The newly released 2006-2007 Internal Revenue Service Priority Guidance Plan, designed as the agency's own blueprint for its guidance projects during the coming year, ranges in scope from consolidated returns to tax-exempt bonds.The Guidance Plan contains 10 more projects than last year's plan, and includes projected rulings on corporations and shareholders, employee benefits, executive compensation, excise taxes, exempt organizations, estate and gift taxes, partnerships, S corporations, and international issues.
"It's an aggressive game plan," said Maplewood, N.J-based tax attorney and consultant Mary Howley. "Even though it contains numerous items that were rolled over from last year's guidance, there is a huge amount of new topics they're working on."
Although many of the projects in this year's plan are mandated by recent legislation, none of the items relate to the just-passed Pension Protection Act of 2006. However, the IRS said that it intends to update and republish the plan periodically this year to reflect additional guidance.
"In the past, we have updated the Priority Guidance Plan to add projects necessary to implement recently enacted tax legislation," the Treasury Department and the IRS said in a joint statement by Treasury deputy assistant secretary for regulatory affairs Eric Solomon, IRS Commissioner Mark W. Everson and IRS chief counsel Donald L. Korb.
"We will continue to evaluate the priority of each guidance project in light of developments arising during the 2006-2007 plan year," they said.
"The Priority Guidance for 2006-2007 is very comprehensive," echoed Susan Serota, the newly elected chair of the American Bar Association Tax Section. "It reflects a lot of the different tax laws that occurred over the last couple of years. It really puts a tremendous burden on the service to get all of them out in a one-year period. It's a very ambitious plan, and I'm pleased that they picked up a number of our suggestions. Basically, it's a large list, but it's a good one."
Bill Smith, director of the national tax office for accounting firm consolidator CBiz, agreed, adding, "Congress keeps passing new tax legislation and saying, 'You have to do this, you have to do that.' The pension legislation was enacted after the to-do list was completed, so now they have to jump on what's mandated by the new legislation, which will impact doing what's already on the list."
"There's not much that's significant on the list which isn't related to legislation over the last two years," he said. "They need to get information out on the deferred compensation rules, political organizations and some ambitious corporate-type provisions."
"It's their wish list - they're saying, 'If we could get everything done, here's what we'd like to do,'" he added. "Everyone knows that not everything will be accomplished during the next year, and a number of the items will roll over to the next list."
"The plan is helpful in knowing when to expect IRS guidance in a particular area and seeing what their priorities are," he said. "However, it does not prioritize items within the plan - it simply lists them by code section. It would be interesting to know within their list what they think are priority items outside of legislative mandates, but that's not there."
A guide to the guidance
Although the plan does not contain projects related to the new pension law, it does include 18 pension-related issues. For example, the plan indicates that the IRS will finalize a number of proposed Roth IRA rulings, including designated Roth contributions under Code Section 401(k) plans and under Section 402A.
The IRS will provide final regs on the credit for household and dependent care expenses, and guidance in a number of areas involving hybrid vehicles and alternate fuels.
Among corporate tax areas in which guidance is forthcoming are consolidated return regulations under Section 1502, regulations regarding transactions involving the transfer or receipt of no-net-equity value, and revised regs regarding the allocation of certain tax benefits among related corporations.
The IRS also intends to issue guidance on accountable plans and per-diem payments, a revenue ruling on taxable health benefits for beneficiaries, and proposed regulations on cafeteria plans. The plan has eight projects in the exempt-organization area, including guidance on political activities by charitable organizations.
"They're biting off a lot," noted Tom Ochsenschlager, vice president of taxation at the American Institute of CPAs. "It's particularly ambitious given their administrative budget. Congress has not been very generous with that. They increased the budget, but it was not earmarked to general funds. It may end up stretching [the IRS's] resources to do it."
"Meanwhile, we are very pleased that they have picked up many of our suggestions. We're looking forward to their proceeding with work on the list," he said.
The AICPA submitted 76 suggestions, which were prepared by the Tax Division's committees and technical resource panels, and approved by the Tax Executive Committee.
"While the categories don't exactly match up, many of the ones we suggested made it to the list," said Ochsenschlager. "And some of what we suggested they might have handled through some other process such as private letter rulings. There are also some issues we didn't comment on because they keep recurring year after year. For example, the consolidated return regs are so difficult to resolve. We had them in our plans for many years, but finally dropped them."
"Most of our highest-priority items in the international area are addressed," he continued. "Five of the eight items in trust and estates were also on our list. One of our highest-priority items [that] they addressed is guidance under Code Section 2053 regarding the extent to which post-death events can be considered in determining the value of the taxable estate."
"And they addressed qualified severance under Code Section 2642 [relating to the inclusion ratio for property transferred in a generation-skipping transfer]. It was another of our higher-priority issues," he added.
"In the corporate area, they picked up all of our suggestions," Ochsenschlager noted. "Of course, it could be that these
issues were already on their radar, but it shows they're thinking along the right lines. And if they picked them up as a result of our suggestions, that's good too."
