With Congress set to return from its summer recess on September 9, lawmakers sought information on the cost of providing premium tax credits to union members who participate in multiemployer health care plans and clarification from the IRS on whether small business owners with partial interests in multiple separate companies should meet the Patient Protection and Affordable Care Act’s (PPACA’s) (P.L. 111-148) mandate for providing insurance. Meanwhile, the IRS released guidance addressing the importation of net built-in losses, research and experimental costs, PPACA information reporting and foreign tax credits.
Two House committee chairmen requested that the Joint Committee on Taxation (JCT) and the Congressional Budget Office (CBO) estimate the cost of providing premium tax credits to union members who participate in multiemployer health care plans (TAXDAY, 2013/09/06, C.1). House Ways and Means Chairman Dave Camp, R-Mich., and House Education and the Workforce Committee Chairman John Kline, R-Minn., said the Obama administration may be crafting lenient regulations for union health plans that would result in higher federal subsidy spending under the PPACA).
The fourth stop on the national tax reform speaking tour for Camp and Senate Finance Committee Chairman Max Baucus, D-Mont., will be the FedEx Express World Hub in Memphis, Tenn. on September 9 (TAXDAY, 2013/09/04, C.1). The lawmakers plan to discuss tax reform at the Sullivan Family Farm in Oakland, Tenn., followed by a meeting with FedEx officials and the company’s small business customers in Memphis.
IRS regulations should clarify whether small business owners with partial interests in multiple separate companies should meet the PPACA’s mandate for providing insurance, according to House Small Business Committee Chairman Sam Graves, R-Mo. (TAXDAY, 2013/09/09, C.1) Graves wrote IRS Principal Deputy Commissioner Daniel Werfel on September 6 asking for clarification of what constitutes a business for purposes of the health care law. The PPACA requires firms employing 50 or more workers to provide insurance, but the law is confusing for small business owners who have small interests in multiple businesses, Graves explained.
Sen. Lamar Alexander, R-Tenn., and Rep. Stephen Fincher, R-Tenn., on September 3 announced their intention to introduce legislation following Congress’s return to session on September 9 requiring the federal government to notify taxpayers whenever the IRS has accessed their tax returns or other information (TAXDAY, 2013/09/05, C.1). The IRS Abuse Protection Bill would require the Treasury Secretary to notify taxpayers, in writing, each time the IRS accesses their tax accounts, tax returns or other tax return information. The notice must include who accessed the information, the purpose for doing so and how the information was accessed. Taxpayers would also receive a copy of the information accessed and any report issued on how it was used.
The Treasury Inspector General for Tax Administration (TIGTA) recommended that the IRS improve its correspondence audit selection process to detect repeated noncompliance by the same taxpayer (Reference Number: 2013-30-077; TAXDAY, 2013/09/06, T.1). TIGTA found that although 40 percent of the taxpayers who agreed to an understatement of least $4,000 in a single-year audit had similar tax issues on prior year and/or subsequent year tax returns, the IRS did not audit prior and/or subsequent year returns for 75 percent of those taxpayers.
Proposed Regulations/Importation of Net Built-In Losses. The IRS has issued proposed regulations under Code Secs. 334(b)(1)(B) and 362(e)(1) that contain guidance on certain nonrecognition transfers of loss property (net built-in losses) to corporations that are subject to federal income tax (NPRM REG-161948-05; TAXDAY, 2013/09/09, I.1). The proposed regulations affect the corporations receiving the loss property.
Proposed Regulations/Research and Experimental Costs. The IRS has proposed regulations to amend the definition of research and experimental procedures under Code Sec. 174 , which sets forth the rules on product research and development expenditures (NPRM REG-124148-05; TAXDAY, 2013/09/06, I.1). Among other things, the proposed regulations provide that if expenditures qualify as research or experimental expenditures, it is irrelevant whether a resulting product is sold or used in the taxpayer’s trade or business.
Final regulations/Dodd Frank. The IRS has issued final regulations that eliminate any reference or required reliance on credit ratings in the Tax Code and substitutes a creditworthiness standard where appropriate (T.D. 9637; TAXDAY, 2013/09/06, I.2). The regulations affect persons subject to various provisions of the tax code and generally adopt the proposed regulations (NPRM REG-118809-11) issued on July 6, 2011, without substantive change.
Interest Rates. The IRS announced that interest rates will remain the same for the calendar quarter beginning October 1, 2013, as they were in the prior quarter (IR-2013-74, Rev. Rul. 2013-16; TAXDAY, 2013/09/06, I.3).
Proposed Regulations/PPACA Information Reporting. The IRS has issued proposed regulations to implement the information reporting requirements for insurers and certain employers under Code Secs. 6055 and 6056 as added by the PPACA (TDNR JL-2157; NPRM REG-132455-11; NPRM REG-136630-12; TAXDAY, 2013/09/06, I.4). The proposed regulations are designed to reduce or streamline information reporting and reflect the IRS’s response to stakeholder comments.
Proposed Regulations/Code Sec. 1092 Straddles. The IRS has issued temporary and proposed regulations relating to the application of the straddle rules to a debt instrument (T.D. 9635; NRPM REG-111753-12; TAXDAY, 2013/09/05, I.1). The regulations clarify that a taxpayer’s obligation under a debt instrument can be a position in personal property that is part of a straddle.
Form 1099-K Transitional Relief. The IRS has provided transitional relief for Code Sec. 6050W filers reporting certain incorrect taxpayer information on Forms 1099-K and payee statements (Notice 2013-56 ; TAXDAY, 2013/09/05, I.2). The relief covers returns and statements required to be filed and furnished in 2013 based on payments made in calendar year 2012.
Final Regulations/Foreign Tax Credit. The IRS has issued final regulations providing guidance relating to the determination of the amount of taxes paid for purposes of the foreign tax credit (T.D. 9634; TAXDAY, 2013/09/04, I.1). These regulations address certain highly structured arrangements that produce inappropriate foreign tax credit results.
Summer Statistics of Income Bulletin. The IRS has released the summer Statistics of Income (SOI) bulletin, which contains articles on the most recent data available from various tax and information returns filed by U.S. taxpayers (IR-2013-73; TAXDAY, 2013/09/04, I.2). This issue features data from Form W-2, Wage and Tax Statement, filed with individual income tax returns for tax years 2008 through 2010, along with articles on topics including 2011 Sole Proprietorship Returns, 2010 Foreign Recipients of U.S. Income and 2010 Foreign-Controlled Domestic Corporations.
Organizations Suggest Changes. Several health-related advocacy organizations have peppered the IRS in recent weeks with recommended changes on eligibility for minimum essential coverage under some government health programs (Notice 2013-41, I.R.B. 2013-29, 60, which they claim would level the playing field for their constituents (TAXDAY, 2013/09/06, M.4). The special interests range from groups advocating for children and pregnant women to those afflicted with kidney disease.
Code Sec. 199 Deduction. The Center for a Responsible Budget (CFRB), a bipartisan, nonprofit organization based in Washington D.C. that educates the public about significant fiscal policy issues, on September 3 released information exploring the options for reforming the Code Sec. 199 deduction (TAXDAY, 2013/09/05, M.4). With Congress considering ways to raise revenue through tax reform and the possible elimination of costly tax expenditures, or business tax deductions, one possibility is reforming Code Sec. 199 , the domestic production activities deduction, which is the second largest domestic corporate tax break. The popular business incentive will cost the federal government $14 billion of foregone revenue in 2013, or approximately $175 billion over the next 10 years according to the JCT. The CFRB examined a complete repeal, which would provide $190 billion over 10 years or enough revenue to finance a 1.5-percentage point cut in the corporate tax rate, repeal only for C corporations, since pass-through entities would not benefit from a corporate rate reduction, and reducing the size of the deduction by limiting it to the 2004 level of 3 percent, or the 2007 level of 6 percent.
G20 Meeting. The Organisation for Economic Co-operation and Development (OECD) Secretary-General Angel Gurría on September 5 presented to G20 leaders gathering in St. Petersburg, Russia, its proposals to tackle tax evasion and avoidance by both companies and individuals (TAXDAY, 2013/09/06, M.3). The G20 leaders are set to endorse the proposals, which would establish automatic exchange of information for tax purposes as the new international standard for tax cooperation and implement the Action Plan on Base Erosion and Profit Shifting (BEPS), which was first presented to G-20 finance ministers in Moscow in July 2013. Prior to the meeting on September 4, Treasury Under Secretary for International Affairs Lael Brainard said that global cooperation is critical to addressing tax avoidance by multinational firms and ensuring that large amounts of income do not go untaxed.
By Jeff Carlson, Stephen K. Cooper and Jennifer J. Rodibaugh, CCH News Staff