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Checkpoint Special Study: IRS Administrative Provisions in the “Protecting Americans from Tax Hikes” Act

Late on December 15, a bipartisan, bicameral agreement was reached on tax extenders—i.e., the 50 or so temporary tax provisions that are routinely extended by Congress on a one- or two-year basis—and numerous other tax provisions in the “Protecting Americans from Tax Hikes (PATH) Act of 2015” (the Act). The agreement, which makes permanent many of the individual and business extenders and contains provisions on Real Estate Investment Trusts (REITs), IRS administration and the Tax Courts and miscellaneous other provisions, is expected to be quickly passed by Congress and signed into law by the President. As explained in this Special Study, the PATH Act provides a number of measures that modify how IRS and its employees works.

For a Special Study on the individual provisions in the Act, see ¶ 50.

For a Special Study that explains key business tax breaks in the Act, see ¶ 52.

For a Special Study on the depreciation and expensing provisions in the Act, see ¶ 53.

For a Special Study on energy tax provisions in the Act, see ¶ 55.

For a Special Study on the REIT provisions in the Act, see ¶ 57.

The IRS-and-its-employees provisions would:

…require the IRS Commissioner to ensure that IRS employees are familiar with and act in accordance with the taxpayer bill of rights, effective on the date of enactment. (Code Sec. 7803(a)(3), as amended by Act Sec. 401)
…prohibit IRS employees from using personal email accounts for official business (codifying IRS current policy), effective on the date of enactment. (Act Sec. 402)
…in the case of an investigation involving the return or return information of an individual alleging a violation of Code Sec. 7213 (dealing with unauthorized disclosure of return information), Code Sec. 7213A (dealing with unauthorized inspection of returns or return information), or Code Sec. 7214 (dealing with offenses by U.S. officers and employees, IRS may disclose to the complainant whether an investigation has been initiated, is open or is closed, effective for disclosures made on or after the date of enactment. (Code Sec. 6103(e)(11), as amended by Act Sec. 403)
…require IRS to create procedures under which a Code Sec. 501(c) organization facing an adverse determination may request administrative appeal to the IRS’ Office of Appeals. Such adverse determinations include determinations relating to the initial or continuing classification of an organization as tax-exempt under Code Sec. 501(a), an organization under Code Sec. 170(c)(2), a private foundation under Code Sec. 509(a), or a private operating foundation under Code Sec. 4942(j)(3). Effective for determinations made after May 19, 2014. (Code Sec. 7123(c), as amended by Act Sec. 404)
…provide for a streamlined recognition process for organizations seeking tax exemption under Code Sec. 501(c)(4). Instead of the current process, Code Sec. 501(c)(4) organizations must file a simple one-page notice of registration with IRS within 60 days of the organization’s formation. Within 60 days after an application is submitted, IRS must provide a letter of acknowledgement of the registration, which the organization can use to demonstrate its exempt status, typically with state and local tax authorities. Generally effective after date of enactment (transition rules apply for certain existing organizations). (Code Sec. 506, as added by Act Sec. 405)
…allow Code Sec. 501(c)(4) organizations and other exempt organizations to seek review in Federal court of any revocation of exempt status by IRS, effective for pleadings filed after date of enactment. (Code Sec. 7428(a)(1)(E), as amended by Act Sec. 406)
…provide for the termination of employment for IRS employees for taking official actions for political purposes. Grounds for termination of an IRS employee are expanded to include performing, delaying, or failing to perform any official action (including an audit) by an IRS employee for the purpose of extracting personal gain or benefit for a political purpose. Effective on date of enactment. (Internal Revenue Service Restructuring and Reform Act of 1998, as amended by Act Sec. 407)
…provide that the gift tax doesn’t apply to contributions to certain tax exempt organizations. The organizations are: (a) nonprofit civic organizations operated exclusively for social welfare and local employees’ associations whose net earnings are used solely for charitable, educational or recreational purposes that are exempt under Code Sec. 501(c)(4); and (b) labor, agricultural or horticultural organizations that are exempt under Code Sec. 501(c)(5), and chambers of commerce, business leagues, real estate boards, boards of trade or professional football leagues not organized for profit or private benefit that are exempt under Code Sec. 501(c)(6). Effective for transfers after date of enactment. (Code Sec. 2501(a)(6), as amended by Act Sec. 408)
…require employers to include an “identifying number” for each employee, rather than an employee’s SSN, on Form W-2, effective on date of enactment. (Code Sec. 6051(a)(2), as amended by Act Sec. 409)
…allow enrolled agents approved by IRS to use the designation “enrolled agent,” “EA,” or “E.A.,” effective on date of enactment. (31 USC 330, as amended by Act Sec. 410)
…correct and clarify certain technical issues in the partnership audit rules enacted in the Bipartisan Budget Act of 2015. (Code Sec. 6225, Code Sec. 6226, Code Sec. 6235, and Code Sec. 6031, as amended by Act Sec. 411)