The U.S. Congress is considering legislation that would revive dozens of tax breaks that expired on January 1, 2014. Different bills are working their way through the U.S. House of Representatives and the U.S. Senate. House Republicans are pursuing a somewhat different, and more aggressive, approach than the Senate. They propose not only to extend many of these tax breaks, but to make some of them permanent. These and other matters of interest are discussed below:
1. U.S. Senate Nears Vote on Bill Extending More Than $80 Billion in Tax Cuts - Senate Democrats are trying to pass a bill that would result in more than $80 billion in tax breaks. Senate Republicans, in league with House Republicans, would like to create even greater tax breaks. The bill now before the Senate includes more than 15 extenders of special interest to business taxpayers. Of particular interest are 2-year extensions of the Research and Development Tax Credit (R & D Tax Credit) and the 50% Bonus Depreciation Deduction for capital improvements. However, Sen. Harry Reid (D - Nev.) is not in favor of allowing any Republican amendments to the bill now before the Senate. Even if the Senate passes the bill, it may meet with resistance by the Republican-controlled House of Representatives.
2. U.S. House of Representatives Votes to Make the Expired R & D Tax Credit Permanent - On May 12, 2014, the Republican-controlled House of Representatives gave notice of its unhappiness with the direction being taken by the Senate in its consideration of the tax extenders bill. The House voted to not only extend the R & D Tax Credit, but to also make it permanent. President Obama has indicated that even if this bill making the R & D Tax Credit permanent reaches his desk, he intends to veto it. Business leaders will want to carefully monitor the future progress of this legislation.
3. IRS and Justice Department Announce Enforcement Priorities - Speaking at the May 10, 2014 meeting of the ABA Section of Taxation, Rebecca Starks, an official with the IRS Criminal Investigation division, stated that stopping identity theft and tax refund fraud will continue to be a top priority for the IRS, acting in partnership with the Justice Department. Ms. Sparks also pointed out that another high priority for the IRS will be cracking down on offshore tax evasion, by both banks and individuals. Ms. Sparks noted that the government is finding a "treasure trove of information" in its scrutinizing of suspicious activity. She said this has led to investigations of various money service businesses.
4. If You Thought the Affordable Care Act (ACA) Wasn’t Complex Enough - Also speaking at the May 10, 2014 meeting of the ABA Tax Section, Stephen Tackney, deputy associate chief counsel (Employee Benefits) of the IRS office of Division Counsel, warned tax practitioners that there will be more compliance complexity for businesses attempting to comply with the ACA. According to Mr. Tackney, employers will be asked to provide a significant amount of information regarding their compliance with IRC Section 4980H. That Code section, known as the employer mandate provision of the ACA, generally imposes an excise tax on large employers who fail to offer full-time employees and their dependents affordable, minimum value health care coverage. It is estimated that the employer mandate of IRC Section 4980H will apply to 4% of all U.S. employers.
5. IRS Services and Enforcement Activities May Be Limited in 2014 As the IRS Satisfies New Obligations - IRS Commissioner, John Koskinen, told members of the House Ways and Means Committee that the cost of the oversight and enforcement responsibility of the IRS in enforcing the ACA and the Foreign Account Tax Compliance Act (FACTA) means the IRS will have to divert funds from other critical programs. Mr. Koskinen remarked "We have a statutory obligation to implement the Foreign Account Tax Compliance Act and the Affordable Care Act, and we will do that, but to the extent that resources remain constrained, we will fund that out of declining taxpayer services and taxpayer enforcement."
6. House of Representatives Holds Former IRS Official Lois Lerner In Contempt of Congress In Connection With Its Investigation of the Tea Party Scandal - The House of Representatives voted to hold former IRS official Lois Lerner in contempt of Congress. This is a result of her refusing to testify about her role in the IRS’s overreaching and burdensome inquiries of the various Tea Party groups seeking tax exempt status during the years 2009-2012. The vote, along party lines, was 231-187, with only 6 Democrats voting in favor of the resolution and no Republicans voting against it. A second resolution was also approved, calling for the Justice Department to appoint an independent counsel to investigate the IRS’s handling of these applications for tax-exempt status.
For additional information regarding these topics, please contact your local UHY LLP professional.
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