IRS Chief Counsel William J. Wilkins called the fate of the tax extenders critical for tax administration after 2012. Many popular but temporary tax incentives expired at the end of 2011 and it is unclear if they will be renewed. Wilkins, who spoke at the Tax Executives Institute, Inc. (TEI) 62nd Mid-Year Conference in Washington, D.C., on March 27, also said it is premature to predict when the Service may finalize guidance on capitalization of costs relating to tangible property.
“Tax extenders” is the collective name for a large number of temporary incentives. The extenders include the state and local sales tax deduction, the higher education tuition deduction, the research tax credit, special expensing rules for film and production costs, transit benefits parity and many more.
“Certainty on these provisions will be critical for the 2013 filing season,” Wilkins said. In past years, Congress has extended the incentives at the eleventh-hour. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (P.L. 111-312) extended many of the temporary incentives through 2011.
Since January, lawmakers have tried several times to attach some or all of the extenders to other bills but have failed. A package of energy extenders was unsuccessfully proposed as an amendment to the Senate’s Moving Ahead for Progress in the 21st Century Bill (Sen 1813). House Ways and Means Committee Chairman Dave Camp, R-Mich., recently said that the committee will begin reviewing the extenders after Congress’s April recess.
“It is difficult for taxpayers when the extenders are in limbo,” Dustin Stamper, manager, Washington National Tax Office, Grant Thornton, LLP, told CCH. “The legislative uncertainty undermines the effectiveness of provisions, such as the research credit, because businesses can never be certain whether it will be extended retroactively or not.”
The IRS issued much-anticipated guidance on the capitalization of costs relating to tangible property in late 2011 (IR-2011-126; T.D. 9564; NPRM REG-168745-03; TAXDAY, 2011/12/28, I.1). Wilkins said that it is too early to predict when the IRS will finalize the guidance. Wilkins noted that some areas may need “tweaking” but he did not elaborate on which ones.
“Word has spread quickly around the globe that U.S. taxpayers must meet their obligations,” Wilkins said. The Service’s voluntary programs have contributed to greater awareness about compliance. Wilkins noted that the Service reopened the 2011 offshore program earlier in 2012 (IR-2012-5; TAXDAY, 2012/01/10, I.1). The voluntary offshore disclosure program offers taxpayers a reduced penalty framework in exchange for full disclosure of unreported foreign accounts.
In other news, Wilkins said that the IRS is on track to complete more guidance projects than in recent years. The IRS recently requested comments about the upcoming guidance plan (Notice 2012-25; TAXDAY, 2012/03/09, I.2).
The guidance plan, however, is not always a predictor of where guidance will go because of intervening events, he said. Wilkins recalled that significant legislation in 2010, such as Patient Protection and Affordable Care Act (P.L. 111-148) and the Foreign Account Tax Compliance Act (as enacted in the Hiring Incentives to Restore Employment (HIRE) Act of 2010 (P.L. 111-147)), resulted in the IRS having to shift resources that year. Future legislation could impact the 2012-2013 guidance plan in ways unknown at this time, he noted.
Wilkins predicted that the IRS return preparer oversight initiative, which has imposed new educational and training requirements on unenrolled preparers, will bring about systemic change to return preparation. “It is not hard to envision contact with a few thousand preparers leading to quality improvements in millions of returns.”
By George L. Yaksick, Jr., CCH News Staff