Inflation Reduction Act Archives - TAX CONTROVERSY 360

Weekly IRS Roundup August 15 – August 19, 2022

by McDermott Will & Emery | Aug 22, 2022 | IRS Appeals, IRS Guidance, Tax Reform, Tax Refunds

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of August 15, 2022 – August 19, 2022.

August 15, 2022: The IRS released Internal Revenue Bulletin 2022-33, which highlights the following:

Revenue Procedure 2022-29 (modifying and superseding Revenue Procedure 2006-36, 2006-38 I.R.B 498). This guidance updates how government agencies and members of the public should request the creation of special statistical studies and compilations involving return information. It also sets forth the criteria for determining reasonable fees for the costs associated with the creation of the special statistical studies and compilations.

Revenue Procedure 2022-34. This guidance updates the applicable percentage table used to calculate an individual’s premium tax credit beginning in calendar year 2023 and also updates the required contribution percentage for plan years beginning after calendar year 2022.

August 15, 2022: The IRS announced that interest rates for fourth quarter overpayments and underpayments will increase starting October 1, 2022. The new rates are as follows:

Individuals: 6% per year, compounded daily, for both overpayments and underpayments
Corporations: 5% for overpayments; 6% for underpayments
Corporate overpayments for the portion exceeding $10,000:5%
Large corporate underpayments: 8%

More information can be found in Revenue Ruling 2022-15, which includes tables of the calculations and explanations of how the IRS calculates the rates.

August 15, 2022: The IRS announced that it will delay the effective date of the Foreign Currency Guidance once again. The US Department of the Treasury (Treasury) and the IRS intend to amend the regulations under Internal Revenue Code Section 987 in order to defer the applicability date of the 2016 final regulations and related 2019 final regulations by one additional year. The amendments would apply to the taxable year beginning on January 1, 2024.

August 15, 2022: The IRS released final regulations, providing guidance to states wanting to inspect certain return information for the purpose of administering state laws related to tax-exempt organizations. The final regulations reflect changes to the Internal Revenue Code made by the Pension Protection Act of 2006.

August 15, 2022: The IRS announced that Form 990-N filers will use a new sign-in process beginning in August. Smaller charities that are eligible and choose to file Form 990-N must sign into the IRS modernized authentication platform using either their active IRS username or by creating an account here.

August 15, 2022: The IRS released Tax Tip 2022-124, reminding all truckers to file Form 2290, Heavy Highway Vehicle Use Tax Return, on or before the August 31, 2022, deadline. Truck owners who drive a highway motor vehicle weighing 55,000 pounds or more must file the return and pay the tax. In addition, taxpayers with 25 or more taxed vehicles must e-file the form.

August 16, 2022: [...]

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

by Kevin Spencer and McDermott Will & Emery | Aug 17, 2022 | IRS Audits, IRS Guidance, Tax Reform
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 [...]

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Is the IRS Finally Receiving Increased Funding?

by Kevin Spencer and McDermott Will & Emery | Jul 28, 2022 | IRS Audits, IRS Guidance, Tax Refunds
After months of back and forth, it appears that additional funding is on its way to the Internal Revenue Service (IRS). Senate Majority Leader Chuck Schumer (D-NY) released a statement yesterday on his agreement with Senator Joe Manchin (D-WV) on the FY2022 Budget Reconciliation legislation and plans to hold a vote in the US Senate next week. A summary of the Inflation Reduction Act of 2022 (Act) provides the following topline estimates:
Total Revenue Raised $739 billion 15% Corporate Minimum Tax $313 billion* Prescription Drug Pricing Reform $288 billion** IRS Tax Enforcement $124 billion** Carried Interest Loophole $14 billion* Total Investments $433 billion Energy Security and Climate Change $369 billion** Affordable Care Act Extension $64 billion** Total Deficit Reduction $300+ billion * = Joint Committee on Taxation Estimate ** = Congressional Budget Office Estimate

With respect to taxes, the summary states that the Act will “[m]ake the biggest corporations and ultra-wealthy pay their fair share” and “[t]here are no new taxes on families making $400,000 or less and no new taxes on small business – we are closing tax loopholes and enforcing the tax code.”

Section 10301 of the Act, entitled “Enhancement of Internal Revenue Service Resources,” provides the following appropriations:

IRS: $78,911,000,000

Taxpayer Services: $3,181,500,000

Provide taxpayer services, including pre-filing assistance and education; filing and account services; taxpayer advocacy services; and other services authorized by 5 U.S.C. 3109 (relating to employment of excerpts and consultants on a temporary or intermittent basis)

Enforcement: $45,637,400,000

Conduct tax enforcement activities to determine and collect owed taxes; provide legal and litigation support; conduct criminal investigations; provide digital asset monitoring and compliance activities; enforce criminal statutes related to violations of internal revenue laws and other financial crimes; purchase and hire passenger motor vehicles; and provide other services authorized by 3109

Operations Support: $25,326,400,000

Support taxpayer services and enforcement programs, including rent payments; facilities services; printing; postage; physical security; headquarters and other IRS-wide administrative activities; research and statistics of income; telecommunications; information technology development, enhancement, operations, maintenance and security; hire of passenger motor vehicles, operations of the IRS Oversight Board; and other services authorized by 3109

Business Systems Modernization: $4,750,700,000

Improve the business systems modernization program, including development of callback technology and other technology to provide a more personalized customer service experience but do not include the operation and maintenance of legacy systems.

Report on IRS-Run Free “Direct Efile” Tax Return System: $15,000,000

Deliver to US Congress (within nine months) a report on the cost of developing and running a free direct efile tax return system; taxpayer opinions, expectations and level of trust—based on surveys—for such a system; and opinions of an independent third party on the overall feasibility, approach, schedule, cost, organizational design and the IRS’s capacity to deliver such a system

Treasury Inspector General for Tax Administration (TIGTA): $403,000,000

For necessary expenses of the TIGTA [...]

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Weekly IRS Roundup August 15 – August 19, 2022

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

Is the IRS Finally Receiving Increased Funding?

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