we missed the mark, or if there’s something that we didn’t consider,’ and also should inform the agency about groups it should conduct outreach to so they have a good understanding of the plan.


IRS Working on Plans to Restart Collection Notices - Naomi Jagoda, Bloomberg ($). “The IRS is engaging in planning to restart the issuance of routine collections notices, an IRS official said Friday at a conference hosted by the American Bar Association’s tax section in Washington.”


IRS Prioritizing SECURE 2.0 Benefit Plan Correction Guidance - Austin Ramsey, Bloomberg ($):

The IRS is rushing to issue immediate guidance on the effective date of SECURE 2.0 Act (Pub. L. No. 117-328) provisions expanding the agency’s employee benefit plan self-correction program.

Regulators are prioritizing Employee Plans Compliance Resolution System guidance over a ‘grab-bag’ notice the agency has said it intends to issue clarifying other imminently effective provisions under the new law, IRS officials said Friday at the American Bar Association May Tax Meeting in Washington.

IRS to Begin Accepting Electronic Submissions of Form 5307, 5316 Applications – Bloomberg ($). “The IRS will accept electronic submissions of Form 5307 and Form 5316 applications for determination letters at beginning June 1, 2023, the agency said Friday.”


IRS Plans to Update Partnership Schedule K-1 Form in Fall 2023 - Erin Slowey, Bloomberg ($). “The Schedule K-1 Form 1065 update will break out a portion of the Section 752 liability allocated by reason of the payment obligations that a partner may have from either a deficit restoration obligation or from a guarantee, said Adrienne Mikolashek, attorney in the IRS Office of Chief Counsel, at the American Bar Association May Tax Meeting in Washington.”

‘The idea here is to not only get better information reporting from the IRS’s perspective but also to do partners a service so that they are fully aware of those obligations,’ said Mikolashek.

GAO Expects To Issue New Large Partnership Audit Report – David van den Berg, Law360 Tax Authority ($):

James R. McTigue Jr., the GAO's director for strategic issues, tax policy and administration, told Law360 that the GAO will issue a report "later this summer" on new large partnership audit procedures the IRS is putting in place because of the Bipartisan Budget Act of 2015. He spoke after a panel at the American Bar Association tax section's May meeting in Washington, D.C.

‘Our work builds on work that we did in 2014 on large partnership audits,’ McTigue said.


Treasury Mulls Guidance on R&D Amortization for Long-Term Contracts - Lauren Vella, Bloomberg ($):

The Treasury and IRS are considering guidance on the amortization of research and development costs in a long-term contract, a Treasury official said Friday.

Following a panel at the American Bar Association May Tax Meeting in Washington, Timothy Powell, tax policy adviser at Treasury confirmed to Bloomberg Tax that the department is considering guidance on the interaction of Sections 174 and 460, following a tax year in which businesses are required to amortize their R&D costs.

Disposition of Property is a Priority for R&D Guidance, Officials Say - Lauren Vella, Bloomberg ($):

Deena Devereux, branch chief of the IRS’s Branch 7 (IT&A), and Timothy Powell, tax policy adviser at the Treasury Department, confirmed to Bloomberg Tax following a panel Friday at the American Bar Association May Tax Meeting in Washington that the treatment of property under tax code Section 174(d) is one of the priorities they would like to address in forthcoming guidance.

Research Amortization Dispositions Raise Unprecedented Issues – Nathan Richman, Tax Notes ($):

Timothy Powell of the Treasury Office of Tax Legislative Counsel said the effects of section 174(d) are some of the major issues the IRS and Treasury are considering while working on substantive guidance for the provision that took effect for tax years beginning after December 31, 2021.

Speaking with Powell at the May 5 American Bar Association Section of Taxation meeting, Deena Devereux of the IRS Office of Associate Chief Counsel (Income Tax and Accounting) noted that unlike some other questions raised by the changes to section 174, there has never been guidance on the question of how amortization continues after disposition of the underlying section 174 asset. She suggested that the next batch of section 174 guidance might not address all issues, in the name of making an earlier release, with something more complete to follow.


IRS’s Werfel Open to Exploring Voluntary Compliance Initiatives - Naomi Jagoda, Bloomberg ($). IRS Commissioner Danny “Werfel told reporters following his remarks that he’s open to the IRS using a variety of strategies as it works to close the ‘tax gap’ between taxes owed and taxes paid. Looking at ways to bring taxpayers into compliance would be done along with the agency’s broader enforcement strategy, he added."

‘There may be opportunities for us to explore agreements, safe harbors, voluntary compliance initiatives,’ he said. ‘My point is that I’m absolutely open to those types of discussions.’

Sharp Use Of IRS Service Funds Could Yield More, Chief Says – David van den Berg, Law360 Tax Authority ($):

If the agency demonstrates that it can use the taxpayer service money effectively, it will be better positioned to ask Congress for more in later years, Internal Revenue Commissioner Daniel Werfel said during a panel session at the American Bar Association tax section's May meeting in Washington, D.C. He said his intent is that the agency will do its best with the funding Congress enacted.

The Inflation Reduction Act provided over $45 billion to the IRS to enhance enforcement, and $3.8 billion for taxpayer services.


Treasury to Clarify in Guidance Who Can Use Direct Pay for Energy Credits – Erin Slowey, Bloomberg ($):

Treasury and the IRS will clarify if an instrumentality of the state can monetize its clean energy tax credits through direct pay in guidance this spring, an official said Friday.

The tax-and-climate law offers a way for these tax-exempt entities, which often don’t have the tax liability to use the incentives, to monetize the credits through a process known as direct pay or when the credits can be treated as refundable payments.


Advanced Energy Tax Credit’s Next Allocation Round Planned for 2024 - Erin Slowey, Bloomberg ($). “The tax-and-climate law expanded the tax credit program under Section 48C to include up to a 30% tax credit to taxpayers for various types of clean energy projects.”

Further down the article:

‘Our goal is to finish the first allocation round, give taxpayers time to figure out whether they were successful,’ said Jennifer Bernardini, an attorney-adviser with the Office of Tax Policy at Treasury, at the American Bar Association May Tax Meeting in Washington. If a taxpayer wasn’t able to get an allocation then, they would be able to join the second round, she added.


New York Republican Seeks to Hike SALT Cap Amid Debt Limit Talks - Samantha Handler, Bloomberg ($):

A New York Republican is pitching legislation to hike the state and local tax deduction, the latest in the GOP from a high-tax blue state to do so.

Rep. Nick LaLota (R-N.Y.) will introduce the SALT Fairness and Deduction Act, which would hike the current $10,000 cap to $60,000 for single filers and $120,000 for joint-filers in the coming days. LaLota would like to see a tweak to the limitation included in ongoing debt limit negotiations, according to his office.

The SALT cap is unlikely to be increased in a debt ceiling bill this year because doing so would worsen the debt situation.

Rumor has it that after the current SALT cap expires (in 2025), it could be increased to at least $20,000 for joint filers. Setting the cap at $20,000 would be a revenue raiser for the federal government because it would bring in more money than if the cap was unlimited, which is what current law is in 2026.  


State Sales Tax Thresholds Post-Wayfair Still Far From Settled – Paul Williams, Law360 Tax Authority ($):

The thresholds that many states rushed to enact in the wake of the 2018 South Dakota v. Wayfair ruling, which allowed states to compel out-of-state companies to collect and remit sales and use taxes, were later adjusted amid compliance worries from the business community and state officials determining what nexus parameters worked best. Recently, while opting to keep a monetary threshold, states are trending toward dropping a transaction threshold amid concerns that it is sweeping up too many small businesses with low-cost sales.


Utah Legislature Can Limit State’s Residential Tax Exemptions - Shweta Watwe, Bloomberg ($):

Durbano Properties LC, which owns a rental property in Washington County, argued the primary residence limitation violates the constitution because ‘the legislature has exempted some but not all property used for residential purposes,’ according to the opinion.

Rejecting that assertion, Justice Diana Hagen wrote that Durbano’s argument ‘presupposes’ that residential property means all property used for residential purposes and ‘constrains the legislature’s ability to define the term by statute.’


Minnesota’s Global Tax Grab (Opinion) – Editorial Board, Wall Street Journal ($):

Minnesota progressives now run all of state government, and the new majority is doing what comes natural: raise taxes, and more taxes. Their misguided plan for a worldwide tax on business earnings in particular may spawn imitators if it passes in the once business-friendly state.

The tax change is part of an omnibus spending bill that Democrats hope to enact by May 22. It would extend Minnesota’s corporate income tax to profits that businesses earn overseas. Any company that owes taxes in the state would be required to report international earnings on top of its domestic taxable income. The state would then apply its 9.8% corporate income-tax rate to a combined income figure based on the company’s entire global profit.


IRS Won’t Use Global Minimum Tax Rules If US Rules Differ - Michael Rapoport, Bloomberg ($):

While the IRS is aware of the rules governing Pillar Two—the portion of the OECD global agreement that sets a 15% global minimum tax—'at the same time, Pillar Two isn’t the law' in the US, said John Lovelace, an attorney in the IRS Office of Chief Counsel.

As the IRS moves to implement and clarify the US’s own 15% corporate alternative minimum tax, 'I don’t think we’re going to lean heavily on the Pillar Two rules and implement the Pillar Two rules when they conflict with the law,' said Lovelace, speaking at the American Bar Association’s May Tax Meeting in Washington.


From the “I guess they’re getting rid of COBOL” file:

IRS Building Centralized Data Platform, Official Says – David van den Berg, Law360 Tax Authority ($):

The Internal Revenue Service is working on developing an enterprise data platform to house data from the agency's dozens of systems in one place, the acting head of the IRS Transformation and Strategy Office said Friday.

The way the agency's systems are currently structured, there is no central platform, and data lives in "dozens of systems across the agency," Bridget Roberts said during a panel session at the American Bar Association tax section's May meeting in Washington, D.C.

Quick catch-up on COBOL:

[S]everal agencies, including the IRS, continue to use technology that was developed almost 50 years ago and was considered obsolete decades ago…

The government continues to use COBOL even though they are struggling to find employees that have expertise with the technology. This shortage of expertise not be surprising – according to the PPI report, COBOL is 43rd most popular programming language and the average age of a COBOL programmer is 55-years-old.

This piece was written in 2020, so the average age is now approaching 60.


It’s National Have a Coke Day! What about Pepsi or 7Up, or even bourbon? Have it your way!

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