Curated by Melanie Cohen
The IRS’s budget for fiscal 2023 was $16.1 billion, but many people may not realize that hundreds of millions of dollars from that budget go to other government agencies for services rendered.
For instance, the IRS has an interagency agreement with the National Archives and Records Administration to store and manage taxpayers’ paper files. It paid NARA approximately $160 million for these services from 2016 through 2020. The fees are projected to rise, with the IRS expected to pay about $191 million from 2021 through 2025.
These kinds of agreements are needed both functionally and legislatively—the former because taxpayer files must be maintained and available for audit, and the latter because the Federal Records Act of 1950 requires it.
Tax may be undergoing a digital revolution, but the IRS is far from paperless. As of March 2023, the agency stored about 5.8 million cubic feet of paper records with NARA—the equivalent of about 2,000 40-foot shipping containers or about 65 Olympic-sized swimming pools. Chances are slim that the amount of paper has gone down in the 16 months that followed.
Large-scale tax record storage ensures that documents, case files, and administrative materials are accessible as required, but it isn’t cheap.
Just as with outside contractors, the IRS has faced challenges from the Treasury Inspector General for Tax Administration for failing to negotiate fee increases with NARA. This illustrates how interagency agreements can wallop agency budgets. The initial revenue that’s distributed across the government doesn’t necessarily reflect where the money ultimately ends up.
As crucial as it is for the IRS to ask Congress for more tax administration funding, finding better ways to spend it and keeping costs down is equally important.
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Insights
Nelson Mullins’ Shane Ramsey analyzes United States v. Miller, saying Supreme Court precedent and two lower court rulings could make the government’s request for reversal an uphill battle.
Hofstra’s Jack Castonguay says accounting firms’ starting salaries are a big barrier to entry for students, adding that accounting pipeline improvements could take several years.
Holland & Knight partners Lee Meyercord and Mary McNulty detail the impact of the Loper Bright ruling on the IRS, saying the ruling jeopardizes a plan to crackdown on corporate tax avoidance.
Grant Thornton’s Josdemar Beni, Rômulo Pedro Batista de Oliveira, and Luiz Felipe de Oliveira Mourão say Brazil’s new transfer pricing rules offer more stability, but that officials still must resolve commodities and transactional issues.
The Tax Foundation’s Alan Cole examines the G-20’s 2% net wealth tax proposal, saying that drawbacks include disinvestment, difficulties of defining wealth, and the US Supreme Court’s recent Moore v. United States ruling.
Columnist Corner
Fighting climate change requires an all-hands approach, columnist Andrew Leahey says in calling for a per-head “cow tax” in his latest Technically Speaking column.
“The financial burden of a per-head livestock tax on greenhouse gas emissions could be offset if structured to include both subsidies to farmers adopting sustainable practices and credits to individual consumers,” Andrew says, noting that such a tax would be easy to pursue.
Career Moves
Anil Arora has joined Mishcon de Reya’s London office as corporate tax partner.
Michele Wightman has joined Weightmans as part of the firm’s strategy to grow the individuals segment and strengthen its national private wealth offering.
Dylan Metzner has joined Buchalter’s Denver office as a shareholder specializing in tax planning and estate matters.
If you’re changing jobs or being promoted, email your submission to TaxMoves@bloombergindustry.com for consideration.
News Roundup
It’s been another busy week in tax news from state capitals to Washington. Here are some stories you might have missed from our Bloomberg Tax news team.
New York, New Jersey Lawmakers Start Plotting SALT Cap Fix
Democrats and Republicans from states such as New York and New Jersey are plotting to come together on a strategy for next year to roll back the state-and-local tax deduction cap. Read More
Rich People Freeze Themselves, and Fortunes, for Future Revival
Estate attorneys are creating trusts aimed at extending wealth until people who get cryonically preserved can be revived, even if it’s hundreds of years later. Read More
Millionaires Fork Over $1 Billion to the IRS in Past-Due Taxes
The IRS has recovered more than $1 billion from millionaires who failed to pay their tax debts, doubling the total collected from its last update earlier this year. Read More
Energy Credits a Sticking Point in GOP’s Hopes for Tax Package
Republicans are divided over whether to claw back the energy credits created and expanded by Democrats’ 2022 tax-and-climate law, complicating the GOP efforts to offset the costs of a major tax package next year. Read More
Tax Journals
Tax Management International Journal
Non-US companies should understand the concerns US investors have when making capital investments abroad, Morrison Cohen’s Isaac Grossman says.
A ruling clarifies when a foreign law firm is considered to have a virtual PE in India, but potential tax issues may still arise, Nishith Desai Associates’ Anirudh Srinivasan, Arijit Ghosh. and Parul Jain say.
MNEs operating in Brazil should quickly work to analyze and carefully document their Brazil operations for TP purposes—and try to minimize year-end TP adjustments, KPMG’s Jessie Coleman, Bruna Ferrari, Sebastian Hoffman, Brad Parker, and Mariel Reissig say.
Recent OECD guidance helped progress the implementation Pillar Two, but MNEs must continuously monitor guidance, DLA Piper’s Kevin Glenn, Pie Glenn, and Marica De Rosa say.
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