Tuesday, December 20, 2022
Crane Reviews Congressional Research Service's Corporate Tax Reform: Issues For Congress
Charlotte Crane (Northwestern), What Do We Know About The US Corporate Income Tax? (JOTWELL) (reviewing Jane Gravelle (Congressional Research Service), Corporate Tax Reform: Issues for Congress (RL34229 2021): :
In the most recent update of the Congressional Research Service pamphlet, Corporate Tax Reform: Issues for Congress (RL34229 2021), Jane Gravelle presents a survey of the recent economic literature that has been invoked to support various changes in the corporate income tax. Gravelle is an economist who has spent her career bridging the gap between academic approaches to tax and the nitty gritty of tax policymaking within the beltway. In this document she explains how little anyone knows about the corporate income tax in the US. ...
The summary provided of this literature is rather dense, especially since it assumes the reader is fully conversant in both the statistical methods and the classic models involved. The benefit to the non-economist reader is not an easily digested synopsis of each of these recent studies, although the references are more than adequate for the reader hoping to build a firm background in the literature. The virtue in this report is instead the revelation of the weak spots in the literature on which current policy debates rely.
December 20, 2022 in Gov't Reports, Tax, Tax Scholarship | Permalink
Monday, May 23, 2022
GAO: Lack Of Data Limits Research On Tax Equity
GAO, Tax Equity: Lack of Data Limits Ability to Analyze Effects of Tax Policies on Households by Demographic Characteristics:
The U.S. has a large and increasing gap in income and wealth by race, ethnicity, and sex. However, little is known about the effects of tax policies across demographic characteristics. The tax code does not tax individuals differentially based on certain demographics. However, some researchers have noted how it could result in potential unintended disparate tax outcomes.
The CARES Act includes a provision for GAO to report on its ongoing COVID-19 monitoring and oversight efforts. GAO was also asked to review how selected tax policies affected households by race, ethnicity, and sex as part of this oversight.
This report (1) examines approaches for analyzing the effect of tax policies, including some in the CARES Act and related legislation, on households by race, ethnicity, and sex, and (2) estimates how households use selected tax provisions by race, ethnicity, and sex.
May 23, 2022 in Gov't Reports, IRS News, Tax | Permalink
Friday, December 11, 2020
CBO: The Role Of Defined Benefit And Defined Contribution Plans In The Distribution Of Family Wealth
CBO, The Role of Defined Benefit and Defined Contribution Plans in the Distribution of Family Wealth:
December 11, 2020 in Gov't Reports, Tax | 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):
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.
December 23, 2019 in Congressional News, Gov't Reports, Tax, Tax News | Permalink | Comments (1)
Tuesday, December 10, 2019
OECD: Trump’s Tax Cuts Push U.S. Tax Burden To Near World's Lowest
Wall Street Journal, Trump’s Tax Cuts Push U.S. Burden Lower in World:
President Trump’s 2017 tax cuts reduced the U.S. tax burden to one of the lowest among major world economies, according to a Thursday report [Revenue Statistics 2019] by an intergovernmental organization.
U.S. tax burdens dropped by the largest amount among those countries in 2018, and the U.S. now has lower taxes than all but three countries in the Organization for Economic Cooperation and Development, the report said.
December 10, 2019 in Gov't Reports, Tax, Tax News, Tax Scholarship, Think Tank Reports | Permalink | Comments (1)
Tuesday, August 6, 2019
Joint Tax Committee Releases IRS Disclosures Of Tax Return Information, 2018
The 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.
August 6, 2019 in Congressional News, Gov't Reports, Tax, Tax News | Permalink | Comments (0)
Thursday, May 23, 2019
Joint Committee On Taxation: Overview Of The Tax Gap
Following 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.
May 23, 2019 in Congressional News, Gov't Reports, Tax | Permalink | Comments (3)
Tuesday, March 26, 2019
Congressional Research Service: Digital Services Taxes
Congressional 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.
March 26, 2019 in Congressional News, Gov't Reports, Tax | Permalink | Comments (0)
Wednesday, July 11, 2018
The Fed: GOP Tax Cuts May Not Boost Economic Growth
Federal Reserve Bank of San Francisco, Fiscal Policy in Good Times and Bad:
Recent U.S. federal fiscal policy has taken a decidedly procyclical turn, driven primarily by the large and front-loaded tax cuts enacted by the 2017 Tax Cuts and Jobs Act. Many analysts have forecast large increases in GDP growth over the next two to three years as a result. However, recent research finds that the effects of fiscal stimulus on overall economic activity are much smaller during expansions than during downturns. This suggests these forecasts may be overly optimistic.
- Bloomberg, Growth Benefits of U.S. Tax Cuts May Be Overestimated
- Fiscal Times, Why the GOP Tax Cuts May Not Boost Growth
July 11, 2018 in Gov't Reports, Tax | Permalink | Comments (1)
Wednesday, June 27, 2018
National Taxpayer Advocate Releases Mid-Year Report To Congress
IR-2018-143 (June 27, 2018), National Taxpayer Advocate Identifies Priority Areas in Mid-Year Report to Congress:
National Taxpayer Advocate Nina E. Olson today released her statutorily mandated mid-year report to Congress that presents a review of the 2018 filing season, identifies the priority issues the Taxpayer Advocate Service (TAS) will address during the upcoming fiscal year and contains the IRS’s responses to each of the 100 administrative recommendations the Advocate made in her 2017 Annual Report to Congress.
The most significant challenge the IRS faces in the upcoming year is implementing the Tax Cuts and Jobs Act of 2017 (TCJA), which among other things requires programming an estimated 140 systems, writing or revising some 450 forms and publications and issuing guidance on dozens of TCJA provisions. Ms. Olson expresses confidence that the IRS will implement the law successfully. “Make no mistake about it. I have no doubt the IRS will deliver what it has been asked to do,” she writes in the preface to the report.
June 27, 2018 in Gov't Reports, IRS News, Tax | Permalink | Comments (0)
Wednesday, May 23, 2018
TIGTA: One-Third Of IRS Employees Who Participated In Public Transportation Subsidy Program Received Excessive Benefits
The Treasury Inspector General for Tax Administration yesterday released Review of the Internal Revenue Service’s Public Transportation Subsidy Program (2018-10-033):
The IRS’s Public Transportation Subsidy Program (PTSP) was created to encourage employees to use public transportation when commuting to and from work in order to improve air quality, reduce traffic congestion, and conserve energy by reducing the number of single occupancy vehicles on the road. In Calendar Year 2016, more than 18,000 IRS employees received more than $17.5 million in public transportation benefits. Controls in place over the program are important to ensure proper stewardship of taxpayer dollars.
WHY TIGTA DID THE AUDIT
The overall objective of this audit was to determine whether the IRS has effective controls in place to prevent, detect, and deter employee misuse of the PTSP.
WHAT TIGTA FOUND
Controls over the application process provided assurance that applications were complete and limited PTSP usage to only those who were approved for the program. In addition, controls over PTSP benefits effectively limited participants to receiving benefits that were less than or equal to the statutory maximum of $255 per month. Lastly, vendor blocks established by the Department of Transportation effectively prevented purchases from being made at non-transportation-related vendors.
However, the PTSP remained vulnerable to misuse by participants. Based on the results of a statistical sample of program participants, TIGTA estimates that 6,449 participants used almost $1.6 million more in transportation benefits than necessary for commuting to work or used benefits while in a nonpay status, on leave, or while teleworking. The IRS does not have effective controls in place to prevent employees from receiving PTSP benefits that are greater than the participant’s actual commuting cost.
May 23, 2018 in Gov't Reports, IRS News, Tax | Permalink | Comments (1)
Sunday, April 29, 2018
Tax Implications Of President Trump's Deregulatory Agenda
Following up on my previous post, Treasury Proposes Repeal Of 298 Tax Regulations: Press Release, Treasury Releases Report Highlighting Regulatory Reform Accomplishments:
The U.S. Treasury Department today released a report detailing its accomplishments in support of the President’s regulatory reform agenda. ... The Department’s regulatory reform accomplishments include:
- Eliminating, reducing, or proposing to eliminate more than 300 regulations in total, including ineffective, unnecessary, or out-of-date “deadwood” regulations;
- Reducing Treasury’s regulatory agenda by approximately 100 items, year-over-year, from Fall 2016 to Fall 2017;
- More than 250 specific Treasury recommendations to reform and reduce the burdens of regulation in the U.S. domestic financial system;
- Introducing zero new significant regulatory actions under Executive Order 13771.
April 29, 2018 in Gov't Reports, IRS News, Tax | Permalink | Comments (0)
Tuesday, March 20, 2018
CBO: The Distribution Of Household Income, 2014
Congressional 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.
March 20, 2018 in Congressional News, Gov't Reports, Tax | Permalink | Comments (0)
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.
November 22, 2017 in Congressional News, Gov't Reports, News, Shuyi Oei, Tax | Permalink | Comments (0)
Friday, November 17, 2017
National Taxpayer Advocate Blog: Caring About “Sharing” — The IRS Should Do More For Participants In The Gig Economy
NTA Blog, Caring about “Sharing” – The IRS Should Do More for Participants in the Gig Economy:
In this blog post, I will discuss how the IRS has been dealing with a growing sector of our economy called the “sharing” economy (also known as the gig economy). Proponents of the sharing economy believe it promotes marketplace efficiency by enabling individuals to generate revenue from assets while the assets are not being used personally. For example, a vacation home owner may rent out her home while she is not using it. Airbnb (short-term home rentals) and Uber (shared car services) are two of the more prominent companies that facilitate a sharing economy.
Nearly a quarter of the U.S. population earns money from the sharing economy. Although it may be growing at a healthy rate, I want to make clear that not all sharing economy participants are finding it to be a very lucrative endeavor. On the contrary, data show that the vast majority – 85 percent – earn less than $500 per month from their gigs.
Furthermore, many of the service providers are simply unfamiliar with the tax filing and recordkeeping requirements. Service providers in the sharing economy may not fit the mold of the traditional employee who works “9 to 5” and receives a Form W-2 from one employer. Rather, a service provider in the sharing economy may have to take on multiple gigs to help make ends meet, making it difficult to track and allocate expenses among the various gigs. The majority of them do not receive any tax information from the sharing economy platform they use to earn their income. This demonstrates both the need for guidance from the IRS and the opportunity to create a culture of tax compliance among participants in the sharing economy from the outset. Establishing the tax compliance norms for this emerging industry in its infancy will assist the IRS as this segment of taxpayers grows.
This leads us to the question, “What can the IRS do to help sharing economy participants comply with their tax obligations?” First, when looking at noncompliance, it is important to distinguish between the various types of noncompliance the IRS encounters. Not all noncompliant taxpayers are willfully noncompliant; many of them are tripped up by “unknowing” or “lazy” noncompliance. That is, some taxpayers are simply unaware of their tax compliance obligations. Many sharing-economy entrepreneurs and merchants have never operated a small business and need to understand certain basic tax obligations (i.e., making required quarterly estimated payments throughout the year to avoid penalties).
November 17, 2017 in Gov't Reports, IRS News, News, Shuyi Oei, Tax | Permalink | Comments (0)
Tuesday, October 17, 2017
Council of Economic Advisers: Reducing Corporate Tax Rate From 35% To 20% Would Increase Household Income By $4,000/Year
Council of Economic Advisers, Corporate Tax Reform and Wages: Theory and Evidence:
Wage growth in America has stagnated. Over the past eight years, the real median wage in the U.S. rose by an average of six-tenths of a percent per year. But even as Americans’ real wages stagnated, real corporate profits soared, increasing by an average of 11 percent per year. The relationship between corporate profits and worker compensation broke down in the late 1980s. Prior to 1990, worker wages rose by more than 1 percent for every 1 percent increase in corporate profits. From 1990-2016, the pass-through to workers was only 0.6 percent, and looking most recently, from 2008-2016, only 0.3 percent.1 The profits of U.S. multinationals are still American profits, but, increasingly, the benefits of those profits do not accrue to U.S. workers.
The deteriorating relationship between wages of American workers and U.S. corporate profits reflects the state of international tax competition. The problem is not unique to America; countries around the world have responded to the international flow of capital by cutting their corporate tax rates to attract capital back from other countries. They have doubled down on such policies as they have seen business-friendly policies benefit workers. This analysis from the Council of Economic Advisers reviews the evidence that has driven other developed countries to pursue the path of lower corporate tax rates and estimates how business tax reform in the Unified Framework for Fixing Our Broken Tax Code2 (hereafter, the “Unified Framework”) is expected to affect wages for American workers.
Reducing the statutory federal corporate tax rate from 35 to 20 percent would, the analysis below suggests, increase average household income in the United States by, very conservatively, $4,000 annually. The increases recur each year, and the estimated total value of corporate tax reform for the average U.S. household is therefore substantially higher than $4,000. Moreover, the broad range of results in the literature suggest that over a decade, this effect could be much larger.
October 17, 2017 in Gov't Reports, Tax | Permalink | Comments (0)
The Problem Of Taxpayer Communications And The Return Receipt Requirement
Nina Olson, the National Taxpayer Advocate (as if you did not know), had a great blog last week describing a really cool study her office conducted on how to improve taxpayer compliance with the Earned Income Tax Credit (ETIC ... again, as if you did not know).
The basic idea was to see if a simple letter mailed to taxpayers who had demonstrated some identifiable error in their 2014 EITC claims would result in them making fewer errors in their 2015 EITC claims. Not only that, but the study compared that group to a control group of similar taxpayers who made similar errors but who were not sent a letter explaining where they went wrong.
Certainly, my intuition as a teacher is that when you give feedback on what students do wrong, they tend to do better. The study supports that intuition’s application to taxpayers: tell them what they were doing wrong and they will do better overall and will certainly do better than those who get no such feedback.
What struck me as particularly interesting and worth further comment was the feature of just how the Taxpayer Advocate Service sent the letter to the taxpayers. Nina gives this description:
October 17, 2017 in Bryan Camp, Gov't Reports, Tax, Tax Practice And Procedure | Permalink | Comments (0)
Saturday, October 14, 2017
IMF: Higher Taxes On The Rich Will Reduce Inequality Without Hurting Economic Growth
IMF Fiscal Monitor, Tackling Inequality, October 2017:
Rising inequality and slow economic growth in many countries have focused attention on policies to support inclusive growth. While some inequality is inevitable in a market-based economic system, excessive inequality can erode social cohesion, lead to political polarization, and ultimately lower economic growth. This Fiscal Monitor discusses how fiscal policies can help achieve redistributive objectives. It focuses on three salient policy debates: tax rates at the top of the income distribution, the introduction of a universal basic income, and the role of public spending on education and health.
New York Times, I.M.F. Cautions Against Tax Cuts for Wealthy as Republicans Consider Them:
The International Monetary Fund delivered a blunt warning to international policy makers ahead of the fund’s annual meeting this week: Governments risk undermining global economic growth by cutting taxes on the wealthy.
The message, while aimed broadly at all developed nations, carries particular resonance in the United States as the Trump administration and Republican lawmakers push a tax plan that critics say will exacerbate income inequality by reducing taxes for the richest Americans. ...
October 14, 2017 in Gov't Reports, Tax | Permalink | Comments (4)
Tuesday, October 10, 2017
Treasury Rolls Back Eight Tax Regulations
Treasury Department, Second Report to the President on Identifying and Reducing Tax Regulatory Burdens (Executive Order 13789) (Oct. 2, 2017) (press release):
This Second Report recommends actions to eliminate, and in other cases mitigate, consistent with law, the burdens imposed on taxpayers by eight regulations that the Department of the Treasury (Treasury) has identified for review under Executive Order 13789. As stated in the order, it is the policy of the President that tax regulations provide clarity and useful guidance. Recent regulations, however, have increased tax burdens and impeded economic growth. The order therefore calls for immediate action to reduce tax regulatory burdens and provide useful and simplified tax guidance.
October 10, 2017 in Gov't Reports, IRS News, Tax | Permalink | Comments (3)
Friday, October 6, 2017
The IRS Scandal, Day 1611: TIGTA Report, Review Of Selected Criteria Used To Identify Tax-Exempt Applications For Review
Treasury Inspector General for Tax Administration, Agency Statement On Audit Report: “Review of Selected Criteria Used to Identify Tax-Exempt Applications for Review”:
In May 2013, the Treasury Inspector General for Tax Administration (TIGTA) published an audit report in which we reported that between May 2010 and May 2012, the Internal Revenue Service (IRS) used inappropriate criteria to identify for review organizations’ applications for tax-exempt status. TIGTA’s 2013 audit found that the IRS inappropriately selected organizations for scrutiny based on their names or policy positions, instead of indications of significant potential political campaign intervention. Further, TIGTA found that the IRS made requests for unnecessary information and delayed, in some cases for years, making decisions on the organizations’ applications.
This audit was initiated based on bipartisan interest expressed by Members of Congress regarding the IRS’s use of other criteria to select tax-exempt applications for further review. Today, we are releasing a 115-page audit report that provides a historical account of the IRS’s use of 17 additional selection criteria going back as far as 2004. These 17 selection criteria were chosen based on bipartisan input from congressional committees of jurisdiction over the IRS, input from the IRS, and training materials that were not provided to TIGTA during the 2013 audit.
TIGTA found that, between 2004 and 2013, the IRS potentially used more than 250 criteria to identify for further review the applications of organizations seeking tax-exempt status. In our 2013 audit, we found that the process for review of applications for potential political advocacy from May 2010 to May 2012 involved the IRS’s use of a tracking sheet identifying the potential political cases selected for further review; however, the IRS was unable to identify what specific cases, if any, were selected for further review under 16 of the 17 criteria in our current report. Without case selection tracking sheets for the 16 criteria, TIGTA used various other sources to identify 146 cases related to the 17 criteria with indications of political activity, and confirmed that 83 of them were selected for review based on the 17 criteria.
This report is divided into 17 sections, one for each of the 17 criteria. Due to the unique nature of the 17 criteria, it is difficult to compare the criteria to each other, or to compare in aggregate to the criteria reviewed in the 2013 audit. However, TIGTA did find that, while the number of organizations impacted is significantly less than the number detailed in the 2013 report, some organizations in the current report also experienced significant delays and received requests for unnecessary information. In addition, in the 2013 report the majority of cases we reviewed were from organizations applying for I.R.C. § 501 (c)(4) status. In contrast, the majority of the 146 cases in the current report were organizations applying for I.R.C. § 501 (c)(3) status.
Our 2013 report made several recommendations for process improvements and all of them were implemented by the IRS, which we verified in a follow-up audit in 2015. As a result of our 2013 report, the IRS completely revamped the process for reviewing tax-exempt applications, including the elimination of criteria listings, known as “Be On the Lookout” listings, in June 2013. According to the IRS, the revamped process has totally eliminated the backlog of applications and reduced processing cycle times for cases. Since the review process in place when the 17 criteria were potentially used by the IRS is no longer in effect, TIGTA did not make any recommendations for improvement in this audit report.
Treasury Inspector General for Tax Administration, Review of Selected Criteria Used to Identify Tax-Exempt Applications for Review (2017-10-054) (Sept. 28, 2017):
IMPACT ON TAXPAYERS
In a prior audit, TIGTA determined that the IRS used inappropriate criteria to select tax‑exempt applications for further review. Moreover, ineffective management resulted in substantial delays in processing certain applications and allowed unnecessary information requests to be issued. It is critical that tax laws are administered in a fair and impartial manner.
WHY TIGTA DID THE AUDIT
In the prior review, TIGTA audited criteria that the IRS stated it used to select potential political cases for additional review from May 2010 through May 2012. The overall objective of this audit was to provide a historical account of the IRS’s development and use of 17 select criteria from 259 criteria used to identify tax‑exempt applications for review. The 17 criteria discussed in this report were selected based on input from staff of various congressional committees of jurisdiction and the IRS as well as from training documents that were not provided to TIGTA in the prior audit.
WHAT TIGTA FOUND
TIGTA found that, from August 2004 through June 2013, the IRS potentially used 259 criteria to identify tax-exempt applications for further review. Most of these criteria involved issues besides political campaign intervention, such as potential fraud, abuse, and links to terrorism.
In the prior audit, TIGTA found that the IRS used a tracking sheet to show which potential political cases were selected for further review; however, IRS management stated that case listings such as the one provided in the prior audit were not required. Due to the lack of case listings for all but one of the 17 criteria, TIGTA used various sources to identify more than 900 cases that could potentially have been selected for review based on the 17 criteria. However, TIGTA could not verify whether all relevant cases were identified.
Based on TIGTA’s review of case documentation, 181 of the more than 900 cases had evidence of political activities or indications of significant potential political campaign intervention (the subject of the prior audit). Thirty-five of these cases were not processed while the applicable criteria were in use and did not appear to be processed based on the criteria. For the remaining 146 cases, TIGTA determined that 83 were processed based upon the criteria and 63 were processed while the criteria were in use, but TIGTA could not confirm these 63 cases were selected based upon the criteria. Analysis of the 146 cases is shown in each of the 17 sections of the report with information for each of these unique criteria.
October 6, 2017 in Gov't Reports, IRS News, IRS Scandal, Tax | Permalink | Comments (0)
Tuesday, October 3, 2017
TIGTA: IRS Must Ensure That Volunteer Income Tax Assistance Is Given Only To Eligible Taxpayers (200,000 Returns Were Prepared For Ineligible Taxpayers, Including Four With AGIs > $1 Million)
The Treasury Inspector General for Tax Administration has released Improvements Are Needed to Ensure That the Volunteer Income Tax Assistance Grant Program Extends Tax Return Preparation to Underserved Populations (2017-40-088):
TIGTA’s review of the almost 4.5 million tax returns prepared by grantees during Grant Years 2014 through 2016 identified that: 1) volunteers prepared 201,572 (4 percent) returns with an Adjusted Gross Income amount that exceeded the income threshold set for free tax return preparation, including 34,371 returns with an Adjusted Gross Income greater than $100,000 and 11 returns with an Adjusted Gross Income exceeding $1 million; 2) the IRS could not verify if 456,220 (10 percent) tax returns with complex tax schedules were prepared by volunteers with advanced certifications; and 3) 15,402 returns were out of scope. Finally, some guidelines and procedures were not current or consistent.
October 3, 2017 in Gov't Reports, IRS News, Tax | Permalink | Comments (1)
Monday, September 18, 2017
The Capacity Of Governments To Raise Taxes
OECD Econ. Dep't Working Paper No. 1407, The Capacity of Governments to Raise Taxes:
This paper investigates the factors that shape governments’ capacity to collect revenue. To do so, it analyses how tax revenue responds to tax rates using evidence from a panel of 34 OECD countries over 1978-2014. The estimations show that the response of revenue to rates weakens as rates become higher, confirming the existence of a hump-shaped relationship between tax revenue and rates for corporate income taxation and providing a new contribution by analysing value-added taxation. Importantly, the estimated responses of revenue to tax rates vary, in some cases very strongly from an economic perspective, depending on country-specific policies and framework conditions. In particular, the corporate income tax revenue-generating potential of hiking the effective rate shrinks much more quickly in more open economies than in more closed ones.
September 18, 2017 in Gov't Reports, Scholarship, Tax | Permalink | Comments (0)
Friday, September 15, 2017
WaPo: The GOP's War On The EITC
In this op-ed in the Washington Post, columnist Catherine Rampell comments on a proposal in the Budget Committee Report 115-240 explaining the current budget legislation. It's a proposal to tighten up processing of tax returns claiming the Earned Income Tax Credit (ETIC). She writes:
September 15, 2017 in Bryan Camp, Gov't Reports, News, Tax, Tax Policy in the Trump Administration, Tax Practice And Procedure | Permalink | Comments (7)
TIGTA: 64% Of The IRS's Information Technology Is Beyond Its Useful Life
The Treasury Inspector General for Tax Administration has released Sixty-Four Percent of the Internal Revenue Service's Information Technology Hardware Infrastructure Is Beyond Its Useful Life (2017-20-051):
The overall objective of this review was to determine the efficiency and effectiveness of key ongoing or planned activities aimed at addressing the IRS operational challenge of replacing its aged hardware infrastructure.
While the Sustaining Infrastructure Program spends on average nearly 99.7 percent of its allocated budget each year, the IRS has not yet achieved its stated objective of reducing its aged information technology hardware to an acceptable level of 20 to 25 percent. In fact, this percentage has steadily increased from 40 percent at the start of Fiscal Year 2013 to 64 percent at the start of Fiscal Year 2017. The IRS estimates that the current replacement cost for its aged information technology hardware is approximately $430 million.
September 15, 2017 in Gov't Reports, IRS News, Tax | Permalink | Comments (1)
Thursday, September 7, 2017
Dealing With IRS Scammers (And How To Tell They Are Not Private Debt Collectors)
Readers will recall that Congress, in §32102 of the 2015 (FAST) Act, amended IRC §6306 to force the Service to outsource some collection inventory to private collection agencies.
Now, I have no doubt that readers of this blog are totally compliant in their taxes. And if any happen to be delinquent in their taxes, I have no doubt they are not in the category of delinquent taxpayers who face collection from private collection agencies. But I also suspect many readers have received questions about the program from clients, friends, family members, workplace colleagues, neighbors, and others.
September 7, 2017 in Bryan Camp, Gov't Reports, IRS News, Tax, Tax Practice And Procedure | Permalink | Comments (0)
Wednesday, September 6, 2017
The (Lack Of) Human Touch In Collecting Taxes
The National Taxpayer Advocate Nina Olsen has a blog post here that is well worth your time to read. It's about the Service's automated levy program called FPLP (Federal Levy Payment Program).
One way the Service tries to collect unpaid taxes is by looking for people who owe the delinquent taxpayer money and snagging those payments. That's called a levy. FPLP is a computer program designed to snags payments owed by the federal government to delinquent taxpayers. Now, some people consider it an irony that one hand of the federal government actually sends payments to many delinquent taxpayers who owe the federal government money. Notably, however, FPLP hits what are commonly viewed as "safety net" payments from Social Security and Federal Retirement programs. So other people consider it an irony that one hand of the federal government would partially undo the safety net payments made by the other hand.
September 6, 2017 in Bryan Camp, Gov't Reports, IRS News, Tax, Tax Practice And Procedure | Permalink | Comments (0)
Wednesday, August 9, 2017
TIGTA: The IRS Continues To Rehire Hundreds Of Former Employees With Conduct And Performance Issues
The Treasury Inspector General for Tax Administration has released The Internal Revenue Service Continues to Rehire Former Employees With Conduct and Performance Issues (2017-10-035):
From January 1, 2015, through March 31, 2016, the IRS hired nearly 7,500 employees, of which more than 2,000 had been previously employed by the IRS. ... The IRS has not effectively updated or implemented hiring policies to fully consider past IRS conduct and performance issues prior to making a tentative decision to hire former employees, including those who were terminated or separated during an investigation of a substantiated conduct or performance issue.
While most employees who are rehired do not have prior conduct or performance issues, TIGTA found that more than 200 (approximately 10 percent) of the more than 2,000 former employees who were rehired between January 2015 and March 2016 were previously terminated from the IRS or separated while under investigation for a substantiated conduct or performance issue.
August 9, 2017 in Gov't Reports, IRS News, Tax | Permalink | Comments (0)
Tuesday, August 8, 2017
GAO: IRS Provides Only 'Minimal Oversight' Of Low Income Housing Tax Credit Program, Refuses To Collect Data That Would Allow It To Impose 'Basic Accountability'
NPR, Housing Program Worth Billions Lacks 'Basic Accountability':
An $8 billion federal program to build housing for the poor is so lacking oversight that virtually no one in government knows how it is working, a government auditor testified before Congress today [Low-Income Housing Tax Credit: Actions Needed to Strengthen Oversight and Accountability (GAO-17-784T) (Aug. 1, 2017)].
IRS and no one else in the federal government really has an idea of what's going on," said Daniel Garcia-Diaz, an auditor with the Government Accountability Office while testifying before the U.S. Senate Committee on Finance. "These are basic accountability requirements we would expect of any program, especially one as important as this one."
August 8, 2017 in Gov't Reports, IRS News, Tax | Permalink | Comments (1)
Sunday, April 30, 2017
The 'Better Way' House Tax Plan: An Economic Analysis
Jane 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.
April 30, 2017 in Congressional News, Gov't Reports, Tax | Permalink | Comments (0)
Thursday, April 6, 2017
TIGTA: 91% Of Taxpayers Whose Bank Accounts Were Seized By The IRS Had Acquired The Cash Legally
The Treasury Inspector General for Tax Administration yesterday released Criminal Investigation Enforced Structuring Laws Primarily Against Legal Source Funds and Compromised the Rights of Some Indiviuals and Businesses:
The Currency and Foreign Transactions Reporting Act of 1970, referred to as the Bank Secrecy Act, requires U.S. financial institutions to file reports of currency transactions exceeding $10,000. ... In October 2014, a new policy was instituted by IRS Criminal Investigation (CI) that it would no longer pursue the seizure and forfeiture of funds related to legal source structuring. In the same month the policy changed, the New York Times reported that CI had been seizing funds in structuring investigations without filing a criminal complaint. Property owners were left to prove their innocence, and many gave up trying. This audit was initiated to evaluate the IRS’s use of seizures against property owners suspected of structuring transactions to avoid Bank Secrecy Act reporting requirements.
Most of the seizures for structuring violations involved legal source funds from businesses. While current law does not require that the funds have an illegal source (e.g., money laundering or criminal activity other than alleged.
Washington Post, The IRS Took Millions From Innocent People Because of How They Managed Their Bank Accounts, Inspector General Finds:
The IRS pursued hundreds of cases from 2012 to 2015 on suspicion of structuring, but with no indications of connections to any criminal activity. Simply depositing cash in sums of less than $10,000 was all that it took to arouse agents' suspicions, leading to the eventual seizure and forfeiture of millions of dollars in cash from people not otherwise suspected of criminal activity.
April 6, 2017 in Gov't Reports, IRS News, Tax | Permalink | Comments (11)
Wednesday, February 1, 2017
Joint Tax Committee Releases Tax Expenditure Estimates For 2016-2020
Joint Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal Years 2016-2020 (JCX-3-17):
Tax 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 report on tax expenditures for fiscal years 2016-2020 is prepared by the staff of the Joint Committee on Taxation (“Joint Committee staff”) for the House Committee on Ways and Means and the Senate Committee on Finance. The report also is submitted to the House and Senate Committees on the Budget.
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 Treasury published its estimates of tax expenditures for fiscal years 2015-2025 in the Administration's budgetary statement of February 9, 2016. The lists of tax expenditures in this Joint Committee staff report and the Administration's budgetary statement overlap considerably; the differences are discussed in Part I of this report under the heading “Comparisons with Treasury.”
February 1, 2017 in Congressional News, Gov't Reports, Tax | Permalink | Comments (0)
Wednesday, November 30, 2016
CBO & Joint Tax Committee: Factors Affecting Revenue Estimates Of Tax Compliance Proposals
The Congressional Budget Office and Joint Committee Taxation have released Factors Affecting Revenue Estimates of Tax Compliance Proposals (CBO Working Paper 2016-05; JTX-90-16):
This paper examines various factors that affect estimates made by the Congressional Budget Office and the staff of the Joint Committee on Taxation of the budgetary savings from tax compliance proposals. Affecting the current law baseline, against which proposed changes are measured, are the size of the tax gap and the amount of Internal Revenue Service (IRS) resources. Other considerations that affect the revenue estimates for either appropriation proposals or changes to the tax code include the distinction between detection and deterrence, the budget scorekeeping guidelines, and the constraints faced by the IRS when trying to obtain a higher return on investment from new initiatives than from the activities allowed under current law. In addition to those common considerations, there are factors unique to proposals to increase funding and to those that would expand the IRS’s enforcement tools allowed under the tax code. Those unique factors are illustrated by two examples—first, the Administration’s proposal to increase funding for IRS enforcement actions that was included in its fiscal year 2016 budget submission and second, legislation enacted in 2016 to reduce identity fraud in the tax system.
November 30, 2016 in Congressional News, Gov't Reports, IRS News | Permalink | Comments (0)
Friday, November 18, 2016
TIGTA: IRS Exposed 28 Million Taxpayers To Identity Theft By Sending Unencrypted Email
- TIGTA, Employees Sometimes Did Not Adhere to E-Mail Policies,Which Increased the Risk of Improper Disclosure of Taxpayer Information (2017-30-010) (press release)
- TIGTA, Improvements Are Needed to Ensure the Protection of Data the IRS Transfers to External Partners (2017-20-004) (press release)
Washington Times, IRS Exposed Taxpayers’ Info Through Shoddy Emails, Audit Shows:
A surprising number of IRS employees are sending unencrypted emails containing personal taxpayer information to private accounts, putting that information at risk of being stolen, the agency’s inspector general said Thursday.
November 18, 2016 in Gov't Reports, IRS News, Tax | Permalink | Comments (3)
Saturday, September 24, 2016
Obama Has Redistributed More Wealth To The Bottom 99% Through The Tax Code Than Any Administration Since At Least 1960
Wall Street Journal, The White House Says Its Policies Slashed the Income Gap:
One of the big criticisms of the current economic expansion—and also the one that ran from 2001 through 2007—is that most of the gains accrued to the best off, unleashing a populist groundswell in the presidential election campaign.
The White House lays out the case in a new report that the Obama administration’s policies have done more than any administration in the last half-century to reduce inequality [The Economic Record of the Obama Administration: Progress Reducing Inequality] ...
The upshot is these changes in tax and health-care policy will increase the share of after-tax income by the poorest fifth of households by 0.6 percentage point while reducing the share of the wealthiest 1% of households by 1.2 percentage points.
Taken together, the administration says that it has done more to redistribute wealth to the bottom 99% of families through tax-code changes than any administration since at least 1960. The share of after-tax income from the poorest fifth of households fell by nearly 25% from 1979 to 2007, and the White House says its tax and health-care changes have reversed one-third of that decline.
September 24, 2016 in Gov't Reports, Tax | Permalink | Comments (3)
Wednesday, September 14, 2016
U.S. Household Incomes Surged 5.2% in 2015, Biggest Increase In Over 50 Years
U.S. Census Bureau, Income and Poverty in the United States: 2015 (Sept. 13, 2016):
Median household income was $56,516 in 2015, an increase in real terms of 5.2 percent from the 2014 median of $53,718 (Figure 1 and Table 1). This is the first annual increase in median household income since 2007, the year before the most recent recession.
September 14, 2016 in Gov't Reports, Tax | Permalink | Comments (4)
Wednesday, September 7, 2016
GAO: IRS Needs To Clarify Authority Of Published Guidance
Government Accountability Office, Treasury and OMB Need to Reevaluate Long-standing Exemptions of Tax Regulations and Guidance (GAO- 16-720):
The Internal Revenue Service (IRS) uses a variety of documents to communicate its interpretation of tax laws to the public, but only considers Internal Revenue Bulletin (IRB) guidance to be authoritative. IRS information published outside of the IRB can help taxpayers understand tax laws and make informed decisions, but does not always include information clarifying the limitations of its use. IRS has detailed procedures for identifying, prioritizing, and issuing new guidance. However, it lacks procedures for documenting the decision about what type of guidance to issue.
Hierarchy of Authority for IRS Guidance and Other Information Sources
September 7, 2016 in Gov't Reports, IRS News, Tax | Permalink | Comments (0)
Friday, July 8, 2016
TIGTA: IRS May Have Allowed 60% Of Former Employees (Including Those Subject To Disciplinary Proceedings) Access To Buildings, Computers
The Treasury Inspector General for Tax Administration has released Access to Government Facilities and Computers Is Not Always Removed When Employees Separate (2016-10-038):
During Fiscal Year 2014, more than 4,100 full-time, permanent employees separated from the IRS, including 186 who separated during a pending disciplinary case (including criminal misconduct). It is important for the IRS to recover security items, such as Government identification, to prevent former employees from unauthorized entry to IRS facilities and workspaces, accessing IRS computers and taxpayer information, or potentially misrepresenting themselves to taxpayers. ...
Based on a random sample of Fiscal Year 2014 employee separations, TIGTA estimates that the IRS could not verify that all security items were recovered for more than 2,700 (66 percent) of the more than 4,100 employee separations. TIGTA also reviewed a judgmental sample of 10 employees who separated during a pending disciplinary case. The IRS could not verify the recovery of the security items for six of these employees and could not provide evidence that these cases were referred to the TIGTA Office of Investigations as required. When the IRS did not collect security items, some were later used to enter IRS buildings.
July 8, 2016 in Gov't Reports, IRS News, Tax | Permalink | Comments (2)
Tuesday, July 5, 2016
GAO: IRS's 30% Error Rate With Refundable Tax Credits Results In $30 Billion In Annual Erroneous Payments
Government Accountability Office, Refundable Tax Credits: Comprehensive Compliance Strategy and Expanded Use of Data Could Strengthen IRS's Efforts to Address Noncompliance (GAO- 16-475):
The Earned Income Tax Credit (EITC), the Additional Child Tax Credit (ACTC), and the American Opportunity Tax Credit (AOTC) provide tax benefits to millions of taxpayers—many of whom are low-income—who are working, raising children, or pursuing higher education. These credits are refundable in that, in addition to offsetting tax liability, any excess credit over the tax liability is refunded to the taxpayer. In 2013, the most recent year available, taxpayers claimed $68.1 billion of the EITC, $55.1 billion of the CTC/ACTC, and $17.8 billion of the AOTC.
Eligibility rules for refundable tax credits (RTCs) contribute to compliance burden for taxpayers and administrative costs for the Internal Revenue Service (IRS). These rules are often complex because they must address complicated family relationships and residency arrangements to determine who is a qualifying child. Compliance with the rules is also difficult for IRS to verify due to the lack of available third party data. The relatively high overclaim error rates for these credits (as shown below) are a result, in part, of this complexity. The average dollar amounts overclaimed per year for 2009 to 2011, the most recent years available, are $18.1 billion for the EITC, $6.4 billion for the CTC/ACTC, and $5.0 billion for the AOTC.
July 5, 2016 in Congressional News, Gov't Reports, Tax | Permalink | Comments (2)
Wednesday, June 29, 2016
CBO: The 2016 Budget Outlook
Congressional Budget Office, The 2016 Budget Outlook (June 29, 2016):
June 29, 2016 in Congressional News, Gov't Reports, Tax | Permalink | Comments (2)
Friday, June 10, 2016
CBO: The Distribution Of Household Income And Federal Taxes, 2013
Congressional Budget Office, The Distribution of Household Income and Federal Taxes, 2013:
In 2013, according to the Congressional Budget Office’s estimates, average household market income— a comprehensive income measure that consists of labor income, business income, capital income (including capital gains), and retirement income—was approximately $86,000. Government transfers, which include benefits from programs such as Social Security, Medicare, and unemployment insurance, averaged approximately $14,000 per household. The sum of those two amounts, which equals before-tax income, was about $100,000, on average. In this report, CBO analyzed the distribution of four types of federal taxes: individual income taxes, payroll (or social insurance) taxes, corporate income taxes, and excise taxes. Taken together, those taxes amounted to about $20,000 per household, on average, in 2013.1 Thus, average after-tax income—which equals market income plus government transfers minus federal taxes— was about $80,000, and the average federal tax rate (federal taxes divided by before-tax income) was about 20 percent.
June 10, 2016 in Congressional News, Gov't Reports, Tax | Permalink | Comments (1)
Friday, May 27, 2016
GAO: IRS's 1950s Computer System Is Federal Government's Oldest, Putting Taxpayer Information At Risk
Government Accountability Office, Federal Agencies Need to Address Aging Legacy Systems (GAO- 16-696T):
Federal legacy IT investments are becoming increasingly obsolete: many use outdated software languages and hardware parts that are unsupported. Agencies reported using several systems that have components that are, in some cases, at least 50 years old. For example, ... the Department of the Treasury uses assembly language code—a computer language initially used in the 1950s and typically tied to the hardware for which it was developed. ... The following table provides examples of legacy systems across the federal government that agencies report are 30 years or older and use obsolete software or hardware, and identifies those that do not have specific plans with time frames to modernize or replace these investments.
May 27, 2016 in Gov't Reports, IRS News, Tax | Permalink | Comments (4)
Sunday, May 8, 2016
TIGTA: IRS Mischaracterizes 88% Of Hobbies As For-Profit Businesses, Allowing Billions In Improper Loss Deductions
The Treasury Inspector General for Tax Administration has released Opportunities Exist to Identify and Examine Individual Taxpayers Who Deduct Potential Hobby Losses to Offset Other Income (2016-30-031):
The Treasury Inspector General for Tax Administration (TIGTA) today publicly released its audit report of the Internal Revenue Service’s (IRS) methods of addressing taxpayers who take business tax deductions for activities not engaged in for profit. TIGTA found that the IRS can improve its methods for identifying high-income taxpayers who may be offsetting their income with “hobby losses” from unprofitable business activity.
The tax code allows taxpayers to deduct all ordinary and necessary expenses paid or incurred in carrying on a trade or business. However, in the “hobby loss” provision in the tax code, the IRS generally disallows business tax deductions for activities not engaged in for profit.
May 8, 2016 in Gov't Reports, IRS News, Tax | Permalink | Comments (10)
Monday, May 2, 2016
Sen. Hatch Demands Release Of Secret Reagan-Era DOJ Tax Memo Supporting Obama's Expansive Use Of Presidential Power
Washington Times, Orrin Hatch Demands Secret Memo That’s Aided Obama Executive Actions:
President Obama’s unilateral pen-and-phone approach to governing has been aided by a decades-old secret memo that allows him to avoid economic scrutiny of some of the most intrusive rules and regulations his administration has issued, a top senator said Thursday.
Now Sen. Orrin G. Hatch, Utah Republican and chairman of the Finance Committee, has demanded Treasury Secretary Jacob Lew release the 1983 memorandum of understanding and defend the Reagan-era policy that has let Mr. Obama pursue changes on everything from corporate taxes to Obamacare without first giving a full heads-up to Congress.
May 2, 2016 in Gov't Reports, Tax | Permalink | Comments (1)
Wednesday, April 20, 2016
Joint Tax Committee Releases IRS Disclosures Of Tax Return Information, 2015
The Joint Committee on Taxation has released Disclosure Report for Public Inspection Pursuant to Internal Revenue Code Section 6103(p)(3)(C) for Calendar Year 2015 (JCX-32-16):
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
April 20, 2016 in Gov't Reports, Tax | Permalink | Comments (0)
Monday, April 18, 2016
IRS Continues To Put Taxpayer Confidential Data At Risk By Not Following 94 GAO Recommendations To Improve Security
Government Accountability Office, IRS Needs to Further Enhance Controls over Taxpayer and Financial Data (GAO-16-590T):
In March 2016 GAO reported that the Internal Revenue Service (IRS) had instituted numerous controls over key financial and tax processing systems; however, it had not always effectively implemented safeguards intended to properly restrict access to systems and information. In particular, while IRS had improved some of its access controls, weaknesses remained with identifying and authenticating users, authorizing users' level of rights and privileges, encrypting sensitive data, auditing and monitoring network activity, and physically securing its computing resources. These weaknesses were due in part to IRS's inconsistent implementation of its agency-wide security program, including not fully implementing GAO recommendations. The table below shows the status of prior and new GAO recommendations as of the end of its fiscal year (FY) 2015 audit of IRS's information security. GAO concluded that these weaknesses collectively constituted a significant deficiency for the purposes of financial reporting for fiscal year 2015. Until they are effectively mitigated, taxpayer and financial data will continue to be exposed to unnecessary risk.
April 18, 2016 in Gov't Reports, Tax | Permalink | Comments (0)
Friday, April 15, 2016
GAO: Two-Thirds Of All Active Corporations Paid Zero Federal Income Tax
Government Accountability Office, Most Large Profitable U.S. Corporations Paid Tax but Effective Tax Rates Differed Significantly from the Statutory Rate (GAO-16-363):
In each year from 2006 to 2012, at least two-thirds of all active corporations had no federal income tax liability. Larger corporations were more likely to owe tax. Among large corporations (generally those with at least $10 million in assets) less than half—42.3 percent—paid no federal income tax in 2012. Of those large corporations whose financial statements reported a profit, 19.5 percent paid no federal income tax that year. Reasons why even profitable corporations may have paid no federal tax in a given year include the use of tax deductions for losses carried forward from prior years and tax incentives, such as depreciation allowances that are more generous in the federal tax code than those allowed for financial accounting purposes. Corporations that did have a federal corporate income tax liability for tax year 2012 owed $267.5 billion.
April 15, 2016 in Gov't Reports, IRS News, Tax | Permalink | Comments (2)
Tuesday, March 29, 2016
GAO: IRS Refusal To Address Previously Identified IT Deficiencies Leaves Confidential Taxpayer Data 'Unnecessarily Vulnerable'
Government Accountability Office, IRS Needs to Further Improve Controls over Financial and Taxpayer Data (GAO-16-398) (Mar. 28, 2016):
The Internal Revenue Service (IRS) made progress in implementing information security controls; however, weaknesses in the controls limited their effectiveness in protecting the confidentiality, integrity, and availability of financial and sensitive taxpayer data. During fiscal year 2015, IRS continued to devote attention to securing its information systems that process sensitive taxpayer and financial information. Key among its actions were further restricting access privileges on key financial applications and continuing its migration to multifactor authentication across the agency. However, significant control deficiencies remained. For example, the agency had not always (1) implemented controls for identifying and authenticating users, such as applying proper password settings; (2) appropriately restricted access to servers; (3) ensured that sensitive user authentication data were encrypted; (4) audited and monitored systems to ensure compliance with agency policies; and (5) ensured access to restricted areas was appropriate. In addition, unpatched and outdated software exposed IRS to known vulnerabilities.
March 29, 2016 in Gov't Reports, Tax | Permalink | Comments (0)
Tuesday, March 22, 2016
House Holds Hearing Today On Fundamental Tax Reform Proposals
The Subcommittee on Tax Policy of the House Ways & Mean Committee holds a hearing today on Fundamental Tax Reform Proposals:
Rep. Devin Nunes (R-CA), a member of the Ways and Means Committee, will testify in support of his bill, H.R. 4377, the American Business Competitiveness (ABC) Act of 2015. This proposal would tax a business based on its actual cash-flow instead of its income.
Rep. Michael Burgess (R-TX) will discuss the merits of his bill, H.R. 1040, the Flat Tax Act. This proposal gives businesses and individuals the choice to opt-in to a 17% flat tax and to be taxed on a cash-flow basis for business activities.
Rep. Robert Woodall (R-GA) will speak in support of his bill, H.R. 25, the FairTax Act of 2015. This proposal would repeal all federal income, payroll and withholding, and estate and gift taxes. The taxes would be replaced with a national sales tax on gross payments of taxable property or services.
In connection with the hearing, the Joint Committee on Taxation has released Background On Cash-Flow And Consumption-Based Approaches To Taxation (JCX 14-16):
March 22, 2016 in Congressional News, Gov't Reports, Tax | Permalink | Comments (2)
Thursday, January 21, 2016
Profit Shifting Of U.S. Multinationals
Tim Dowd, Paul Landefeld & Anne Moore (Joint Committee on Taxation), Profit Shifting of U.S. Multinationals:
We analyze the profit shifting behavior of U.S. multinational firms using a unique panel data set of U.S. tax returns over the period 2002-2012. Prior research has found significant effects of tax rates in affiliate and parent countries on the profit shifting behavior of multinational entities, with semi-elasticities ranging from close to zero to well above one. We build on this prior work by allowing more heterogeneity in response across the distribution of tax rates and by including affiliates located in tax havens around the world. Our findings suggest that elasticities based on a log-linear specification may severely understate the sensitivity of profits to tax in low-tax jurisdictions while simultaneously overstating this elasticity in high-tax jurisdictions. Accounting for this type of nonlinearity appears crucial in considering how the global allocation of firm profits might change in response to tax rate changes.
January 21, 2016 in Gov't Reports, Scholarship, Tax | Permalink | Comments (0)
Friday, January 15, 2016
GAO: Only 38% Of Taxpayers Who Called IRS Got Through In 2015 (Down From 74% In 2010); Wait Time Increased From 11 To 31 Minutes
Government Accountability Office, Deteriorating Taxpayer Service Underscores Need for a Comprehensive Strategy and Process Efficiencies (GAO-16-151) (Jan 14, 2016):
The Internal Revenue Service (IRS) provided the lowest level of telephone service during fiscal year 2015 compared to prior years, with only 38 percent of callers who wanted to speak with an IRS assistor able to reach one. This lower level of service occurred despite lower demand from callers seeking live assistance, which has fallen by 6 percent since 2010 to about 51 million callers in 2015. Over the same period, average wait times have almost tripled to over 30 minutes. IRS also struggled to answer correspondence in a timely manner and assistors increasingly either failed to send required correspondence to taxpayers or included inaccurate information in correspondence sent. IRS has taken steps to remind assistors to send correspondence, but does not have adequate controls to ensure that they send accurate correspondence before closing cases. GAO also found that the Department of the Treasury (Treasury) does not include correspondence performance goals in its performance plan, and therefore, does not have a complete set of measures to assess performance. The decline in service has coincided with a 10 percent reduction in IRS's annual appropriations, as well as resource allocation decisions by IRS to meet statutory responsibilities, such as implementing tax law changes and supporting information technology infrastructure.
January 15, 2016 in Gov't Reports, IRS News, Tax | Permalink | Comments (2)