IRS Commissioner Thanks Tax Pros for Surviving Tax Season

Internal Revenue Service Commissioner John Koskinen has sent a message of thanks to tax professionals and their partners for managing to get through a “challenging” tax season.

“As the April 15 deadline approaches, I want to thank all the tax professionals and other partners who have helped to make a challenging filing season run as smoothly as we could have hoped,” Koskinen wrote in an email Wednesday. “Every filing season is busy and presents unique issues. This tax season saw hurdles ranging from the tax extender legislation in December to putting in place new provisions of the Affordable Care Act. The work of attorneys, Certified Public Accountants and Enrolled Agents as well as the software industry and payroll community has been extremely helpful—and essential—to running the tax system and helping the nation.”

Koskinen—who has faced his own challenges this tax season dealing with steep budget cuts that sharply reduced IRS customer service hours and personnel—also thanked tax pros for their patience.

“I just wanted to let you know how much we appreciate your hard work and continued dedication—as well as your patience,” he added. “I know tax professionals—as well as taxpayers—have faced long wait times when calling the IRS for assistance. I want you to know it’s frustrating for me as well as IRS employees. This remains a major area of concern for the IRS.”

Koskinen also looked beyond tax season. “While the April 15 milestone will quickly pass, please remember we appreciate the work you do throughout the year helping individual and business clients with extensions, amended returns and compliance issues,” he said. “We look forward to continuing to work with tax professionals and all of our partners in the tax community in the year ahead. Thanks again for your hard work, and congratulations on reaching April 15.”

House Ways and Means Committee chairman Paul Ryan, R-Wis., whose committee oversees the IRS, also had a statement on Tax Day about his plans for reforming the tax code and the IRS.

“Today is more than a deadline; it’s a call to action,” he said. “There’s no getting around the fact that our tax code is a mess. It sends jobs overseas, it discourages productivity, and it punishes hard work. But President Obama wants to make it worse. He wants to raise yet another $2 trillion in taxes and give even more special carve-outs to his favorite industries. Our tax code should not pick winners and losers. Our country can’t reach its potential with a tax code that punishes people for reaching their own.”

Ryan added that the tax-writing Ways and Means Committee is working on tax reform. “That’s why this committee is working to fix our tax code—every last word of it,” he said. “If we make our tax code simpler, flatter, and fairer, we can create more jobs and more take-home pay. We don’t see eye to eye with this President. But I’m hopeful that we can find some common ground. I believe we can work together to simplify our code and create a better system for American job creators—big and small—in the next year. And regardless of how long it takes, whether it’s with this president or the next, we remain committed to real reform that will create opportunity for all Americans.”

Separately, Ryan’s office also noted that the House is taking up seven pieces of legislation Wednesday to reform the IRS (see House Ways and Means Committee Passes Bills to Reform IRS). The bills include:

• H.R. 1058, Taxpayer Bill of Rights Act of 2015, which would incorporate a taxpayer’s bill of rights into the core responsibilities of the IRS commissioner. This would include rights to quality service, to pay no more than the correct amount of tax, to privacy, and to challenge the IRS’s decisions and be heard.

• H.R. 1152, would prohibit IRS employees from using personal email for official government business.

• H.R. 1026, Taxpayer Knowledge of IRS Investigations Act, would amend the tax code to stop the IRS from using a provision designed to protect taxpayer privacy to instead protect government employees who improperly look at or reveal taxpayer information.

• H.R. 1295, would amend the tax code to improve the process for making determinations with respect to whether organizations are exempt from taxation under section 501(c)4 of such code. The bill would help prevent the IRS from targeting organizations because of their political or religious beliefs when filing for tax-exempt status. This legislation allows groups to declare their tax-exempt status rather than wait to gain approval from the IRS. It also gives these groups access to court to challenge IRS decisions.

• H.R. 1314, would amend the tax code to provide for a right to an administrative appeal relating to adverse determinations of tax-exempt status of certain organizations

• H.R. 709, the Prevent Targeting at the IRS Act, would make political targeting a fireable offense at the IRS. The legislation would authorize the IRS to terminate employees who target individuals because of their political beliefs.

• H.R. 1104, Fair Treatment for All Gifts Act, would protect Americans who donate to tax-exempt organizations from the threat of a gift tax audit.

All seven bills passed on Wednesday. “We’ve said from day one that we’re going to clean up the IRS, and these bills are a key part of that effort,” said Ryan. “These are commonsense, bipartisan reforms that will provide real accountability and help make sure people are never unfairly targeted again. The IRS should work for the taxpayer, not the other way around. But the IRS is just part of the problem. We have a tax code that punishes people for working, saving, and investing—things we’re going to need if we want to build a healthy economy. If we really want to give relief to taxpayers and create opportunity in our country, we need to overhaul our broken tax code to make it simpler, flatter, and fairer for all Americans. These bills are a firm step forward.”

In the Senate, Senate Finance Committee ranking member Ron Wyden, D-Ore., also called for tax reform on Tax Day. “As Americans race to meet tonight’s midnight tax filing deadline, we are reminded that it’s long past time to clean up our nightmare tax system,” Wyden said in a statement. “Such a complex code is only dividing taxpayers into two different camps – the fortunate who have extra resources to successfully navigate the system to their benefit, and the rest of Americans.  It’s time for a fair and simple tax code that works for everyone.”

Advertisements
Standard

How Does a Corporate ‘Tax Inversion’ Work?

The U.S. government has been promising a crackdown on tax inversion deals for months. Yet the measures announced Monday may not be enough of a disincentive for companies like Pfizer or AbbVie, which are tempted by the savings involved in snapping up smaller foreign rivals and re-domiciling themselves to avoid America’s labyrinthine tax system.

The new rules, aimed at “when possible, stopping” inversion deals, according to the U.S. Treasury, aim to close a number of tax loopholes that make inversion deals possible.

One element will stop companies using so-called “hopscotch” loans, which allow a redomiciled parent company to access earnings from its foreign subsidiaries without raising its tax bill. Another would stop inverted companies transferring cash or property from a “controlled foreign corporation” to their new parent company to avoid U.S. tax. A further measure stops companies using special dividends and other one-off payments to make sure they come in under the threshold of 80 percent of the combined company, which is needed to make an inversion happen.

“Today’s measures do little to negatively impact the economic benefit from the proposed Pfizer acquisition of AstraZeneca.”

These new regulations are part of efforts across the world to clamp down on companies redomiciling to avoid paying tax in their home country. The Organisation for Economic Co-operation and Development (OECD) announced plans to curb corporate tax avoidance last week.

Yet questions remain over whether the measures will have the effect Treasury Secretary Jack Lew desires – making some already mooted deals “no longer make sense”. Although the plunge in the share prices of AstraZeneca, Shire and Smith & Nephew, all potential or actual targets for tax inversion-related deals, in trading on Tuesday suggests some think he is right.

Pfizer/AstraZeneca

Pfizer cannot come back with a raised bid for AstraZeneca until November 26. Its previous $118-billion bid was rejected, and partly caused the furore which led to Lew’s actions.

“Today’s measures do little to negatively impact the economic benefit from the proposed Pfizer acquisition of AstraZeneca,” Andrew Baum, pharmaceuticals analyst at Citi, wrote in a research note.

Pfizer could still reduce its tax rate from 28 percent to 22 percent post inversion, according to Baum’s calculations.

AbbVie/Shire

Shire’s management, possibly fortuitously, insisted on a $500-million break fee if the $55-billion deal, which would reduce AbbVie’s average tax from 22 percent to 13 percent by 2016, does not complete for political reasons. This demonstrates the shadows cast over inversion deals months ago.

However, it is still unclear whether the new rules will affect deals which have been agreed but not yet completed.

Medtronic/Covidien

Medical devices specialist Medtronic announced in June a $42.9 billion cash-and-share deal to buy Covidien, a smaller rival which was founded in the U.S. but moved to Dublin for tax purposes. It has already run into trouble with some shareholders, who may have to pay extra capital gains tax on their shares, over the inversion element of the deal – particularly as some Medtronic executives and board members have received extra payments to make up for these effects.

Mylan/Abbott Laboratories

Generic drugs specialist Mylan plans to cut its tax bill by buying Abbott Laboratories’ branded specialty and generics business in developed markets outside the U.S in a $5.3 billion deal, and headquartering itself in the Netherlands. The deal is scheduled to close early next year, so could still be impacted by the new measures.

Standard