With Congress scheduled to return from a two-week recess during the week of April 16, President Obama is urging lawmakers to approve the “Buffett Rule,” legislation that would impose a minimum 30-percent tax rate on the adjusted gross incomes of households earning more than $1 million annually. The IRS released a slew of guidance on April 13 addressing Form 990, Return of Organization Exempt from Income Tax, filers, the deferral of losses on the sale or exchange of property between members of a controlled group, the allocation of earnings and profits in tax-free transfers from one corporation to another, the federal tax consequences of an ordering provision in a trust, a will, or a provision of local law that attempts to determine the tax character of the amounts paid to a charitable beneficiary of the trust or estate and transfers of like-kind property or involuntary conversions between a C corporation and a regulated investment company (RIC) or a real estate investment trust (REIT).
President Obama on April 11 took the second opportunity in two days to press for congressional approval of the so-called “Buffett Rule” (TAXDAY, 2012/04/12, W.1). Named after the billionaire investor, the legislation (Paying a Fair Share Bill of 2012 (Sen 2230)) would impose a minimum 30-percent tax rate on the adjusted gross incomes of households earning more than $1 million annually. On April 10, the president laid out his case during a speaking engagement at Florida Atlantic University, telling the audience that Americans have to decide whether they want to continue with the present system that gives tax breaks to those who do not need them, or whether to make changes. Republicans in both the House and Senate dismissed the “Buffett Rule” as a campaign ploy that would do little to create fairness in the tax system. Sen 2230, sponsored by Sen. Sheldon Whitehouse, D-R.I., is scheduled for a vote in the Senate when Congress returns from recess on April 16.
The Treasury Inspector General for Tax Administration issued reports during the week of April 9 with the following findings:
The IRS is taking longer to respond to offers in compromise (OICs) due to a substantial increase in the number of offers submitted by taxpayers (TAXDAY, 2012/04/13, T.1). TIGTA had audited the OIC process to assess the effectiveness of the OIC Program to timely process requests, consistently apply OIC guidelines, accurately measure results of the program and effectively promote the program.
The IRS may not be recognizing and properly investigating fraud indicators during field audits of individual tax returns (TAXDAY, 2012/04/11, T.1). TIGTA conducted a review of 116 examinations in which unreported income or overstated expenses resulted in taxpayers agreeing that they owed at least $10,000 of additional taxes.
Form 990. The IRS issued an announcement to filers of Form 990, Return of Organization Exempt from Income Tax, and the short version, Form 990-EZ (Announcement 2012-19; TAXDAY, 2012/04/16, I.7). The announcement stated that, with exceptions, it is now optional for the 2011 tax year for filers to report their interests in the income, expenses, and assets of joint ventures and other partnerships in which they have an ownership interest using information from Form 1065, U.S. Return of Partnership Income, Schedule K-1.
Deferral Loss Regulations. The IRS issued final regulations concerning the deferral of losses on the sale or exchange of property between members of a controlled group (T.D. 9583; TAXDAY, 2012/04/16, I.5). The regulations provide that stock issued to a member of the controlled group by a target corporation should be taken into account in determining whether a loss would be treated as a noncapital, nondeductible amount if the rules of Reg. §1.1502-13 applied.
Code Sec. 312 Proposed Regulations. The IRS issued proposed regulations to clarify the regulations under Code Sec. 312 regarding the allocation of earnings and profits in tax-free transfers from one corporation to another (NPRM REG-141268-11; TAXDAY, 2012/04/16, I.4). The proposed regulations affect corporations involved in these transfers and their shareholders.
Estate/Trust Payment Regulations. The IRS issued final regulations under Code Sec. 642(c) on the federal tax consequences of an ordering provision in a trust, a will, or a provision of local law that attempts to determine the tax character of the amounts paid to a charitable beneficiary of the trust or estate (T.D. 9582; TAXDAY, 2012/04/16, I.3).
RIC/REIT Property Transfer Proposed Regulations. The IRS issued proposed regulations that would amend existing regulations under Code Sec. 337(d) concerning transfers of like-kind property or involuntary conversions between a C corporation and an RIC or REIT (NPRM REG-139991-08; TAXDAY, 2012/04/16, I.1).
U.S.-Germany. The Competent Authorities of Germany and the United States entered into an agreement regarding the eligibility of certain pension arrangements for benefits (TAXDAY, 2012/04/13, I.1). The agreement clarifies the treatment of a contractual trust arrangement (CTA) established by an employer to hold assets set aside to fund the employer’s simple employer-sponsored pension plan (SESP) and the term “pension fund.”
Health Insurance Fee Guidance. The IRS issued proposed regulations implementing and providing guidance on the fees imposed by the Patient Protection and Affordable Care Act (P.L. 111-148) on issuers of certain health insurance policies and plan sponsors of certain self-insured health plans to fund the Patient-Centered Outcomes Research Trust Fund (NPRM REG-136008-11; TAXDAY, 2012/04/13, I.2).
IRS Information Letters. The IRS released several information letters (INFO 2012-0001 through 2012-0022; TAXDAY, 2012/04/13, I.3, I.4, I.5, I.6; TAXDAY, 2012/04/12, I.2) for the benefit of taxpayers that stated general information on issues including employer identification numbers for church organizations; eligibility for a deduction for energy-efficient lighting property costs; the expired tax credit for purchases of hybrid cars; the tax consequences of transfers of savings bonds held by a married couple; and a request to increase the standard mileage rate.
College-Related Tax Benefits. The IRS reminded taxpayers of several college-related tax benefits, including the American Opportunity Tax Credit (AOTC), Lifetime Learning Credit, the deduction for tuition and fees, and the deduction for students and former students making student loan payments (IR-2012-46; TAXDAY, 2012/04/12, I.1).
IRS Oversight Board. The IRS Oversight Board recommended an IRS fiscal year (FY) 2013 budget of $13.03 billion (TAXDAY, 2012/04/12, I.3). This represents a $1.22-billion increase over the IRS’s FY 2012 budget of $11.81 billion, and a $273-million increase over President Obama’s recommended FY 2013 budget of $12.76 billion.
Filing Extension. The IRS reminded individuals unable to meet the April 17 tax deadline to apply for an extension online or to request an automatic extension using Form 4868 (IR-2012-45; TAXDAY, 2012/04/11, I.1). All taxpayers may use the Free File link at www.irs.gov to electronically request an automatic extension.
Renewable Electricity Credit/Inflation Adjustment. The IRS published the inflation adjustment factors and reference prices to be used in computing the renewable electricity production credit for calendar year 2012 (TAXDAY, 2012/04/11, I.2).
Acquiescence. The IRS recommended acquiescence in the result only in A. Baer Revocable Trust, DC Neb.,2010-1 USTC ¶60,590 (AOD-2012-1; TAXDAY, 2012/04/11, I.3). In that case, the court held that the decedent’s estate was entitled to a refund of the estate tax deficiency assessed against the value of certain contingent bequests.
Twitter Tax Tips. The IRS reminded taxpayers that they can obtain valuable last-minute tips by following the IRS on Twitter (IR-2012-43; TAXDAY, 2012/04/09, I.3). IRS tweets cover tax tips, tax law changes, IRS e-file, getting a filing extension, and the online “Where’s My Refund?” tool.
By Jeff Carlson and Jennifer J. Rodibaugh, CCH News Staff