IRS Commissioner Danny Wuerffel testifies before the House Appropriations Committee in Washington, DC, on May 7, 2024.
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The U.S. Treasury Department and IRS on Monday announced plans to “close significant tax loopholes” exploited by large and complex partnerships. This could generate an estimated $50 billion or more in tax revenue over the next 10 years.
The plan, according to the Treasury Department, would allow a single company operating through different legal entities to trade the original purchase price of an asset to receive a higher deduction or reduce future profits. It is said that it is targeting “a shift in base.”
“These tax shelters allow wealthy taxpayers to avoid paying what they owe,” IRS Commissioner Danny Wuerffel told reporters at a press conference Friday.
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Taxpayers may be able to avoid the penalty by paying the estimated second quarter amount by June 17th.
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After studying the standards change issue for a year, the agency announced its intention to issue proposed regulations. It also announced revenue awards for related party partnership transactions involving changes in standards that have no “economic substance” or “substantive business purpose” to the parties.
The plan builds on the IRS’ continued efforts to strengthen audits of the wealthiest taxpayers, large corporations, and complex partnerships.
“The Treasury Department and the IRS are committed to combating high tax abuse from all angles, and the proposed rules announced today will improve tax fairness and reduce the deficit,” Treasury Secretary Janet Yellen said in a statement. Deaf,” he said.
According to the Treasury Department, filings of pass-through businesses with assets over $10 million increased by 70% between 2010 and 2019, but the audit rate for these partnerships fell from 3.8% to 0.1% during this period.
This results in an estimated annual tax gap of $160 billion (the difference between what is owed and what is collected) by the top 1% of taxpayers, the agency said.
Conflict over IRS funding
The announcement comes less than a week after President Joe Biden’s top economic adviser announced “key principles” for tax policy, including sustained funding of the IRS.
“Maintaining the president’s investment in the IRS will ensure that the ultra-wealthy meet their tax obligations and play by the same rules,” White House National Economic Council Counsel Lael Brainard said at a press conference Wednesday. We should,” he told reporters.
Republicans have targeted IRS funding ever since Congress approved about $80 billion in funding from the Inflation Control Act.
