Yearly Archives: 2017

The Internal Revenue Service released the 2016 IRS Data Book IR-2017-69, a snapshot of agency activities for the fiscal year.

The 2016 IRS Data Book describes activities conducted by the IRS from Oct. 1, 2015, to Sept. 30, 2016, and includes information about returns filed, taxes collected, enforcement, taxpayer assistance, the IRS budget and workforce as well as other data. This edition contains charts that show trends such as increases in telephone service and declines in enforcement activities when compared to 2015.

Enforcement Actions Decline in 2016

During Fiscal Year 2016, the IRS collected more than $3.3 trillion, processed more than 244 million tax returns and other forms, and issued more than $426 billion in tax refunds.
  

• There were fewer enforcement actions taken during FY 2016.
• The IRS audited just over 1 million tax returns of individuals in FY 2016, down almost 16 percent from the prior year’s total of 1.2 million.

• The coverage of individuals audited fell to 0.70 percent, the lowest coverage rate in more than a decade.

• Several collection activities fell in FY 2016. IRS levies were down 40 percent compared to the prior year, and the agency filed almost 9 percent fewer liens than in the prior year.

 

 

 

 

On January 5, 2015 we posted Tax Cases To Watch In 2015? which included at #4 Amazon.com, Inc& Subsidiaries, (2017) 148 TC No. 8  and describe that Amazon was bitterly locked in a $1.5 billion transfer pricing dispute with the Internal Revenue Service over an arrangement it inked with a European subsidiary, and the outcome of the case, which is sitting in U.S. Tax Court, is being closely watched by multinationals and tax lawyers alike.

Now the US Tax Court has ruled against the IRS in this $1.5 billion transfer pricing dispute with Amazon, which currently has experts calling for a re-examination of the agency's valuation methodologies in order to prevent it from wasting its own resources and those of taxpayers.

Using methodologies the U.S. Tax Court had already knocked down in another transfer pricing lawsuit against Veritas Software Corp. in 2009, the IRS made substantial transfer pricing adjustments that reallocated more income from Amazon’s European subsidiary to its U.S. operations and assessed more than $234 million in deficiencies for the 2005 and 2006 tax years. The IRS’ position could have resulted in an overall tax liability of $1.5 billion, plus interest, Amazon estimated.

Somewhat predictably, U.S. Tax Court Judge Albert Lauber noted the similarities between the Amazon and Veritas cases, and reprimanded the IRS for being “unreasonable” and for abusing its discretion in reaching its conclusions. Amazon’s methodologies, with some adjustments, were more reasonable, he said.

Rejecting IRS's substantial transfer-pricing adjustments under Code Sec. 482, the Tax Court has concluded that IRS's determination with respect to the buy-in payment and cost-allocation method, under an agreement in which Amazon.com and its domestic subsidiaries transferred intangible assets to its foreign subsidiary, was arbitrary, capricious, and unreasonable.

The Court found that the taxpayer's uncontrolled transaction (CUT) method, with appropriate upward adjustments, was the best method to determine the buy-in payment, and that its cost-allocation method, with certain adjustments, supplied a reasonable basis for allocating costs to intangible development costs (IDCs).

The Tax Court’s opinion does not specify what Amazon’s final tax liability will be, but the retailer had previously estimated that the IRS’ notices of proposed adjustments issued for a seven-year period, starting in 2005, could have resulted in a tax liability of $1.5 billion plus interest.

Have A Tax Problem? 

Contact the Tax Lawyers at 

Marini & Associates, P.A.

for a FREE Tax Consultation

at: www.TaxAid.com or www.OVDPLaw.com or

Toll Free at 888-8TaxAid (888 882-9243).

• significantly reduce marginal tax rates for both individuals and businesses,
• increase standard deduction amounts to nearly four times current levels,
• limit or repeal some tax expenditures,
• repeal the individual and corporate alternative minimum taxes and the estate and gift taxes, and
• tax the profits of foreign subsidiaries of US companies in the year they are earned.

So Where Does That Leave Tax Advisers?

 

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Fast-forward 4 Months and now according to Taxnotes 

Tax Reform Is 'Impossible' This Year." 

 

Warren Payne, a former House Ways and Means Committee policy director now with Mayer Brown LLP, believes that passing tax reform by August will be ‘‘impossible’’ this year. Rather, he suggested during a conference call March 16 that it is more likely to be addressed in early 2018. Payne pointed  to the border adjustment provisions in the House Republican tax reform blueprint, noting that they are both contentious as well as integral to the entire package. He speculated that the Trump administration will wait several weeks before offering a policy position on the border adjustable tax.

Payne contrasted the House Republican proposal for international tax reform with the Trump administration’s plan during the campaign, which proposed keeping a worldwide system in place and

ending deferral, suggesting that it remains unclear whether President Trump would support a move to a territorial-style system.

 

‘‘If the administration decides to forgo the border adjustment policy, it must either find alternative ways to broaden the tax base, settle for a higher corporate rate, or proceed with tax reform that is a  net tax cut,’’ Payne said. He explained that a border-adjustable tax could be a huge revenue boost, estimated to raise almost $1 trillion over 10 years that could be used to reduce rates and offer immediate expensing, and it would serve as a strong anti-tax base erosion measure. He added that the tax could account for about an 8-point reduction in the corporate income tax rate.

‘‘It takes months, not weeks,’’ to draft, debate, and pass tax reform legislation, Payne said.

 

House Republicans are struggling to round up the votes needed to move the AHCA, but John Buckley, a former chief tax counsel for House Ways and Means Democrats, said passing tax reform legislation will likely be even tougher.   ‘‘The political choices are going to be more difficult. There would be Organized Business Opposition on tax reform that you don’t see on healthcare reform.’’
 

Have a Tax Problem?

 

Contact the Tax Lawyers at

Marini & Associates, P.A.

 

 for a FREE Tax Consultation Contact US at 

www.TaxAid.com or www.OVDPLaw.com

or Toll Free at 888-8TaxAid (888 882-9243).