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IRS and Treasury Department officials have been noticeably less forthcoming about the regulations the government plans to issue on the 2017 tax act, a change that comes as companies clamor for more clarity about how the law will affect them.
At recent tax conferences, including the May meeting of the American Bar Association Section of Taxation, officials stuck to a variation of this refrain: “We understand the issue and are working on regulations.”
If it seems as though Internal Revenue Service officials are more tight-lipped than usual, it’s because they have been instructed to be exceptionally reserved when talking about tax reform, said an agency official who requested anonymity to speak candidly. In the past, officials have been more willing to talk about their thinking on issues and rulemaking challenges.
The IRS and Treasury didn’t immediately respond to requests for comment.
It isn’t unusual for speakers from the government to limit what they say about impending regulations, but the message of “we are aware of that issue and have it under consideration” was so consistent and prevalent at the ABA tax section panels that it would be hard to believe that it wasn’t coordinated, Robert Ward, an attorney with WardChisholm P.C. in Bethesda, Md., said.
The reticence about the agency’s thinking comes as tax lawyers and their clients are planning their reactions to the changes in the law that lowered the corporate tax rate to 21 percent from 35 percent, overhauled how U.S. companies operating overseas are taxed, and provided a complex new deduction for pass-through businesses—companies where the owners pay the tax on their personal returns. Businesses are closely watching the IRS at the same time as the agency is closing the curtains.
“It’s like reading the tea leaves in the dark while wearing sunglasses,” said Stuart Gibson, counsel at Schiff Hardin LLP in Washington. “There may be some concern among career people that you don’t want to get ahead of the political process.”
Government officials, particularly career workers who aren’t appointed by the administration, are trying to make sure they don’t draw attention to themselves, the IRS official said. But political appointees aren’t immune either. Former Treasury official Dana Trier abruptly left his position as deputy assistant secretary for tax policy after publicly criticizing aspects of the tax law at the ABA tax section meeting in February. Trier is now counsel in Davis Polk & Wardwell LLP’s tax department in New York.
“I think you might see some response to Dana Trier’s departure in the sense that individuals may be unwilling to go beyond the specific parameters that they’ve been OK’d to talk about because they don’t want to rock the boat,” said Lisa Zarlenga, a partner with Steptoe & Johnson LLP in Washington who worked at Treasury as tax legislative counsel under President Barack Obama.
Craig Gerson, a principal at PricewaterhouseCoopers LLP in Washington who moderated a May 11 panel at the ABA conference on how the interest expense deduction limitation will apply to partnerships, began with this explanation: “You may have noticed the government speakers are somewhat reticent on panels today, so rather than fire questions at them that they can’t answer, we are going to turn things over to them for a moment, let them get out of their system things they might want to say, and then we’re not going to bother them.”
Bryan Rimmke, an attorney-adviser in Treasury’s Office of Tax Legislative Counsel, said, “I actually don’t have anything I would like to say, but I’ll do my best to actually chime in where I can.”
A tax practitioner who attended the conference and asked to remain anonymous said the Office of Management and Budget’s new review powers over parts of the 2017 tax law (Pub. L. No. 115-97) may also be contributing to the unwillingness of people in Treasury and the IRS to say things that might be construed differently in the press than expected.
The amount that speakers are willing to divulge about regulations likely depends on the project being discussed, Zarlenga said.
“I would assume that if there are significant policy and legal calls that haven’t been made yet, the government speakers aren’t going to be out there speculating on what’s going to be in the regs,” she said.
In some cases at the May 10-12 ABA tax section meeting, government officials didn’t just say that they were aware of the issues and working on regulations. A couple of speakers identified specific issues they were considering for a particular project. Others offered insight into how they were thinking about a particular aspect of the new law, answering practitioner questions with, “Yeah, that’s my take on it too,” Zarlenga said.
Eric Solomon, a principal in Ernst & Young LLP’s National Tax Department in Washington and a former Treasury assistant secretary for tax policy under President George W. Bush, didn’t comment on whether the government speakers were more tight-lipped than in the past. However, under any administration and for any regulatory project, government representatives need to be careful of what they say before rules are published, Solomon, chair-elect of the ABA tax section, told Bloomberg Tax.
They don’t want to mislead taxpayers and practitioners should the regulations end up being different than they originally thought, he said. They also have to be careful not to give information to some people that isn’t available to everyone else at the same time, Solomon said.
Regardless of how much information Treasury and IRS officials share, Solomon said, it’s important that they attend events like the ABA tax section meeting.
“Their presence at ABA meetings and other forums is very important so they can hear the issues that taxpayers and their representatives are facing, as well as the relative priorities of those issues,” he said.
“In addition, their presence puts a human face on the decision-makers, allows taxpayers to feel they have some input into the system, and diminishes the perception that decisions are made without sufficient engagement with the public,” Solomon said.
The ABA tax section’s chair, Karen Hawkins, said in an emailed statement that “the government speakers conducted themselves as they deemed appropriate and the Section is always appreciative that they are willing to give their time to address our tax lawyers during this and all other Section meetings.”
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