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Wednesday, July 17, 2024

Treasury, IRS unveil plan to close ‘major tax loophole’ used by large partnerships

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After a year of studying the basis-shifting issue, the agencies announced their intent to issue proposed regulations. They also released a revenue ruling on related-party partnership transactions involving basis shifting without “economic substance” for the parties or “substantial business purpose.”    

The plan builds on ongoing IRS efforts to increase audits on the wealthiest taxpayers, large corporations and complex partnerships.

“Treasury and the IRS are focused on addressing high-end tax abuse from all angles, and the proposed rules released today will increase tax fairness and reduce the deficit,” U.S. Secretary of the Treasury Janet Yellen said in a statement.

Pass-through business filings with more than $10 million in assets increased 70% between 2010 and 2019, but the audit rate for these partnerships fell from 3.8% to 0.1% during that period, according to the Treasury. 

This has contributed to an estimated $160 billion a year tax gap — the shortfall between what is owed and collected — attributed to the top 1% of tax filers, the agency said.

The battle over IRS funding

The announcement comes less than one week after President Joe Biden’s top economic advisor unveiled his “key principles” for tax policy, including sustained IRS funding.  

“We should ensure ultra-wealthy taxpayers pay what they owe and play by the same rules by maintaining the President’s investment in the IRS,” White House National Economic Council advisor Lael Brainard told reporters Wednesday during a press call.

IRS funding has been a target for Republicans since Congress approved nearly $80 billion in funding via the Inflation Reduction Act.

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Chris Washington
Chris Washingtonhttps://whnynews.com
Chris Washington brings over 25 years of experience in financial journalism to WHNY News. A Schenectady native, Chris has a keen eye for business trends impacting upstate New York. His insightful reporting has earned him numerous accolades. Chris holds a degree in Economics from Syracuse University.
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