After the December holiday season (during which Congress was not in session), there are few tax legislative developments to report. At this time, Congress appears to be more concerned with political posturing than with taking action in the tax arena. The following are some recent developments:
I. Tax Code Overhaul Unlikely in 2014 - Echoing similar comments by Representative Dave Camp (R-Mich.), U.S. Chamber of Commerce CEO Thomas Donahue has told reporters that the possibility of an overhaul of the Internal Revenue Code in 2014 is remote. Mr. Thomas did indicate, however, that he does not rule out smaller fixes this year. In the words of Mr. Donahue, "This is a complicated issue for the country and especially for the business community, and here's why: Everyone likes tax reform in theory until it's their favored position up for elimination."
II. House Democrats Believe That At Least Some of the Tax Breaks That Expired on January 1, 2014 May Be Resurrected in Spring 2014 - In a December 12, 2013 business luncheon hosted by the New Markets Tax Credit Coalition, Representative Richard Neal (D-Mass.) offered his views on tax reform and "tax extenders" (legislation extending the life of those tax breaks that expired on January 1, 2014). He indicated that Congress may renew at least some of the expired tax breaks as soon as the first quarter of 2014. According to Rep. Neal, "They have to get it done, so I think if reform stalls, my sense is sometime around February or March, maybe" [at least some of the expired tax breaks will be reinstated retroactively for all of 2014]. The New Markets Tax Credit Coalition is a vocal supporter of the New Markets Tax Credit, which was one of the many tax breaks that expired on January 1, 2014. The credit provided an economic incentive for businesses to invest in low-income communities.
III. Senate Republicans Not As Certain That Tax Extenders Will Happen Soon - Speaking at a Republican party lunch on January 9, 2014, Senator Orrin Hatch (R-Utah) said that swift action in the Senate's Finance Committee is not likely for extending the nearly 60 tax breaks that expired on January 1, 2014. According to Senator Hatch, it would take time to examine the list of nearly 60 expired tax breaks to determine which ones to renew. Senator Hatch feels that the Finance Committee's current priorities are establishing a Trade Promotion Authority agreement, and finding ways to pay for a legislative fix to prevent Medicare reimbursements to physicians from sharply decreasing. Even if the Finance Committee takes up a bill to extend the tax breaks, Senator Hatch indicated that he would be in favor of extending "only the ones that we really should do".
IV. National Taxpayer Advocate Urges Comprehensive Taxpayer Bill of Rights to Increase Taxpayer Trust in IRS - In her 2013 Annual Report to Congress, National Taxpayer Advocate Nina E. Olson made a recommendation to the IRS that it adopt a comprehensive Taxpayer Bill of Rights. In her report, Ms. Olson notes that the effective collection of taxes by the IRS depends on voluntary compliance with the tax laws by taxpayers, and that taxpayer rights are essential to voluntary compliance. As stated by Ms. Olson, "If taxpayers believe they are treated, or can be treated, in an arbitrary and capricious manner, they will mistrust the tax system and be less likely to comply with the laws voluntarily. If taxpayers have confidence in the fairness and integrity of the system, they will be more likely to comply". In arguing that knowledge of taxpayer rights promotes voluntary compliance, the report cites a survey of U.S. taxpayers. The survey found that less than 50% of the survey respondents believed that they have rights before the IRS, and that only 11% said they knew what those rights are. The report calls on the IRS to take the taxpayer rights that already exist in the Internal Revenue Code and group them into 10 broad categories, modeled on the U.S. Constitution's Bill of Rights. According to the report, this would help taxpayers better understand their rights.
V. House Republicans Demand the Removal of a Donor to the Democratic Party From the Justice Department's Investigation of the IRS's Handling of Requests For Tax Exemption By Tea Party Groups - Republican members of the House Oversight and Government Reform Committee are demanding that Attorney General Eric Holder remove Barbara Bosserman from leading the criminal investigation of the IRS by the Department of Justice. The investigation is aimed at determining whether the IRS's handling of tax exemption requests filed with the IRS by Tax Party groups was politically motivated (by a desire to delay or deny such requests). Apparently, Ms. Bosserman is a well-known Democratic political donor, which Republicans say is a clear indication of a conflict of interest. They maintain her participation in the investigation of the IRS's treatment of Tea Party groups is inappropriate, since these groups are generally perceived as favoring Republican candidates and/or causes.
For additional information regarding this topic, please contact your local UHY LLP professional.
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