Hundreds of tax attorneys joined Hill staffers and officials from the IRS and Treasury Department May 11 to 13 for the American Bar Association tax section meeting in Washington.
There were dozens of sessions over the three days with panelists digging into the latest developments in tax policy and administration. It was a bit of a whirlwind, but that’s why we’re here—here are the top five takeaways from the conference:
Treasury Reviewing Regulations
Treasury officials said the agency’s microscope is now trained on proposed and temporary regulations from 2016 under a White House order that appeared to focus only on final regulations. That means an even broader range of rules pulled into the review mandated by President Donald Trump in an April 21 executive order, which directed Treasury to scrutinize “significant” guidance with an eye to possible changes or repeal.
At the same time, officials said, they have developed a way to move some tax regulations through the Treasury Department slowly, in a way consistent with the freeze on all federal regulations Trump ordered in January. While details are scarce, “the wheels are turning,” Brendan O’Dell, an attorney-adviser in Treasury’s Office of Tax Policy, said May 12. “The process for clearing regulations through Treasury has been established. Guidance will be issued, but at a measured pace.”
Partnership Guidance Coming
The Internal Revenue Service is continuing to work on guidance implementing the partnership audit procedures established in the Bipartisan Budget Act. The agency released a version of the rules in January, but the regulatory freeze prevented them from appearing in the Federal Register. Sub-regulatory guidance about the law is likely to appear in the Internal Revenue Manual this summer, O’Dell said.
The law is proving to be tricky for the agency to implement because of some procedural hurdles. The regulation freeze has limited the IRS’s ability to issue rules and hold hearings. Practitioners are also pushing Congress to pass technical corrections to the law that would allow partnerships to push audit adjustments to the investor at the end of a tiered structure. The IRS is hesitant to allow it without Congress actually changing the law. A technical-corrections measure hasn’t been introduced yet this year.
Senate Mulling Technical Side of Tax Reform
The Senate is thinking through some of the technical challenges of overhauling the tax code. Mark E. Warren, tax counsel for Senate Finance Committee member John Thune (R-S.D.), walked ABA attendees through the need for a mechanism to prevent taxpayers from gaming the system by routing their income through a business. The House and White House tax plans have called for special passthrough rates that are lower than the tax rates for individual income.
Additionally, the Senate is considering tailoring tax breaks toward the size of a business, Warren said. Larger companies could see lower tax rates, where small and mid-sized companies could be eligible for faster cost recovery, he said.
White House and Tax Reform
Drama in the White House could affect legislating ability, a Democratic tax counsel on the Ways and Means Committee said at the ABA meeting.
And this was before the Washington Post story Monday that said Trump might have divulged sensitive information to the Russians. Trump fired FBI Director James Comey late last week, setting off a firestorm on Capitol Hill.
“Let’s be honest. There’s a whole lot of noise going on in the background that is preventing us from doing regular, normal things,” Aruna Kalyanam, tax counsel and staff director for Ways and Means Democrats, said May 12. “I think we have to not ignore that aspect of it, too.”
Republican lawmakers have said in recent days that they are still on track with their top priorities, though they have acknowledged some of the White House controversy is a day-to-day distraction.
Keeping it Simple-ish
Treasury officials said they’re focused on making life easier for taxpayers in upcoming guidance.
Officials dealing with estate tax and exempt organizations stressed simplicity—a goal in line with a White House push to curb regulations and reduce the burden of existing rules.
Practitioners should send suggestions for areas that can be simplified, and those ideas could make their way into the agency’s upcoming priority guidance plan, Elinor C. Ramey, an attorney-adviser at Treasury, said May 12.
With assistance from Alison Bennett, Laura Davison, Kaustuv Basu and Allyson Versprille.
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