Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Tuesday, June 18, 2024

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

Screenshot 2024-06-17 at 9.44.26 PMThe U.S. Treasury Department has announced a new plan to close tax loopholes exploited by large partnerships, as part of broader efforts to ensure that wealthy individuals and large corporations pay their fair share of taxes. This initiative follows findings that many IRS audits of large partnerships failed to uncover noncompliance due to the complexity of these business structures. The plan will utilize advanced data analytics and artificial intelligence to better identify high-risk entities for auditing​.

A significant component of the plan involves targeting specific compliance issues, such as scrutinizing the transfer pricing practices of foreign-owned corporations and expanding audits of the largest corporate taxpayers. These measures aim to address sophisticated tax avoidance strategies and ensure accurate reporting of U.S. profits​.

Funding for these efforts comes from the Inflation Reduction Act, which allocates resources to close the tax gap—the difference between taxes owed and taxes paid. The IRS plans to use these funds to enhance enforcement and modernize its technology infrastructure. However, some of the funding was recently reduced following negotiations with Congress.

The initiative also focuses on addressing the substantial portion of the tax gap attributed to unreported business income, particularly income shielded through partnerships. Recent estimates suggest that the tax gap could be as high as $1 trillion annually, underscoring the urgent need for improved tax compliance and enforcement​.

Overall, the Treasury's plan represents a concerted effort to close loopholes and enhance tax compliance among the wealthiest taxpayers and largest partnerships. By leveraging new technologies and enhanced enforcement strategies, the initiative aims to ensure a fairer tax system and reduce the tax gap​.

For more information see Kate Dore "Treasury, IRS unveil plan to close ‘major tax loophole’ used by large partnerships", CNBC, June 17,2024.

Special thanks to David S. Luber (Florida Probate Attorney) for bringing this article to my attention.

https://lawprofessors.typepad.com/trusts_estates_prof/2024/06/treasury-irs-unveil-plan-to-close-major-tax-loophole-used-by-large-partnerships.html

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