President-elect Donald Trump's tax reform plans, combined with House Republicans' "A Better Way" proposal for IRS restructuring, spell turbulent times ahead for the nation's tax collector.
"As always in tax administration . . . the devil's in the details, and these very broad conceptual things don't tell me how things are going to work in the future," said Christopher S. Rizek of Caplin & Drysdale, Chtd., who was responsible for Treasury regulations in the aftermath of the Internal Revenue Service Restructuring and Reform Act of 1998. The GOP's "Better Way" plans "actually raise more questions than they answer," Rizek said.
The GOP blueprint proposes to restructure the IRS into "families and individuals," "business," and "independent 'small claims court'" units streamlined for "delivering world-class customer service." But there is no mention of enforcement, nor of a taxpayer advocate, and it also lacks a tax-exempt and government entities division, as now exists, Rizek noted. How an "independent" small claims court unit would operate -- when the government already has the U.S. Tax Court to resolve taxpayer disputes -- and whether it would be subordinate or superior to, or simply operate alongside, the Tax Court is left unaddressed, Rizek said.
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Almost nothing is known about Treasury Secretary-designate Steven Mnuchin's perspective on tax administration, but Rizek said the nomination of House Freedom Caucus member Rep. Mick Mulvaney, R-S.C., a proponent of impeaching IRS Commissioner John Koskinen, to head the White House Office of Management and Budget does not sound promising for the IRS.
"They're not going to have a friend at OMB," Rizek said, given that OMB is usually the first to cut the IRS's annual budget request, even before it gets to Congress to be cut some more. "Just from optics, it doesn't look like [Mulvaney] is going to be their friend," Rizek said.
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Excerpt taken from the article "IRS Turmoil Likely as Trump, GOP Ready Tax, Agency Reforms" by William Hoffman for Tax Notes.