On January 15, 2014, the House, by a vote of 359-67, passed an appropriations bill to fund our federal government through September 30, 2014. The next day, January 16, 2014, the Senate passed the bill by a vote of 72-26. The bill will now make its way to President Obama for signature.
Once signed by President Obama, the bill, commonly known as the “Consolidated Appropriations Act, 2014,” will become law (the “Act”). The Act spans 1,524 pages and contains some interesting provisions. Title I of Division E of the Act focuses on the Department of Treasury.
- The Act provides the IRS with a 2014 budget of $11.3 billion. This represents a budget decrease of $526 million or 4.4% from its 2013 budget.
The $11.3 billion budget is primarily allocated among four areas:
1. Taxpayer Assistance -- $2.123 billion
- tax counseling for elderly
- low-income taxpayer clinics
- community volunteer income tax assistance programs
- taxpayer advocate service
2. Enforcement -- $5.022 billion
3. Operation Support -- $3.741 billion
- facilities services
4. Business Systems Modernization -- $313 million
The Service has some flexibility in spending its budget. For example, it may allocate 5% or less of any specific appropriation or 3% or less of its “enforcement” appropriation to other IRS budget items. Advance approval, however, of the Committees for Appropriations is necessary.
- The IRS is directed to maintain an employee training program which includes education about taxpayer rights, “dealing courteously” with taxpayers, ethics, and the impartial application of tax law.
- The IRS is directed to use funds from its budget to improve taxpayer service, including its 1-800 helpline services.
- None of the IRS’s budget may be available to target taxpayers for “regulatory scrutiny based on ideological beliefs,” or “for exercising any right guaranteed under the First Amendment.”
- $92 million of additional funds will be made available to the Service (through September 15, 2015) to be used “solely to improve the delivery of services to taxpayers, to improve identification and prevention of refund fraud and identity theft, and to address international and offshore compliance issues.”
Tax practitioners should be asking themselves a few questions about the Act as it pertains to the Service, including:
- With the budget cuts, how will the enforcement side of the Service be impacted from the taxpayer and/or practitioner perspective?
- With over $2 billion allocated to taxpayer assistance, will taxpayers and practitioners actually feel any positive impact?
It is expected President Obama will sign the Act into law. Time will tell how the Service’s budget under the Act will actually impact taxpayers and tax practitioners.
Larry J. Brant is a Shareholder in Garvey Schubert Barer, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; New York, New York; Washington, D.C.; and Beijing, China. Mr. Brant practices in the Portland office. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
Upcoming Speaking Engagements
- "Evaluating the Built-in Gains Tax for C to S Conversions After TCJA," New York University Summer Institute in Taxation – Advanced Conference on Subchapter SNew York, NY, 7.26.18
- "S Corporation Distributions – The Ins and Outs," New York University 77th Institute on Federal TaxationNew York, NY, 10.21.18-10.26.18
- Portland, OR, 11.5.18
- "The Tax Cuts and Jobs Act – What It May Mean to Your Clients," Estate Planning Council of Portland Mini-SeminarPortland, OR, 11.7.18
- "S Corporation Distributions – The Ins and Outs," New York University 77th Institute on Federal TaxationSan Diego, CA, 11.11.18-11.16.18