IRS REHIRES PRIVATE COLLECTORSWashington, D.C. — The Internal Revenue Service has decided to renew the contracts of two companies involved in its controversial private debt collection program.
The two firms — Pioneer Credit Recovery and CBE Group — began doing collection work for the IRS in 2006. The private collection program has received criticism from privacy advocates, federal employee unions and National Taxpayer Advocate Nina Olson.
Olson pointed out in a recent report that the program is falling far short of revenue projections and that the costs have far exceeded the revenue generated. The IRS had estimated that the private debt collectors would haul in $65 million last year. Instead, the private collectors only brought in $31 million, of which two thirds went to the IRS and the other third to them. Olson’s office has called for the repeal of the program.
The House passed a bill last October that would repeal the IRS’s ability to use private debt collection companies. It went to the Senate, where it has been referred to the Senate Finance Committee.
HOUSE HOLDS HEARING ON DERIVATIVE TAXES
Washington, D.C. — The House Subcommittee on Select Revenue Measures held a hearing to examine whether there is a need for a more uniform treatment of various derivative structures.
Committee Chairman Richard Neal, D-Mass., pointed out the pitfalls of derivatives, noting the financial damage to the market in mid-March after one insurer posted heavy losses, in part due to one type of derivative, credit default swaps. “Complexity is the name of the game in the derivatives market,” he said in his opening statement. “But I believe it is important for Congress to understand how this market operates and for this committee to understand how these products are taxed. ... I believe we set up inherent conflicts when derivatives enjoy a better tax treatment than the underlying asset.”
The first part of the hearing concentrated on the broader issue of derivatives, while the second part focused on one type of derivative: prepaid forward contracts. The Treasury Department issued a notice and began soliciting public comments on them last December.
“Because of the large number of taxpayers potentially affected and their relative level of sophistication, the migration of prepaid forward contracts into the portfolios of retail investors served as an occasion for us to revisit the core issue related to prepaid forward contracts — whether or not a current accrual of income should be required,” said Michael Desmond, a tax legislative counsel with the Treasury Department, in his prepared testimony.
VERTEX TAPS NORTON FOR NEW CHIEF INCOME TAX OFFICER POST
Berwyn, Pa. — Vertex Inc., a provider of tax-processing solutions and products, named Bob Norton to the newly created post of chief income tax officer. In that role, Norton, a noted author and speaker on corporate tax automation and tax governance, will be charged with growing Vertex’s business lines.
Most recently, Norton served as vice president of tax solutions for Longview Solutions, a provider of corporate performance management software, and also held a number of senior financial management positions managing global tax, treasury and M&A functions for Siemens’ medical IT division.
TIGTA AUDIT: IRS PUBLISHED GUIDANCE PROGRAM NEEDS MORE OVERSIGHT
Washington, D.C. — The Internal Revenue Service needs to improve oversight of its process for interpreting tax laws through its published guidance program, according to a new audit publicly released by the Treasury Inspector General for Tax Administration.
The audit, “The Public Guidance Program Needs Additional Controls to Minimize Risks and Increase Public Awareness,” examined the process by which the IRS Office of Chief Counsel develops tax guidance, including a pilot guidance program to request and evaluate public submissions before considering changes to existing regulations. The Senate Finance Committee requested the review after news articles questioned whether the pilot program was putting special interests before the public’s interests when developing tax guidance, though the TIGTA reported that it did not.
“Although Counsel considers ideas from a wide variety of sources when selecting guidance projects for its annual business plan, it does not track all open projects on the business plan, which could lead to an increased risk of untimely actions, less management oversight and less public awareness,” TIGTA Inspector General J. Russell George said.
The audit makes seven recommendations to the IRS, including expanding written procedures for developing and monitoring the guidance business plan, issuing more frequent updates to and establishing a reasonable expectation in the Priority Guidance Plan, and improving recordkeeping.
