It’s Official: President Biden Signs the Inflation Reduction Act into Law, IRS to Receive Increased Funding

By and on August 17, 2022

On August 16, 2022, US President Joe Biden signed into law the Inflation Reduction Act of 2022 (Act). A press release from the White House touts the Act as one that will “lower the costs for families, combat the climate crisis, reduce the deficit, and finally ask for the largest corporations to pay their fair share.” The press release provides a numerical summary of the Act’s impact on the healthcare, clean energy and tax sectors.

As we previously discussed, the Act provides for a significant increase in funding for the Internal Revenue Service (IRS). IRS Commissioner Chuck Rettig shared the following written statement regarding the Act:

The signing of the historic reconciliation package marks a transformational moment for our agency—and an opportunity for the future of tax administration. The IRS has struggled for many years with insufficient resources to fulfill our important mission. During the next 10 years, these funds will help us in many areas, including adding critical resources to not just close the tax gap but meaningfully improve taxpayer service and technology. This will allow the IRS to provide services to taxpayers in the manner they expect and deserve. The act also includes a wide range of tax law changes that we will have to implement very quickly.

 

Given the scope of the bill, keep in mind these changes will not be immediate. It’s a 10-year plan, and it will take time to put these provisions into place. More details will be available in coming months.

 

We have a lot of hard work in front of us to deliver on the high expectations this historic funding will provide. But I have great confidence IRS employees are up to the task—and will deliver for Americans as they have countless times before in the history of our agency.

The Act also contains several new provisions relating to the corporate alternative minimum, a tax on stock buybacks, and tax credits for clean energy use and production. These provisions will require immediate guidance given that they are effective for taxable years beginning after December 31, 2022.

Practice Point: The IRS has its work cut out for it. It is critical that timely guidance be provided to taxpayers impacted by the Act’s new provisions to allow for proper planning and modeling. Additionally, the IRS needs to create and execute a plan to improve its technology and customer service.

Update as of August 18, 2022: US Secretary of the Treasury Janet Yellen has issued a memorandum to Commissioner Rettig, directing the IRS to produce, within six months, an operational plan detailing how the additional funding would be deployed over the next decade. Secretary Yellen specifically stated that she would like the IRS to work closely with Deputy Secretary of the Treasury Wally Adeyemo “to identify specific operational initiatives and associated timelines that will improve taxpayer service, modernize technology, and increase equity in our system of tax administration by pursuing tax evasion by those at the top who today do not pay their tax bill.” The operational plan should include details on how resources will be spent over the next decade on technology, service improvement and personnel. Secretary Yellen indicated that she is prepared to approve the near-term use of funds to improve services for the next tax filing season.

Andrew R. Roberson
Andrew (Andy) R. Roberson focuses his practice on tax controversy and litigation matters. He represents clients before the Internal Revenue Service (IRS) Examination Division and Appeals Office and has been involved in over 75 matters at all levels of the federal court system, including the US Tax Court and Federal District Courts, several US Courts of Appeal and the Supreme Court. Andy has experience settling tax disputes through alternative dispute resolution procedures, including Fast Track Settlement and Post-Appeals Mediation, and in representing clients in Compliance Assurance Process (CAP) audits. In addition to representing corporations and partnerships in tax disputes, he also represents high net-worth individuals and assists taxpayers needing to make voluntary disclosures. Read Andy Roberson's full bio.


Kevin Spencer
Kevin Spencer focuses his practice on tax controversy issues. Kevin represents clients in complicated tax disputes in court and before the Internal Revenue Service (IRS) at the IRS Appeals and Examination divisions. In addition to his tax controversy practice, Kevin has broad experience advising clients on various tax issues, including tax accounting, employment and reasonable compensation, civil and criminal tax penalties, IRS procedures, reportable transactions and tax shelters, renewable energy, state and local tax, and private client matters. After earning his Master of Tax degree, Kevin had the privilege to clerk for the Honorable Robert P. Ruwe on the US Tax Court. Read Kevin Spencer's full bio.

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