House lawmakers voted to repeal a key funding mechanism for the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148): the medical device tax. The IRS released guidance on new ABLE accounts, guidance for multiemployer pension plans, draft PPACA forms for employers and more. Speakers at an IRS hearing generally looked with disfavor on proposed regulations for the gambling industry.
House. House lawmakers on June 18 approved the Protect Medical Innovation Bill of 2015 (HR 160) , which would repeal the medical device excise tax (TAXDAY, 2015/06/19, C.1). The final vote was 280 to 140. The medical device tax was intended to help pay for the PPACA and imposes a 2.3-percent excise tax on the sale of certain medical devices by the manufacturer or importer of the device. According to the Joint Committee on Taxation, the estimated cost of the measure would add approximately $24.4 billion to the federal budget deficit over 10 years. The White House, in a Statement of Administration Policy, said it would veto the measure.
The House Appropriations Committee on June 17 approved a fiscal year (FY) 2016 appropriations bill to provide $20.2 billion in annual funding for the Treasury Department, the Judiciary, the Small Business Administration, the Securities and Exchange Commission and several other agencies (TAXDAY, 2015/06/18, C.1). The measure, which passed by a vote of 30 to 20, includes $10.1-billion to fund the IRS for FY 2016, which represents a cut of approximately $838 million, compared to FY 2015. Following opening remarks, lawmakers voted on amendments to the bill, which now goes to the House floor for consideration.
House lawmakers on June 18 approved, by a vote of 218 to 208, the Trade Priorities and Accountability Bill of 2015 (HR 2146) to establish Trade Promotion Authority (TPA) (TAXDAY, 2015/06/19, C.3). Because the Trade Adjustment Assistance (TAA) vote failed in the House on June 12, the second vote in the House on stand-alone TPA legislation sends the bill back to the Senate for consideration of the stand-alone measure despite previous Senate passage of both TPA and TAA. House Republican leaders used a noncontroversial bill as a vehicle for TPA, the Defending Public Safety Employees’ Retirement Bill (HR 2146), which would allow federal law enforcement officers, firefighters and air traffic controllers to make penalty-free withdrawals from governmental plans after age 50.
House Ways and Means Committee Chairman Paul Ryan, R-Wis., said on June 14 that congressional Republicans are committed to comprehensive, alternative solutions to the PPACA in light of the upcoming Supreme Court decision in D. King v. S.M. Burwell , CA-4, 2014-2 ustc ¶50,367 (TAXDAY, 2015/06/16, C.1). The Supreme Court is expected to rule on a challenge to the Code Sec. 36B regulations, which extend the premium assistance tax credit to qualified individuals in both federally facilitated and state-run Health Insurance Marketplaces, before the end of June. Ryan said Republicans are working to overcome the PPACA’s shortcomings while also developing “patient-centered alternatives.” He added that Republicans want to first see what the Supreme Court’s ruling is, specifically so that they can customize their response to the actual ruling, and that plan will involve making sure people have assistance during a transition from the PPACA .
Senate. Senate Finance Committee members Charles E. Grassley, R-Iowa, and John Thune, R-S.D., on June 16 introduced the Taxpayer Bill of Rights Enhancement Bill of 2015 (Sen 1578), which they predicted would improve customer service at the IRS, create new taxpayer protections and update and strengthen existing taxpayer protections (TAXDAY, 2015/06/17, C.1). For fiscal year (FY) 2016, House appropriators recently provided $2.2 billion, $75-million above current levels, for taxpayer services, intended to improve the rate that IRS answers telephone calls and correspondence from taxpayers (TAXDAY, 2015/06/12, C.1). The legislation comes amid what the lawmakers termed “gross mismanagement and inappropriate actions by IRS employees that have shaken what little confidence taxpayers may have had in the agency.”
Senate Finance Committee (SFC) Chairman Orrin G. Hatch, R-Utah, has ruled out a gas tax hike to help replenish the Highway Trust Fund, but witnesses during a June 18 SFC hearing on the challenge of finding revenue to finance the fund either disagreed or offered other ideas (TAXDAY, 2015/06/19, C.2). Hatch also dismissed the idea of a so-called repatriation holiday, which, according to the Joint Committee on Taxation (JCT), loses nearly $120 billion over 10 years. Hatch said it was not a “serious proposal” to pay for a long-term highway bill.
SFC ranking member Ron Wyden, D-Ore., on June 12 introduced legislation, the Craft Beverage Modernization and Tax Reform Bill (Sen 1562), which would, among other provisions, reduce excise taxes for brewers (TAXDAY, 2015/06/16, C.2). Wyden’s proposal would provide a rate of $16-per-barrel on the first 6-million barrels for all brewers and beer importers compared to the current $18-per-barrel. Wyden’s bill also defines small brewers as those producing less than 2-million barrels annually, with the application of an excise tax of $3.50-per-barrel for the first 60,000 barrels, jumping to $16 after that. The measure also expands the excise tax credit for small wine producers.
IRS Budget. The Treasury Inspector General for Tax Administration (TIGTA) reported that reductions in the IRS budget have resulted in declines in taxpayer service, case closures, and dollars collected (Ref. No. 2015-30-035; TAXDAY, 2015/06/18, T.1). The IRS has been forced to limit contact representatives for its Automated Collection System (ACS); revenue officers collected 7-percent less than in 2011 and have closed 34-percent fewer cases; and finally budget limitations have restricted promotion opportunities, which prevents the IRS from loading case inventories to full capacity.
New Markets Tax Credit. The Treasury Department’s Community Development Financial Institutions Fund (CDFI Fund) announced that it will allocate more than $3.5 billion in New Markets Tax Credit awards to a total of 76 organizations under the 2014 round of the New Markets Tax Credit Program (TDNR JL-10074; TAXDAY, 2015/06/16, T.1). The 76 organizations receiving awards were selected from a pool of 263 applicants that requested approximately $19.9 billion in allocation authority.
ABLE Accounts. The IRS has issued guidance on the requirements a program must satisfy in order to be a qualified ABLE program under Code Sec. 529A (NPRM REG-102837-15; TAXDAY, 2015/06/22, I.1). The guidance also expressly allows a qualified ABLE program or any of its contractors to contract with one or more Community Development Financial Institutions (CDFIs) that commonly serve disabled individuals and their families to provide one or more required services.
Multiemployer Plans. The IRS and Treasury have issued temporary and proposed regulations, as well as a revenue procedure, governing the suspension of benefits by multiemployer pension plans under Code Sec. 432(e)(9), which was added by the Multiemployer Pension Reform Act of 2014 (P.L. 113-235) (T.D. 9723; NPRM REG-102648-15; Rev. Proc. 2015-34; TDNR JL-10078; TAXDAY, 2015/06/18, I.1).
PPACA 2015 Draft Forms. The IRS has posted on its website draft 2015 forms for use by employers under the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) (TAXDAY, 2015/06/19, I.4). These include: draft 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage; draft 2015 Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns; and draft Form 1095-B, Health Coverage.
Casino Reporting. Officials from casinos with slot machines criticized proposed IRS regulations (NPRM REG-132253-11, I.R.B. 2015-12, 771) that would modify the reporting of winnings from slot machines, bingo and keno (TAXDAY, 2015/06/18, I.6). The officials testified at a June 17 hearing at IRS National Headquarters that the proposals on electronic tracking of slot machine player activity would be burdensome and difficult to implement.
AFSP Update. Nearly 44,000 tax return preparers participated in the voluntary Annual Filing Season Program (AFSP) during 2014, the IRS announced in a news release (IR-2015-90; TAXDAY, 2015/06/19, I.2). The IRS also announced that the rules about who may represent clients before the IRS will change, effective from January 1, 2016.
Estate Tax. The IRS has announced on its website that it will only issue estate tax closing letters on request, for estate tax returns (Form 706) filed on or after June 1, 2015 (TAXDAY, 2015/06/19, I.3). The IRS indicated that an estate should wait at least four months after filing the return to make the request. The IRS also issued final regulations providing guidance on the following: (1) the estate and gift tax applicable exclusion amount, in general; (2) the requirements for electing portability of a deceased spousal unused exclusion amount (DSUEA) to the surviving spouse; and (3) the applicable rules for the use of the DSUEA by the surviving spouse (T.D. 9725; TAXDAY, 2015/06/15, I.5).
Oklahoma Disaster Relief. A May 27, 2015 notice granting relief to victims of severe storms, tornadoes, straight-line winds and flooding that took place beginning on May 5, 2015 in parts of Oklahoma was updated by the IRS on June 18 to include Choctaw, Cotton, Rogers and Tillman counties (HOU-04-2015; TAXDAY, 2015/06/19, I.6). The IRS had also updated the relief earlier in the week to include Atoka, Bryan, Comanche, Johnston, Kiowa, Le Flore, McClain, McCurtain, Pittsburg and Pottawatomie counties, and on June 15 to include Beckham, Caddo, Canadian, Marshall, McIntosh, Seminole and Wagoner counties (TAXDAY, 2015/06/17, I.4).
FBAR Delinquent Procedures. The IRS has reviewed and left unchanged its procedures for taxpayers who (1) have not filed a required Report of Foreign Bank and Financial Accounts (FBAR) (FinCEN Form 114), (2) are not under a civil examination or a criminal investigation by the IRS, and (3) have not already been contacted by the IRS about the delinquent FBARs (TAXDAY, 2015/06/18, I.5). These procedures, first released in October 2014, are for individuals who do not need to use either the Offshore Voluntary Disclosure Program (OVDP) or the Streamlined Filing Compliance Procedures to file delinquent or amended tax returns to report and pay additional tax.
Circular 230. The IRS has issued online information on Circular 230 the document that includes rules for tax professionals who practice before the IRS (FS-2015-19; TAXDAY, 2015/06/17, I.1). Notably, the fact sheet highlights the most important Circular 230 provisions for tax professionals to review to prevent them from making common errors.
IRS Personnel Changes. Jeffrey Tribiano, a top official at the U.S. Department of Agriculture’s (USDA) Food and Nutrition Service and a commissioned officer in the Navy Reserve, has been named IRS deputy commissioner for Operations Support beginning June 29 (IR-2015-89; TAXDAY, 2015/06/17, I.2). Tribiano will be in charge of the IRS’s key support and management functions: chief financial officer; Human Capital Office; Information Technology; and the Office of Planning, Programming and Audit Coordination.
Failure to Deposit Penalty Abatement. The IRS has issued interim guidance on abatement of the penalty for failure to deposit for taxpayers who are unable to obtain a bank account (unbanked taxpayers), or who cannot make other arrangements for depositing their tax deposit obligations, as described in Reg. §31.6302-1(h)(2), which must be made by electronic funds transfer (EFT) (SBSE-04-0615-0045; TAXDAY, 2015/06/17, I.3). This applies to corporate income taxes, excise taxes, and employment taxes. The interim guidance is effective June 9, 2015.
Empowerment Zones. The IRS has announced that all empowerment zone designations remain in effect through December 31, 2014 (IR-2015-88; TAXDAY, 2015/06/16, I.2). Empowerment zones are certain urban and rural areas where employers and other taxpayers qualify for special tax incentives.
Determination Letters. In a new revenue procedure, the IRS adds an issue to section 5.01 of Rev. Proc. 2015-3, which lists areas under study in which rulings will not be issued until the IRS resolves the issue through publication of a revenue ruling, revenue procedure, regulations, or otherwise (Rev. Proc. 2015-37; TAXDAY, 2015/06/16, I.3). The added issue is whether the assets in a grantor trust receive a Code Sec. 1014 basis adjustment at the death of the deemed owner of the trust for income tax purposes when the assets are not includible in the gross estate of the owner under the estate tax provisions of the Tax Code.
Credit for Carbon Dioxide Sequestration. The IRS has released the inflation adjustment factor for the credit for carbon dioxide (CO2) sequestration under Code Sec. 45Q for 2015 (Notice 2015-44; TAXDAY, 2015/06/16, I.4). The inflation adjustment factor is 1.0924, and the credit is $21.85 per metric ton of qualified CO2 under Code Sec. 45Q(a)(1) , and $10.92 per metric ton of qualified CO2 under Code Sec. 45Q(a)(2).
Nonconventional Source Fuel Reference Price. The IRS has published the nonconventional source fuel reference price for calendar year 2014 (Notice 2015-45; TAXDAY, 2015/06/15, I.1). The reference price for calendar year 2014 is $87.39.
Summary of Benefits and Coverage. The IRS has released final rules regarding the contents and distribution of the summary of benefits and coverage (SBC) and uniform glossary for group health plans and health insurance coverage in the group and individual markets (T.D. 9724; TAXDAY, 2015/06/15, I.4). These rules finalize changes to the regulations implementing the disclosure requirements under section 2715 of the Public Health Service Act (PHS) to help plans and individuals understand their health coverage and compare other coverage options.
Tax-Exempt and Government Entities. The Advisory Committee on Tax-Exempt and Government Entities (ACT) and its five subcommittees issued its annual report to the IRS (TAXDAY, 2015/06/19, I.1). The committee’s employee plans (EP), exempt organizations (EO), federal, state and local government (FSLG), Indian tribal government and tax-exempt bonds (TEB) subgroups each selected a project for review and submitted recommendations to the IRS.
By Jeff Carlson and Jennifer Cordaro, Wolters Kluwer News Staff