Paul L. Caron

Monday, June 29, 2020

National Taxpayer Advocate Erin Collins Delivers Her First Report To Congress


IR 2020-132 (June 29, 2020), National Taxpayer Advocate Erin Collins Delivers Her First Report to Congress; Identifies COVID-19 Challenges, CARES Act, and Taxpayer First Act Implementation As Priority Issues For Taxpayers:

National Taxpayer Advocate Erin M. Collins today released her first report to Congress, identifying taxpayer challenges arising from the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and the IRS's implementation of the Taxpayer First Act as priority issues the Taxpayer Advocate Service (TAS) plans to focus on in the coming year. The report also assesses the 2020 filing season, identifies other TAS areas of focus, and includes the IRS's responses to administrative recommendations proposed in the National Taxpayer Advocate's 2019 annual report.

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June 29, 2020 in Congressional News, Tax, Tax News | Permalink | Comments (0)

Saturday, June 20, 2020

CRS: The Section 199A Deduction — How It Works And Illustrative Examples

Congressional Research Service, The Section 199A Deduction: How It Works and Illustrative Examples (R46402 June 10, 2020):

CRS LogoCongress made numerous changes to the federal tax code for individuals and corporate and noncorporate businesses in December 2017, as part of P.L. 115-97 (referred to in this report as the 2017 tax revision but also known as the Tax Cuts and Jobs Act). At the core of the law was a permanent cut in the corporate income tax rate from a top rate of 35% to a flat rate of 21%.

During the congressional debate over the 2017 tax revision, pass-through business owners sought tax relief comparable to any reduction in corporate tax rates. Heeding this request, Congress added a new deduction under Section 199A of the federal tax code. The deduction allows pass-through business owners to deduct up to 20% of their qualified business income (QBI) in determining their personal tax liability. This reduces effective tax rates for pass-through business profits by up to 20%. Like most of the changes in the individual income tax in P.L. 115-97, the new Section 199A deduction is temporary: it is available from 2018 to 2025.

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June 20, 2020 in Congressional News, Tax | Permalink | Comments (0)

Saturday, February 15, 2020

House Holds Hearing On The Disappearing Corporate Tax

The House Ways and Means Committee held a hearing on Tuesday on The Disappearing Corporate Income Tax with these witnesses:

House LogoJason Furman (Harvard), Testimony:

  1. Corporate tax collections are very low both in historical perspective and compared with other countries. This contributes to the overall low level of revenue.
  2. The 2017 tax law (Public Law 115-97) is a major reason for this revenue loss, with its total cost likely to be even larger than was estimated when the law originally passed.
  3. There is no evidence that the 2017 tax law has made a substantial contribution to investment or longer-term economic growth. In fact, business investment growth has
    slowed to nearly a halt while economic growth has been propped up by increases in government spending.
  4. Going forward, a well-designed business tax reform could both increase revenue and encourage more investment and innovation.

Rebecca Kysar (Fordham), Testimony:

  1.  TCJA has failed to live up to its promise of broadening the tax base on the foreign income of multinational corporations, which was the quid pro quo for a lower corporate tax rate.
  2. Treasury has weakened these already generous features of TCJA in the face of intense lobbying for business interests, which will further erode the U.S. tax base. Troublingly, many of these regulatory giveaways have no statutory basis

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February 15, 2020 in Congressional News, Tax, Tax News | Permalink | Comments (1)

Monday, December 23, 2019

CBO: Projected Changes In The Distribution Of Household Income, 2016 To 2021

CBO, Projected Changes in the Distribution of Household Income, 2016 to 2021 (Dec. 19, 2019):

Visual Summary
In this report, the Congressional Budget Office builds on its past analyses of the distribution of household income in the United States by projecting what that distribution would look like in 2021 under current law and comparing those projections with the actual distribution in 2016. In particular, this analysis focuses on how two factors—means-tested transfers and federal taxes—affect the distribution of income. Means-tested transfers are cash payments and in-kind benefits from federal, state, and local governments that are designed to provide assistance to individuals and families with low income and few assets. Such transfers include benefits provided through programs such as Medicaid and the Supplemental Nutrition Assistance Program (SNAP) but not social insurance benefits, such as Social Security and Medicare. Federal taxes consist of individual income taxes, payroll taxes, corporate income taxes, and excise taxes. 

Average Household Income
Average inflation-adjusted household income is projected to grow for all groups. Growth in average income—both before and after means-tested transfers and federal taxes are accounted for— is projected to be fastest for households in the highest quintile (or fifth) of the income distribution.


Cumulative Income Growth
Growth in income before transfers and taxes is generally slower than growth in income after transfers and taxes. That pattern reflects rising means-tested transfer rates and decreasing federal tax rates from 1979 (the first year for which data are available) to 2016.

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December 23, 2019 in Congressional News, Gov't Reports, Tax, Tax News | Permalink | Comments (1)

Tuesday, August 6, 2019

Joint Tax Committee Releases IRS Disclosures Of Tax Return Information, 2018

Joint Tax CommitteeThe Joint Committee on Taxation has released Disclosure Report For Public Inspection Pursuant to Internal Revenue Code Section 6103(p)(3)(C) For Calendar Year 2018:

Section 6103(p)(3)(C) of the Internal Revenue Code provides that the Secretary of the Treasury shall, within 90 days after the close of each calendar year, furnish to the Joint Committee on Taxation for disclosure to the public a report which provides, with respect to each Federal agency and certain other entities, the number of: (1) requests for disclosure of returns and return information (as such terms are defined in section 6103(b)); (2) instances in which returns and return information were disclosed pursuant to such requests or otherwise; and (3) taxpayers whose returns, or return information with respect to whom, were disclosed pursuant to such requests. In addition, the report must describe the general purposes for which such requests were made.

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August 6, 2019 in Congressional News, Gov't Reports, Tax, Tax News | Permalink | Comments (0)

Tuesday, July 2, 2019

President Trump Signs The Taxpayer First Act Of 2019

Monday, July 1, 2019

Oh: The Distributional And Tax Planning Consequences Of The Tax Cuts And Jobs Act

Jason Oh (UCLA), The Distributional and Tax Planning Consequences of the Tax Cuts and Jobs Act (Testimony Before the House Ways & Means Committee (March 27, 2019)):

The TCJA was the most significant overhaul of the tax system in over three decades. It is commendable that this committee is evaluating how this law affects the American public. We are fortunate to have the projections of the Joint Committee on Taxation and various think tanks, but the sheer amount of data can be overwhelming. The goal of my testimony is to crystallize that data into five major takeaways. I pair each takeaway with a figure that captures the point visually.


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July 1, 2019 in Congressional News, Scholarship, Tax | Permalink | Comments (0)

Thursday, May 23, 2019

Joint Committee On Taxation: Overview Of The Tax Gap

Joint Tax CommitteeFollowing up on my previous post, House Holds Hearing Today On The Tax Gap:  the Joint Committee on Taxation has released Overview Of The Tax Gap (JCX-19-19) (May 08, 2019):

This document ... provides a standard definition of the tax gap, a description of issues relevant to measurement of the tax gap, and a discussion of taxpayer behavioral responses and the effectiveness of measures to increase compliance.  ...

A standard definition of the tax gap is the shortfall between the amount of tax voluntarily and timely paid by taxpayers and the actual tax liability of taxpayers. It measures taxpayers’ failure to accurately report their full tax liabilities on tax returns (i.e., underreporting), pay taxes due from filed returns (i.e., underpayment), or file a required tax return altogether or on time (i.e., non-filing). Estimates of the tax gap provide a picture of the level of overall noncompliance by taxpayers for a particular tax year, and include shortfalls in individual income taxes, corporate income taxes, employment taxes, estate taxes, and excise taxes. The individual behavioral responses to taxation that result in the tax gap raise a set of important policy questions, such as the optimal level of resources to devote to tax administration and the manner in which those resources are best deployed.  

The Internal Revenue Service (“IRS”) periodically conducts studies to estimate the size of the tax gap and analyze its components. Table 1 indicates that in the most recent study, the estimated annual gross tax gap, per year on average for tax years 2008-10, was $458 billion and the annual net tax gap, which is the gross tax gap adjusted for late payments and collections due to enforcement activities, was $406 billion. Adjusted for inflation, the gross and net tax gaps are $504 billion and $447 billion in 2016 dollars, respectively.  With total average tax liabilities of $2.5 trillion per year between 2008 and 2010, the voluntary compliance rate is 81.7 percent and the net compliance rate is 83.7 percent.

Tax Gap 1

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May 23, 2019 in Congressional News, Gov't Reports, Tax | Permalink | Comments (3)

Thursday, May 9, 2019

House Holds Hearing Today On The Tax Gap

House LogoThe House Ways & Means Committee held a hearing this morning on Understanding the Tax Gap and Taxpayer Noncompliance:

The Honorable J. Russell George
Treasury Inspector General for Tax Administration (TIGTA), U.S. Department of the Treasury
• Testimony

Benjamin Herndon
Chief Research and Analytics Officer, IRS
• Testimony

James R. McTigue
Director, Tax Issues, Strategic Issues, GAO
• Testimony

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May 9, 2019 in Congressional News, Tax | Permalink | Comments (0)

Monday, April 29, 2019

Yin: Congressional Testimony On The House Ways & Mean Committee's Authority To Obtain President Trump's Tax Returns

George K. Yin (Virginia), Testimony Before the House Ways and Means Oversight Subcommittee on Legislative Proposals and Tax Law Related to Presidential and Vice-Presidential Tax Returns:

This submission is the testimony provided to the House Ways and Means Oversight Subcommittee in February 2019 on the ability of the chairman of the committee to obtain and disclose the tax return information of any taxpayer including the president. It describes the controlling law, the circumstances in which the chairman's request should be respected, and the conditions for disclosing the information to the public.

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April 29, 2019 in Congressional News, Tax | Permalink | Comments (0)

Tuesday, March 26, 2019

Congressional Research Service: Digital Services Taxes

CRS LogoCongressional Research Service, Digital Services Taxes (DSTs): Policy and Economic Analysis (R45532) (Feb. 25, 2019):

Several countries, primarily in Europe, and the European Commission have proposed or adopted taxes on revenue earned by multinational corporations (MNCs) in certain “digital economy” sectors from activities linked to the user-based activity of their residents. These proposals have generally been labeled as “digital services taxes” (DSTs). For example, beginning in 2019, Spain is imposing a DST of 3% on online advertising, online marketplaces, and data transfer service (i.e., revenue from sales of user activities) within Spain. Only firms with €750 million in worldwide revenue and €3 million in revenues with users in Spain are to be subject to the tax. In 2020, the UK plans to implement a 3% DST that would apply only to businesses whose revenues exceed £25 million per year and groups that generate global revenues from search engines, social media platforms, and online marketplaces in excess of £500 million annually. The UK labels its DST as an “interim” solution until international tax rules are modified to allow countries to tax the profits of foreign MNCs if they have a substantial enough “digital presence” based on local users. The member states of the European Commission are also actively considering such a rule. These policies are being considered and enacted against a backdrop of ongoing, multilateral negotiations among members and nonmembers of the Organization for Economic Cooperation and Development (OECD).These negotiations, prompted by discussions of the digital economy, could result in significant changes for the international tax system.

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March 26, 2019 in Congressional News, Gov't Reports, Tax | Permalink | Comments (0)

Monday, January 28, 2019

Lesson From Congress: Overbearing Oversight?

Senate_budget_committeeToday’s lesson comes from Congress.  It is a primer on IRS oversight.  It was prompted by an amazing letter I found buried on my desk.  

In an October 2015 hearing, House Ways and Means Committee member Diane Black questioned then IRS Commissioner John Koskinen about the lack of IRS responses to 10 GAO oversight recommendations from July 2015. 

On October 23, 2015, Koskinen sent her a letter.  The letter explained the status of the 10 oversight recommendations.  It then also explained the status of 200 additional recommendations from the prior three years, recommendations the IRS had also not responded to.  Of the 210 total, 167 had not yet reached their original due dates for responsive actions.  The other 43 were late but had received extensions from the oversight bodies who had made the recommendations: the Government Accountability Office (GAO) and the Treasury Inspector General for Tax Administration (TIGTA). 

The number 210 is not the amazing part.  The amazing part is that the letter explained that during that same three-year period, the IRS has dealt with some 1,240 oversight recommendations just from GAO and TIGTA.  That number does not even include the myriad directives and orders from various Congressional oversight committees, nor the yearly Congressional-mandated oversight from the National Taxpayer Advocate.  Thinking about the FTE’s needed to address just these 1,240 recommendations makes me dizzy. 

I think you will be impressed by the amount of oversight the IRS is subject to; I make no prediction on whether your impression will be good or bad.  But I hope today's lesson helps you understand that, as the IRS re-opens with its depleted workforce, it faces more than the tsunami of correspondence from worried taxpayers, and a first return filing season under the wicked complexities of the Tax Cuts and Jobs Act.  It must also keep responding to a relentless review of every facet of its operations.  Most of the review is done in good faith.  Some of it is not, as I explain below the fold.  But either way, one can reasonably ask how much is too much.  Does the amount of oversight truly make for better tax administration, or not.

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January 28, 2019 in Bryan Camp, Congressional News, Miscellaneous, Scholarship, Tax | Permalink | Comments (0)

Thursday, December 20, 2018

Joint Tax Committee Releases General Explanation Of The Tax Cuts And Jobs Act

Joint Tax CommitteeA last-minute Christmas gift:  Joint Committee on Taxation, General Explanation Of Public Law 115-97 (JCS-1-18) (Dec. 20, 2018) (457 pages):

This document, prepared by the staff of the Joint Committee on Taxation in consultation with the staffs of the House Committee on Ways and Means, the Senate Committee on Finance, and the Treasury Department’s Office of Tax Policy, provides an explanation of Public Law No. 115–97 (also referred to as the ‘‘Act’’ throughout). The explanation of the provisions follows the order of the Act.

For each provision, the document includes a description of prior law, an explanation of the provision, and the effective date. The prior law section describes the law in effect immediately prior to enactment and does not reflect changes to the law made by the provision or by subsequent legislation. For contemporaneous legislative history related to the Act, please see the relevant House Ways and Means Committee report, the reconciliation recommendations submitted by the Senate Budget Committee, and the Conference Report. This document includes citations to some, but not necessarily all, regulations and other administrative guidance issued as of the time of publication of the document. These citations are included strictly as reference tools for readers.

December 20, 2018 in Congressional News, Tax | Permalink | Comments (0)

Sunday, September 30, 2018

Democrats Plan To Examine Trump’s Tax Returns After Midterm Election; Strategy Could Be Applied To Anyone's Tax Return

Trump Tax ReturnsPolitico, Democrats Planning To Examine Trump’s Tax Returns After the Midterms:

The years-old mystery of what’s in President Donald Trump’s tax returns will likely quickly unravel if Democrats win control of at least one chamber of Congress.

Democrats, especially in the House, are quietly planning on using an obscure law that will enable them to examine the president’s tax filings without his permission.

The nearly 100-year-old statute allows the chairmen of Congress’ tax committees to look at anyone’s returns, and Democrats say they intend to use that power to help answer a long list of questions about Trump’s finances. Many also want to use it to make public confidential information about Trump’s taxes that he’s steadfastly refused to release.

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September 30, 2018 in Congressional News, IRS News, Tax | Permalink | Comments (9)

Tuesday, July 24, 2018

Senate Report: Trump’s Tax Law And International Tax — More Complexity, Loopholes And Incentives To Ship Jobs Overseas

Senate LogoSenate Finance Committee Press Release, Wyden Report Details Truth Behind Republican, Trump Claims that Tax Scam Helps Workers, Increases Investment in U.S.:

Senate Finance Committee Ranking Member Ron Wyden, D-Ore., today released a Senate Finance Committee report that explores how Trump’s tax scam rewards multinational corporations, not workers, which will lead to fewer jobs here at home [Trump’s Tax Law and International Tax:
More Complexity, Loopholes and Incentives to Ship Jobs Overseas]. The report debunks false claims made by Republicans and Trump, and lists tactics multinational corporations will use to artificially lower their tax bills and shift profits overseas.

"Donald Trump and Congressional Republicans continue to peddle the false promises outlined in this tax scam report” Wyden said. “Republicans promised $4,000 wage increases and claimed the top priority of their tax law was promoting jobs in the United States. Their new international tax regime instead rewards companies for investing overseas while hardworking Americans watch their wages fall."

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July 24, 2018 in Congressional News, Tax | Permalink | Comments (0)

Friday, July 13, 2018

House Panel Passes $1,000 Tax Break For Gym Memberships, Exercise Classes: 'It Violates Every Principle Of Tax Policy'

Wall Street Journal, House Panel Passes Tax Break for Gym Memberships, Exercise Classes:

Taxpayers would be able to claim new breaks for gym memberships, exercise classes and other fitness expenses under a bipartisan bill advanced Thursday in the House of Representatives.

The bill would consider those costs as medical expenses for tax purposes, enabling people to use tax-advantaged health-savings accounts and flexible spending accounts to pay for them. The break would be capped at $500 a year for individuals and $1,000 for joint filers. It would reduce federal revenue by $3.5 billion over a decade.

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July 13, 2018 in Congressional News, Tax | Permalink | Comments (0)

Monday, July 9, 2018

NY Times: Government Work Done, Tax Policy Writers Decamp To Lobbying Jobs

New York Times, Government Work Done, Tax Policy Writers Decamp to Lobbying Jobs:

Six months after Republicans pushed a $1.5 trillion tax overhaul through Congress, many of the most influential players who worked behind the scenes on the legislation are no longer on Capitol Hill or in the Trump administration.

They are now lobbyists.

The two-way street between lobbying and lawmaking is well worn in Washington. But after President Trump’s campaign pledge to “drain the swamp,” there was some speculation that the so-called special interests might be sidelined. And while the frenetic two-month sprint last year to pass the tax legislation left some lobbyists marginalized, the businesses now scrambling to navigate the changes are increasingly recruiting the people who wrote it.

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July 9, 2018 in Congressional News, IRS News, Tax | Permalink | Comments (0)

Thursday, June 28, 2018

Senate Holds Hearing Today On Charles Rettig's Nomination To Be IRS Commissioner

RettigThe Senate Finance Committee holds a hearing today on the nomination of Pepperdine Law School graduate Charles Rettig's nomination to be the Commissioner of the IRS.

Bloomberg, Trump's IRS Nominee to Face Questions on Management Experience:

President Donald Trump’s nominee to lead the Internal Revenue Service, Charles Rettig, has spent decades helping wealthy and famous people fight the agency’s efforts to collect taxes.

At a Thursday confirmation hearing, the criminal tax lawyer from Beverly Hills, California, will face questions from lawmakers about whether he’s qualified to run the IRS. Democrats will question whether he has the management skills to run an agency struggling to implement the biggest tax overhaul in a generation. ...

Rettig, 61, who has represented the estate of Michael Jackson and the creator of the "Girls Gone Wild" video franchise, probably will win the 51 votes needed for confirmation in the Republican-controlled Senate.

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June 28, 2018 in Congressional News, IRS News, Tax | Permalink | Comments (2)

Tuesday, April 24, 2018

Senate Holds Hearing Today On Early Impressions Of The New Tax Law

Senate LogoThe Senate Finance Committee holds a hearing today on Early Impressions of the New Tax Law (livestream at 2:30 pm EST):

We are just four months into our new, modernized tax system and we have already started to see tax reform’s benefits roll in — companies are investing their savings in America’s workforce, utility bills are dropping, and dollars that were locked out overseas are coming home,” Chairman Hatch said. “But given that this was the largest tax rewrite in more than three decades, we still have work to do to support the new law’s implementation. This hearing will allow Finance Committee members to take a look at early impressions of the new tax code.


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April 24, 2018 in Congressional News, Tax | Permalink | Comments (0)

Tuesday, March 20, 2018

CBO: The Distribution Of Household Income, 2014

CBOCongressional Budget Office, The Distribution of Household Income, 2014:

In 2014, household income was unevenly distributed: Households at the top of the income distribution received significantly more income than households at the bottom of the distribution. According to the Congressional Budget Office’s estimates:

  • Average income among households in the lowest quintile (or fifth) of the income distribution was about $19,000 (see Summary Figure 1).
  • Average income among households in the highest quintile was about $281,000.

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March 20, 2018 in Congressional News, Gov't Reports, Tax | Permalink | Comments (0)

Tuesday, December 19, 2017

GOP Could Use Treasury Gimmick To Avoid PAYGO Sequestration From Tax Bill

Following up on my previous post, Why the End of This Year Is the Worst Possible Time to Pass Tax Reform:  Sam Wice, The Gimmick Republicans Could Use to Avoid a PAYGO Sequestration, Yale J. on Reg.: Notice & Comment (2017):

Republicans plan to pass a deficit increasing tax-reform proposal, but the Pay-As-You-Go Act (PAYGO) would require a sequestration, an automatic reduction in spending, if tax reform increased the deficit.  Republicans could avoid a sequestration by convincing Senate Democrats to support legislation lifting the sequestration.  Democrats, however, might not be willing to compromise on an issue that they believe that Republicans caused.  Nevertheless, Republicans have a gimmick they could unilaterally use to avoid a sequestration.  Specifically, Republicans could use the Treasury Department’s estimate, which claims that the economic growth from tax reform would pay for its costs.

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December 19, 2017 in Congressional News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Monday, December 18, 2017

The Impact Of The GOP Tax Bill On Higher Education: Taxes On Large Endowments, $1 Million Compensation Are In; Taxes On Tuition Remission And Logo Licensing, Private Activity Bond Restrictions Are Out

Chronicle of Higher Education, Final Tax Bill Would Spare Some Higher-Ed Worries, but Could Lead to State Budget Cuts:

The Republican-backed tax overhaul is headed for final floor votes in Congress without some of the measures that would directly target higher education. Notably, a proposed tax on tuition waivers for graduate students and other college employees is no longer in the compromise legislation. But a high-profile tax on the investment earnings of some of the largest college endowments stayed in the bill. ...

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December 18, 2017 in Congressional News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (2)

Davis Polk's Tax Cuts And Jobs Act Navigator

Davis PolkFollowing up on my weekend posts:

Davis Polk, Tax Cuts and Jobs Act Navigator:

We are pleased to release our first “TCJA Navigator,” a hyperlinked version of the Conference Committee’s tax reform bill released on December 15th.

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December 18, 2017 in Congressional News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Saturday, December 16, 2017

GOP Finalizes Tax Bill, House And Senate Expected To Approve Conference Agreement Next Week

Saturday, December 9, 2017

Joint Tax Committee: Comparison Of The House And Senate Tax Bills

Joint Tax CommitteeJoint Committee on Taxation,  Comparison of the House- and Senate-Passed Versions of the Tax Cuts and Jobs Act (JCX-64-17) (Dec. 7, 2017) (51 pages):

This document ... compares the provisions of the House- and Senate-passed versions of the Tax Cuts and Jobs Act (“TCJA”).

Largely following the organization of the House bill, the document is divided into four sections, individual tax reform, business tax reform, taxation of foreign income and foreign persons, and exempt organizations. Within each section of the document, provisions of the legislation are divided into three categories: (1) provisions for which there are no differences between the House bill and the Senate amendment; (2) provisions for which there are differences between the House bill and the Senate amendment; and (3) provisions that are in only the House bill or the Senate amendment. Except for provisions that are only in the Senate amendment, within each category provisions are generally listed in the order in which they appear in the House bill.

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December 9, 2017 in Congressional News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Thursday, December 7, 2017

 'Holy Crap': Experts Find Tax Plan Riddled With Glitches

CrapPolitico, 'Holy Crap': Experts Find Tax Plan Riddled With Glitches:

Republicans’ tax-rewrite plans are riddled with bugs, loopholes and other potential problems that could plague lawmakers long after their legislation is signed into law.

Some of the provisions could be easily gamed, tax lawyers say. Their plans to cut taxes on “pass-through” businesses in particular could open broad avenues for tax avoidance.

Others would have unintended results, like a last-minute decision by the Senate to keep the alternative minimum tax, which was designed to make sure wealthy people and corporations don't escape taxes altogether. For many businesses, that would nullify the value of a hugely popular break for research and development expenses.

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December 7, 2017 in Congressional News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Saturday, December 2, 2017

Senate Passes 479-Page Tax Bill 51-49; House And Senate Bills Now Go To Conference

Wednesday, November 22, 2017

Oei & Ring: Will Proposed Tax Legislation Tilt The Worker Classification Debate?

Shu-Yi Oei & Diane Ring (On Labor), Will Proposed Tax Legislation Tilt the Worker Classification Debate? 

Tax reform is in the air. On Thursday, November 9, Senate Republicans released a Description of the Chairman’s Mark (prepared by the Joint Committee on Taxation (JCT)), which contains in substance the Senate version of proposed tax reform legislation. Among other things, that JCT description stated that the bill would clarify the treatment of many workers as independent contractors by providing a safe harbor that, if satisfied, would guarantee such treatment. But in the modification to the Chairman’s Mark released on November 14, that safe harbor provision was stricken from the Senate bill.

In a blog post on TaxProf Blog, we expressed concern about this worker classification clarification provision. In brief, our worry was that even though the legislation “clarifies” the treatment of workers as independent contractors and arguably simplifies some aspects of their tax compliance burdens, it also carries potentially important ramifications for broader fights over worker classification that are occurring in the labor and employment law area.

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November 22, 2017 in Congressional News, Gov't Reports, News, Shuyi Oei, Tax | Permalink | Comments (0)

Thursday, November 16, 2017

Senate GOP Tax Bill Includes A 'Harvey Weinstein Tax'

WeinsteinUSA Today, Beer, Booze and a Harvey Weinstein Tax Make It Into the Latest Senate Tax Overhaul Plan:

Sex and booze made it into the congressional battle over taxes in a late-night revision.

The latest changes to a Senate Republican tax plan, released at 10:30 p.m. on Tuesday, include tax cuts for producers of beer, wine and liquor, and a new provision that might be called the Harvey Weinstein tax: An end to corporations' ability to deduct attorney fees and settlement payments in sexual harassment or abuse cases if there is a nondisclosure agreement. ...

The change dealing with lawsuit settlements was proposed by Sen. Bob Menendez, D-N.J., and spokesman Juan Pachon said it was motivated by publicity about settlements over harassment by Hollywood producer Weinstein and former Fox News commentator Bill O'Reilly.

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November 16, 2017 in Congressional News, Tax | Permalink | Comments (3)

Saturday, November 11, 2017

Oei & Ring: The Senate Tax Bill And The Battles Over Worker Classification

Shu-Yi Oei (Boston College) & Diane M. Ring (Boston College), The Senate Tax Bill and the Battles over Worker Classification:

Senate Republicans released their version of tax reform legislation on Thursday, November 9. The legislative language is not available yet, but the Description of the Chairman’s Mark (prepared by the Joint Committee on Taxation) suggests that one of the key provisions in the bill will clarify the treatment of workers as independent contractors by providing a safe harbor that guarantees such treatment. The JCT-prepared description tracks the contents of the so-called “NEW GIG Act” proposed legislations introduced by Congressman Tom Rice (R-S.C.) in the House and Senator John Thune (R-S.D.) in the Senate in October and July 2017, respectively. “NEW GIG” is short for the “New Economy Works to Guarantee Independence and Growth (NEW GIG) Act.” But notably, and as we further discuss below, the legislation is not limited in its application to gig or sharing economy workers.

Assuming the Senate Bill adopts the basic parameters of the NEW GIG proposed legislation — which looks to be the case based on the JCT-prepared description — we have some concerns. In brief, this legislation purports to simply “clarify” the treatment of workers as independent contractors and to make life easier for workers by introducing a new 1099 reporting threshold and a new withholding obligation. But the legislation carries potentially important ramifications for broader fights over worker classification that are raging in the labor and employment law area. Despite possibly alleviating tax-related confusion and reducing the likelihood of under-withholding, we worry that there are quite a few underappreciated non-tax hazards for workers if these provisions go through.

Summary of the Legislation

The legislation (assuming the Senate Bill more or less tracks the NEW GIG Act language) purports to achieve such “clarification” of worker classification status by doing the following:

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November 11, 2017 in Congressional News, News, Political News, Shuyi Oei, Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Friday, November 3, 2017

The Only Person Mentioned In The Republican Tax Bill Is ... Steph Curry

Sunday, October 15, 2017

Zelinsky: The House Appropriations Committee And The Johnson Amendment

Edward Zelinsky (Cardozo), The House Appropriations Committee and the Johnson Amendment:

The Committee on Appropriations of the US House of Representatives, in a so-called rider to the pending federal budget bill, has proposed significant procedural restrictions on the IRS’s ability to enforce the Johnson Amendment. The Johnson Amendment is the provision of the Internal Revenue Code which prevents all tax-exempt institutions (including churches) from participating in political campaigns. The Committee’s budget rider is the most recent salvo in the ongoing dispute about churches and politics.

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October 15, 2017 in Congressional News, Tax | Permalink | Comments (0)

Tuesday, October 3, 2017

Senate Holds Hearing Today On International Tax Reform

Senate LogoThe Senate Finance Committee held a hearing today on International Tax Reform:

October 3, 2017 in Congressional News, Tax | Permalink | Comments (0)

Wednesday, September 20, 2017

Batchelder: Opportunities And Risks In Individual Tax Reform

Lily Batchelder (NYU), Opportunities and Risks in Individual Tax Reform: Testimony Before the US Senate Committee on Finance:

This testimony before the US Senate Committee on Finance on individual tax reform makes five main points.

First, the current tax reform effort is occurring at a time when low- and middle-income families are facing deep financial challenges. Economic disparities are vast and have been widening for decades. The US also has one of the lowest levels of economic mobility relative to our competitors. Our debt as a share of GDP is projected to grow to unprecedented levels in coming decades, largely because of the retirement of the Baby Boom and increasing life expectancy. This growth in debt will be a drag on economic growth. For all these reasons, tax reform should increase revenues and enhance progressivity. Doing so would boost economic growth and make the tax code fairer at the same time. At a bare minimum, tax reform should maintain the current level of revenues and progressivity—and these both should be measured consistently and without resort to budget gimmicks like a “current policy” baseline.

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September 20, 2017 in Congressional News, Scholarship, Tax | Permalink | Comments (0)

Tuesday, September 19, 2017

CBO: An Analysis of Corporate Inversions

Congressional Budget Office, An Analysis of Corporate Inversions (Sept. 18, 2017):

U.S. multinational corporations—businesses incorporated and operating in the United States that also maintain operations in other countries—can use a variety of strategies to change how and where their income is taxed. One such strategy is a corporate inversion, which can result in a significant reduction in worldwide tax payments for a company. U.S. companies have engaged in corporate inversions since 1983, and public and government attention to them has varied over the years. Concern grew most recently in 2014 because the group of corporations that announced plans to invert that year included some that were very large: Their combined assets were $319 billion, more than the combined assets of all of the corporations that had inverted over the previous 30 years.


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September 19, 2017 in Congressional News, Tax | Permalink | Comments (1)

Monday, August 7, 2017

Kleinbard: The Debt Ceiling Crisis May Remove Remaining Constraints On Congressional Irresponsibility

New York Times op-ed:  The Debt-Ceiling Crisis Is Real, by Edward D. Kleinbard (USC):

Sometime in October, the United States is likely to default on its obligation to pay its bills as they come due, having failed to raise the federal debt ceiling. This will cost the Treasury tens of billions of dollars every year for decades to come in higher interest charges and probably trigger a severe recession.

The debt ceiling is politically imposed, and the decision not to raise it, and therefore to choose to default, is also political. It’s something America has avoided in the past. This time, though, will be different. ...

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August 7, 2017 in Congressional News, Tax | Permalink | Comments (2)

Senate Confirms David Kautter As Assistant Treasury Secretary For Tax Policy

KautterFollowing up on previous posts (links below):  the Senate has confirmed David Kautter as Assistant Secretary of the Treasury for Tax Policy.  From President Trump's nomination announcement:

Mr. Kautter currently serves as Partner-in-Charge of the Washington National Tax practice for RSM, an audit, tax, and consulting services firm. He was also previously the Managing Director of the Kogod Tax Center and Executive-in-Residence at the Kogod School of Business at American University (AU).

Prior to his work at AU, Mr. Kautter spent over 30 years at Ernst and Young, including serving as Director of National Tax for over 13 years. Mr. Kautter also worked on Capitol Hill as Tax Legislative Counsel for former Senator John C. Danforth of Missouri. He is a high honors graduate of the University of Notre Dame and received his J.D. from Georgetown Law Center. 

From his webpage at American University's Kogod Tax Center:

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August 7, 2017 in Congressional News, IRS News, Tax | Permalink | Comments (0)

Tuesday, August 1, 2017

Herzig: Scaramucci, Section 1043, And Certificates Of Divestiture

ScaramucciWith the announcement of his resignation/termination, former White House Communications Director Anthony Scaramucci’s tenure in the Trump Administration lasted about 10 days. Those 10 days may prove tremendously interesting from a tax perspective. Like most administrative officials, Mr. Scaramucci requested a Certificate of Divestiture (“Certificate”) from the Office of Government Ethics (“OGE”).

Under the Ethics in Government Act (“Act”) (Ethics in Government Act of 1978, P.L. No. 95-52), certain individuals entering the administration must divest their holdings to avoid ethical dilemmas. Once a Certificate is issued, that individual could qualify under section 1043 for deferral of gains (assuming the procedural requirements are met). Congress enacted section 1043 to further the collective good by eliminating a tax-based barrier for entry into public service. If one qualifies under section 1043, the statute permits deferral of recognition of gain from sales required to comply with the Act if government securities or diversified mutual funds are acquired. (For a full description of the section 1043 rules see also Donald Williamson, A. Blair Staley, and James S. Gale, Tax Planning for Federal Appointee’s Conflict of Interest Requirements, Tax Notes (Mar. 16, 2009).

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August 1, 2017 in Congressional News, Political News, Tax | Permalink | Comments (0)

Saturday, July 29, 2017

Democrats Should Embrace Raising Taxes On Capital Income As Part Of Their 'Better Deal'

A Better DealWashington Post, Democrats’ ‘Better Deal’ for Workers Leaves a Tough Question Unanswered:

Leading Democratic politicians announced their economic agenda for next year's midterm elections on Monday, calling for measures to bring down prices for prescription drugs, control monopolies and help companies pay for training for their workers.

The documents distributed to reporters, however, mentioned taxes only in passing, glossing over what could be a crucial aspect of any Democratic platform in the coming years. Democrats can use tax policy to pay for their other proposals, to equalize incomes directly and to answer frustrated voters' questions about where the party really stands on the economy.

Democrats have frequently called for the rich to pay more in taxes, but some in the party are becoming dissatisfied with the solutions Democrats have put forward so far, which mainly involve untangling kinks and loopholes in the existing system and general, jack-of-all-trades hikes and surcharges.

To lessen inequality and to raise new revenue to fund broad, progressive new programs, senior Democratic policymakers have been talking about novel ideas for taxing the wealth of the richest Americans. Those plans could include a comprehensive tax on capital, a broad category of wealth that includes stocks, bonds, businesses, property and other assets.

“Progressives should be focused on how to fundamentally reform how we tax capital income in this country,” said David Kamin, who served as a special assistant to President Barack Obama on economic issues. ...


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July 29, 2017 in Congressional News, Tax | Permalink | Comments (1)

Thursday, July 27, 2017

Trump, Congress Reach Agreement On 'Skinny Tax Reform'

GOP Statement on Tax Reform:

Today, House Speaker Paul Ryan (R-WI), Senate Majority Leader Mitch McConnell (R-KY), Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, Senate Finance Committee Chairman Orrin Hatch (R-UT), and House Ways and Means Committee Chairman Kevin Brady (R-TX) issued the following joint statement on tax reform:

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July 27, 2017 in Congressional News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Friday, July 7, 2017

Tax Reform Is Hard (#TRIH)

With the looming deadline on both the debt ceiling and the tax reconciliation bill (not to be confused with the ACHA reconciliation instructions), taxes and, hopefully, tax reform are moving to the top of the legislative agenda.   The rhetoric of tax reform is heating up.  Yesterday Paul Ryan tweeted:

Screen Shot 2017-07-06 at 9.43.05 AM

Speaker Ryan is not the only member of GOP leadership discussing tax reform.  News last week broke that Steve Bannon wants to raise the top bracket rate to a number that has ”a 4 in front of it”. So, the GOP continues to a least float the idea of substantive tax reform measures.  

I don't want to get too carried away about tax reform. Despite my optimism for "reform season," others does not seem to have the same zeal. First there is no "plan" to discuss.  Second, the House Appropriations Bill (which I wrote about at Surly) does not seem to be too keen on the chances of real reform measures.  For example, the Appropriations Bill addresses estate tax regulations and ACA penalties.  If the estate tax and the ACA are on the chopping block, then why worry about the measures in the Appropriations Bill?

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July 7, 2017 in Congressional News, Political News, Tax, Tax Analysts, Tax Policy in the Trump Administration, Tax Profs | Permalink | Comments (1)

Tuesday, May 23, 2017

House Holds Hearing Today On The Border Adjustment And International Tax Reform

Ways & Means (2016)The House Ways & Means Committee held a hearing this morning on Increasing U.S Competitiveness and Preventing American Jobs from Moving Overseas:

The hearing focused on border adjustment and international tax modernization as a core element of comprehensive tax reform and the implications of these policies for increasing jobs, investment, and economic growth in the United States.

Witness List
Juan Luciano
President & CEO, Archer Daniels Midland

Brian Cornell
Board Chairman & CEO, Target

William Simon
Former President & CEO, Walmart

Lawrence B. Lindsey
President & CEO, The Lindsey Group

Kimberly Clausing
Thormund A. Miller & Walter Mintz Professor of Economics, Reed College

Clausing 4

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May 23, 2017 in Congressional News, Tax | Permalink | Comments (0)

Monday, May 15, 2017

Grewal:  Congress Handcuffs The IRS

Andy Grewal (Iowa), The IRS Gets Handcuffed by the Congress, Yale J. on Reg.: Notice & Comment (May 3, 2017):

The House and Senate recently reached agreement on a comprehensive spending bill and expect to pass it soon. Regarding the IRS, the bill freezes the agency’s budget at $11.2 billion and thus does not, as some feared, make substantial cuts to its funding. Nonetheless, the IRS may face hardships, because its funding remains significantly below its 2010 level ($13.6 billion) while its responsibilities have greatly expanded in recent years, especially because of the Affordable Care Act.

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May 15, 2017 in Congressional News, IRS News, Tax | Permalink | Comments (2)

Sunday, April 30, 2017

The 'Better Way' House Tax Plan: An Economic Analysis

CRS LogoJane G. Gravelle (Congressional Research Service), The “Better Way” House Tax Plan: An Economic Analysis (R44823) (Apr. 25, 2017):

On June 24, 2016, House Speaker Paul Ryan released the Better Way Tax Reform Task Force Blueprint, which provides a revision of federal income taxes. For the individual income tax, the plan would broaden the base, lower the rates (with a top rate of 33%), and alter some of the elements related to family size and structure by eliminating personal exemptions, allowing a larger standard deduction, and adding a dependent credit. For business income, the current income tax would be replaced by a cash-flow tax rebated on exports and imposed on imports, with a top rate of 20% for corporations and 25% for individuals. The cash-flow tax would be border-adjusted (imports taxed and exports excluded), making domestic consumption the tax base. The system would also move to a territorial tax in which foreign source income (except for easily abused income) would not be taxed. In addition, the proposal would repeal estate and gift taxes. Although the Affordable Care Act (ACA) taxes are not repealed in the Better Way tax reform proposal, ACA taxes are repealed in the Healthcare Task Force proposals.

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April 30, 2017 in Congressional News, Gov't Reports, Tax | Permalink | Comments (0)

Tuesday, April 18, 2017

Sen. Flake Releases Report on 'Outlandish Tax Rackets'


Sen. Jeff Flake (R-AZ), Tax Rackets: Outlandish Loopholes to Lower Tax Liabilities (press release):

As Tax Day approaches and Congress considers long-overdue tax reforms, the report is intended to highlight loopholes that create fake markets for unnecessary or unwanted goods and services; encourage more borrowing, spending, and taxing by local governments; and shift the tax burden to the middle class. ...

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April 18, 2017 in Congressional News, Tax | Permalink | Comments (1)

Thursday, March 16, 2017

Joint Tax Committee:  Overview Of The Federal Tax System

Joint Committee on Taxation, Overview Of The Federal Tax System As In Effect For 2017 (JCX-17-17) (March 15, 2017):

This document ... provides a summary of the present-law Federal tax system as in effect for 2017. 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 16, 2017 in Congressional News, Tax | Permalink | Comments (0)

Thursday, March 9, 2017

CBO:  International Comparisons Of Corporate Income Tax Rates

Congressional Budget Office, International Comparisons of Corporate Income Tax Rates:

In the United States, the top federal statutory corporate income tax rate (the rate set by law that applies to the highest corporate income tax bracket) has been 35 percent since 1993. Most corporate income is taxed at that rate. With state taxes added in, the top statutory rate is even higher; on average, that combined rate was 39.1 percent in 2012, among the highest in the world.

The statutory corporate tax rate is one of many features of the tax system that influence corporate behavior. Companies are likely also to consider other provisions of the tax system—including tax preferences, surtaxes, and noncorporate taxes— that affect the amount of taxes they owe. Among the alternative measures of tax rates that account for some of those provisions are the average and effective marginal corporate tax rates.


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March 9, 2017 in Congressional News, Tax | Permalink | Comments (0)

Thursday, March 2, 2017

2017 Joint Economic Report

Joint Economic Committee, The 2017 Joint Economic Report (Feb. 28, 2017) (279 pages):

Chapter 8: The Missing Chapter on Tax Reform…...........….149
The Connection between Tax Reform and Economic Growth...149
A Lost Opportunity for Pro-Growth Reform................................150
The Highest Corporate Tax Rate in the Developed World ........151
International Tax Systems .........................................................153
Passthrough Businesses and the Individual Tax Rate...............155
Double Taxation of Savings and Investment .............................157
Cost Recovery and Investment .................................................161
Should Death Be a Taxable Event?...........................................163
The Cost of Unnecessary Complexity........................................165
Recommendations ....................................................................167

March 2, 2017 in Congressional News, Tax | Permalink | Comments (0)

Tuesday, February 28, 2017

CBO:  U.S. Is On Path To Highest Budget Deficits And Debt In Our History

Congressional Budget Office, CBO’s Assessment of the Long-Term Budget Outlook and Its Approach to Dynamic Analysis:

If current laws governing federal taxes and spending did not change, the United States would face steadily increasing federal budget deficits and debt over the next 30 years, according to projections by CBO. As a result, CBO estimates, public debt would reach 145 percent of GDP by 2047, higher than any percentage previously recorded in the United States.


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February 28, 2017 in Congressional News, Tax | Permalink | Comments (0)

Thursday, February 23, 2017

Camp & Thuronyi:  An IRS Whistleblower Could Release Trump's Tax Return To Congress Under § 6103(f)

Trump Tax ReturnsFollowing up on my previous posts (links below):  Forbes, Disclosing President Trump's Tax Returns — An Unconventional Idea, by Bryan Camp (Texas Tech) & Victor Thuronyi (former Lead Counsel, (Taxation), IMF):

Lots of folks want to see Donald Trump’s tax returns. Conventional wisdom is that the returns cannot be disclosed unless he consents. That conventional wisdom is based on the general rule contained in 26 U.S.C. § 6103(a). The general rule forbids IRS employees (and some folks who receive information from IRS employees) from disclosing “return information.” That is a term of art that means not just tax returns but also just about anything in the IRS files.

Section 6103 is a really complex statute, mostly because of the exceptions to the general rule. The exceptions are found in subsections (c) through (o). These exceptions balance a taxpayer’s privacy with the needs of government officers and employees to do their jobs. So the exceptions to the general rule can get quite gnarly.

Several commentators have begun to explore some of the lesser-known exceptions to the general rule of nondisclosure. George Yin has a nice op-ed piece that explains one exception to the general rule in § 6103: Congress can ask for Trump’s returns. Andy Grewal also explores this idea in a well-done post over at the Yale regulation blog. Both posts are worth reading.

Both George and Andy focus on the power of certain congressional committees and staff to ask for tax returns as part of their oversight function. That power is found in § 6103(f)(1) through (f)(4). Democrats have acted on the ideas in George and Andy’s blogs. Stephen Ohlemacher from the AP reports that Democrats on the House Ways and Means Committee tried to get the committee to ask for Trump’s returns, but were outvoted by committee Republicans.

But what if the returns were dumped on the committee’s lap by an IRS employee without the Committee having made a request? That could happen under the very last paragraph in subsection (f).

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February 23, 2017 in Congressional News, IRS News, Tax | Permalink | Comments (1)