CCH Tax Day Report
Congress returned to Washington after a July Fourth holiday break. The House passed the IRS Appropriations Bill for fiscal year (FY) 2017 (HR 5485) on July 7. The Treasury Inspector General for Tax Administration (TIGTA) reported that the IRS needs to improve controls designed to prevent unauthorized entry into its facilities by former employees. The Service, meanwhile, issued proposed regulations covering the health insurance premium tax credit.
House. The House approved the Financial Services and General Government Appropriations Bill for the fiscal year (FY) 2017 (HR 5485) by a 239-to-185 vote on July 7 (TAXDAY, 2016/07/11, C.1). The bill now heads to the Senate for consideration. HR 5485 provides funding for a $10.9-billion budget for the IRS for FY 2017, resulting in funding $236 million below its current budget, and $1.3-billion below the president’s request. The House Appropriations Committee approved the bill during a full committee markup on June 9.
The House Ways and Means Committee on July 7 unanimously approved the bipartisan Clyde-Hirsch-Sowers RESPECT bill (HR 5523), which would limit the IRS’s civil asset forfeiture authority (TAXDAY, 2016/07/08, C.2). The bill now heads to the House floor.
The House approved the bipartisan Restoring Access to Medication and Improving Health Savings Bill of 2016 (HR 1270) by a vote of 243 to 164 on July 6 (TAXDAY, 2016/07/07, C.1). The measure, sponsored by Rep. Lynn Jenkins, R-Kan., with 39 Republican and Democratic cosponsors, would repeal provisions of the Internal Revenue Code added by the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) that limit payments for medications from health savings accounts (HSAs), medical savings accounts and health flexible spending arrangements to only prescription drugs.
The House Ways and Means Oversight Subcommittee held a hearing on July 7 examining cost-sharing reductions (CSR) under the PPACA (TAXDAY, 2016/07/08, C.1). IRS Commissioner John Koskinen and Treasury Assistant Secretary for Tax Policy Mark Mazur testified on the administration of the CSR program under the PPACA A.
TIGTA reported that the IRS needs to improve its controls designed to prevent former employees from unauthorized entry into its facilities (Ref. No. 2016-10-038; TAXDAY, 2016/07/07, T.1). The report estimated that the IRS could not verify that all security items were recovered for more than 2,700 of the more than 4,100 employee separations.
501(c) Organizations. The IRS has issued final and temporary regulations pertaining to the requirement that organizations must notify the IRS of their intent to operate under Code Sec. 501(c)(4) (T.D. 9775, NPRM REG-101689-16; TAXDAY, 2016/07/11, I.1). In addition, the IRS released Rev. Proc. 2016-41, which sets forth the procedure that an organization is to follow.
Health Insurance Premium Tax Credit. The IRS released proposed regulations that relate to the health insurance premium tax credit and the individual shared responsibility provision of the PPACA (NPRM REG-109086-15; TAXDAY, 2016/07/07, I.1). The proposed regulations provide guidance and clarification on eligibility for the premium tax credit (including guidance on opt-out arrangements), the amount of the tax credit, figuring out the benchmark plan premium and information reporting.
Data Theft Risks. In a partnership with state tax agencies and the tax preparation community, the IRS has launched a campaign, “Protect Your Clients; Protect Yourself,” to raise awareness among tax professionals on their responsibilities to protect their clients from identity theft and to protect their businesses as well (TAXDAY, 2016/07/07, I.2).
Tax Matters Partner. The IRS has issued field attorney advice that states that when determining who can be designated and serve as the tax matters partner (TMP) of a limited liability company, the operating agreement and state law must be reviewed (FAA 20161801F; TAXDAY, 2016/07/05, I.3).
West Virginia Disaster Victims. The IRS has updated the notice granting relief for victims of severe storms and flooding that took place on June 22, 2016 in parts of West Virginia. Individuals who reside or have a business in one of the listed counties will qualify for the relief from the IRS (WV-2016-02; TAXDAY, 2016/07/05, I.2, TAXDAY, 2016/07/11, I.2).
Streamlined Critical Pay Authority. As the IRS’s chief information and technology officer’s term expires, Koskinen expressed his hope that Congress will renew the IRS’s Streamlined Critical Pay Authority (TAXDAY, 2016/07/06, I.10). The Streamlined Critical Pay Authority is a special hiring authority granted to the IRS that Koskinen cited as helping the IRS recruit the best IT and cybersecurity talent.
Nonconventional Source Fuel. The IRS has published the nonconventional source fuel reference price for calendar year 2015 (Notice; TAXDAY, 2016/07/06, I.8). The reference price continues to apply in determining the amount of the enhanced oil recovery credit under Code Sec. 43, the marginal well production credit under Code Sec. 45I, and percentage depletion in case of oil and natural gas produced from marginal properties under Code Sec. 613A.
Qualified Intermediary Agreement. The IRS has issued a proposed qualified intermediary (QI) agreement to replace the 2014 QI agreement set to expire on December 31, 2016 (Notice 2016-42; TAXDAY, 2016/07/06, I.1). A QI agreement simplifies the withholding agent’s withholding obligations under Chapters 3 and 4 of the tax code, and the agent’s obligations as a payor under Chapter 61 of the Code and Code Sec. 3406.
By Jessica Jeane and Jalisa Mathis, Wolters Kluwer News Staff