With lawmakers on their August recess, the Congressional Budget Office (CBO) issued a report indicating that the federal budget deficit for the first 10 months of fiscal year (FY) 2012 will be lower than the corresponding period in 2011, largely due to higher tax revenue from corporations and individuals. In addition, Senate Finance Committee ranking member Orrin G. Hatch, R-Utah, asked the IRS to keep politics out of any decision to issue rules on the tax treatment of nonprofits. Meanwhile, a Treasury Inspector General for Tax Administration (TIGTA) report said that IRS supervisors urged employees to ignore potential fraud in a program that reviews and verifies applications for Individual Taxpayer Identification Numbers (ITINs).
In an August 6 letter, Hatch urged the Service to resist allowing the IRS rulemaking process to be subverted to achieve partisan political gains (TAXDAY, 2012/08/08, C.2 ). His letter follows a similar missive by Sen. Charles Schumer, D-N.Y., who requested in March that the Service place a strict percentage-based cap nonprofit spending on political activities.
In its monthly budget review, released on August 7, the CBO said that corporate income tax revenue grew by $42 billion, largely due to changes in rules governing deductions for equipment (TAXDAY, 2012/08/08, C.1 ). Other revenue increases were attributed to individual income tax revenue, which grew by $37 billion, and payroll taxes, which grew by $14 billion. Collection of estate and gift taxes rose by $5 billion as did excise taxes, the CBO said.
IRS Discouraged Fraud Detection. According to a newly released report, TIGTA found that IRS supervisors created an environment that discouraged employees from detecting fraudulent applications, in some cases eliminating successful processes used to identify questionable ITIN application fraud patterns and schemes (TAXDAY, 2012/08/09, T.2 ).
Entity Restructuring/Section 218 Agreements. IRS and Social Security Administration (SSA) officials discussed the effect of four types of predecessor/successor situations on existing Section 218 Agreements during an August 8 IRS webinar (TAXDAY, 2012/08/09, I.3 ). “Each predecessor-successor situation has its own unique effect on Social Security coverage,” Diane Moore, specialist, IRS Federal, State & Local Government Division, said.
Corporate Bond Rate. For pension plan years beginning in August 2012, the IRS has released the corporate bond weighted average interest rate, the permissible range of interest rates used to calculate current plan liability and to determine the required contribution under Code Sec. 412(l) for plan years through 2012, and the current corporate bond yield curve and related segment rates for the purpose of establishing a plan’s funding target under Code Sec. 430(h)(2) (Notice 2012-53 ; TAXDAY, 2012/08/08, I.1 ).
Low-Income Housing Credit. The IRS issued proposed amendments to the low-income housing tax credit utility allowance regulations that would clarify that utility costs paid by a tenant based on actual consumption in a submetered rent-restricted unit are treated as paid by the tenant directly to the utility company (NPRM REG-136491-09 ; TAXDAY, 2012/08/07, I.2 ). The proposed regulations affect owners of low-income housing projects that claim the credit, the tenants in those low-income housing projects, and the state and local housing credit agencies that administer the credit.
By Stephen K. Cooper and Jennifer J. Rodibaugh, CCH News Staff