IRS Commissioner Danny Wuerfel testifies before the House Appropriations Committee in Washington, D.C., on May 7, 2024.
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The US Treasury Department and the IRS on Monday unveiled a plan to “close a major tax loophole” used by large, complex partnerships, which could raise more than $50 billion in… Tax revenues Over the next ten years.
The plan targets so-called “related-party basis shifting,” where individual companies operating through different legal entities trade the original purchase prices on assets to gain further discounts or reduce future gains, according to the Treasury Department.
“These tax shelters allow wealthy taxpayers to avoid paying what they owe,” IRS Commissioner Danny Werfel told reporters on a press call on Friday.
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After a year of studying the issue of changing the basis, the agencies announced their intention to issue proposed regulations. They also issued a revenue ruling on related party partnership transactions involving a change of basis without “economic substance” to the parties or a “substantial business purpose.”
The plan relies on the IRS’s ongoing efforts to Increase audits On the wealthiest taxpayers, large corporations and complex partnerships.
US Treasury Secretary Janet Yellen said in a statement, “Treasury and the IRS are focused on addressing tax abuses from all angles, and the proposed rules issued today will work to increase tax fairness and reduce the deficit.”
Filings for businesses with more than $10 million in assets increased 70% between 2010 and 2019, but Audit rate These partnerships fell from 3.8% to 0.1% during that period, according to the Treasury Department.
This contributed to the estimate $160 billion tax gap annually The agency said the shortfall between what was owed and what was collected was due to the top 1% of tax filers.
The battle over IRS funding
This announcement comes less than one week after the president Joe BidenHis chief economic advisor revealed “Basic principles” of tax policyincluding continued funding for the IRS.
“We must ensure that wealthy taxpayers pay what they owe and play by the same rules by keeping the president invested in the IRS,” Lael Brainard, a White House National Economic Council adviser, told reporters Wednesday during a press call.
IRS funding has been a A target for Republicans Since Congress approved approx Financing worth $80 billion Through the inflation reduction law.
