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Federal Tax

NTU to Prioritize TCJA Fixes, Clawing Back IRS Enforcement Funds, Director Says

Tim Shaw  

· 5 minute read

Tim Shaw  

· 5 minute read

The 2023 policy agenda of the National Taxpayers Union includes working with both parties in Congress to pass bipartisan revisions to the 2017 tax reform bill, as well as stripping additional funds granted to the IRS for increased enforcement activities.

Per its website, the NTU identifies as nonpartisan government spending hawk and is classified as a Code Sec. 501(C)(4) nonprofit entity. Andrew Lautz, director of federal policy for NTU and the National Taxpayers Union Foundation, shared with Checkpoint in an interview the organization’s most pressing items entering the new year. According to Lautz, much focus will be given to needed changes to some provisions of the Tax Cuts and Jobs Act of 2017.

First and foremost, this includes doing away with the TCJA-mandated amortization of research and development or experimentation expenses over five years. Previously, under Code Sec. 174, taxpayers could deduct such expenses immediately. “There’s long been bipartisan work to sort of unglue that and go back to full expensing – correct what we saw as an error in TCJA,” Lautz said. He noted that although there is support on both sides of the aisle for ending the amortization requirement, talks on the Hill have been wrapped up with child tax credit proposals, like extending the enhancements made to the CTC by the American Rescue Plan of 2021.

Lautz said that unlinking the two proposals has “been tough,” as the two are “linked for now,” but NTU is working with senators and House representatives to undo the Section 174 change separately from CTC reforms. He added that they have come “very close to the finish line a few times with some of the major vehicles that were moving through Congress last year” but a deal is not quite there yet.

Another TCJA-related goal at the NTU is to address the phaseout of 100% bonus depreciation deduction for qualified assets, such as machinery and equipment. As of January 2023, the rate has fallen to 80% and will continue to gradually phase out to 0% in 2027. NTU supports maintaining 100% bonus depreciation. “That so far is a partisan policy,” remarked Lautz, “but it’s something we continue to work on the outside in making sure that stays part of the discussion.”

Looking further ahead, NTU is gearing up for a “big discussion” regarding individual expiring TCJA provisions that sunset in 2025. That is, whether certain provisions should be extended, modified, or lapsed. NTU will continue advocating for TCJA’s “across the board” lower tax rates and the nearly doubled standard deduction, which reduces tax filing burdens and saves taxpayers time on completing returns, according to Lautz.

NTU also anticipates coordinating with key party leaders on respective committees on the TCJA Code Sec. 199A business income deduction, of which Lautz said the NTU does not have an official position on due to its complexity and how it was originally passed in 2017. Some expected last year’s omnibus spending bill to spotlight bipartisan TCJA-related proposals, but the final package was more retirement-centric. See 2023 Tax Outlook Pt. 1: Lame Duck Session, Split Congress Expectations (12/07/2022).

Because TCJA was not touched in the final year-end package, these discussions will carry over to 2023 and beyond. “I think we need to operate at NTU on a dual track where we are talking about the standalone bills and making the case again, trying to make as many of those individual policies as bipartisan as possible,” Lautz said.

Lautz relished the thought of an ideal world where Congress would consider TCJA matters on a bill-by-bill basis two years ahead of deadlines, with regular order in the Senate. “Unfortunately, it’s never the way Congress operates,” he said.

In early January, the NTU in a publication authored by Lautz urged lawmakers to vote for the Family and Small Business Taxpayer Protection Act, a Republican House measure promised by now-Speaker Kevin McCarthy of California ahead of the midterm elections. The bill, approved by the House January 10, claws back all but a portion of the $80 billion IRS funding provided by the Inflation Reduction Act, most notably all amounts set aside for enforcement activities.

Lautz wrote that the $8 billion that would be retained for customer service and system modernization improvements “could help the IRS to manage and implement longstanding plans in these areas, while more thoughtful compliance initiatives can be developed.” The proposed bill, which is not believed to have a chance of passing in the Senate, is not “the exact approach NTU would take,” read the post, but “represents a step in the right direction.”

Adding context to the organization’s stance, Lautz clarified at interview that NTU deviates from the message put forth by some leading Republicans that the biggest threat lies with the so-called army of IRS agents that would be hired with the IRA appropriation. “We had some concerns with the funding and how the funding was split in the IRA but no, this does not mean 87,000 agents are coming to barrel down your door,” Lautz explained, saying “the funding for us was too much too fast and wasn’t accompanied with the proper guardrails.”

The NTU is eagerly awaiting, like many, the release of the IRS’ spending plan required by Secretary Yellen. Lautz said it remains to be seen if Treasury will stay true to its word that audit rates will not rise above historical levels for taxpayers making under $400,000. The group will likely have a response to the plan when it is made available, but perhaps not immediately, as they want to absorb the full report and not “jump to conclusions,” as Lautz stated.


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