The American Institute of Certified Public Accountants (AICPA) on February 7 released its compendium of tax legislative proposals for 2023, spanning over 60 recommendations in the interest of simplifying and brining technical corrections to the Tax Code.
According to Jan Lewis, Chair of the AICPA Tax Executive Committee, the proposals address areas of the Code “that need attention,” are “technical in nature,” and “can be readily addressed.” She said as much in a letter attached with the proposals addressed to the chairs and ranking members of the Senate Finance Committee and the House Ways and Means Committee, respectively.
Spanning 160 pages, the compendium offers several legislative topics pertaining to employee benefits; individual income tax; tax administration; corporate tax; trust, estate, and gift tax, tax methods and periods, and international tax. Each begins with an overview of present law, details of the proposal, and supporting analysis.
“These proposals generally promote simplicity and fairness and are generally noncontroversial,” read the compendium’s forward. “This Compendium includes items focused on improving tax administration, making the tax code fairer, and effectively promoting important policy objectives.”
For example, one such proposal would allow a reasonable cause exception for penalties under Code Sec. 6707A and Code Sec. 6662A for all reportable transactions, as well as a litigative backstop should relief be denied. The penalty under Code Sec. 6707A is assessed to those who fail to disclose a reportable transaction and is equal to 75% of the difference in tax if the transaction were properly reported.
Penalty caps are $100,000 for “listed transactions,” or $10,000 for individuals and $50,000 for other taxpayers failing to report transactions other than listed transactions. The Section 6662A penalty applies to understatements attributable to certain reportable transactions and equals 20% or 30%, depending if the transaction was disclosed.
Noting that there is currently no reasonable cause exception for taxpayers acting in good faith under both sections, the AICPA writes that the penalty structures are “not consistent with penalty policies articulated by Congress when the Code was amended in 1989,” and the absence of judicial review is “a violation of procedural due process and notions of fair tax administration.”
The AICPA said that it is opposed to strict liability penalties because they are “unduly harsh,” adding that “fairness and effective tax administration require the IRS to retain discretion in assessing and abating penalties.”
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