Tax Season Ends with New Legislation
Congress returned to work in April after a two week recess and the House immediately passed a slew of tax-related bills. In rapid succession, House lawmakers voted to repeal the federal estate tax, make permanent the state and local sales tax deduction, and make reforms to the IRS. The tax filing season concluded on April 15 with the IRS Commissioner reporting that return and refund processing went smoothly (many taxpayers and practitioners might disagree).
While tax reform discussions continue between the White House and GOP leaders in Congress, the House moved forward with votes on a number of stand-alone tax bills. In April, the House approved:
- HR 622, the State and Local Sales Tax Deduction Fairness Bill, which extends permanently the deduction for state and local sales taxes in lieu of state and local income taxes.
- HR 1058, the Taxpayer Bill of Rights Bill of 2015, which codifies taxpayer rights before the IRS;
- HR 1152, which prohibits IRS employees from using personal email accounts to conduct official business;
- HR 1295 and HR 1314, which make reforms to the process for requesting tax-exempt status;
- HR 709, the Prevent Targeting at the IRS Bill, which makes political targeting a terminating offense at the IRS; and
- HR 1104, the Fair Treatment for All Gifts Bill, intended to ensure fair and equal gift tax audit treatment for taxpayers who donate to tax-exempt organizations.
Estate Tax Repeal
The Death Tax Repeal Bill (HR 1105) was approved by the House, 240-to-179, mainly along party lines. In addition to repealing the federal estate tax, the bill repeals generation-skipping transfer (GST) tax for all future transfers. GOP leaders in the Senate have indicated their support for the bill but have not yet scheduled a vote. Because of Senate rules, tax votes generally require a super majority of 60 votes and it is unclear if estate tax repeal has the requisite support. President Obama has said he would veto any legislation to repeal the federal estate tax.
On April 16, President Obama signed the Medicare Access and CHIP Reauthorization Act of 2015 (HR 2), also known as the "doc fix" bill. While the new law largely enacts reforms to Medicare, one provision impacts the IRS. The law authorizes the IRS to levy up to 100 percent of a qualified payment owed to a Medicare provider with unpaid tax liabilities. Previously, the IRS could levy up to 30 percent.
The 2015 filing season began on-time but with added emphasis on new reporting requirements under the Patient Protection and Affordable Care Act. The Affordable Care Act generally requires individuals to carry minimum essential health insurance coverage, unless exempt, or make a shared responsibility payment. The payment is due when individuals file their income tax return.
"Taxpayers affected by the tax-related PPACA provisions generally have been able to fulfill their filing obligations," IRS Commissioner John Koskinen told Congress on April 15. The IRS made every effort to communicate with taxpayers and preparers about the tax changes, beginning last year and continuing through the 2015 filing season."
Koskinen acknowledged problems with IRS customer service. The IRS's phone level of service at the start of the filing season was 54 percent, falling to below 40 percent by the end of the filing season. "Our level of customer service this filing season was unacceptably low, both in person and on the phone," Koskinen said. Koskinen attributed the declines in customer service to cuts in the agency's budget in recent years. Koskinen said funding for the IRS has been reduced by $1.2 billion over the past five years.