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The American Institute of CPAs in a March 31 letter to House of Representatives voiced its “strong support” for a series of tax administration bills passed in recent days.

The American Institute of CPAs in a March 31 letter to House of Representatives voiced its “strong support” for a series of tax administration bills passed in recent days.

The four bills highlighted in the letter include the Electronic Filing and Payment Fairness Act (H.R. 1152), the Internal Revenue Service Math and Taxpayer Help Act (H.R. 998), the Filing Relief for Natural Disasters Act (H.R. 517), and the Disaster Related Extension of Deadlines Act (H.R. 1491).

All four bills passed unanimously.

H.R. 1152 would apply the “mailbox” rule to electronically submitted tax returns and payments. Currently, a paper return or payment is counted as “received” based on the postmark of the envelope, but its electronic equivalent is counted as “received” when the electronic submission arrived or is reviewed. This bill would change all payment and tax form submissions to follow the mailbox rule, regardless of mode of delivery.

“The AICPA has previously recommended this change and thinks it would offer clarity and simplification to the payment and document submission process,” the organization said in the letter.

H.R. 998 “would require notices describing a mathematical or clerical error be made in plain language, and require the Treasury Secretary to provide additional procedures for requesting an abatement of a math or clerical adjustment, including by telephone or in person, among other provisions,” the letter states.

H.R. 517 would allow the IRS to grant federal tax relief once a state governor declares a state of emergency following a natural disaster, which is quicker than waiting for the federal government to declare a state of emergency as directed under current law, which could take weeks after the state disaster declaration. This bill “would also expand the mandatory federal filing extension under section 7508(d) from 60 days to 120 days, providing taxpayers with additional time to file tax returns following a disaster,” the letter notes, adding that increasing the period “would provide taxpayers and tax practitioners much needed relief, even before a disaster strikes.”

H.R. 1491 would extend deadlines for disaster victims to file for a tax refund or tax credit. The legislative solution “granting an automatic extension to the refund or credit lookback period would place taxpayers affected my major disasters on equal footing as taxpayers not impacted by major disasters and would afford greater clarity and certainty to taxpayers and tax practitioners regarding this lookback period,” AICPA said.

Also passed by the House was the National Taxpayer Advocate Enhancement Act (H.R. 997) which, according to a summary of the bill on Congress.gov, “authorizes the National Taxpayer Advocate to appoint legal counsel within the Taxpayer Advocate Service (TAS) to report directly to the National Taxpayer Advocate. The bill also expands the authority of the National Taxpayer Advocate to take personnel actions with respect to local taxpayer advocates (located in each state) to include actions with respect to any employee of TAS.”

Finally, the House passed H.R. 1155, the Recovery of Stolen Checks Act, which would require the Treasury to establish procedures that would allow a taxpayer to elect to receive replacement funds electronically from a physical check that was lost or stolen.

All bills passed unanimously. The passed legislation mirrors some of the provisions included in a discussion draft legislation issued by the Senate Finance Committee in January 2025. A section-by-section summary of the Senate discussion draft legislation can be found here.

AICPA’s tax policy and advocacy comment letters for 2025 can be found here.

By Gregory Twachtman, Washington News Editor

The Tax Court ruled that the value claimed on a taxpayer’s return exceeded the value of a conversation easement by 7,694 percent. The taxpayer was a limited liability company, classified as a TEFRA partnership. The Tax Court used the comparable sales method, as backstopped by the price actually paid to acquire the property.

The Tax Court ruled that the value claimed on a taxpayer’s return exceeded the value of a conversation easement by 7,694 percent. The taxpayer was a limited liability company, classified as a TEFRA partnership. The Tax Court used the comparable sales method, as backstopped by the price actually paid to acquire the property.

The taxpayer was entitled to a charitable contribution deduction based on its fair market value. The easement was granted upon rural land in Alabama. The property was zoned A–1 Agricultural, which permitted agricultural and light residential use only. The property transaction at occurred at arm’s length between a willing seller and a willing buyer.

Rezoning

The taxpayer failed to establish that the highest and best use of the property before the granting of the easement was limestone mining. The taxpayer failed to prove that rezoning to permit mining use was reasonably probable.

Land Value

The taxpayer’s experts erroneously equated the value of raw land with the net present value of a hypothetical limestone business conducted on the land. It would not be profitable to pay the entire projected value of the business.

Penalty Imposed

The claimed value of the easement exceeded the correct value by 7,694 percent. Therefore, the taxpayer was liable for a 40 percent penalty for a gross valuation misstatement under Code Sec. 6662(h).

Ranch Springs, LLC, 164 TC No. 6, Dec. 62,636

State and local housing credit agencies that allocate low-income housing tax credits and states and other issuers of tax-exempt private activity bonds have been provided with a listing of the proper population figures to be used when calculating the 2025:

State and local housing credit agencies that allocate low-income housing tax credits and states and other issuers of tax-exempt private activity bonds have been provided with a listing of the proper population figures to be used when calculating the 2025:

• calendar-year population-based component of the state housing credit ceiling under Code Sec. 42(h)(3)(C)(ii);
• calendar-year private activity bond volume cap under Code Sec. 146; and
• exempt facility bond volume limit under Code Sec. 142(k)(5)

These figures are derived from the estimates of the resident populations of the 50 states, the District of Columbia and Puerto Rico, which were released by the Bureau of the Census on December 19, 2024. The figures for the insular areas of American Samoa, Guam, the Northern Mariana Islands and the U.S. Virgin Islands are the midyear population figures in the U.S. Census Bureau’s International Database.

Notice 2025-18

The value of assets of a qualified terminable interest property (QTIP) trust includible in a decedent's gross estate was not reduced by the amount of a settlement intended to compensate the decedent for undistributed income.

The value of assets of a qualified terminable interest property (QTIP) trust includible in a decedent's gross estate was not reduced by the amount of a settlement intended to compensate the decedent for undistributed income.

The trust property consisted of an interest in a family limited partnership (FLP), which held title to ten rental properties, and cash and marketable securities. To resolve a claim by the decedent's estate that the trustees failed to pay the decedent the full amount of income generated by the FLP, the trust and the decedent's children's trusts agreed to be jointly and severally liable for a settlement payment to her estate. The Tax Court found an estate tax deficiency, rejecting the estate's claim that the trust assets should be reduced by the settlement amount and alternatively, that the settlement claim was deductible from the gross estate as an administration expense (P. Kalikow Est., Dec. 62,167(M), TC Memo. 2023-21).

Trust Not Property of the Estate

The estate presented no support for the argument that the liability affected the fair market value of the trust assets on the decedent's date of death. The trust, according to the court, was a legal entity that was not itself an asset of the estate. Thus, a liability that belonged to the trust but had no impact on the value of the underlying assets did not change the value of the gross estate. Furthermore, the settlement did not burden the trust assets. A hypothetical purchaser of the FLP interest, the largest asset of the trust, would not assume the liability and, therefore, would not regard the liability as affecting the price. When the parties stipulated the value of the FLP interest, the estate was aware of the undistributed income claim. Consequently, the value of the assets included in the gross estate was not diminished by the amount of the undistributed income claim.

Claim Not an Estate Expense

The claim was owed to the estate by the trust to correct the trustees' failure to distribute income from the rental properties during the decedent's lifetime. As such, the claim was property included in the gross estate, not an expense of the estate. The court explained that even though the liability was owed by an entity that held assets included within the taxable estate, the claim itself was not an estate expense. The court did not address the estate's theoretical argument that the estate would be taxed twice on the underlying assets held in the trust and the amount of the settlement because the settlement was part of the decedent's residuary estate, which was distributed to a charity. As a result, the claim was not a deductible administration expense of the estate.

P.B. Kalikow, Est., CA-2

An individual was not entitled to deduct flowthrough loss from the forfeiture of his S Corporation’s portion of funds seized by the U.S. Marshals Service for public policy reasons. The taxpayer pleaded guilty to charges of bribery, fraud and money laundering. Subsequently, the U.S. Marshals Service seized money from several bank accounts held in the taxpayer’s name or his wholly owned corporation. 

An individual was not entitled to deduct flowthrough loss from the forfeiture of his S Corporation’s portion of funds seized by the U.S. Marshals Service for public policy reasons. The taxpayer pleaded guilty to charges of bribery, fraud and money laundering. Subsequently, the U.S. Marshals Service seized money from several bank accounts held in the taxpayer’s name or his wholly owned corporation. The S corporation claimed a loss deduction related to its portion of the asset seizures on its return and the taxpayer reported a corresponding passthrough loss on his return.

However, Courts have uniformly held that loss deductions for forfeitures in connection with a criminal conviction frustrate public policy by reducing the "sting" of the penalty. The taxpayer maintained that the public policy doctrine did not apply here, primarily because the S corporation was never indicted or charged with wrongdoing. However, even if the S corporation was entitled to claim a deduction for the asset seizures, the public policy doctrine barred the taxpayer from reporting his passthrough share. The public policy doctrine was not so rigid or formulaic that it may apply only when the convicted person himself hands over a fine or penalty.

Hampton, TC Memo. 2025-32, Dec. 62,642(M)

On February 11, the White House released President Donald Trump’s fiscal year (FY) 2021 budget proposal, which outlines his administration’s priorities for extending certain tax cuts and increasing IRS funding. Treasury Secretary Steven Mnuchin testified before the Senate Finance Committee (SFC) on February 12 regarding the FY 2021 budget proposal.

On February 11, the White House released President Donald Trump’s fiscal year (FY) 2021 budget proposal, which outlines his administration’s priorities for extending certain tax cuts and increasing IRS funding. Treasury Secretary Steven Mnuchin testified before the Senate Finance Committee (SFC) on February 12 regarding the FY 2021 budget proposal.

Extension of TCJA’s Individual Tax Cuts
Trump’s FY 2021 budget proposal indicates that tax cuts for individuals and passthrough entities under the Tax Cuts and Jobs Act (TCJA) ( P.L. 115-97), which are set to expire at the end of 2025, would be extended. This extension is estimated to cost $1.4 trillion over 10 years, and is reportedly being used as a "placeholder" in the budget for Trump’s forthcoming "Tax Cuts 2.0" plan.

Infrastructure
Trump’s budget proposal also calls for a $1 trillion infrastructure package, although funding details remain scarce at this time. In January, House Democrats unveiled their infrastructure proposal, which also lacked funding details.

IRS Funding
Additionally, Trump’s budget proposes $12 billion in base funding for the IRS "to modernize the taxpayer experience and ensure that the IRS can fulfill its core tax filing season responsibilities." The budget proposal would boost IRS funding from currently enacted levels of $11.5 billion.

Further, the budget would provide $300 million to continue the IRS’s modernization efforts. Specifically, the budget proposal states that IRS funding would help to:

• digitize more IRS communications to taxpayers, so they can respond quickly and accurately to IRS questions;
• create a call-back function for certain IRS telephone lines, so taxpayers do not need to wait on hold to speak with an IRS representative; and
• make it easier for taxpayers to make and schedule payments online.

Hill Reaction
"The Trump Economy stands firm on the proven pro-growth pillars of tax cuts, deregulation, energy independence, and better trade deals," the budget proposal states. However, Democratic lawmakers, while highlighting criticisms of the TCJA, are all but promising Trump’s budget request will not become law.

"Repealing incentives to reduce carbon emissions will hinder our fight against climate change and deter the kind of innovation our planet needs. And extending misguided tax cuts for the richest Americans will only deepen the deficit and further concentrate wealth at the top," House Ways and Means Committee Chairman Richard Neal, D-Mass., said in a statement after the budget proposal was released.

"It [Trump’s budget proposal] doubles down on the failed 2017 GOP tax law, extending expiring provisions and adding $1.5 trillion more to debt over the last six years of the budget window. Most of this extension’s tax breaks go to the richest one-fifth of households," House Budget Committee Democrats said in a committee report during the week of February 10.

However, it is worth noting that Trump’s budget proposal is merely an annual starting point for budget negotiations as Congress has the "power of the purse." Additionally, many of Trump’s requests, particularly those that include extending TCJA tax cuts, would have little chance of successfully clearing the currently Democratic-controlled House.

SFC Hearing; Wyden Bill
Secretary Mnuchin spent much of the SFC hearing praising and defending the TCJA and Treasury’s implementation of the GOP law. "Tax cuts, regulatory reform, and better trade deals are improving the lives of hardworking Americans," Mnuchin told lawmakers. "Unemployment remains historically low at 3.6 percent and is at or near all-time lows for African Americans, Hispanic Americans, and veterans. The unemployment rate for women recently reached its lowest point in nearly 70 years," he added.

Likewise, SFC Chairman Chuck Grassley, R-Iowa praised the TCJA and pointed to the same statistics mentioned by Mnuchin as evidence of its success. "Statistics like these show the tax reform is a success. The Treasury Department’s work to implement the new tax law has been an important part of that success," Grassley said.

However, SFC ranking member Ron Wyden, D-Ore., did not mince words when criticizing Mnuchin’s leadership of Treasury, the TCJA, and related regulations. "It sure looks like corporate special interests are going to make off with new loopholes worth $100 billion in addition to their outlandish share of the original $2 trillion Trump tax law," Wyden said during his opening statement. "When people say the tax code is rigged and the Trump administration has made it worse, what I’ve described is a textbook case of what they are talking about."

In that vein, Wyden introduced a bill on February 12 which would block Treasury’s "exception to the new tax on foreign earnings that allows multinationals to essentially choose the lowest available tax rate," as noted in Wyden’s press release. During the hearing, Wyden accused Treasury of creating a new "corporate tax loophole." Generally, Wyden’s bill would amend the tax code to clarify that high-taxed amounts are excluded from tested income for purposes of determining global intangible low-taxed income (GILTI) only if such amounts would be foreign base company income or insurance income.

Recently, Democrats have been criticizing Treasury for proposing related GILTI regulations based on corporate interests, but Mnuchin vehemently denied that claim. "Our job is to implement the legislation, not to make the legislation," he told lawmakers during the hearing. "Our job has been to implement that part of the tax code consistent with the intent and as prescribed by the law and that is what we have done."

Energy Tax Policy
Meanwhile, on the other side of the Capitol, in a February 11 letter to Senator Grassley, nearly 30 Democratic senators called for prompt committee action on energy tax policy. "Despite numerous opportunities, including in the recent tax extenders package, the Finance Committee has failed to take action on the dozens of energy tax proposals pending before it," the senators wrote in the letter led by Wyden. "Energy tax incentives have played a key part in shaping U.S. energy policy for more than 100 years, and members have shown clear interest in re-examining that ongoing role."

It’s not too early to get ready for year-end tax planning. In fact, many strategies take time to set up in order to gain maximum benefit. Here are some preliminary considerations that may help you to prepare.

It’s not too early to get ready for year-end tax planning. In fact, many strategies take time to set up in order to gain maximum benefit. Here are some preliminary considerations that may help you to prepare.

Gather your data. One major reason for planning towards year’s end is that you usually now have a clearer picture of what your total income and deductions will look like for the entire year. From those estimates, you may want to do some planning to accelerate or defer income and/or deductions in a way that can lower your overall tax bill for this year and next. To do that effectively, however, you need to take inventory of your year-to-date income and deductions, as well as take a look ahead at likely events through December 31, 2016, that may impact on that tally. Since you’ll need to eventually gather this data for next year’s tax return, you can double-down on the benefits of doing so now.

Personal changes. Changes in your personal and financial circumstances – marriage, divorce, a newborn, a change in employment, investment successes and downturns – should all be noted for possible consideration as part of overall year-end tax planning. A newborn, for example, may not only entitle the proud parents to a dependency exemption, but also a child tax credit and possible child care credit as well. Also, as with any ‘life-cycle” change, your tax return for this year may look entirely different from what it looked like for 2015. Accounting for that difference now, before year-end 2016 closes, should be an integral part of your year-end planning.

New developments. Recent tax law changes – whether made by legislation, the Treasury Department and IRS, or the courts –should be integrated into specific to 2016 year-end plan. A strategy-focused review of 2016 events includes, among other developments:

• the PATH Act (including those handful of extended provisions that will expire before 2017, as well as longer-extended changes to bonus depreciation and expensing rules);
• new de minimis and remodel-refresh safe harbors within the ground-breaking and far-reaching “repair regulations;”
• the definition of marriage as applied by new IRS guidance;
• growing interest by the IRS in the liabilities and responsibilities of participants within the “sharing economy”;
• changing responsibilities of individuals and employers under revised rules within the Affordable Care Act; and
• the impact of recent Treasury Department regulations, including those affecting certified professional employer organizations, late rollover relief, changes to deferred compensation plans, partial annuity payment options from qualified plans, and more. 

Timing. Once December 31, 2016 has come and gone, there is very little that you can do to lower your tax bill for 2016. True, there are some retirement plan contributions made early in 2017 that may count to offset 2016 liabilities and some accounting-oriented elections may be made when filing a 2016 return. But those opportunities are limited, with much greater potential savings on most fronts available if action is taken by December 31. For business taxpayers, one of many planning points to keep in mind: a deduction for equipment is not allowed until it is “placed into service” within the business operations; purchasing it is not enough.

Many taxpayers realize significant tax from year-end tax planning. If you wish to explore further whether you might benefit, please feel free to contact our offices.

The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) accelerated the due date for filing Form W-2, Wage and Tax Statement and Form W-3, Transmittal of Wage and Tax Statements, and any returns or statements required by the IRS to report nonemployee compensation to January 31. The change is scheduled to take effect for returns and statements required to be filed in 2017. At this time, many employers and payroll providers are reprogramming their systems for the accelerated due date.

The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) accelerated the due date for filing Form W-2, Wage and Tax Statement and Form W-3, Transmittal of Wage and Tax Statements, and any returns or statements required by the IRS to report nonemployee compensation to January 31. The change is scheduled to take effect for returns and statements required to be filed in 2017. At this time, many employers and payroll providers are reprogramming their systems for the accelerated due date.

Filing requirements

Every employer engaged in a trade or business who pays remuneration, including noncash payments of $600 or more for the year for services performed by an employee must file a Form W-2 for each employee from whom income, social security, or Medicare tax was withheld or income tax would have been withheld if the employee had claimed no more than one withholding allowance or had not claimed exemption from withholding on Form W-4, Employee's Withholding Allowance Certificate.

Prior to the PATH Act, the deadline for filing Copy A of Form W-2 with the Social Security Administration (SSA) was the last day of February following the calendar year for which the filing is made. The filing deadline was extended to the last day of March for employers that file electronically.

Comment. Under the combined annual wage reporting (CAWR) system, the IRS and the Social Security Administration (SSA) agree to share wage data. Employers submit Form W-2, (listing Social Security wages earned by individual employees), and Form W-3, (providing an aggregate summary of wages paid and taxes withheld) directly to the SSA. After the SSA records the wage information from Forms W-2 and W-3 in its individual Social Security wage account records, SSA forwards the information to the IRS

Revised deadline

Under the PATH Act, the due date has been accelerated to January 31, effective for Forms W-2, W-3 and information returns relating to calendar years beginning after December 18, 2015. The accelerated filing date of January 31 for Forms W-2 and W-3 matches the due date for providing wage statements to employees and written statements to payees receiving nonemployee compensation. One consequence of the PATH Act is that these returns no longer qualify for the extended due date of March 31 for filing electronically.

Penalties

Employers that fail to file a correct Form W-2 by the due date may be subject to a penalty under Code Sec. 6721. Higher penalties apply to returns required to be filed after December 31, 2016 and are indexed for inflation. Forms W-2 with incorrect dollar amounts may be eligible for a new safe harbor for certain minor errors.

If you have any questions about the new filing deadlines, please contact our office.