WSJ Op-Ed: Biden's Tax Proposal Would Help Nobody But Tax Lawyers

Wall Street Journal Op-Ed:  A Biden Tax Proposal Would Help Nobody but Tax Lawyers, by Travis Nix (J.D. 2023, Georgetown):

Buried on page 82 of the Biden administration budget’s proposed tax changes for 2023 is a section that would give the Internal Revenue Service more time to audit individuals and large companies. Current law limits the IRS to three years to assess a tax deficiency, except if a taxpayer appears to have failed to report at least 25% of income, in which case the agency gets six years. There’s no time limit if the suspected omissions are deliberate. The Biden proposal would change this standard by also allowing six years if the IRS believes the taxpayer has unintentionally omitted more than $100 million from a return.

On the surface, this may appear a reasonable measure. It’s appropriate for the IRS to audit corporations that fail to report income, and $100 million sure seems like a lot of money. But it’s complicated.

While $100 million is an enormous sum for an individual, it’s beans for large corporations with billions in revenue. It could represent a relatively minor transaction—such as a small acquisition that a corporation thought was tax-free, but the IRS decides to dispute.

There’s a big difference between willful tax evasion and an honest mistake stemming from an ambiguous tax code. Since the IRS already has unlimited time to audit the returns of companies that seem to have deliberately omitted income they knew was taxable, the new regulation would largely target unknowing omissions that result from unclear regulations. ...

The Biden proposal would be good for tax lawyers—more of whom would probably be hired to handle businesses’ transactions—but bad for the economy.