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Friday, November 21, 2014

CBO: Options for Reducing the Deficit, 2015 to 2024

Congressional Budget Office, Options for Reducing the Deficit: 2015 to 2024:

This document provides estimates of the budgetary savings from 79 options that would decrease federal spending or increase federal revenues over the next decade. 

36 of these 79 options are tax increases:

CBO

Individual Income Tax Rates
1.  Increase Individual Income Tax Rates
2.  Implement a New Minimum Tax on Adjusted Gross Income
3.  Raise the Tax Rates on Long-Term Capital Gains and Dividends by 2 Percentage Points

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November 21, 2014 in Congressional News, Gov't Reports, Tax | Permalink | Comments (0)

Wednesday, November 12, 2014

CBO: The Distribution of Household Income and Federal Taxes, 2011

Congressional Budget Office, The Distribution of Household Income and Federal Taxes, 2011:

Overall, federal taxes are progressive, meaning that average tax rates generally rise as income increases. Households in the lowest income quintile paid about $500 in federal taxes in 2011, on average, which amounted to an average federal tax rate of about 2 percent, CBO estimates. Households in the middle quintile paid about $7,000 in federal taxes, and households in the highest quintile paid about $58,000 in federal taxes, which results in average federal tax rates of approximately 11 percent and 23 percent, respectively.

As a result of the progressive federal tax structure, households in the highest quintile of before-tax income paid a greater share of federal taxes in 2011 than they received in before-tax income, while households in each of the other quintiles paid a smaller share of federal taxes than they received in before-tax income (see figure below). Households in the highest income quintile received a little more than half of total before-tax income and paid more than two-thirds of all federal taxes in 2011. In contrast, households in the lowest income quintile received approximately 5 percent of total before-tax income in 2011 and paid less than 1 percent of all federal taxes, CBO estimates.

Chart 1A

CBO estimates that average federal tax rates under 2013 law would be higher—relative to tax rates in 2011—across the income spectrum. The estimated rates under 2013 law would still be well below the average rates from 1979 through 2011 for the bottom four income quintiles, slightly below the average rate over that period for households in the 81st through 99th percentiles, and well above the average rate over that period for households in the top 1 percent of the income distribution.

Chart 2A

Government transfers and federal taxes lessen income inequality because federal taxes are progressive and payments from government transfer programs generally decline as a share of income as income rises. Between 1979 and 2011, government transfers reduced income inequality to a greater extent than federal taxes, based on a standard measure of inequality known as the Gini index. In 2011, government transfers accounted for approximately two-thirds of the reduction in income inequality observed between market income and after-tax income.

Chart 18

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November 12, 2014 in Congressional News, Tax | Permalink | Comments (0)

Monday, October 13, 2014

Congress, GAO Target ‘Supersize’ IRAs

Super Size MeFollowing up on my previous posts:

Wall Street Journal Tax Report:  Washington Scrutiny of ‘Supersize’ IRAs, by Laura Saunders:

Washington is taking a hard look at tax-sheltered retirement accounts, especially “supersize” ones worth millions of dollars. Savers should consider what it could mean for them.

The U.S. Government Accountability Office, an arm of Congress, recently released a report on individual retirement accounts, requested by Senate Finance Committee Chairman Ron Wyden (D., Ore.). Its publication coincided with Senate hearings on retirement savings held last month.

The GAO study addressed questions many people asked after disclosures that former presidential candidate Mitt Romney had a traditional IRA worth as much as $101 million and technology entrepreneur Max Levchin put more than 13.3 million shares of Yelp YELP -5.11% stock in a Roth IRA before the firm went public in 2012.

How many supersize IRAs are there? The GAO estimates more than 300 individuals or families have IRAs with balances greater than $25 million, while more than 9,000 have IRAs worth more than $5 million. The GAO wasn’t able to distinguish between regular and Roth IRAs, given the data. ...

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October 13, 2014 in Congressional News, Gov't Reports, Tax | Permalink | Comments (0)

Monday, September 29, 2014

Graetz: The Bipartisan 'Inversion' Evasion: Meaningful Tax Reform Requires a Different President and a Different Congress

Wall Street Journal op-ed:  The Bipartisan 'Inversion' Evasion: Neither the White House Nor Congress Seems Interested in Tax Reform That Would Make Companies Want to Stay Here, by Michael J. Graetz (Columbia):

Tennessee Williams was famous for concocting American dramas where something is terribly wrong but no one is willing to talk about the underlying problem. That is exactly where we are now with the Obama administration's attack on "corporate inversions"—transactions where a U.S. company merges with a foreign company and locates the parent company abroad to reduce taxes.

This week Treasury Secretary Jack Lew announced new regulations that "will significantly diminish the ability of inverted companies to escape U.S. taxation." For some U.S. companies considering inversion, he said, the new measures will mean inverting will "no longer make economic sense." He admitted, however, that Treasury's moves are just a stopgap measure until Congress enacts corporate tax reform.

President Obama, Mr. Lew and just about everyone in Congress agree that the laws governing corporate taxation need rewriting. Members of both parties say they support reforms that will lower the corporate tax rate—now the highest statutory rate among developed nations—and make our corporate tax system more "competitive." The president points to his Framework for Business Tax Reform, announced in February 2012. Republicans take their cues from a comprehensive tax-reform plan issued in February by outgoing House Ways and Means Committee Chairman Dave Camp. Mr. Obama's plan would lower the corporate tax rate to 28% from 35%. Mr. Camp's plan would lower it to 25%. Both would impose a "minimum" tax rate of around 15% on the foreign earnings of a U.S. multinational corporation.

The Treasury's new regulations are aimed at hindering inverted companies' ability to bring cash back to the U.S. free of corporate taxes. And they would require the new foreign parent to be engaged in real business activities. But the new regulations do not address one of the advantages of inversion—the inverted companies' ability to use debt from their foreign parent to increase interest deductions as a way to strip earnings out of the U.S. ...

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September 29, 2014 in Congressional News, Tax | Permalink | Comments (0)

Wednesday, August 27, 2014

CBO: An Update to the Budget and Economic Outlook

Congressional Budget Office, An Update to the Budget and Economic Outlook (Aug. 2014):

Figure 1-1

 

August 27, 2014 in Congressional News, Gov't Reports, Tax | Permalink | Comments (1)

Tuesday, August 5, 2014

Joint Tax Committee Releases Tax Expenditure Estimates for 2014-2018

The Joint Committee on Taxation yesterday released Estimate of Federal Tax Expenditures for Fiscal Years 2014-2018 (JCS-97-14):

Joint Tax CommitteeTax expenditure analysis can help both policymakers and the public to understand the actual size of government, the uses to which government resources are put, and the tax and economic policy consequences that follow from the implicit or explicit choices made in fashioning legislation. This report1 on tax expenditures for fiscal years 2014-2018 is prepared by the staff of the Joint Committee on Taxation. ...  As in the case of earlier reports, the estimates of tax expenditures in this report were prepared in consultation with the staff of the Office of Tax Analysis in the Department of the Treasury (“the Treasury”).

The Joint Committee staff has made its estimates (as shown in Table 1) based on the provisions in Federal tax law enacted through June 30, 2014. Expired or repealed provisions are not listed unless they have continuing revenue effects that are associated with ongoing taxpayer activity. Proposed extensions or modifications of expiring provisions are not included until they have been enacted into law. The tax expenditure calculations in this report are based on the January 2014 Congressional Budget Office (“CBO”) revenue baseline and Joint Committee staff projections of the gross income, deductions, and expenditures of individuals and corporations for calendar years 2013-2018.

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August 5, 2014 in Congressional News, Tax | Permalink | Comments (0)

Senate Finance Committee Unanimously Approves Tax Court Nominee Pugh

PughThe Senate Finance Committee on Friday unanimously approved the nomination of Cary Douglas Pugh to the U.S. Tax Court: (June 6, 2014):

Cary Douglas Pugh is currently Counsel in the tax department at Skadden, Arps, Slate, Meagher & Flom, L.L.P., a position she has held since 2005. From 2002 to 2005, Ms. Pugh was the Special Counsel to the Chief Counsel of the Internal Revenue Service. From 1999 to 2002, Ms. Pugh served as Tax Counsel for the Senate Committee on Finance, where she was responsible for advising committee members on individual and corporate tax issues. Ms. Pugh was an associate at Vinson & Elkins, L.L.P. from 1995 to 1999 and Judicial Clerk to the Honorable Jackson L. Kiser on the U.S. District Court for the Western District of Virginia from 1994 to 1995. Ms. Pugh received a B.A. from Duke University, an M.A. from Stanford University, and a J.D. from the University of Virginia School of Law.

Pugh will join the Tax Court once she is confirmed by the full Senate, along with pending nominees Tamara Ashford and L. Paige Marvel.

August 5, 2014 in Congressional News, Tax | Permalink | Comments (0)

Monday, August 4, 2014

NPR: Tax Extenders Bill Killed by Politics on Capitol Hill

NPR -- It's All Politics,  A Tax Bill Killed By The Push And Pull Of Politics On The Hill:

NPRA few months back, Sen. Ron Wyden, a Democrat from Oregon, brought a bill to the floor that basically offered tax incentives to businesses and individuals. Those incentives are called tax extenders.

They include big stuff and small stuff — tax breaks for wind farms, tax breaks for schoolteachers who buy their own supplies. Tax breaks for rum producers in Puerto Rico, people who make movies, race track owners, even some breaks for people who bike to work. In other words, something for every lawmaker to take home.

This should have been a slam dunk. And at first, it was. Ninety-six senators gathered in the chamber shortly after Wyden's speech, and all voted in favor of moving the bill forward. But two days later, this bill, with 96 out of 100 supporters, was stopped cold. To anyone watching, it might have looked like some special kind of insanity.

But Howard Gleckman, a senior fellow with the tax policy center at the Urban Institute, says look closer.

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August 4, 2014 in Congressional News, Tax | Permalink | Comments (1)

Tuesday, July 22, 2014

Senate Report Criticizes Hedge Funds' Use of Basket Options Tax Strategy

Senate LogoSenate Permanent Subcommittee on Investigations, Committee on Homeland Security and Governmental Affairs, Abuse of Structured Financial Products: Misusing Basket Options to Avoid Taxes and Leverage Limits (97 pages):

For the last decade, the U.S. Senate Permanent Subcommittee on Investigations has presented case histories showing how financial institutions, law firms, accountants, and others have designed and implemented complex financial structures to take advantage of and, at times, abuse or violate U.S. tax statutes, securities regulations, and accounting rules. This investigation offers yet another detailed case study of how two financial institutions – Deutsche Bank AG and Barclays Bank PLC – developed structured financial products called MAPS and COLT, two types of basket options, and sold them to one or more hedge funds, including Renaissance Technologies LLC and George Weiss Associates, that used them to avoid federal taxes and leverage limits on buying securities with borrowed funds. While that type of option product was identified as abusive in a public memorandum by the IRS 2010, taxes have yet to be collected on many of the basket option transactions and its use to circumvent federal leverage limits has yet to be analyzed or halted. 

July 22, 2014 in Congressional News, Tax | Permalink | Comments (0)

Senate Holds Hearing Today on The Taxation of Income of U.S. Multinational Enterprises

Senate LogoThe Senate Finance Committee holds a hearing today on The U.S. Tax Code: Love It, Leave It or Reform It!:

  • Mihir Desai (Harvard University)
  • Peter Merrill (PricewaterhouseCoopers)
  • Leslie Robinson (Dartmouth College)
  • Pascal Saint-Amans (OECD)
  • Allan Sloan (Fortune)
  • Robert Stack (U.S. Treasury Department)

In connection with the hearing, the Joint Committee on Taxation has released Present Law and Background Related to Proposals to Reform the Taxation of Income of Multination Enterprises (JCX-90-14) (99 pages):

This document ...  includes a description of present law, background on recent global activity related to the taxation of cross-border income, and descriptions and a comparison of recent proposals to reform the U.S. international tax system. ...

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July 22, 2014 in Congressional News, Tax | Permalink | Comments (0)

Tuesday, June 24, 2014

Senate Holds Hearing Today on Student Loans and Tax Policy

Senate LogoThe Senate Finance Committee holds a hearing today on Less Student Debt from the Start: What Role Should the Tax System Play?:

  • Mark J. Mazur (Assistant Secretary for Tax Policy, U.S.Treasury Department)
  • Jayne Caflin Fonash (Director of School Counseling, Loudoun Academy of Science, Sterling, VA)
  • Scott A. Hodge (President, Tax Foundation, Washington, D.C.)
  • Amber Lee (Graduate, Willamette High School, Eugene, OR)
  • Dean Zerbe (National Managing Director, alliantgroup, Washington, D.C.) 

In connection with the hearing, the Joint Committee on Taxation has released Background And Present Law Related To Tax Benefits For Education (JCX-70-14) (June 20, 2014):

This document ... includes a description of present law and analysis relating to tax benefits for education.

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June 24, 2014 in Congressional News, Tax | Permalink | Comments (0)

Wednesday, June 11, 2014

CRS: Tax Issues in Corporate Expatriation, Inversions, and Mergers

CRS LogoDonald J. Marples & Jane G. Gravelle, Corporate Expatriation, Inversions, and Mergers: Tax Issues, Cong. Res. Serv. (R43568) (May 27, 2014):

News reports in the late 1990s and early 2000s drew attention to a phenomenon sometimes called corporate “inversions” or “expatriations”: instances where U.S. firms reorganize their structure so that the “parent” element of the group is a foreign corporation rather than a corporation chartered in the United States in order to reduce the effect of the U.S. corporate income tax. These corporate inversions apparently involved few, if any, shifts in actual economic activity from the U.S. abroad, at least in the near term. Bermuda and the Cayman Islands—countries with no corporate income tax—were the location of many of the newly created parent corporations, and tax savings were the principal objective.

These types of inversions largely ended with the enactment of the American Jobs Creation Act of 2004 (JOBS Act, P.L. 108-357), which denied the tax benefits of an inversion if the original U.S. stockholders owned 80% or more of the new firm. The Act effectively ended shifts to tax havens where no real business activity took place.

However, two avenues for inverting remained. The Act allowed a firm to invert if it has substantial business operations in the country where the new parent was to be located; the regulations at one point set a 10% level of these business operations. Several inversions using the business activity test resulted in Treasury regulations in 2012 that increased the activity requirement to 25%, effectively closing off this method. Firms could also invert by merging with a foreign company if the original U.S. stockholders owned less than 80% of the new firm.

Two features made a country an attractive destination: a low corporate tax rate and a territorial tax system that did not tax foreign source income. Recently, the UK joined countries such as Ireland, Switzerland, and Canada as targets for inverting when it adopted a territorial tax. At the same time the UK also lowered its rate (from 25% to 20% by 2015).

Recently, several high profile companies have indicated an interest in merging or plans to merge with a non-U.S. headquartered company, including Pfizer and Chiquita. Pfizer, for example, was interested in merging with a smaller British firm, AstraZeneca, and moving headquarters to the UK. For Pfizer, which has accumulated substantial profits in subsidiaries in low tax foreign countries that would be taxed if paid to the U.S. parent, the territorial tax system is likely the most important tax benefit from such a merger. This “second wave” of inversions again raises concerns about an erosion of the U.S. tax base.

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June 11, 2014 in Congressional News, Tax | Permalink | Comments (1)

Wednesday, April 23, 2014

GAO: Budget Cuts Hurt IRS's Performance

GAO,  GAO LogoInternal Revenue Service: Absorbing Budget Cuts Has Resulted in Significant Staffing Declines and Uneven Performance (GAO-14-534) (Apr. 21, 2014):

IRS’s appropriations have declined to below fiscal year 2009 levels and FTEs have been reduced by about 8,000 since fiscal year 2009. Planned performance in enforcement and taxpayer service has decreased or fluctuated; for example, in the fiscal year 2014 congressional justification the audit coverage target for individual examinations was 1.0 percent for fiscal year 2014, however, the target was lowered to 0.8 percent in the fiscal year 2015 congressional justification. Amidst lower demand, IRS’s telephone level of service performance (the percentage of callers seeking live assistance and receiving it) was 73 percent from January 1 through March 15, 2014 compared to 69 percent during the same period last year. However, between fiscal years 2009 and 2013, IRS’s telephone level of service fluctuated between 61 percent and 74 percent. Average wait times have almost doubled since fiscal year 2009—from 8.8 minutes to 16.8 minutes as of mid-March 2014.

Not including other budgetary resources such as user fees, the fiscal year 2015 budget request for IRS is $12.5 billion, which is an increase of 10.5 percent ($1.2 billion) in funding and 8.3 percent in staffing (6,998 FTEs) over fiscal year 2014. According to the President’s budget, of the requested $1.2 billion, $480 million is predicated on a cap adjustment—funding above the discretionary spending limit—and largely covers enforcement and infrastructure initiatives. IRS’s workload has increased as a result of legislative mandates and priority programs, such as work related to the Patient Protection and Affordable Care Act and identity theft.

IRS has absorbed approximately $900 million in budget cuts since fiscal year 2010 through savings and efficiencies and by reducing, delaying, or eliminating services. For example, IRS delayed two information technology projects (Information Reporting and Document Matching and Return Review Program) and substantially reduced employee training. To help improve operations, the President requested a large budget increase for IRS in fiscal year 2015. However, additional funding is not the only solution. We have open recommendations on IRS’s operations that may help it achieve efficiencies over time, such as developing a long-term plan to improve web services.

IRS Enacted Appropriations, FY 2009-2014, and Fiscal Year 2015 Request

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April 23, 2014 in Congressional News, Gov't Reports, IRS News, Tax | Permalink | Comments (0)

Wednesday, April 9, 2014

Testimony in Yesterday's Congressional Tax Hearings

Capitol HillSenate Budget Committee, Supporting Broad-Based Economic Growth and Fiscal Responsibility through a Fairer Tax Code:

  • John L. Buckley (Former Chief Counsel, House Ways & Means Committee and former Chief of Staff, Joint Committee on Taxation)
  • Jane Gravelle (Senior Specialist in Economic Policy, Congressional Research Service)
  • Diana Furchtgott-Roth (Senior Fellow, Manhattan Institute for Policy Research)

Senate Finance Committee, Protecting Taxpayers from Incompetent and Unethical Return Preparer: (detailed coverage here):

House Ways & Means Committee, The Benefits of Permanent Tax Policy for America’s Job Creators:

April 9, 2014 in Congressional News, Tax | Permalink | Comments (0)

Tuesday, April 1, 2014

Senate Holds Hearing Today on Caterpillar's Tax Reduction Strategies

CaterpillarThe Permanent Subcommittee on Investigations Subcommittee of the Senate Homeland Security and Governmental Affairs Committee holds a hearing today on Caterpillar's Offshore Tax Strategy (webcast):

Panel #1:

Panel #2:

  • Thomas F. Quinn (PricewaterhouseCoopers, Chicago)
  • Steven R. Williams (PricewaterhouseCoopers, McLean, VA)
  • James G. Bowers (PricewaterhouseCoopers, Dallas)

Panel #3:

  • Julie A. Lagacy (Finance Services Division, Caterpillar)
  • Robin D. Beran (Chief Tax Officer, Caterpillar)
  • Rodney Perkins (Former Senior International Tax Manager, Caterpillar)

Press and blogosphere:

April 1, 2014 in Congressional News, Tax | Permalink | Comments (0)

Monday, March 31, 2014

Joint Tax Committee Releases Overview of the Federal Tax System as in Effect for 2014

Joint Tax CommitteeThe Joint Committee on Taxation has released Overview of the Federal Tax System as in Effect for 2014 (JCX-25-14) (Mar. 28, 2014):

This document ... provides a summary of the present-law Federal tax system as in effect for 2014.

The current Federal tax system has four main elements: (1) an income tax on individuals and corporations (which consists of both a “regular” income tax and an alternative minimum tax); (2) payroll taxes on wages (and corresponding taxes on self-employment income) to finance certain social insurance programs; (3) estate, gift, and generation-skipping taxes, and (4) excise taxes on selected goods and services. This document provides a broad overview of each of these elements.

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March 31, 2014 in Congressional News, Tax | Permalink | Comments (0)

Thursday, February 27, 2014

Editorial Page Reactions to the House GOP Tax Reform Plan

Tax Reform LogoEditorial page reactions to the House GOP tax reform plan from

  • Bloomberg
  • New York Times
  • Wall Street Journal
  • Washington Post
  • USA Today

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February 27, 2014 in Congressional News, Tax | Permalink | Comments (0)

Wednesday, February 26, 2014

House GOP Releases Tax Reform Plan

Tax Reform LogoThe House Ways & Means Committee Republicans today released a tax reform plan, The Tax Reform Act of 2014:

Press and blogosphere coverage:

February 26, 2014 in Congressional News, Tax | Permalink | Comments (2)

Mays Receives 2014 Pillar of Excellence Award

Janice Mays, Democratic Staff Director, Chief Counsel, and Former Chief Tax Counsel of the House Ways & Means Committee received the 2014 Pillar of Excellence Award at the Tax Council Policy Institute's 15th Annual Tax Policy & Practice Symposium in Washington, D.C.:

MaysThe 2014 award is given to Mays based on her extraordinary dedication and contribution to the field of tax law and policy. ... "Janice Mays embodies all the characteristics the Pillar of Excellence Award was designed to recognize," said Lynda K. Walker, executive director and general counsel of TCPI. "For more than three decades she has been a driving force behind federal tax policy development and is both widely regarded as a thoughtful expert and highly respected on both sides of the aisle for her leadership on Capitol Hill. We are honored to present the award to Janice, who has dedicated her career to shaping sound and fair tax policy."

Mays is the first woman and fifth overall recipient of this award, which honors individuals who consistently go above and beyond what is required, proving to be true leaders in their field. ... Qualifications for the Pillar of Excellence Award include playing a key role in tax policy; its impact on the tax business and national economy; participation in knowledge-sharing opportunities; and demonstration of the overall understanding of tax policies among professionals, executives and policymakers.

Mays joined the Committee staff in 1975 after receiving her undergraduate degree (cum laude) from Wesleyan College in Macon, Ga., and her juris doctorate from the University of Georgia College of Law.  She also holds a Master of Law in taxation from the Georgetown University School of Law.

February 26, 2014 in Congressional News, Tax | Permalink | Comments (1)

Senate Charges Credit Suisse With Helping U.S. Clients Evade U.S. Taxes

Tuesday, February 25, 2014

House GOP Releases Tax Reform Plan

Tax Reform LogoThe House Ways & Means Committee Republicans today released a tax reform plan, Making Today’s Tax Code Simpler and Fairer while Creating More Jobs and Higher Take Home Pay for American Workers:

The Ways and Means Committee has held more than 30 separate hearings on comprehensive tax reform over the last three years and released three discussion drafts.

1.  Simplifying taxes for small business and their employees:

This draft is specifically focused on reducing the burden the tax code imposes on small businesses and their workers.  With about half of the private sector workforce employed by a small business – a total of nearly 60 million Americans –  every dollar spent on complying with an overly complex, burdensome and broken tax code is a dollar that cannot be used for investment, hiring and higher wages for American workers.

The discussion draft contains several core components that simplify tax compliance for small businesses and provide certainty with respect to the ability of small businesses to recover certain costs immediately.  These include widely supported reforms such as permanent section 179 expensing and expansion of the “cash accounting” method, amongst other provisions.  The discussion draft also includes two separate options designed to achieve greater uniformity between S corporations and partnerships – one that revises current rules and a second that replaces current tax rules with a new unified pass-through regime.

2.  Making Wall Street play by the rules:

The proposal seeks to modernize tax rules to minimize Wall Street’s ability to hide and disguise potentially significant risks through the abuse of derivatives and other novel financial products – an activity that was a contributing factor to the 2008 financial crisis.  The discussion draft also outlines changes to tax rules designed to provide greater simplicity and uniformity.

3.  Helping America compete and win when doing business overseas:

Despite losing jobs to foreign competitors, America is still using an outdated international tax system designed nearly 60 years ago.  Yet, in recent years, virtually every one of our major competitors around the globe has been actively reforming their tax laws.  Even our closest neighbors are getting ahead of us, as Canada has already reformed its tax code and Mexico is doing so right now.  If we don’t take action, we risk falling further behind.

An American tax code should make it easier for American companies to bring profits earned overseas back home to the U.S. – so they can be invested here – and that is the purpose of the international tax reform draft.

Press and blogosphere coverage:

February 25, 2014 in Congressional News, Tax | Permalink | Comments (0)

Friday, February 7, 2014

CRS: Tax Rates and Economic Growth

CRS LogoCongressional Research Service, Tax Rates and Economic Growth (R42111) (2014):

This report summarizes the evidence on the relationship between tax rates and economic growth, referring in a number of cases to other CRS reports providing more substance and detail. Potentially negative effects of tax rates on economic growth have been an issue in the debates about whether to increase taxes to reduce the deficit and whether to reform taxes by broadening the base to lowering tax rates.

Initially, it is important to make a distinction between the effects of policies aimed at short-term stimulation of an underemployed economy and long-run growth. In the short run, both spending increases and tax cuts are projected to increase employment and output in an underemployed economy. These effects operate through the demand side of the economy. In general, the largest effects are from direct government spending and transfers to lower-income individuals, whereas the smallest effects are from cutting taxes of high-income individuals or businesses.

Long-run growth is a supply-side phenomenon. In the long run, the availability of jobs is not an issue as an economy naturally creates jobs. Output can grow through increases in labor participation and hours, increases in capital, and changes such as education and technological advances that enhance the productivity of these inputs.

Historical data on labor participation rates and average hours worked compared to tax rates indicate little relationship with either top marginal rates or average marginal rates on labor income. Relationships between tax rates and savings appear positively correlated (that is, lower savings are consistent with lower, not higher, tax rates), although this relationship may not be causal. Similarly, during historical periods, slower growth periods have generally been associated with lower, not higher, tax rates.

A review of statistical evidence suggests that both labor supply and savings and investment are relatively insensitive to tax rates. Small effects arise in part because of offsetting income and substitution effects (which make the direction of effects uncertain) and in part because each of these individual responses appears small. Institutional constraints may also have an effect. Offsetting income and substitution effects also affect savings. Capital gains taxes are often singled out as determinants of growth, but their effects on the cost of capital are quite small. International capital flows also appear to have a small effect. Most expenditures that affect the productivity of labor and capital inputs (research and development, education, or infrastructure) are already tax favored or provided by the government. Small business taxes are also sometimes emphasized as important to growth, but the evidence suggests a modest and uncertain effect on entrepreneurship.

Claims that the cost of tax reductions are significantly reduced by feedback effects do not appear to be justified by the evidence, where feedback effects are in the range of 3% to 10% and can, in some cases, be negative. Because of the estimated realizations response, capital gains tax cuts have in the past been estimated to have a large revenue offset (about 60%), but more recent empirical estimates suggest one of about 20%. In general, for stand-alone rate reductions the additions to the deficit would cause tax cuts to have a larger cost both because of debt service and because of crowding out of investment, which would swamp most behavioral effects.

(Hat Tip:  Bruce Bartlett.)  Prior TaxProf Blog posts:

February 7, 2014 in Congressional News, Tax | Permalink | Comments (1)

Thursday, January 30, 2014

CRS: Overview of the Federal Tax System

CRS LogoCongressional Research Service, Overview of the Federal Tax System (RL32808) (Jan. 23, 2014):

The major sources of federal tax revenue are individual income taxes, Social Security and other payroll taxes, corporate income taxes, excise taxes, and estate and gift taxes. This report describes the federal tax structure, provides some statistics on the tax system as a whole, and presents analysis of selected tax concepts.

(Hat Tip: Bruce Bartlett.)

January 30, 2014 in Congressional News, Tax | Permalink | Comments (0)

Thursday, January 16, 2014

Conservative Groups Urge Congress to Reject Proposed 501(c)(4) Regs

A coalition of 55 conservative organizations has sent this letter to Congress requesting it to reject the IRS's proposed regulations limiting the political speech of 501(c)(4) groups:

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January 16, 2014 in Congressional News, IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Sunday, December 22, 2013

Joint Tax Committee Releases Description of President Obama's Tax Proposals

Joint Tax CommitteeJoint Committee on Taxation, Description of Certain Revenue Provisions Contained in the President's Fiscal Year 2014 Budget Proposal (JCS-4-13) (220 pages):

This document ... provides a description and analysis of certain revenue provisions modifying the Internal Revenue Code ... that are included in the President’s fiscal year 2014 budget proposal. ... Because many of the provisions in the 2014 budget proposal are substantially similar or identical to the fiscal year 2013 budget proposal, the Joint Committee Staff has described only those provisions that did not appear in the fiscal year 2013 budget proposal or that are substantially modified. The document generally follows the order of the proposals as included in the Department of the Treasury’s explanation of the President’s budget revenue proposals. For new provisions, there is a description of present law and the proposal (including effective date), and a discussion of policy issues related to the proposal. For modified provisions, there is a description of the modification, and a footnote directing the reader to the Joint Committee Staff’s description of the revenue provision as it appeared in the fiscal year 2013 budget proposal.

December 22, 2013 in Congressional News, Tax | Permalink | Comments (0)

Thursday, December 19, 2013

Senate Finance Committee Releases Energy Tax Reform Plan

Tuesday, December 10, 2013

Senate Holds Hearing on John Koskinen's Nomination to be IRS Commissioner

Monday, December 9, 2013

CBO: The Distribution of Household Income and Federal Taxes, 2010

Congressional Budget Office, The Distribution of Household Income and Federal Taxes, 2010:

The increase in the nation’s economic activity in 2010 affected households’ income, federal tax liabilities, and federal tax rates. In this report, the Congressional Budget Office (CBO) presents its estimates of the distribution of household income and federal taxes in 2010, and it compares those estimates with estimates for the preceding three decades. The report also discusses the effects of changes in tax rules on the distribution of federal taxes in 2013.

Average Federal Tax Rates, by Income Group, 2010

Change in Before-Tax Income, by Income Group, 2009 to 2010

Average Federal Tax Rates, by Income Group, 1979 to 2010 and Under 2013 Law

Cover Table

December 9, 2013 in Congressional News, Tax | Permalink | Comments (0)

Thursday, November 21, 2013

Senate Finance Committee Releases Depreciation and Accounting Tax Reform Plan

Wednesday, November 20, 2013

Senate Finance Committee Releases Tax Administration Reform Plan

Senate Finance Committee Releases International Tax Reform Plan

Senate Logo

November 20, 2013 in Congressional News, Tax | Permalink | Comments (0)

Thursday, November 14, 2013

CBO Releases 36 Revenue-Raising Options

The Congressional Budget Office yesterday released Options for Reducing the Deficit: 2014 to 2023.   Chapter 4 outlines 36 revenue-raising options:

44715-SummaryTableofOptions_Page_1

44715-SummaryTableofOptions_Page_2

44715-SummaryTableofOptions_Page_3

November 14, 2013 in Congressional News, Tax | Permalink | Comments (0)

Friday, October 25, 2013

CBO: Corporate Income Tax Receipts

CBOCongressional Budget Office, Snapshot of Corporate Income Tax Receipts:

Since 2008, receipts from corporate income taxes have been smaller, relative to the size of the economy, than their historical average of 1.9 percent of gross domestic product (GDP)—largely because the recent recession substantially reduced taxable corporate profits. Temporary provisions in tax laws also played a role, particularly provisions that let firms accelerate deductions for investments they made in certain equipment between 2008 and 2013. CBO projects that corporate income tax receipts will rise as a percentage of GDP in the next few years—to levels above the historical average—as the economy continues to recover and those temporary provisions expire. After 2016, however, receipts are projected to decline as a percentage of GDP—dropping back near their historical average by 2023—as profits fall relative to GDP. The relative decline in profits is expected to stem from increases in corporations’ interest payments, growth in the share of national income going to workers, and increased deductions for investments as the stock of business capital rises due to the economic recovery.

Corporate Income Tax Receipts

For more information on CBO’s latest projections of corporate income tax receipts, see The 2013 Long-Term Budget Outlook (September 2013) and Updated Budget Projections: Fiscal Years 2013 To 2023 (May 2013).

October 25, 2013 in Congressional News, Tax | Permalink | Comments (0)

Tuesday, September 17, 2013

AEI Hosts Program Today on Senator Lee's Tax Reform Plan

AEI LogoThe American Enterprise Institute hosts a forum today on Tax Reform, the Family, and the Pursuit of Happiness: A New Plan by Senator Mike Lee:

Join us for an AEI event featuring Senator Mike Lee (R-UT), who will present a new tax reform plan that seeks to restore middle-class opportunity and promote the upward mobility of working families. In addition to lowering rates and eliminating distortive loopholes, Senator Lee’s plan provides parents with relief from the unfair tax treatment they receive for their investment in their children.

Senator Lee’s remarks will be followed by a question-and-answer period and a panel discussion in which experts with varying views will review the plan’s policy implications.

Introduction: Arthur C. Brooks
Remarks:  Senator Mike Lee
Discussion:  Alex Brill, Elaine Maag, Ramesh Ponnuru, W. Bradford Wilcox, Alan D. Viard

September 17, 2013 in Conferences, Congressional News, Tax | Permalink | Comments (0)

Friday, September 13, 2013

CRS: The Potential Federal Tax Implications of United States v. Windsor

CRS LogoCongressional Research Service, The Potential Federal Tax Implications of United States v. Windsor (Striking Section 3 of the Defense of Marriage Act (DOMA)): Selected Issues (R43157) (Sept. 9, 2013):

This report will provide an overview of the potential federal tax implications for same-sex married couples of the U.S. Supreme Court ruling in United States v. Windsor, with a focus on the federal income tax. Estate tax issues are also discussed. Importantly, this report focuses on changes in the interpretation and administration of federal tax law resulting from the Court’s decision. The decision itself did not amend federal tax law. This report is not intended to address all tax-related issues that may arise as a result of the Windsor decision. Such discussion is beyond the scope of this report.

(Hat Tip: Bruce Bartlett.)

September 13, 2013 in Congressional News, Gov't Reports, Tax | Permalink | Comments (1)

Wednesday, August 7, 2013

CRS: The Federal Tax Implications of United States v. Windsor

CRS LogoCongressional Research Service, The Potential Federal Tax Implications of United States v. Windsor (Striking Section 3 of the Defense of Marriage Act (DOMA)): Selected Issues (R43157):

This report will provide an overview of the potential federal tax implications for same-sex married couples of the U.S. Supreme Court (SCOTUS) ruling in United States v. Windsor, with a focus on the federal income tax. Estate tax issues are also discussed. Importantly, this report focuses on changes in the interpretation and administration of federal tax law that may result from the SCOTUS decision. This decision did not amend federal tax law. This report is not intended to address all tax-related issues that may arise as a result of the Windsor decision. Such discussion is beyond the scope of this report. 

(Hat Tip: Bruce Bartlett.)

August 7, 2013 in Congressional News, Tax | Permalink | Comments (3) | TrackBack (0)

Wednesday, July 31, 2013

Joint Economic Committee Holds Hearing Today on Lessons From Reagan: How Tax Reform Can Boost Economic Growth

JECThe Joint Economic Committee holds a hearing today on Lessons from Reagan: How Tax Reform Can Boost Economic Growth:

  • James S. Gilmore III (President & CEO, Free Congress Foundation; 68th Governor of Virginia)
  • Laura D’Andrea (Professor, UC-Berkeley Haas School of Business)
  • Kevin Hassett (Senior Fellow, American Enterprise Institute)
  • Jane Gravelle (Senior Specialist, Congressional Research Service)

July 31, 2013 in Congressional News, Tax | Permalink | Comments (0) | TrackBack (0)

Friday, July 26, 2013

Senate Unanimously Confirms Two Judges to U.S. Tax Court

Tax Court Logo 2The Senate Finance Committee yesterday unanimously confirmed President Obama's two nominees to the United States Tax Court:

Joseph W. Nega
Joseph W. Nega is a Senior Legislation Counsel to the Joint Committee on Taxation of the United States Congress, a position he has held since 2008.  His primary areas of responsibility are the individual income tax, tax exemption requirements for state and local bonds, tax credit bonds, and employment taxes.  Mr. Nega has served on the Joint Committee staff since 1985.  Prior to his current position, Mr. Nega served as a Legislation Counsel from 1989 to 2008, and as a Legislation Attorney from 1985 to 1989.  Mr. Nega received a B.S.C. in Accounting from DePaul University, a J.D. from DePaul University School of Law, and an M.L.T. (Taxation) from Georgetown University School of Law.

Judge Michael B. Thornton
Judge Michael B. Thornton currently serves as a Judge of the United States Tax Court, a position held since March 1998.  From June 2012 to March 2013 he served as Chief Judge of the Tax Court.  Previously, Judge Thornton served in the U.S. Department of the Treasury as Deputy Tax Legislative Counsel in the Office of Tax Policy from 1995 to 1998, first joining the Department  as an Attorney-Adviser in February 1995.  He served with the U.S. House Committee on Ways and Means as Chief Minority Tax Counsel in 1995, and as Tax Counsel from 1988 to 1994.  Judge Thornton was an Associate Attorney with Miller and Chevalier from 1985 to 1988 and Sutherland, Asbill, and Brennan from 1982 to 1983.  He was a Law Clerk to the Honorable Charles Clark, Chief Judge, U.S. Court of Appeals for the Fifth Circuit from 1983 to 1984.  Judge Thornton received a B.S. and M.S. from University of Southern Mississippi, an M.A. from University of Tennessee, and J.D. from Duke University School of Law.

July 26, 2013 in Congressional News, Tax | Permalink | Comments (1) | TrackBack (0)

Wednesday, July 24, 2013

Senate to Keep Tax Reform Proposals Secret Until 2064

Senate LogoPolitico, Tax Committee Transforms Into Fort Knox:

Senate Finance Committee leaders have a message for their anxious colleagues: Your secret is safe with us.

In a memo to the tax staffer for every senator, committee officials said they’re going to great lengths to make sure that tax reform submissions, which are due to the panel on Friday, won’t leak.

For starters, the committee says submissions will be sealed by the panel and the National Archives until Dec. 31, 2064. Today’s fiscal policy fights, which have an endless feel about them, should be less relevant by then.

But staffers are taking other measures to transform the Finance Committee into Washington’s version of Fort Knox. The documents will receive unique identifying numbers, a confidential seal and a special encryption. Paper copies of each proposal will be kept in a safe. And beyond Finance Committee Chairman Max Baucus (D-Mont.) and ranking Republican Orrin Hatch, only 10 staffers will have any sort of access to the proposals.

The unusual tactics speak to the high stakes of the so-called blank slate approach to tax reform Baucus and Hatch are pursuing. They’re starting from scratch in their pursuit of a new tax system and they’ve given their colleagues until Friday to explain which tax provisions should stay on the books.

That’s put senators in the uncomfortable position of defending — or choosing not to defend — breaks with powerful constituencies. Many lawmakers have said they’re reluctant to play ball, worried about picking winners or losers and concerned that those choices might later be held against them.

July 24, 2013 in Congressional News, Tax | Permalink | Comments (1) | TrackBack (0)

Thursday, July 18, 2013

House Holds Hearing Today on The IRS’ Systematic Delay and Scrutiny of Tea Party Applications

House LogoThe House Committee on Oversight and Government Reform holds a hearing today on The IRS’ Systematic Delay and Scrutiny of Tea Party Applications:

  • Elizabeth Hofacre (Revenue Agent, Exempt Organizations, Tax Exempt and Government Entities Division, IRS)
  • Carter Hull (Recently Retired, Tax Law Specialist, Exempt Organizations, Tax Exempt and Government Entities Division, IRS)
  • J. Russell George (Inspector General, Treasury Inspector General for Tax Administration)
  • Michael McCarthy (Chief Counsel, Treasury Inspector General for Tax Administration)
  • Gregory Kutz (Assistant Inspector General for Management Services and Exempt Organizations, Treasury Inspector General for Tax Administration)

July 18, 2013 in Congressional News, IRS News, Tax | Permalink | Comments (5) | TrackBack (0)

Wednesday, July 17, 2013

House Holds Hearing Today on The IRS and Small Businesses: Ensuring Fair Treatment

House LogoThe House Small Business Committee holds a hearing today on The Internal Revenue Service and Small Businesses: Ensuring Fair Treatment:

On May 14, 2013, the Department of the Treasury's Inspector General for Tax Administration (TIGTA) issued a report which found that the IRS used inappropriate criteria that identified for review conservative organizations that had applied for tax-exempt status based on their names or policy positions. Recent investigations by Congress have raised additional questions about the IRS's improper targeting of non-profit organizations, and whether the IRS may have also targeted small businesses for additional scrutiny or audits. This hearing will be an opportunity for members to question the Acting IRS Commissioner about how the agency selects, classifies and audits the returns of small businesses.

July 17, 2013 in Congressional News, Tax | Permalink | Comments (0) | TrackBack (0)

Monday, July 8, 2013

Max & Dave's Excellent Tax Reform Adventure Kicks Off Today in Minneapolis

TedMax Baucus (Chair, Senate Finance Committee) and Dave Camp (Chair, House Ways & Means Committee) kick off their Nationwide Tour for a Simpler, Fairer Code to Boost Economy, Create Jobs and Improve Wages in Minneapolis today with visits to 3M and Baldinger Bakery:

The 3M Company is an American multinational corporation based in Maplewood, Minnesota.  With $30 billion in global sales, 3M employs 88,000 people worldwide and has operations in more than 70 countries.

Baldinger Bakery is a fourth generation, family-run businesses in St. Paul, Minnesota.  Baldinger Bakery was founded in 1888 when Henry and Rebecca Baldinger left Eastern Europe and made their way to America, settling in St. Paul.  Over the years they developed a following for their breads, rolls and buns.  As their following expanded so did operations. Today, the commercial bakery is in a state-of-the-art facility that can produce about 65,000 buns per hour.

On their tax reform tour, the tax-writing Chairmen will be talking to a range of Americans and businesses – from large multinational corporations with overseas operations like 3M, to small, family-run businesses and individual taxpayers.

“Over the past two years we’ve heard from hundreds of experts on how to fix the tax code to make it simpler for families and spark a more prosperous economy.  We want even more input and want to hear directly from the American people.  That is why we are going around the country and starting off in St. Paul, meeting with leaders in business — big and small,” said Chairman Dave Camp and Chairman Max Baucus. 

July 8, 2013 in Congressional News, Tax | Permalink | Comments (0) | TrackBack (0)

Thursday, June 27, 2013

Senate Finance Committee Proposes 'Blank Slate' Tax Reform

Update:

June 27, 2013 in Congressional News, Tax | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 26, 2013

House Report: IRS Deputy IT Director Steered $500 Million in Contracts to Pal

IRS Logo 2

The House Committee on Oversight and Government Reform yesterday released  Questionable Acquisitions: Problematic IT Contracting at the IRS (157 pages):

The IRS spends approximately $2 billion every year on information technology (IT) alone. The agency has over 400 dedicated employees who work on IT acquisition. Many vendors compete to do business with the IRS. Considering the large annual IRS investment in IT, any advantage in the contracting process gained by a particular vendor could prove very lucrative. The Committee found that one company—Strong Castle, Inc.—gained precisely such an advantage based on the relationship between the company’s CEO and an IRS contracting official. Strong Castle, Inc. was formerly known as Signet Computers. In January 2012 Braulio Castillo purchased Signet Computers and subsequently renamed the company Strong Castle, Inc. Except for specific references in documents, testimony, and discussion surrounding the purchase of the company, this report will refer to the company as Strong Castle.

The Committee learned of allegations concerning a series of contracts, potentially worth more than $500 million, awarded by the IRS to Strong Castle. Witnesses who contacted the Committee alleged that Strong Castle engaged in fraud to win those IRS contracts. Documents and testimony obtained by the Committee showed that a cozy relationship between Strong Castle President and Chief Executive Officer Braulio Castillo and IRS Deputy Director for IT Acquisition Greg Roseman may have influenced the selection process.

June 26, 2013 in Congressional News, IRS News | Permalink | Comments (1) | TrackBack (0)

Monday, June 24, 2013

CRS: A Brief Overview of Business Types and Their Tax Treatment

CRS LogoCongressional Research Service,  A Brief Overview of Business Types and Their Tax Treatment (R43104) (June 12, 2013):

In the United States, how a business is taxed at the federal level is partly dependent on how it is organized. The income of subchapter C corporations, also known as “regular” corporations, is taxed once at the corporate level according to the corporate tax system, and then a second time at the individual-shareholder level according to the individual tax rates when corporate dividend payments are made or capital gains are recognized. This leads to the so-called “double taxation” of corporate income. Businesses that choose any other form of organization are, in general, not subject to the corporate income tax. Instead, the income of these businesses passes through to their owners and is taxed according to individual income tax rates. Examples of these alternative “pass-through” forms of organization include sole proprietorships, partnerships, subchapter S corporations, and limited liability companies.

This report summarizes the general tax treatment of corporate and pass-through businesses. The intent is to introduce those who are unfamiliar with the current U.S. business tax environment to the basics of corporate and pass-through taxation. Understanding how various businesses are taxed provides a starting point from which one can evaluate current and future proposals to change the taxation of corporations and pass-throughs. Additionally, since pass-through income is typically taxed only at individual income tax rates, this report is also a useful starting point for understanding the effects on pass-through businesses from a change to individual income tax rates. A list of related CRS products on business taxation may be found at the end of the report.

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June 24, 2013 in Congressional News, Tax | Permalink | Comments (0) | TrackBack (0)

Friday, June 21, 2013

Senate Releases Tax Reform Option Paper on Non-Income Tax Issues

Senate LogoThe Senate Finance Committee  yesterday released its Tenth (and Final) Tax Reform Option Paper on Non-Income Tax Issues and Related Reforms:

This document is the last in a series of ten papers compiling tax reform options that Finance Committee members may wish to consider as they work towards reforming our nation’s tax system. This compilation is a joint product of the majority and minority staffs of the Finance Committee with input from Committee members’ staffs. ... The paper outlines the following potential goals for reform in this area:

  • Simplify the law in order to reduce the cost to businesses and individuals of complying with the tax code.
  • Ensure that the overall federal tax system is fair, while minimizing the negative effect of taxes on economic growth.
  • Carefully consider whether and how non-income tax measures should account for any positive or negative externalities.

 
The paper lists the following broad reform options with more details included for each policy proposal:  

I.  EMPLOYMENT TAXES

  1. Increase FICA and SECA taxes.
  2. Eliminate or reduce the FICA and SECA taxes.
  3. Make the Social Security tax less regressive.
  4. Eliminate employment tax exclusions for certain categories of workers.
  5. Simplify, clarify, and make fairer the FICA and SECA tax rules.
  6. Reform the income tax treatment of Social Security and Medicare benefits.

II.  WEALTH TRANSFER TAXES

  1. Repeal the estate and generation-skipping transfer taxes.
  2. Replace the wealth transfer system with an alternative wealth transfer tax system.
  3. Modify the tax rates and exemptions.
  4. Reform and simplify the current wealth transfer tax system.
  5. Miscellaneous simplification reforms.

III.  EXCISE TAXES

  1. Introduce a securities transactions excise tax.
  2. Prohibit the Treasury Department from assisting foreign governments in enforcing taxes on securities transactions occurring on a U.S. exchange.
  3. Impose a levy on large financial institutions.
  4. Enact or increase sin taxes.
  5. Repeal all sin taxes.
  6. Enact a tax on the value of land.
  7. Modify the rum excise tax transfer (“cover-over”) to the United States Virgin Islands and Puerto Rico, and limit the total amount of direct or indirect government assistance to rum producers.

IV.  CONSUMPTION TAXES

  1. Enact a consumption tax, while preserving the income tax and employment taxes.
  2. Replace the income tax with a consumption tax.
  3. Replace employment taxes with a consumption tax.

June 21, 2013 in Congressional News, Tax | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 18, 2013

GAO: Taxing Bitcoin

BitcoinFollowing up on my previous post, The IRS Takes a Bite Out of Bitcoin (May 2, 2013): GAO, Virtual Economies and Currencies: Additional IRS Guidance Could Reduce Tax Compliance Risks (GAO-13-516):

Recent years have seen the development of virtual economies, such as those within online role-playing games, through which individual participants can own and exchange virtual goods and services. Within some virtual economies, virtual currencies have been created as a medium of exchange for goods and services. Virtual property and currency can be exchanged for real goods, services, and currency, and virtual currencies have been developed outside of virtual economies as alternatives to government-issued currencies, such as dollars. These innovations raise questions about related tax requirements and potential challenges for IRS compliance efforts.

This report (1) describes the tax reporting requirements for virtual economies and currencies, (2) identifies the potential tax compliance risks of virtual economies and currencies, and (3) assesses how IRS has addressed the tax compliance risks of virtual economies and currencies.

June 18, 2013 in Congressional News, Tax | Permalink | Comments (0) | TrackBack (0)

Monday, June 17, 2013

Yin: Joint Tax Committee Should Investigate the IRS

Tax Analysts George K. Yin (Virginia), Former Chief of Staff Thinks JCT Should Investigate the IRS, 139 Tax Notes 1443 (June 107 2013):

House Ways and Means Committee Chair Dave Camp, R-Mich., has reportedly rejected use of a joint committee to investigate the IRS because such a committee would not be authorized to access confidential tax return information. Yet Camp already heads a joint committee (the Joint Committee on Taxation), which has that specific authority under sections 6103(f) and 8023. Moreover, the JCT was created for the express purpose of investigating the tax agency's administration of the tax laws, following a lengthy Senate investigation of corruption charges against the agency and possible favoritism towards companies associated with then-Secretary of the Treasury Andrew Mellon. Congress wanted a permanent organization to conduct future tax investigations, oversee the agency, and make sure it was administering the law in the manner Congress intended. Camp should make use of this valuable resource to streamline Congress's efforts and prevent the integrity of its investigation from being undermined by political squabbling.  

All Tax Analysts content is available through the LexisNexis® services.

June 17, 2013 in Congressional News, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Friday, June 14, 2013

Yin: Comments on House Draft Reform on Taxation of Passthrough Entities

George K. Yin (Virginia), Comments on Selected Draft Reforms of the House Committee on Ways & Means on the Taxation of Passthrough Entities:

This paper is a slightly revised version of comments submitted to the House Committee on Ways & Means concerning four proposals to reform the taxation of passthrough entities. Among other things, the paper urges that passthrough entities be required to recognize gain on distributions of appreciated property to an owner of the entity. Adoption of this single proposal of the committee would be a meaningful step towards achieving the committee’s dual goals of simplification and reform.

June 14, 2013 in Congressional News, Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Senate Releases Tax Reform Option Paper on Tax-Exempt Organizations and Charitable Giving

Senate LogoThe Senate Finance Committee  yesterday released its Ninth Tax Reform Option Paper on Tax-Exempt Organizations and Charitable Giving:

This document is the ninth in a series of papers compiling tax reform options that Finance Committee members may wish to consider as they work towards reforming our nation’s tax system. This compilation is a joint product of the majority and minority staffs of the Finance Committee with input from Committee members’ staffs. ... The paper sets out the following broad goals for reform in this area:

  • Maximize the efficiency and effectiveness of any incentives for charitable giving that are retained or reformed;
  • Consider whether the availability of tax incentives for charitable giving should be broadened to more taxpayers;
  • More tightly align tax-exempt status with providing sufficient charitable benefits;
  • Closely examine the relationship between political activity and tax-exempt status;
  • Reconsider the extent to which tax-exempt organizations should be allowed to engage in commercial activity; and
  • Improve the accountability and oversight of tax-exempt organizations.


The paper outlines the following broad policy options with more specific proposals detailed in the paper:

I.  CHARITABLE DEDUCTION
  1. Repeal the charitable contribution deduction
  2. Fundamentally reform the charitable contribution deduction
  3. Attempt to increase the effect of charitable incentives on charitable giving
  4. Incrementally reform the charitable contribution deduction

II. TAXATION OF BUSINESS ACTIVITIES OF NONPROFITS

  1. Tax all commercial activities of tax-exempt
  2. Revise the requirements for tax-exempt status for organizations engaged in commercial activity
  3. Revise the UBIT rules for organizations engaged in commercial activity
  4. Tighten rules on conversion from tax-exempt to for-profit status
  5. General reforms to tax-exempt entities

III. POLITICAL ACTIVITY AND LOBBYING OF TAX-EXEMPTS

  1. Limit political activity of 501(c)(4), (c)(5) and (c)(6) organizations
  2. Change the categories of tax-exempt organizations that may engage in political activities
  3. Reform reporting and disclosure rules
  4. Clarify that payments to 501(c)(4) organizations are excluded from the gift tax
  5. Expand the prohibition on 501(c)(4) organizations engaging in lobbying from receiving any federal funds to include contracts.

IV. BROAD TAX-EXEMPT ISSUES

  1. Reform the taxation of private foundations
  2. Reform the taxation of endowments
  3. Ensure that donor-advised funds and supporting organizations are directing resources for charities
  4. Limit executive compensation by tax-exempt organizations
  5. Reform reporting requirements
  6. Develop enforcement methods other than revocation of tax-exempt status as the only penalty for noncompliance

June 14, 2013 in Congressional News, Tax | Permalink | Comments (0) | TrackBack (0)