Daily Tax Update - July 28, 2011: House To Vote On Boehner's Debt Plan - Senate Vote Expected Later Tonight

HOUSE TO VOTE ON BOEHNER’S DEBT PLAN – SENATE VOTE LATER TONIGHT:  The House is expected to vote on House Speaker John Boehner’s debt plan bill this evening.  The vote in the House is likely to be very close, but the bill is expected to pass.   

  • Boehner’s new bill would cut $917 billion in spending, create a commission charged with finding another $1.8 trillion in additional savings by November 23, and require a second debt limit increase before the 2012 elections.  The President has said he would veto the House bill. 
  • Senate Majority Leader Harry Reid announced that the Senate would vote on Boehner’s bill later tonight.  Reid said, "As soon as the House completes its vote tonight, the Senate will move to take up that bill.  It will be defeated.  No Democrat will vote for a short-term Band-Aid that would put our economy at risk and put the nation back in this untenable situation a few short months from now."  Reid suggested a compromise could still come together.  Reid said, "Magic things can happen here in Congress in a very short period of time under the right circumstances."

HEARING ON NEW IRS TAX RETURN PREPARER INITIATIVE:  Today, the House Ways and Means Subcommittee on Oversight held a hearing on the new IRS tax return preparer initiative.   In his opening remarks, Subcommittee Chairman Boustany said, "In 2010, the IRS launched a paid return preparer initiative, which it hopes will stop abusive returns at the source, rather than through the lengthy and expensive audit process.  Under this new oversight regime, return preparers must register with the IRS, pay an application fee, and will be assigned a unique identification number.  The IRS also plans to impose mandatory minimum competency testing, continuing education requirements, background and tax checks, and certain ethical standards."  Boustany added, "This initiative enjoys broad-based support.  But there are lingering concerns and questions that remain unanswered.  Much of the program will not be in place until 2013, so we will not know its full impact for some time.  However, it remains unclear how the initiative will ultimately impact tax compliance.  A recent report issued by the GAO raised concerns regarding the program’s future effectiveness."  Boustany said, "Without an effective public education campaign and enforcement plan, some argue that little progress is being made at reaching preparers that pose the greatest compliance threats. This is a critical issue for tax administration and it is important that Congress understands the new requirements and continues its oversight to judge whether the new program improves tax compliance."

  • David Williams, Director, IRS Return Preparer Office stated, "Through the Tax Return Preparer Program, the IRS is in the process of ensuring a basic competency level for tax return preparers and focusing our enforcement efforts on rooting out unscrupulous preparers. To date, we have registered over 717,000 return preparers and next year will start requiring a competency test and annual continuing education for many preparers who are not a CPA, attorney or enrolled agent."  Regarding PTINs, Williams said, "More than an identification number, the PTIN registration process gives the IRS an important and better line of sight into the return preparer community than we have ever had before. We can leverage that information to help better analyze trends, spot anomalies and potentially detect fraud. The PTIN process will also help the IRS build, in several years, a publicly-accessible database of those registered. This is an extremely important tool for consumers as they will be able to search the database to ensure that their preparer is registered. The database will confirm for the public which return preparers are properly registered with the IRS."  Williams continued, "The next phase of the return preparer initiative involves tailored requirements for different subsets of paid return preparers. For example, CPAs, attorneys, and enrolled agents must only renew their PTIN annually; there are no other requirements. They are exempt from competency testing and continuing education requirements because of similar professional standards already applicable to these groups."
  • Jim White, Director, Strategic Issues, Government Accountability Office, discussed a new GAO report titled, "Improving Tax Return Accuracy Depends on IRS's Use of New Requirements." The report stated, "As intermediaries between taxpayers and IRS, paid preparers can educate taxpayers about tax laws and prevent tax return errors and resulting IRS audits. However, GAO has found that paid preparers make errors. For example, in a 2006 report, GAO had tax returns prepared at 19 outlets of several commercial tax chains. All 19 returns had mistakes ranging from refund overclaims of nearly $2,000 to underclaims of over $1,700. In 2008, GAO reported that in Oregon, regulation of paid preparers corresponded with more accurate taxpayer returns….  Initially, IRS plans to focus on educating paid preparers about the new requirements and not on penalizing them for noncompliance. However, it is developing and implementing strategies for ensuring paid preparers comply with the new requirements."
  • Testimony can be accessed here.
  • For additional information, contact: Aaron P. Nocjar -   anocjar@steptoe.com

WAYS & MEANS SUBCOMMITTEES SCHEDULE JOINT HEARING ON ENERGY TAX POLICY AND TAX REFORM:  On August 3, the House Ways and Means Subcommittee on Select Revenue Measures and Subcommittee on Oversight will hold a joint hearing on the intersection of energy policy and tax policy, with a focus on the dual priorities of comprehensive tax reform and a sustainable energy policy that address our economic, security, and environmental needs.

  • In announcing the hearing, Select Revenue Measures Subcommittee Chairman Tiberi said, "Energy security and comprehensive tax reform are two of the most important priorities we can pursue to create jobs and ensure the long-term strength of the US economy.  As the committee with jurisdiction over energy tax policy, the Ways and Means Committee should examine whether there sometimes can be tension between these priorities, and how this Committee can design tax policies that achieve our energy security goals while also staying true to the principles of simplicity, fairness, and growth that drive the Committee’s tax reform agenda."
  • Oversight Subcommittee Chairman Boustany said, "With so much of our energy policy driven by the tax code, comprehensive tax reform needs to consider whether these tax incentives promote a sound energy strategy.  This hearing will examine how IRS implements and enforces rules on energy credits, and it will explore the role of the tax code in energy policy."

NEW DIRECTOR APPOINTED FOR CENTRE FOR TAX POLICY & ADMINISTRATION: Mr. Pascal Saint-Amans has been appointed Director of the Centre for Tax Policy and Administration (CTP).  He will take up his duties on 1st February 2012 upon the retirement of Mr. Jeffrey Owens.  According to the OECD’s press release, "Mr. Saint-Amans, a French national, joined the OECD in September 2007 as Head of the International Cooperation and Tax Competition Division in the CTPA. He was responsible for the OECD’s work on harmful tax practices, money laundering and tax crimes, the tax aspects of countering bribery of foreign officials and administrative cooperation between tax authorities. He played a key role in the advancement of the OECD tax transparency agenda in the context of the G20. In October 2009 he was appointed Head of the Global Forum Division, created to service the Global Forum on Transparency and Exchange of Information for Tax Purposes, a programme with the participation of over 100 countries."

  • Additional information can be accessed here.

TAX BILLS INTRODUCED JULY 27TH:

1. [112nd] H.R.2666 : To neutralize the discriminatory effect of any country that employs indirect taxes and grants rebates of the same upon export if United States trade negotiating objectives regarding border tax treatment in World Trade Organization negotiations are not met.
Sponsor: Rep Pascrell, Bill, Jr. [NJ-8] (introduced 7/27/2011)      Cosponsors (2)
Committees: House Ways and Means
Latest Major Action: 7/27/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

2. [112nd] H.R.2669 : To restrict the use of offshore tax havens and abusive tax shelters to inappropriately avoid Federal taxation, and for other purposes.
Sponsor: Rep Doggett, Lloyd [TX-25] (introduced 7/27/2011)      Cosponsors (53)
Committees: House Ways and Means; House Financial Services
Latest Major Action: 7/27/2011 Referred to House committee. Status: Referred to the Committee on Ways and Means, and in addition to the Committee on Financial Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.

3. S.1432: A bill to amend the Internal Revenue Code of 1986 to modify the exception from the 10 percent penalty for early withdrawals from governmental plans for Federal and State qualified public safety employees.
Sponsor: Sen Nelson, Bill [FL] (introduced 7/27/2011)      Cosponsors (None)
Latest Major Action: 7/27/2011 Referred to Senate committee. Status: Read twice and referred to the Committee on Finance.

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