Congress | TaxConnections

26 Feb 2015

Staff Reductions & Insufficient Funding Will Dramatically Impact IRS in 2015 And Beyond

Last Tuesday, IRS Commissioner John Koskinen addressed the New York State bar Association Tax Section in New York. His comments provide keen insight into the going-on’s at the IRS. Mr. Koskinen’s most important announcement centered on the agency’s anticipated reduction in the number of rulemaking projects as a result of budgetary constraints.

Although releasing guidance is one of the agency’s core functions, there are simply not enough attorneys in the Office of Chief Counsel to shoulder the burden. Nor are there any plans on the horizon to hire more workers, in light of the agency-wide hiring freeze.

“Our office of chief counsel continues to make every effort to issue guidance in a timely Read More

Written by Michael DeBlis, III | Posted in Audit • Corporate • Federal • IRS • Partnership

30 Dec 2014

Should A Convicted Congressman Be Allowed To Keep His Seat In Congress And Continue To Receive Benefits?

Seems like politicians are having a problem staying out of trouble these days. The latest one to “bite the dust” did so in grand fashion, not failing to live up to the hypocrisy that makes for scintillating newspaper headlines. Who was this person? None other than United States Congressman, Michael Grimm. To use a cliché, Mr. Grimm’s “naughtiness” earned him a stocking full of coal from Santa this Christmas.

Amid a drumbeat of calls for his resignation, Rep. Michael Grimm pleaded guilty to aiding and assisting in the preparation of a false tax return on December 23, 2014. The ink on the signature at the bottom of Mr. Grimm’s plea agreement wasn’t even dry before the embattled Congressman vowed to hold onto his Staten Island congressional seat.

Written by Michael DeBlis, III | Posted in Tax Fraud/Evasion/Crimes

07 Jan 2014

Continued Bonus Depreciation Or Tax Reform?

One of the fifty seven federal tax provisions that expired at the end of 2013 was 50% bonus depreciation. That has been a temporary provision for several years, primarily aimed at helping economic recovery. It’s also been a generous provision (it was even 100% for a few years). With 50% bonus depreciation, a business claims depreciation on new equipment in the year it is placed in service equal to 50% of the cost plus normal depreciation on the balance. If the company was also eligible for Section 179 expensing, it would first claim $500,000 and then take 50% of the balance and then normal depreciation on the balance.

Temporary tax provisions are often renewed well after they expire. These temporary provisions all “cost” money because they result in reduced tax collections. To be extended in a revenue neutral bill, Congress has to find “offsets” – other tax increases or spending cuts. Read More

Written by Annette Nellen | Posted in Corporate • Tax Provision/Tax Reporting

12 Sep 2013

New Worries for Those Thinking of Renouncing US Citizenship!

If you are one of the many US citizens contemplating renouncing your US citizenship, Congress recently sent a fairly clear message that now, as opposed to later, may be the right time to get out of the club. On June 12, 2013, US Senators Jack Reed (D-RI) and Chuck Schumer (D-NY) attempted to add yet another hurdle in the ongoing saga for those individuals looking to renounce their US citizenship in filing an amendment to the immigration reform bill, which attempted to ensure that the US Department of Homeland Security could exclude certain individuals from re-entry into the US forever. The proposed amendment was never voted on in the House and died before reaching the floor. If the proposed amendment had made its way into law, it would have excluded from re-entry not only former US citizens who renounce for tax avoidance purposes (as is the current law), but also renouncing individuals who are considered “Covered Expatriates” under Internal Revenue Code § 877A.

Maybe this is a response to the fact that Americans Renouncing U.S. Citizenship Increased 6 times so far in 2013!

What is most important to take away from this failed passage of legislation is that the issue of renouncing one’s US citizenship is again front and center on Congress’s radar and the only guarantee moving forward is that any potential changes will not make things any easier to get out. Read More

Written by tbeecher | Posted in FATCA • United States

15 Mar 2013

Tax-Exempt Bonds And Small Business Health Care Tax Credit Take A Hit From Sequester

The Internal Revenue Service said that budget sequestration would require reductions in refundable credits for certain tax-exempt bonds and the refundable portion of the Small Business Health Care Tax Credit for some small tax-exempt employers, along with whistleblower awards.

In a pair of emails March 4, the IRS noted that pursuant to the requirements of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, certain automatic cuts will take place as of March 1, 2013. The 1985 law, better known as the Gramm-Rudman-Hollings Act, provided the original basis for the budget sequestration process that was revived in 2011 as part of the Budget Control Act.

Under the provisions of the 2011 law, which aimed to curb the budget deficit, Congress and the Obama administration set a goal of identifying $1.5 trillion in deficit reduction measures, or else $1.2 trillion in automatic spending cuts over 10 years across most government agencies would begin in 2013. After numerous meetings and reports, and the efforts of the Simpson-Bowles Commission and a congressional “super committee,” Democrats and Republicans were unable to reach an agreement, and $85 billion in automatic spending cuts began to take effect on March 1.

In an email to the tax-exempt bond community, the IRS noted that Form 8038-CP claims for certain qualified tax-exempt bonds are subject to the sequester. The required reductions include a reduction to refundable credits under Section 6431 of the Tax Code applicable to certain qualified bonds. The sequester reduction is applied to Section 6431 amounts claimed by an issuer on any Form 8038-CP filed with the IRS that results in a payment to the issuer on or after March 1, 2013. The sequestration reduction rate will be applied until the end of the fiscal year (Sept. 30, 2013) unless there is some intervening congressional action, at which time the sequestration rate would be subject to change.

The reductions apply to Build America Bonds, Qualified School Construction Bonds, Qualified Zone Academy Bonds, New Clean Renewable Energy Bonds and Qualified Energy Conservation

Bonds for which the issuer elected to receive a direct credit subsidy pursuant to Section 6431. As determined by the Office of Management and Budget, payments to issuers from the budget accounts associated with these qualified bonds are subject to a reduction of 8.7 percent of the amount budgeted for such payments. For more information, visit Effect of Sequestration on Certain State & Local Government Filers of Form 8038-CP on the Tax Exempt Bonds Homepage of IRS.gov. Taxpayers and tax practitioners may also call the TEB Customer Service at 1-(877) 829-5500.

The sequester is also set to affect the Small Business Health Care Tax Credit which was included as part of the Patient Protection and Affordable Care Act of 2010, the Obama administration’s signature health care reform law. The IRS noted in an email to tax-exempt organizations that the required cuts under sequestration include a reduction to the refundable portion of the Small Business Health Care Tax Credit for certain small tax-exempt employers under Section 45R of the Tax Code. As a result, the refundable portion of the claim will be reduced by 8.7 percent. The sequestration reduction rate will be applied until the end of the fiscal year (Sept. 30, 2013) unless there is some intervening congressional action, at which time the sequestration rate is subject to change.

Separately, the IRS also said Tuesday it was reducing whistleblower payment awards by 8.7 percent because of sequestration, unless Congress intervenes. Last week, IRS Acting Commissioner Steven T. Miller informed IRS employees that sequestration might also require unpaid furloughs of five to seven days starting this summer, after tax season is over. Along with the reductions in employee pay, Miller also warned of other budget cuts at the agency, which has already seen its budget cut in the past two fiscal years. Miller wrote: “If sequestration occurs, we will continue to operate under a hiring freeze, reduce funding for grants and other expenditures, and cut costs in areas such as travel, training, facilities and supplies. In addition, we will need to review contract spending to ensure only the most critical and mandatory requirements are fully funded.”