Many states and municipalities offer substantial economic incentives to corporate taxpayers to move to and invest in their areas. Central to those offers is the belief that these incentives are received tax free. However, owing to changes in the Tax Code under the Tax Cuts and Jobs Act, taxpayers must ensure that such incentives are carefully structured.
US taxpayers are generally taxable on income earned worldwide, regardless of the manner in which that income is paid (eg, currency (foreign or domestic) or property (tangible, intangible or virtual)). Therefore, if cryptocurrency has been bought, sold or exchanged, those transactions could be subject to federal tax. If the cryptocurrency is held offshore, a number of offshore reporting obligations could also apply to these holdings.
The Internal Revenue Service (IRS) Compliance Assurance Process programme is a real-time audit programme that seeks to resolve the tax treatment of all or most return issues before tax returns are filed. Taxpayers and IRS leadership have generally praised it as one of the most successful corporate tax enforcement programmes. However, its fate has been uncertain in recent years given the IRS's shift in the examination process and the agency's dwindling resources.
Taxpayer Advocate Nina E Olson recently testified before a congressional oversight committee regarding ongoing challenges to the administration of an efficient and effective tax system. Her testimony echoes many tax professionals' concerns that the tax system is not being implemented in the most effective and efficient manner. With the advent of tax reform and the government's struggle to implement its sweeping changes, it is hoped that many of these issues will be addressed.
A shrinking Internal Revenue Service (IRS) budget has meant that fewer agents are available to make sure that the tax laws are being enforced. In 2017 the audit rate fell to its lowest levels in 15 years, with the chance of being audited falling to 0.6%. There has been movement to get the IRS more funding in the wake of tax reform, but it remains to be seen whether some of those funds will be used to increase its enforcement functions.
Tax controversy practitioners are undoubtedly aware of the gradual movement over the years to conform certain Tax Court procedure rules to those of the Federal Rules of Civil Procedure. A few important areas of divergence between the different rules, as well as situations where the Tax Court rules do not address a particular matter, were discussed at the recent Tax Court Judicial Conference.
The Tax Court recently rejected an Internal Revenue Service (IRS) attempt to expand on the privilege waiver principles set out in a previous case. The court concluded that the IRS was not entitled to any documents from the period after a notice of deficiency was issued, making clear that subpoenas are not for broad-based 'fishing expeditions'. The case is consistent with the IRS's recent pattern of arguing aggressively against the assertion of privilege and work-product protections in tax audits.
The Internal Revenue Service (IRS) recently published an Office of Chief Counsel IRS memorandum, which deals with a merchant bank's claim that its revenue from merchant discount fees qualifies as domestic product gross receipts under Internal Revenue Code Section 199. The memorandum is further proof that taxpayers and the IRS do not see eye to eye.
Coca-Cola is seeking a redetermination in the Tax Court of certain Internal Revenue Service (IRS) transfer-pricing adjustments relating to its 2007 to 2009 tax years. The IRS has moved for partial summary judgment seeking a ruling that a 1996 Internal Revenue Code Section 7121 closing agreement executed by the parties is not relevant to the case before the court.