The week of May 16 saw the introduction of a House resolution to censure IRS Commissioner John Koskinen. In addition, lawmakers presented a number of tax reform proposals, including one that is meant to simplify how derivatives are taxed, and a bill intended to limit two corporate tax loopholes. The Treasury Inspector General for Tax Administration (TIGTA) issued a report finding that the IRS has made very little improvement in reducing improper Earned Income Tax Credit (EITC) payments. The IRS announced that it will begin beta testing a new authentication and access process for its Get Transcript Online tool. The IRS also released finalized regulations for disbursements from designated Roth accounts to multiple destinations.
House. The House passed the Stolen Identity Refund Fraud Prevention Bill of 2016 (HR 3832), sponsored by Rep. James Renacci, R-Ohio, by voice vote on May 16 (TAXDAY, 2016/05/17, C.1). HR 3832 is a bipartisan measure that provides for a number of changes related to IRS administration regarding identity theft.
An IRS spokesperson told Wolters Kluwer on May 16 that Commissioner John Koskinen “remains focused on serving the nation’s taxpayers” after the House Judiciary Committee announced it will review Koskinen’s performance as chief of the agency (TAXDAY, 2016/05/17, C.2). On May 13, the Judiciary Committee revealed it will hold two hearings in coming weeks about Koskinen’s leadership at the IRS. The first is scheduled for May 24.
The House Oversight and Government Reform Committee Chairman Jason Chaffetz, R-Tex., on May 18 introduced a resolution to censure Koskinen. (TAXDAY, 2016/05/19, C.2). The resolution seeks Koskinen’s resignation or removal, and requires the forfeiture of his pension, Chaffetz said in a statement.
House Ways and Means Committee ranking member Sander Levin, D-Mich., introduced the Protecting the U.S. Corporate Tax Base Bill of 2016 on May 17 (TAXDAY, 2016/05/18, C.1). According to Levin, the bill is intended to limit two so-called “corporate tax loopholes.”
Senate. The Senate Finance Committee (SFC) on May 17 examined the strengths and weaknesses of an integration of the corporate and individual tax systems. (TAXDAY, 2016/05/18, C.1). Chairman Orrin G. Hatch., R-Utah, announced that he will introduce a proposal in the next several weeks that will eliminate double taxation of corporate income by providing a dividends paid deduction. This deduction would reduce the current favoritism toward debt-financed investment, as well as reduce inversions and the “lock-out effect,” he noted.
The Senate Small Business and Entrepreneurship Committee held a hearing on May 18 to discuss the impact of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) on small businesses (TAXDAY, 2016/05/19, C.4). Lawmakers examined various tax implications of the healthcare law and how IRS regulations have affected small business growth.
SFC ranking member Ron Wyden, D-Ore., released a tax reform proposal on May 18 focused on simplifying how derivatives are taxed (TAXDAY, 2016/05/19, C.1). According to Wyden, there would be a mark-to-market requirement for treatment of derivatives and ordinary tax treatment on resulting gains and losses. This requirement would also apply to combinations of derivatives and their underlying investments, implementing a capital hedging limitation.
EITC Improper Payment. TIGTA issued a report finding that the IRS has made little improvement in reducing improper payments of the EITC (Ref. No. 2016-40-036; TAXDAY, 2016/05/20, T.1). TIGTA found that the IRS failed to report an overall EITC improper payment rate of less than 10 percent.
Get Transcript Authentication. The IRS is scheduled to begin testing a new authentication and access process for its Get Transcript app, as part of efforts to evaluate and improve its cybersecurity measures (TAXDAY, 2016/05/20, I.2). More information about the new authentication and access process and full re-launch of the app will be made available once testing has concluded.
Code Secs. 45 and 48 Guidance Updated. The IRS released corrected guidance addressing the extension and modification of Code Sec. 45 and 48 that resulted from the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) (P.L. 114-113; Notice 2016-31; TAXDAY 2016/05/19, I.1). The guidance is applicable to any project for which a taxpayer claims the renewable electricity production tax (PTC) credit or the energy investment credit in lieu of the PTC under Code Sec. 45 and 48 that is placed in service after certain dates.
Military Personnel. The IRS reminded members of the U.S. military and their families about potential tax benefits available to them (TAXDAY, 2016/05/20, I.1). Publication 3 (2015), Armed Forces Tax Guide, provides information and tips to help service members and their families take advantages of all tax benefits allowed by law.
Roth Accounts. The IRS issued finalized regulations that eliminate the requirement that each disbursement from a designated Roth account that is directly rolled over to an eligible retirement plan be treated as a separate distribution from any amount paid directly to the employee and subject to the pro rata rule for allocating pre-tax and after-tax amounts to each distribution (T.D. 9769; TAXDAY, 2016/05/18, I.1). Under the final regulations, if disbursements are made from a taxpayer’s designated Roth account to the taxpayer and also to the taxpayer’s Roth IRA or designated Roth account in a direct rollover, the pre-tax amounts will be allocated first to the direct rollover, as opposed to being allocated pro rata to each destination.
Memorial Day Systems Shutdown. The IRS has scheduled the annual Memorial Day Systems Shutdown for the Modernized e-File (MeF) Systems to begin Saturday, May 28 at 11:59 a.m. and end on Tuesday, May 31 at 6 a.m. (TAXDAY, 2016/05/18, I.7). As the Production and ATS MeF Systems will not be operational during this timeframe, users are asked to refrain from accessing the systems to transmit business/individual/state tax returns, retrieve acknowledgments or submit any other service requests.
Enrolled Agents. The IRS has begun its annual enrolled agent (EA) clean-up (TAXDAY, 2016/05/16, I.3). Over 5,000 EAs who did not renew during the 2016 cycle will be moved to inactive status, while more than 2,000 EAs who did not renew during the 2013 and 2016 cycles will be moved to terminate status.
Offers in Compromise. The IRS notified tax professionals that, effective immediately, the Service will return newly filed Offer in Compromise (OIC) applications in cases where the taxpayer has not filed all required tax returns (TAXDAY, 2016/05/16, I.3). Fees will also be returned.
By Jalisa Mathis and Jessica Watkins, Wolters Kluwer News Staff