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Tax News & Views Maddening Leaks Roundup

Jay Heflin
April 29, 2024
Angry Phone

Key Takeaways

  • Data leaks from IRS infuriate Taxpayers.
  • But Free-File went well.
  • Following the wrong law.
  • Exemption Status Could be on the Line.
  • Court updates.
  • Pushing Trade Leader on Tax Adjustments.
  • Lobby-Shop Gold.
  • Smell the Peace Rose.

IRS Leak Leaves Rich Taxpayers Frustrated With Few Legal Options - Erin Schilling, Bloomberg ($):

Wealthy taxpayers who learned in recent weeks that their data was stolen in a widespread breach years ago are hesitating to sue the IRS because the damages they’d get in a win are so small. 

The IRS sent letters to wealthy taxpayers this month informing them that they were affected by a theft of tax information carried out by a former agency contractor who also took the returns of former President Donald Trump and many high-profile billionaires.

While not wealthy, yours truly had my tax information stolen from the IRS roughly ten years ago. My information remains on the Dark Web and I continue to get harassing phone calls saying that “officials” will come to my house and arrest me if I don’t pay up.  I wasn’t given the option to sue the IRS.

While the [IRS] letters give taxpayers options to sue, the fact that taxpayers at most can win $1,000 per instance of unauthorized inspection or disclosure plus possible punitive damages and legal fees makes litigation seem like it’s not worth the trouble, lawyers said. Taxpayers also need to figure out exactly what data was taken before they can act.

 

IRS To Decide Soon On Renewal Of E-File Pilot Program – David van den Berg, Law360 Tax Authority ($):

The Internal Revenue Service expects to decide on the future of its free e-filing pilot program this spring after gathering additional feedback, Commissioner Daniel Werfel said Friday.

The agency will meet with various "partners and stakeholders" in the coming weeks regarding the pilot program, and responses from those talks and project data will help the agency determine the program's future, Werfel told reporters. The agency has been gathering data and user feedback since the pilot began and is studying it, Werfel said.

Direct File pilot officially closes after more than 140,000 taxpayers successfully use direct e-filing system in 12 states, including integration with 4 state tax systems – IRS. “The Internal Revenue Service announced the closure of the Direct File pilot with several hundred thousand taxpayers across 12 states signing up for Direct File accounts, and 140,803 taxpayers filing their federal tax returns using the new service.”

 

The IRS as Legislator: Are Things Working as They Should? – Monte Jackel, Tax Notes ($):

A recent Tax Notes news story highlights an issue becoming more common for taxpayers, their advisers, and the IRS — that is, whether the IRS and Treasury’s statutory interpretation of congressional language allows them to issue administrative guidance that “fixes” an arguable drafting error by Congress in lieu of waiting for a legislative correction... The IRS and Treasury have taken conflicting positions on this issue without any applicable regulatory or other authority to act.

The point: "[I]f Congress makes a drafting mistake that means following the literal words of the statute would produce unintended results, must the statute still be applied exactly as written?"

 

Tax Exempts

Speaker Johnson calls on Columbia University president to resign and threatens federal funding for colleges – Scott Wong, Peter Nicholas and Stephanie Gosk, NBC News:

After a meeting with Columbia University President Minouche Shafik, House Speaker Mike Johnson called on her to resign Wednesday if she can’t tamp down Gaza war protests at the school and threatened federal funding for colleges that don't create safe environments for their Jewish students.

One consequence for not doing as told could be the school losing its tax status.

He then issued this threat to colleges: “If these campuses cannot get control of this problem, they do not deserve taxpayer dollars,” adding that House Republicans will be working on legislation to address the situation.

The effort to restrict or remove the tax exempt status from colleges and universities has been a goal for quite a long time. One could argue that the current tumult is being used as an excuse to revoke the tax policy.

 

Court Side

IRS Sees Flaws in Asset Values of Skin Care Inventor’s Estate – Erin McManus, Tax Notes ($):

The IRS keeps finding more dark spots in the transactions and assets of the estate of an inventor of an antiaging cream. 

The valuation and ownership of shares in a limited liability company, inventory of the antiaging product, Ethocyn, along with furnishings, motor vehicles, guns, art, and other assets are all being disputed by the IRS in its April 11 answer filed with the Tax Court in Estate of Burnison v. Commissioner.

 

4 More Indicted In Alleged Abusive Trust Tax Scheme – Anna Scott Farrell, Law360 Tax Authority ($). “A federal grand jury in Denver indicted four more people in connection with what prosecutors call a conspiracy to defraud the government in a multistate scheme to promote abusive tax shelters using sham trusts to hide business income and illegally deduct personal expenses such as family weddings.”

 

Abbott Labs' $417M IRS Bill Isn't Wrong, Tax Court Told – David Hansen, Law360 Tax Authority ($):

The Internal Revenue Service denied allegations by Abbott Laboratories that it incorrectly increased the global healthcare giant's income, resulting in a $417 million tax bill, in answering Abbott's lawsuit filed with the U.S. Tax Court.

In a point-by-point response filed Thursday, the agency rejected Abbott's claims that it incorrectly added billions of dollars to Abbott's income by erroneously adjusting stock-based compensation, royalty payments and amortization deductions among other miscellaneous adjustments when computing the company's liability for the 2019 tax year.

 

Ex-Moody's GC Cops To Tax-Filing Fail On $54M Paycheck – Carla Baranauckas, Law360 Tax Authority ($). “The former general counsel for Moody's Corp. has pled guilty to willfully failing to file federal income tax returns for four years in which he collected $54 million in income, federal prosecutors announced Friday.”

 

International Zone

Ways and Means GOP Warn of Tax Implications of USTR Digital Move - Samantha Handler, Bloomberg ($):

Some House Ways and Means Republicans urged Treasury Secretary Janet Yellen to give guidance on the potential tax implications of a US Trade Representative decision from last year, saying it undermines the US’s possible advantage in the global tax deal… 

Feenstra, along with nine other GOP lawmakers, wrote that they are also concerned about the tax policy implications. The policy seems to contradict Treasury’s position in Pillar One negotiations at the Organization for Economic Cooperation and Development, the lawmakers said. The Republicans, too, still have issues with the 2021 global tax deal’s Pillar One, which seeks to reallocate multinationals’ residual income to market jurisdictions.

 

How New Transition Rules Coordinate Foreign Branch Guidance – Carrie Brandon Elliot, Tax Notes ($). “Proposed regs issued November 14, 2023 (REG-132422-17), provide taxpayers with rules that address how to transition from previous section 987 guidance to the new rules for foreign branch gains and losses. The transition rules coordinate application of previous versions of the section 987 regs with the proposed regs’ new rules.”

 

From the “Money Pit” file

Still-Stalled Business Break Tax Bill Helped Drive Lobbying Jump - Chris Cioffi and Samantha Handler, Bloomberg ($):

The House-passed tax bill helped drive millions in spending on federal lobbying in the first quarter of 2024 as businesses sought to advance the now-stalled legislation aimed at restoring expired tax breaks and boosting the child tax credit. 

Filings from heavy hitters like the US Chamber of Commerce and the Business Roundtable showed a boost in spending, including on advocacy for the tax bill. At least 340 companies and groups listed the legislation in their lobbying filings, representing interests ranging from housing and child welfare advocates to universities, county governments, and industry groups.

Money flowed to lobby shops to enact the “Tax Relief for American Families and Workers Act of 2024,” which includes R&D expensing, expanding the 163(j) interest deduction and upping Bonus Depreciation. The bill passed the House but has stalled in the Senate.

Now, lobby shops are turning their focus to the 2025 tax fight, which will be huge. This fight will be about extending provisions in the Tax Cuts and Jobs Act (TCJA) and it could extend into 2026 or even 2027.

Tax staffers also expect any extension of TCJA provisions to be for a single year, meaning lawmakers will bicker about TCJA extensions every-single-year. This means that lobby shops will be lobbying for their clients every-single-year, and clients will be paying them for this service every-single-month. That means fat monthly checks will be flowing to lobby shops for years to come.

Legislation that extends TCJA provisions should be called the “Making Lobby Shops Permanent Act.”

 

What Day Is It

Happy National Peace Rose Day! This flower has an interesting history. National Day Calendar:

French horticulturist Francis Meilland developed the Peace rose between 1935 and 1939. When Meilland foresaw the German invasion of France to protect the new rose, he sent cutting to his friends in Italy, Turkey, Germany, and the United States. It is believed these cuttings were sent to the United States on the last plane available before the German invasion.

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About the Author(s)

Jay Heflin Photo

Jay Heflin

Director of Legislative Affairs
Jay brings more than two decades of experience to his job as Director of Tax Legislative Affairs in Eide Bailly’s Washington D.C. office. Jay provides political intelligence and guidance to the firm on the progress of tax legislation on Capitol Hill. Prior to joining the firm, he was a director at the tax lobbying shop Federal Policy Group, LLC, where he tracked tax legislation in Congress and participated in lobbying efforts to amend tax legislation. Before joining the Federal Policy Group, he was a Congressional reporter for several news organizations where his beat was tax policy.

Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.