IRS Reform Bills Passed by House Ways & Means Committee

The House of Ways and Means committee passed seven bills this week, all of which aim to reform the IRS.  It is part of the GOP House’s efforts to come up with a 2016 fiscal year budget.  Here is the breakdown of the seven bills:

H.R. 709 – This bill would terminate IRS employees for taking official actions for political purposes, such as performing audits for personal gain or benefit, or for a political purpose.

This is in response to improper political activity by IRS Exempt Organizations employees in the targeting of conservative groups seeking 501(c)(4) status.  You would think such legislation should be unnecessary, but given what we’ve experienced with some of our clients, it’s probably a good idea.

H.R. 1026 – The Taxpayer Knowledge of IRS Investigations Act, which would provide taxpayers information on whether they were being investigated by the IRS and whether the investigation was open or closed.

H.R. 1058 – This bill would enshrine the Taxpayer Bill of Rights, which the IRS implemented just last year in the Tax Code.

I understand the intent here, but I’m not sure I want to see such things enshrined into law…if for no other reason that it may impede efforts to later streamline and simply the Code.  Maybe it wouldn’t, but it seems extraneous.

H.R. 1104 – The Fair Treatment for All Donations Act would allow deductions from the federal gift tax for gifts made to certain tax-exempt organizations.

H.R. 1152 – This bill would prohibit officers and employees of the IRS from using personal email accounts to conduct official business.

You can thank Hillary Clinton for this one.  Like some others listed here, this should be obvious.  But given the recent revelations that Clinton skirted federal recordkeeping requirements by using a personal email server, it appears that making such activity illegal is the only reliable way to stop it.

H.R. 1295 – Organizations operating as a 501(c)(4) organization must either file as such or give acknowledgement of their operation to the IRS within 60 days after the organization is established. Furthermore, the IRS must show acknowledgement of receiving this information from the 501(c)(4) organization within 60 days. If the organization does not notify the IRS within the timeline, it is subject to a penalty of $20 per day the failure continues, up to a total amount of $5,000.

This legislation would require both prospective 501(c)(4) organizations and the IRS to get on the ball with regard to applying for status and acknowledging such applications respectively.  In other words, new 501(c)(4)s would have to declare intent to operate as such immediately upon incorporation, and the IRS would have to acknowledge receipt of the application right away.  Though this sounds like a big deal, note that there is nothing in there about the IRS granting approval within 60 days, but rather only acknowledging receipt of intent.  Frankly, I’m not sure this solves anything.

H.R. 1314 – This bill would amend the Tax Code to provide the right to an administrative appeal relating to adverse determinations of tax-exempt status.

Five of these seven bills have been on the table before, as Rep. Sander Levin stated in an opening statement at the markup session. House Ways and Means Committee chairman Paul Ryan stated last week that these changes “are simply common sense.” “All we’re saying are things like, ‘Don’t target people because of their political beliefs. Don’t tax donations to tax-exempt groups. Don’t send taxpayer information to your private email.”

It will be interesting to see where all this goes.  Even if the budget passes both the GOP-controlled House and Senate, it is almost a certainty that President Obama will veto it.  Round and round we go!