Tax News & Views Are you playing the Powerball? Roundup

July 14, 2023

IRS Would Get Billions of Dollars, But a Long To-Do List - Doug Sword, TaxNotes($):

The IRS will have to do a lot of singing for its supper as Senate and House appropriators included nearly two dozen “recommendations” — actually closer to commands — to go along with the agency’s annual spending allocation.

House appropriators want a report and an update inside of 180 days on how the agency’s move to commercial cloud services is going, and a report by September 30 on how it has reduced processing backlogs, along with a five-year backlog reduction plan. The House Appropriations Committee advanced a spending bill July 13 that includes an $11.2 billion budget for the agency.

Senate Proposes Flat IRS Budget; House Wants 9 Percent Cut - Doug Sword, TaxNote($): "Senate appropriators countered the House’s proposed 9 percent cut to IRS funding with a bill that would set the agency’s budget at $12.3 billion for fiscal 2024, the same as it is in this fiscal year."

Lawmakers Line Up Funding for IRS Data Security Plan - Jonathan Curry, TaxNotes($):

The House subcommittee responsible for the IRS’s budget released its proposed version of the agency’s fiscal 2024 budget July 13. Buried within it is a recommendation that the IRS be given $150 million for its cybersecurity enhancement account specifically to implement zero trust architecture (ZTA) and other cybersecurity enhancements.

ZTA, an approach to enterprise wide data security that is premised on the concept that trust should never be the default but rather needs to be continually evaluated, happened to be the subject of a TIGTA report that was also released July 13. According to the inspector general, the IRS developed a ZTA plan in response to a 2021 executive order, but it had fallen short in a few areas during the implementation phase.

House Panel Clears Bill To Cut IRS Funding To $11.2B - Stephen K. Cooper, Law360($):

The committee voted 34-26 to clear the fiscal 2024 general government and financial services appropriations bill for consideration by the full House of Representatives. The IRS would receive $11.2 billion for fiscal 2024 under the bill, marking a $1.1 billion cut compared with the fiscal year 2023 enacted level. The bill would provide $4.2 billion in enforcement funding — a $1.2 billion cut compared with the current fiscal year funding.

IRS says it collected $38 million from more than 175 high-income tax delinquents - The Hill, Fatima Hussein, AP:

The IRS is showcasing its new capability to aggressively audit high-income tax dodgers as it makes the case for sustained funding and tries to avert budget cuts sought by Republicans who want to gut the agency.

IRS leaders said they collected $38 million in delinquent taxes from more than 175 high-income taxpayers in the past few months.

Justices' Repatriation Tax Review Could Destabilize US Code - Dylan Moroses, Law360($). "A favorable ruling for Charles and Kathleen Moore, who are challenging the transition tax on deferred earnings held abroad under Internal Revenue Code Section 965 , could implicate many other aspects of U.S. tax laws, particularly the taxation of corporations, sophisticated investments and partnerships, tax practitioners said."

Disallowed Captive Insurance Wipes Out Qualified Business Income - Erin McManus, TaxNotes($):

The businesses are challenging the IRS’s final partnership administrative adjustments disallowing deductions for insurance premiums and claimed QBI in a petition filed June 22 with the Tax Court in Dayka & Hackett LLC v. Commissioner.
The IRS disallowed $966,679 of Dayka & Hackett’s claimed $1.4 million insurance expense deduction for 2018. The agency said premium payments made to entities it didn’t recognize as insurance companies under the tax code lacked economic substance.

Government to Appeal Tax Court’s Farhy Decision - Andrew Velarde, TaxNotes($):

The Tax Court held that the IRS could not assess penalties under section 6038(b) against a taxpayer for his failure to file Forms 5471, "Information Return of U.S. Persons With Respect to Certain Foreign Corporations." Unlike other tax code provisions, Congress had not explicitly authorized assessment for those penalties, the Tax Court reasoned.
A petition filed June 12 by the estate of Barbara Rosenthal disputes the IRS’s determination that her estate is a potential beneficiary of $11.7 million from the estate of her brother, Michael Bakwin, in Estate of Rosenthal v. Commissioner.

Rosenthal wasn’t named in Bakwin’s will and died only four months after her brother’s death. Her estate wouldn’t have been pulled into his estate’s issues but for a no-contest clause in his will.

IRS: Vermont flooding victims now eligible for tax relief; Oct. 16 deadline, other dates extended to Nov. 15. "Flooding victims anywhere in Vermont now have until Nov. 15, 2023, to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today."

McCormick Says Michigan Wrongly Assessed Income Tax - Jaqueline McCool, Law360($):

The company said that at the time of the assessments it had no tax presence in the state. Its offices were headquartered in Maryland, but it had a few employees in Michigan who worked from home and only solicited customers in the state. According to the federal tax code, income tax can't be derived if the only business activity in the state is the solicitation of orders. Therefore, McCormick argued, the Michigan employees fell within the exempted group.

Be sure to contact us if you happen to win the Powerball this weekend. As you have heard, chances are slim... this Time's article is a little dated, but explains the odds of some crazy things that are more likely to happen than winning the Powerball. Good luck if you play!

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