Tuesday, May 21, 2013

CCH Weekly Report from Washington, D.C.

CCH Weekly Report from Washington, D.C.

The House Ways and Means Committee held the first hearing examining the IRS's conduct in dealing with the applications of certain conservative groups seeking tax-exempt status in the wake of the Treasury Inspector General for Tax Administration's (TIGTA) report that Service personnel specifically targeting for review applications for tax-exempt status from organizations with the words "Tea Party" and "Patriots" in their names. IRS Acting Commissioner Steven T. Miller resigned and is being replaced by Office of Management and Budget Controller Daniel Werfel, who agreed to serve through the end of the fiscal year.


Small Business Tax Reform. The Small Business and Pass-Through Entity Tax Reform Discussion Draft proposed by House Ways and Means Committee Chairman Dave Camp, R-Mich., won approval from tax experts testifying before the House Subcommittee on Select Revenue Measures on May 15 (TAXDAY, 2013/05/16, C.1 ). Witness suggested changes to the draft, including expanding cash accounting to more small businesses and allowing a safe harbor for inventory tracking. Lawmakers heard opposing views of the proposal to shift to a unified regime for pass-through entities.

IRS Tax-Exempt Controversy. On May 17, Treasury Inspector General for Tax Administration (TIGTA) J. Russell George testified before the Ways and Means Committee regarding the TIGTA report concerning oversight by the IRS of groups that apply for tax-exempt status (TAXDAY, 2013/05/20, C.1 ). The report found that the IRS used inappropriate criteria, based on names and policy positions, to identify specific groups applying for tax-exempt status (Reference No. 2013-10-053 ; TAXDAY, 2013/05/16, T.1 ).


Oversight Board. The IRS Oversight Board issued a statement in response to the TIGTA report (TAXDAY, 2013/05/17, I.3 ). "The use of inappropriate criteria to identify organizations applying for tax-exempt status indicates, in the Board's opinion, a breakdown in the business processing system of the IRS," the Oversight Board said. In related news, President Obama also called for accountability in the IRS (TAXDAY, 2013/05/14, I.1 ).

New Acting IRS Commissioner. President Obama announced on May 16 the appointment of Werfel as IRS acting commissioner, effective Wednesday, May 22 (TAXDAY, 2013/05/17, W.1 ). The appointment follows Miller's resignation in the wake of intense pressure focused on the Service's improper targeting of conservative political groups that were seeking nonprofit status (TAXDAY, 2013/05/15, I.5 ).

IRS Furlough Days. The IRS will be closed on May 24, June 14, July 5, July 22 and August 30, 2013. On those days, no IRS offices will be operating, IRS employees will be furloughed without pay, no tax returns will be processed and no compliance-related activities will take place (IR-2013-51 ; TAXDAY, 2013/05/16, I.4 ). However, taxpayers should continue to file their returns and pay any taxes due, and the Electronic Federal Tax Payment System (EFTPS) will operate as usual.

June 2013 AFRs. The IRS has provided various prescribed applicable federal rates (AFRs) for federal income tax purposes for June 2013 (Rev. Rul. 2013-12 ; TAXDAY, 2013/05/20, I.1).

RTRP Test Fees. Fee amounts collected for scheduled registered tax return preparer (RTRP) test appointments that were canceled due to the court-ordered injunction are being refunded (TAXDAY, 2013/05/17, I.4 ). Also being refunded are fees collected from return preparers who tested on or after January 18, 2013, the date the test was enjoined.

RTRP Regulations. Karen Hawkins, director of the IRS Office of Professional Responsibility (OPR), spoke in favor of the IRS's authority to regulate unenrolled tax return preparers, which the IRS has designated as RTRPs (TAXDAY, 2013/05/15, I.5 ). Hawkins believes that the U.S. district court's decision in S. Loving, DC D.C., 2013-1 ustc ¶50,156 (TAXDAY, 2013/01/22, J.3 ) is incorrect.

Illinois Disaster Relief. Victims of severe storms, straight-line winds and flooding that began on April 16 , in parts of Illinois may qualify for filing relief from the IRS (IL-2013-28 ; TAXDAY, 2013/05/16, I.3 ). The president has declared the counties of Cook, DeKalb, DuPage, Fulton, Grundy, Kane, Kendall, Lake, LaSalle, McHenry and Will as federal disaster areas.

Carbon Dioxide Capture Credit. The IRS has released the 2013 inflation adjustment factor for the carbon dioxide (CO2) capture credit (Notice 2013-34 ; TAXDAY, 2013/05/15, I.1 ). The 2013 inflation-adjusted credit applies to the amount of qualified CO2 captured by a taxpayer at a qualified facility and disposed of in secure geological storage.

Medical Loss Ratio Rules. The IRS has issued proposed regulations that provide guidance to Blue Cross and Blue Shield organizations, and certain other health care organizations, on computing and applying the medical loss ratio added to tax code by the Patient Protection and Affordable Care Act (P.L. 111-148 ) (NPRM REG-126633-12 ; TAXDAY, 2013/05/13, I.1). The regulations are proposed to apply to tax years beginning after December 31, 2013.

Criminal Investigations 2012 Report. IRS Criminal Investigations (CI) has released its annual report for fiscal year 2012, highlighting gains in enforcement actions and penalties imposed on convicted tax criminals (IR-2013-50 ; TAXDAY, 2013/05/13, I.4 ). The 28-page report summarizes a wide variety of CI activity on a range of tax related issues during the year ending September 30, 2012.

Schedules M-1 and M-3. The IRS has announced on its website that corporations and partnerships with $10 million to $50 million in total assets at the end of the tax year will be permitted to file Schedule M-1 for tax years ending after December 31, 2014, rather than Schedule M-3, Parts II and III. Part I, lines 1-12 will continue to be required of these taxpayers (TAXDAY, 2013/05/13, I.5 ).

Code Sec. 336(e) Regulations. The IRS released final regulations allowing an election to treat the sale, exchange or distribution of at least 80 percent of the voting power and value of the stock of a target corporation as a sale of all of the target's underlying assets (T.D. 9619 ;TAXDAY, 2013/05/13, I.6 ). The regulations provide the terms and conditions for making such an election and the consequences of the election.

By Stephen K. Cooper and Jennifer J. Rodibaugh, CCH News Staff

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