Tax reform and regulatory simplification top US tax agenda

by Julie Martin

David J. Kautter, the Trump Administration’s new interim IRS commissioner and Treasury Assistant Secretary for Tax Policy, said December 1 that his two highest priorities are to enact and implement US tax reform and to simplify existing tax regulations.

Speaking at the 30th Annual Institute on Current Issues in International Taxation.conference, cosponsored by the IRS and George Washington University Law School, Kautter that he has been forced to work mostly on tax reform during the four months he has been at his new Treasury post, leaving little time for simplification efforts.

The focus on tax reform will likely continue if legislation is passed, Kautter said, noting that the House tax reform bill, for example, contains more than 80 grants of regulatory authority to Treasury, including some grants that bear deadlines, that will need to be addressed.

Kautter said that he still expects to make headway on tax regulation simplification during his tenure, though. He said the IRS has already identified over 200 tax regulation projects, possibly more than 300 projects, that are candidates for withdrawal. He said he hopes the agency will be able to remove many regulations that no longer reflect the IRS and Treasury’s views.

During a separate conference panel Anne O. Devereaux, IRS Deputy Associate Chief Counsel International Field Service & Litigation, expressed concern about recent court cases that could affect the IRS’s ability to draft tax regulations, particularly Chamber of Commerce of the US v. IRS, No. 1:16-cv-00944 (W.D. Tex. 29 September 2017) and Altera Corporation v. Commissioner, 145 T.C. No. 3 (2015), both of which are currently on appeal.

The Chamber of Commerce case held that a temporary IRS regulation was invalid for failing to comply with the Administrative Procedures Act and the Altera case concluded that IRS regulations did not satisfy the “reasoned decision making” standard, panelists explained, during a session led by Philip R. West, Partner & Chair of Steptoe & Johnson LLP.

Devereaux commented that if these court challenges are successful, the IRS may need to operate differently and it may become much more difficult for the IRS to release helpful tax guidance. This would be particularly problematic given the “avalanche that seems to be heading our way” as a result of tax reform, Devereaux said. According to Devereaux, this might be good example of a situation where taxpayers should be “careful about what they wish for,” given the ramifications of any court decisions against the government.

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