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What to Expect During a Change of Administration

With the inauguration of President Trump, and the accompanying change of administration, the American people have been promised great change in all areas of the federal government. One question we at McDermott have been frequently asked since the election is: what should a taxpayer expect from the Internal Revenue Service (IRS) and the Department of Justice (DOJ) Tax Division while the transitions in the executive branch are taking place? Major tax policy changes are being discussed, but what about the immediate practical effects of a turnover in high-level personnel within these agencies, particularly if a taxpayer is under audit or investigation?

During a change in administration, taxpayers may be affected by any of the following:

  • If under audit, the exam team may ask for longer statute extensions than would otherwise apply, to account for possible delays in internal managerial-level approvals.
  • If a taxpayer is negotiating a settlement, and that settlement requires approval by the IRS National Office or the Assistant Attorney General for Tax, settlement approvals may be delayed due to personnel changes.
  • This applies to civil settlements reached with IRS Appeals, in Tax Court litigation, or in federal district court litigation. Delays are also possible for criminal agreements, including plea agreements, deferred prosecution agreements and non-prosecution agreements.
  • Ongoing litigation (particularly appellate litigation) may be stayed or delayed, to the extent a case involves a policy position that the administration may want to change.
  • The regulatory freeze enacted by the Trump administration also affects procedural regulations, including proposed regulations related to the new partnership audit rules.

Initial comments from prospective Secretary of Treasury Steven Mnuchin indicate that he believes IRS staffing should be increased, which would be a welcome change.  Any significant changes like this are likely to be long-term, however, so we are unlikely to see their effect for some time.




IRS Updates List of Items Requiring National Office Review

On June 30, 2016, the Internal Revenue Service (IRS) issued Chief Counsel Notice 2016-009, which can be found here. In the notice, the IRS updated the list of issues that require IRS National Office review (the List). The List indicates those issues or matters raised by IRS field examiners that must be coordinated with the appropriate IRS Associate office.

There are several new items on the List. Notably, corporate formations with repatriation transactions, certain spin-off transactions and transactions that may implicate Treasury Regulation § 1.701-2 partnership anti-abuse rules are now also included. Debt-equity issues pursuant to Section 385 continue to be on the List.

In addition, now included are issues designated for litigation and issues that for technical tax reasons will not be referred to the IRS Office of Appeals under Revenue Procedure 2016-22, Section 3.03 (also relating to issues designated for litigation). We discussed Revenue Procedure 2016-22 in a recent posting. (more…)




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