Washington Tax Update

| 1/9/2020
Washington Tax Update January 2020

Legislative update

On Dec. 20, the president signed two large spending bills funding the government, including the IRS, through Sept. 30, 2020, the end of the fiscal year.

Highlights of the tax provisions include:

  • Repeal of some unpopular Affordable Care Act provisions, such as the medical device and high-cost employer-sponsored excise taxes.
  • Some fixes to the Tax Cuts and Jobs Act of 2017 (TCJA), repealing the parking tax imposed on nonprofits and the kiddie tax imposed on death benefits received by gold star families. However, the bill does not provide a much-requested fix to the lengthened period for amortization of qualified improvement property that was enacted under the TCJA.
  • Sweeping changes to retirement savings included in the Setting Every Community Up for Retirement Enhancement Act of 2019, such as raising the age for minimum required distributions to participants from individual retirement accounts (IRAs) from 70 1/2 to 72 and allowing IRA contributions after age 70 1/2.
  • Extension of certain expiring provisions generally through the end of 2020.
  • Disaster relief provisions.

The U.S. Department of the Treasury and the IRS have received several letters from members of Congress regarding IRS enforcement and guidance. The IRS received letters expressing concern regarding recent guidance issued on virtual currency. Members also wrote to Treasury in favor of increased resources for IRS enforcement and criminal investigations.

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Regulatory and administrative update

Treasury and the IRS recently published a number of regulations to implement the TCJA, including proposed and final regulations relating to international provisions such as:

In addition, final regulations implementing the IRC Section 163(j) interest limitation were sent to the Office of Management and Budget on Dec. 17 and should be released in the next month or two. 

The IRS also is in the process of continuing its implementation of the Taxpayer First Act (TFA). The IRS established a dedicated office to coordinate this effort, led by the commissioner’s chief of staff. The IRS is seeking feedback from the public on TFA implementation. Recent actions to implement the TFA include publication of proposed regulations on misdirected deposits.

On the personnel front, the Office of Professional Responsibility named a new leader. Additionally, a permanent national taxpayer advocate to replace Nina Olson, who retired over the summer, has not yet been named. The acting national taxpayer advocate released the office’s annual report to Congress this week.

Interestingly, the current chief of appeals announced her retirement amid all of the changes that the TFA made to the IRS appeals function. The deputy chief of that office will take the helm on an acting basis until a permanent replacement is named.

The IRS continues to pursue its enforcement priorities related to micro-captives, conservation easements, employment tax, and virtual currency. In its recently released annual report for 2019, the IRS also highlighted abusive trust arrangements and the sharing economy.

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Rochelle Hodes
Rochelle Hodes
Principal, Washington National Tax
Peter Judge