SENATORS EXPAND LEASING TAX SHELTERS PROBE: Federal agencies may have played a role in approving abusive tax shelter leases using federally funded infrastructure assets, according to Sen. Chuck Grassley, R-Iowa, chairman of the Senate Finance Committee, and ranking member Sen. Max Baucus, D-Mont.The senators have been investigating how major U.S. companies receive huge tax deductions by pretending to lease the infrastructure of cities and foreign countries, and then pretending to lease them back.
Under this scheme, according to Grassley and Baucus, municipalities are paid an up-front cash fee to enter into a long-term lease of their infrastructure to the tax shelter promoters. The cash received by the municipality, however, pales in comparison to the federal tax benefits received by the corporations, which then are able to depreciate taxpayer-funded bridges, subways and rail systems as a result of the lease.
The senators wrote to the Federal Aviation Administration and the Environmental Protection Agency asking for details of any such deals that those agencies may have approved. The letters follow an earlier letter to the Federal Transportation Department. Grassley and Baucus estimated that such leasing deals cost the Treasury as much as $2 for every $1 that the cities and their agencies receive in fees from the promoters of such arrangements.
E-FILING, HOME COMPUTER USE SURGE: E-filing is running more than 9 percent ahead of last year’s pace, and the number of taxpayers filing from their home computers has soared, according to the Internal Revenue Service.Overall, the IRS said that the number of tax returns has increased by 2.8 percent compared to last year. More than 33.5 million returns have been e-filed, about three million more than this time last year. Returns prepared and filed from home computers have jumped by 23 percent.
Returns filed through the IRS Free File program are up by more than 24 percent over last year, with more than 1.9 million returns filed through the program, a public-private partnership between the IRS and a consortium of tax software companies launched last year. In addition, the IRS noted that tax professionals have submitted more than 23 million e-filed returns, a 7.2 percent increase over last year. Direct deposit of refunds has climbed to nearly 28 million, a gain of 9.3 percent.
So far, the IRS said that taxpayers have made about 9.8 million visits to the “Where’s My Refund?” service through Feb. 29 — almost twice as many as during the same period a year ago. The service, which debuted nearly two years ago, handled more than 18 million electronic inquiries in 2003.
AICPA LAUDS MEASURES TO SIMPLIFY TAX CODE: The American Institute of CPAs joined with other long-time proponents of tax simplification in praising the Bush administration for proposing a series of measures to streamline the federal tax code over the next few years.In a letter to Treasury Secretary John W. Snow, representatives from the AICPA’s Tax Executive Committee, the American Bar Association’s Section on Taxation and the Tax Executives Institute praised a number of provisions in the Bush administration’s 2005 federal budget plan that they said address “the urgent need for major simplification” of the nation’s tax laws.
“We especially welcome the proposals to simplify the tax laws for families, including the proposals to adopt a uniform definition of ‘qualifying child’ for purposes of various child-based benefits,” the three groups told Snow. They also endorsed budget proposals to eliminate the income-related phase-outs for the adoption tax credit and exclusion, to eliminate the household maintenance test for head-of-household filing status, and to simplify the complex computational and eligibility requirements for the earned-income tax credit and child tax credit.
The three organizations singled out the administration’s plan to explore “a long-term solution” to the alternative minimum tax dilemma as “perhaps the most significant legislative item contained in the revenue proposals.”
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