IRS announces ‘major’ new tax rule taking an extra $50 billion from Americans

New rules from the United States Treasury aimed to sic the Internal Revenue Service on successful businesses “costing the federal government billions of dollars each year,” have been announced.

Sure to delight socialists everywhere, a “major tax loophole” became the focus of the Treasury Monday that the department believes could amount to more than $50 billion in revenue taken in by the federal government over the next decade.

A statement announced that “partnership basis shifting,” a process in which assets are moved around to reduce tax liability, would be brought to an end.

Describing how “wealthy individuals, complex partnerships, and large corporations” had been using the tax code to their advantage, the department wrote, “A single business that operates through many different legal entities (‘related parties’) enters into a set of transactions that manipulate partnership tax rules to maximize tax deductions and minimize tax liability… For example, a partnership might shift tax basis from property that does not generate tax deductions (such as stock or land) to property that does (such as equipment).”

In a statement reported by the Associated Press, Deputy Treasury Secretary Wally Adeyemo summed up the practice as “really just a shell game.”

Likewise, as Treasury argued basis shifting was “costing the federal government billions of dollars each year,” IRS Commissioner Danny Werfel said, “These tax shelters allow wealthy taxpayers to avoid paying what they owe.”

Partnership tax specialist Miles Johnson of the Tax Law Center at New York University Law added to the AP, “These transactions effectively make income disappear from the tax system by creating depreciation deductions or other tax reductions that don’t reflect any true economic cost.”

Treasury Secretary Janet Yellen credited President Joe Biden’s so-called Inflation Reduction Act with providing the resources necessary as her department lamented that audits of passthrough businesses with over $10 million in assets had fallen from 3.8 percent in 2010 to 0.1 percent in 2019 while filings from those same businesses increased from 174,100 to 297,400 over that same period.

“Thanks to resources from President Biden’s Inflation Reduction Act, Treasury and the IRS have the tools to stop longstanding abuses,” she said while arguing, “Treasury and the IRS are focused on addressing high-end tax abuse from all angles, and the proposed rules released today will increase tax fairness and reduce the deficit.”

As it happened, the IRA allocated $80 billion in new funding to the IRS which Americans had been assured would not be used to audit the average taxpayer.

Johnson noted the rule and guidance showed that the IRS sought to curb basis shifting “by eliminating their tax benefits and better identifying them to the IRS as without substance.”

Meanwhile, socialist fan girl and Massachusetts Sen. Elizabeth Warren (D) reacted on social media more at the heart of the effort and wrote, “The super wealthy use complex tax schemes to avoid paying what they owe. @TreasuryDepSec and @IRSnews are right to end these shell games. Thanks to President Biden and Democrats in Congress, a well-funded IRS is closing a loophole to make the rich pay their taxes,” earning snide derision.

Kevin Haggerty

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