Weekly Report from Washington, D.C.

Congress returned after its Memorial Day recess and the House Appropriations Committee approved the Financial Services and General Government Appropriations Bill for fiscal year (FY) 2017, which includes funding for the IRS. The Treasury Inspector General for Tax Administration (TIGTA) issued two audit reports, with one finding that the IRS had not effectively identified and assisted all individuals potentially affected by the Get Transcript application data breach. In addition, the IRS issued final regulations that define the term “taxpayer” as it applies for the exclusion of discharge of debt income for specific entities. Final, temporary and proposed regulations that impose corporate level tax when property from a C corporation becomes the property of a REIT or RIC were also issued.

Congress

House. The House Appropriations Committee approved the Financial Services and General Government Appropriations Bill for fiscal year (FY) 2017 on June 9 (TAXDAY, 2016/06/10, C.3), which included a $10.9-billion budget for the IRS for FY 2017. The full committee submitted a draft report in explanation of the bill it will accompany, detailing IRS funding and oversight (TAXDAY, 2016/06/09, C.1). The bill now goes to the House floor.

House Ways and Means Oversight Subcommittee Chairman Peter Roskam, R-Ill., and ranking member John Lewis, D-Ga., sent a letter dated June 7 to Attorney General Loretta Lynch asking that all assistant U.S. attorneys (AUSAS) involved in the alleged abuse by IRS’s civil asset forfeiture be held accountable (TAXDAY, 2016/06/10, C.2). The letter requested details on how the Department of Justice (DOJ) is reprimanding those involved and seeks information on how the DOJ will ensure the alleged abuse does not happen again.

Senate. Senate Finance Committee Chairman Orrin G. Hatch, R-Utah, sent letters dated June 9 to IRS Commissioner John Koskinen and Treasury Department Secretary Jack Lew inquiring into certain safeguards and coordination strategies the agencies have in place for Code Sec. 1603 grants and energy tax credits (TAXDAY, 2016/06/13, C.2).

Treasury

Cybersecurity. TIGTA found that the IRS did not effectively identify and assist all individuals potentially affected by the Get Transcript application data breach (Ref. No. 2016-40-037; TAXDAY, 2016/06/09, T.1). TIGTA’s analysis of system audit logs created between January 1, 2014 and May 21, 2015, identified approximately 621,000 taxpayers whose tax account information involved potentially unauthorized access not identified by the IRS.

Injured Spouse. TIGTA also reported that the IRS’s Injured Spouse Program did not always resolve taxpayers’ requests for relief in a timely manner, resulting in the unnecessary assessment and payment of interest (Ref. No. 2016-40-042; TAXDAY, 2016/06/10, T.1). TIGTA found that 30 percent of the cases were not resolved within the required time period.

IRS

REITs and RICs. The IRS issued final, temporary and proposed regulations that impose corporate level tax on certain transactions where property from a C corporation becomes the property of a REIT or a RIC (T.D. 9770, NPRM REG-126452-15; TAXDAY, 2016/06/08, I.1). The regulations are meant to prevent abuses of Code Secs. 355(h) and 856(c)(8) and in furtherance of the purposes of the repeal of General Utilities.

Discharge of Indebtedness Regs. The IRS issued final regulations that define the term “taxpayer” for the exclusion of discharge of debt income from gross income of a grantor trust or an entity that is disregarded as an entity separate from its owner (T.D. 9771; TAXDAY, 2016/06/10, I.1).

Expatriate Health Plans. The Departments of the Treasury, Labor, and Health and Human Services have issued proposed regulations on the rules for expatriate health plans, expatriate health plan issuers, and qualified expatriates under the Expatriate Health Coverage Clarification Act of 2014 (EHCCA) (P.L. 113-235); NPRM REG-135702-15; TAXDAY, 2016/06/09, I.1). The regulations are proposed for years beginning on or after January 1, 2017.

Interest Rates. The IRS announced that the interest rates for the calendar quarter beginning July 1 will remain at 4 percent for overpayments (3 percent for corporations), 4 percent for underpayments, and 6 percent for large corporate underpayments (IR-2016-84; Rev. Rul. 2016-12;TAXDAY, 2016/06/07, I.3). The interest rate corporate overpayment that exceeds $10,000 remains at 1.5 percent.

Get Transcript Relaunch. The IRS has relaunched its Get Transcript online service with a much more rigorous authentication process, which provides increased protection against identity theft (IR-2016-85; TAXDAY, 2016/06/08, I.2). The new process requires two-step authentication for all online tools and applications that require a high level of assurance.

TE/GE Advisory Committee. The TE/GE Advisory Committee has issued its annual recommendations report to the IRS (TAXDAY, 2016/06/09, I.2). The report offers recommendations to the IRS as to how to approach certain topics and policies to better encourage tax compliance with its limited resources.

Common Reporting Standard. IRS Commissioner John Koskinen has urged Congress to act quickly on the Common Reporting Standard legislation during his discussion regarding recent international tax development at the 2016 Organisation for Economic Co-operation and Development (OECD) International Tax Conference. (TAXDAY, 2016/06/08, I.3). The call for a common reporting standard comes after what has been the successful implementation of the Foreign Account Tax Compliance Act (FATCA) (P.L. 111-147).

By Jessica Jeane and Jalisa Mathis, Wolters Kluwer News Staff.

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CCHTaxGroup

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