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Weekly IRS Roundup March 13 – March 17, 2023

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of March 13, 2023 – March 17, 2023.

March 13, 2023: The IRS released Internal Revenue Bulletin 2023-11, which highlights the following:

  • Notice 2023-21: This notice postpones the beginning of the lookback periods under Section 6511 for certain taxpayers to file a claim for refund. Affected taxpayers include those who had tax returns due from April 15, 2020 to July 15, 2020, or from April 15, 2021 to May 17, 2021, and due to the COVID-19 pandemic, those due dates were postponed by Notice 2020-23 or Notice 2021-21 to July 15, 2020 or May 17, 2021, respectively.
  • Treasury Decision 9972: These final regulations amend the rules for filing certain returns and statements electronically to reflect changes made by the Taxpayer First Act of 2019 and to promote electronic filing.
  • Notice 2023-19: This notice provides guidance on the corporate bond monthly yield curve, corresponding spot segment rates and the 24-month average segment rates for February 2023. The notice also provides guidance as to interest rates on 30-year Treasury securities and 30-year Treasury weighted average rates.
  • REG 122286-18: These proposed regulations provide rules relating to the use of forfeitures in qualified retirement plans, including a deadline for the use of forfeitures in defined contribution plans, and clarify that forfeitures arising in any defined contribution plan may be used for one or more of the following purposes, as specified in the plan, to (1) pay plan administrative expenses, (2) reduce employer contributions under the plan or (3) increase benefits in other participants’ accounts in accordance with plan terms.
  • Action on Decision 2023-2: The IRS announced nonacquiescence to the US Tax Court’s decision in Complex Media, Inc. v. Commissioner, T.C. Memo. 2021-14, that the parties’ failure to report transactions fully or consistently should not be a major factor in a decision of whether to allow a taxpayer to disavow the form of its transactions and to the standard the Court applied to allow a petitioner to disavow its form. The IRS also announced nonacquiescence to the court’s determination that the fair market value of a “Deferred Payment Right” for purposes of Section 351(b)(1) is not equal to its issue price.
  • Treasury Decision 9973: This document contains final regulations that treat members of a consolidated group as a single US shareholder in certain cases for purposes of Section 951(a)(2)(B). The final regulations affect consolidated groups that own stock of foreign corporations.

March 13, 2023: The IRS announced that Danny Werfel began work as the 50th Commissioner of the IRS. Werfel was confirmed by the US Senate on March 9, 2023, and his term will run through November 12, 2027. You can read more about his confirmation
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Senate Confirms New IRS Commissioner

The US Senate has confirmed Daniel Werfel as the next commissioner of the Internal Revenue Service (IRS). The Senate voted 54-42, achieving bipartisan support for the nominee.

Undoubtedly on top of Werfel’s priority list will be how to deploy the agency’s $80 billion in new funding provided by the Inflation Reduction Act of 2022. During his confirmation hearing, Werfel said he did not plan to boost audit rates for taxpayers making less than $400,000 a year but would focus on compliance for the highest income earners. He also mentioned modernizing taxpayer service at the IRS.

Werfel is not new to the commissioner post as he previously served as acting commissioner from May to December 2013 during the Obama administration. He also previously served in the Office of Management and Budget. Werfel’s new appointment will run until November 2027.

Practice Point: We are interested to see how the IRS will be administered under Werfel. The IRS has numerous challenges ahead, but we are hopeful that Werfel, along with the additional funding allotted by US Congress, will usher in a new era for the agency.




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President Biden to Nominate New IRS Commissioner

On November 10, 2022, US President Joe Biden announced his intent to nominate Danny Werfel to serve as Commissioner of the Internal Revenue Service. US Secretary of the Treasury Janet Yellen has expressed her support for Werfel’s nomination. Charles Rettig, whose term expires on November 12, 2022, is the current IRS Commissioner and Doug O’Donnell has been selected to serve as acting IRS Commissioner until the position is formally filled.

The White House press release provides the following background on Werfel:

Danny Werfel is a public and private sector leader who has served under both Democratic and Republican administrations. Across more than 15 years of government service, Werfel served President Barack Obama and President George W. Bush to lead some of the governments’ most complex management challenges as the Internal Revenue Service (IRS) Acting Commissioner and Office of Management and Budget (OMB) Controller. In the wake of an Inspector General report alleging various forms of mismanagement and bias in the determination of tax-exempt status for non-profit organizations, President Obama appointed Werfel to serve as Acting Commissioner of IRS in 2013. Werfel provided immediate stability to the IRS, effectively responding to numerous Congressional investigations, successfully launching the Affordable Care Act technology that IRS was responsible for, and navigated the IRS through a multi-week government shutdown. At the end of his tenure, both the majority and minority leaders of the Senate Finance Committee publicly recognized his contribution and performance. As OMB Controller, Werfel successfully led a cross-government effort to ensure the $787 billion American Recovery and Reinvestment Act was implemented transparently and with minimal fraud or error. He also led the government-wide efforts to prepare for and implement the budget sequester of FY2013. Werfel played a key role under the Bush Administration in the implementation of the Emergency Economic Stabilization Act of 2008, overseeing the efforts of the Office of Financial Stability to achieve a clean financial statement audit in its first year of existence.

 

Werfel has spent the last nine years at Boston Consulting Group where he helped launch their U.S. public sector practice. He holds a Bachelor of Science in Industrial and Labor Relations (with honors) from Cornell University, a Juris Doctor (with honors) from the University of North Carolina, Chapel Hill, and a Master of Public Policy from Duke University. Werfel lives in the District of Columbia with his wife and two children.




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Senate Confirms Rettig as Next IRS Commissioner; Desmond Next?

On September 12, 2018, the Senate confirmed, by a vote of 64-33, Charles P. Rettig to be Commissioner of the Internal Revenue for the term expiring November 12, 2022. We previously discussed the nomination of Mr. Rettig and his background here.

The IRS Commissioner presides over the United States’ tax system and is responsible for establishing and interpreting tax administration policy and for developing strategic issues, goal and objectives for managing and operating the IRS. This includes responsibility for overall planning, directing, controlling and evaluating IRS policies, programs, and performance. The IRS Commissioner is also required by statute under Internal Revenue Code (Code) Section 7803 to ensure that all IRS employees are familiar with and act in accord with the Taxpayer Bill of Rights.

The nomination of Michael J. Desmond to be Chief Counsel of the Internal Revenue Service (IRS) remains pending in the Senate. We previously discussed the nomination of Mr. Desmond and his background here.

The IRS Chief Counsel serves as the chief legal advisor to the IRS Commissioner on all matters pertaining to the interpretation, administration, and enforcement of the Internal Revenue Code, as well as all other legal matters. Attorneys in the IRS Chief Counsel’s Office serve as lawyers for the IRS. Their role is to provide the IRS and taxpayers with guidance on interpreting Federal tax laws correctly, represent the IRS in litigation, and provide all other legal support required to carry out the IRS mission




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Nominations Announced for Tax Court and IRS Commissioner

On January 23, 2018, President Trump announced his intent to nominate Courtney Dunbar Jones to the US Tax Court. He previously nominated Elizabeth Copeland and Patrick Urda on August 3, 2017.

Courtney Dunbar Jones is a senior attorney in the Tax-Exempt and Government Entities division in the Office of Chief Counsel of the Internal Revenue Service (IRS). If confirmed, she will assume the position left vacant by the 2016 retirement of Judge John O. Colvin. Judge Colvin still performs judicial duties as a Senior Judge on recall.

On January 24, 2018, numerous press outlets announced that President Trump will nominate Charles “Chuck” Rettig of Hochman, Salkin, Rettig, Toscher & Perez, to serve as the next Commissioner of the IRS.

Rettig has been in private practice at Hochman, Salkin for more than 35 years and has a long record of leadership in our field. Among his many accomplishments, Rettig was instrumental in working with the IRS to establish key settlement initiatives over the last 15 years, including providing key practitioner guidance in designing the Offshore Voluntary Disclosure Program.

If confirmed, Rettig would helm an IRS that has been significantly reshaped by budget cuts and staff attrition in recent years. Rettig would also oversee the implementation of tax reform. Rettig has been a friend and mentor to many of us in the tax controversy bar over the years, and we are encouraged by the selection of someone from the private bar to the post.




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Overview of Tax Litigation Forums

Taxpayers can choose whether to litigate tax disputes with the Internal Revenue Service (IRS) in the US Tax Court (Tax Court), federal district court or the Court of Federal Claims. Claims brought in federal district court and the Court of Federal Claims are tax refund litigation: the taxpayer must first pay the tax, file a claim for refund, and file a complaint against the United States if the claim is not allowed. Claims brought in the Tax Court are deficiency cases: the taxpayer can file a petition against the IRS Commissioner after receiving a notice of deficiency and does not need to pay the tax beforehand.

As demonstrated in the chart below, approximately 97 percent of tax claims are instituted in the Tax Court. It should be noted that, after a taxpayer files a petition in Tax Court, the taxpayer no longer has the option of bringing the claim in any other court for the year(s) at issue.

Tax Court Versus Tax Refund Litigation

Source: https://www.irs.gov/uac/soi-tax-stats-chief-counsel-workload-tax-litigation-cases-by-type-of-case-irs-data-book-table-27

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National Taxpayer Advocate Releases 2016 Annual Report to Congress

On January 10, 2017, the National Taxpayer Advocate Nina E. Olson released her 2016 Annual Report to Congress.

According to the Taxpayer Advocate Service (TAS), the report was delivered to Congress with no prior review by the Internal Revenue Service (IRS) Commissioner, the Secretary of the Treasury or the Office of Management and Budget.  The primary sections of the report include:

  • 2016 Special Focus – IRS Future State: The National Taxpayer Advocate’s Vision for a Taxpayer-Centric 21st Century Tax Administration
  • Most Serious Problems Encountered by Taxpayers
  • Recommendations to Congress
  • Most Litigated Issues
  • Taxpayer Advocate Service Research and Related Studies
  • Literature Reviews

Practice Point: TAS, an independent organization within the IRS, is an excellent (and often underutilized) resource for individual and corporate taxpayers who may be at a standstill with the IRS – especially on a technical, administrative, or “red-tape” issue. Taxpayers of all shapes and sizes should consider, where appropriate, utilizing the TAS in appropriate circumstances where they are encountering delays in the administration of their tax disputes.

This post is the first in a four-part series addressing highlights of the Annual Report that may be of interest to our readers.




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