Weekly Report from Washington, D.C.

Lawmakers have started their August recess, but before breaking the Senate Finance Committee (SFC) issued a report on the IRS’s processing of applications for tax-exempt status. The IRS reported that guidance will be released for partnerships, professional employer organizations and on the Health Care Tax Credit (HCTC).


The SFC investigative report released on August 5 found that IRS management “failed to provide effective control, guidance and direction” over the processing of applications for tax-exempt status between the years 2010 to 2013 (TAXDAY, 2015/08/06, C.1). In addition, it discovered that former Exempt Organizations Division Chief Lois Lerner became aware of the Tea Party applications, which served as the basis for the investigation, in early 2010, but failed to inform her superiors about their existence.

The Finance Committee also on August 5 released an updated summary of tax extenders provisions in the Tax Relief Extension Bill of 2015 and modifications of Hatch’s chairman’s mark (TAXDAY, 2015/08/06, C.2). The updated mark includes expansion of the Work Opportunity Tax Credit (WOTC) to apply to hiring of the long-term unemployed, modification of increased expensing limitations and credit for nonbusiness energy property.


Direct Contact Rule. The Treasury Inspector General for Tax Administration (TIGTA) has reported that, despite policies and procedures that ensure taxpayers have the right to designate an authorized representative to act on their behalf in dealing with the IRS, there were 29 allegations that IRS employees violated this general rule (Ref. No. 2015-30-061; TAXDAY, 2015/08/06, T.1). In nine of these cases, the IRS took disciplinary action against those employees, TIGTA noted.

ITINs. A TIGTA report found that the IRS does not have effective procedures in place to ensure that copies of documents certified by foreign issuing agencies are authentic (Ref. No. 2015-40-038; TAXDAY, 2015/08/07, T.1). According to TIGTA, the verification of these documents is critical as lapses may lead to Individual Taxpayer Identification Numbers (ITINs) being issued based on false documentation.


Partnerships. The IRS has announced that it intends to issue regulations under Code Sec. 721(c) to ensure that when a U.S. person transfer property with built-in gain to a partnership that has foreign partners related to the transferor, income or gain attributable to the property will be taken into account by the transferor (Notice 2015-54; TAXDAY, 2015/08/07, I.5). The IRS will also issue regulations under Code Secs. 482 and 6662 applicable to controlled transactions involving partnerships to ensure the appropriate valuation of these transactions.

Professional Employer Organizations. The IRS has announced that it plans to begin accepting applications for the new professional employer organizations (PEO) certification beginning July 1, 2016 (TAXDAY, 2015/08/06, I.2). PEOs will be able to apply to be certified to act, for purposes of the employment tax provisions, as the employer of service providers they lease to their customers.

PPACA. The IRS has reminded individuals who received advance payments of the Code Sec. 36B premium assistance tax credit in 2014 to file their 2014 return as soon as possible (TAXDAY, 2015/08/04, I.2). Individuals who fail to file a 2014 return will not be eligible to receive advance payments of the credit in 2016.

Tax Scams. A fresh advisory has been issued to taxpayers to remain on guard about tax scams (IR-2015-99; TAXDAY, 2015/08/07, I.2). New scams reportedly have been occurring with increased frequency over the phone, in e-mails or through letters with authentic looking letterheads, all in attempts to trick taxpayers into divulging personal financial information or scare them into making false tax payments.

HCTC. The IRS has reported that more guidance will be forthcoming about the Health Coverage Tax Credit (HCTC) (TAXDAY, 2015/08/05, I.5). The Trade Preferences Extension Act of 2015 (P.L. 114-27) extended the HCTC, made certain modifications and also made the credit retroactive.

FATCA. The U.S and Turkey signed an intergovernmental agreement (IGA) to implement the Foreign Account Tax Compliance Act (FATCA) (P.L. 111-147). (TAXDAY, 2015/08/01, I.1) The agreement is a Model I IGA.

By George L. Yaksick, Jr. and Chantal Mahler, Wolters Kluwer News Staff



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