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Coronavirus Relief Legislation Complicates TCJA Campaign

Posted on May 18, 2020

The IRS’s newest compliance campaign centered on the Tax Cuts and Jobs Act may need revisions given recent changes in response to the coronavirus pandemic.

“The current situation has made the TCJA work a little more complicated than it was a couple of months ago,” Nikole Flax, deputy commissioner, IRS Large Business and International Division, said May 14 during a webinar hosted by EY.

The IRS announced a new TCJA-related campaign May 1, which says that most returns that will be under review in 2020 will reflect changes made by the tax law. LB&I initiated the campaign to “closely monitor issues on a select pool of returns and share information learned throughout LB&I and the IRS,” according to the IRS website.

“The goal of this campaign is to identify transactions, restructuring and technical issues and better understand taxpayer behavior under the new law,” the website says.

However, Congress in March enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136), which made significant changes to TCJA-related provisions.

Flax said the IRS was aware there could be CARES Act-related complications when the campaign was announced, but said it wanted to be transparent in terms of future priorities.

“We know that there are filings for 2017 and 2018 that could be amended,” Flax said. “We’ll have to refine the campaign to reflect what additional changes might come in and approach the issues from the taxpayer’s most recent position for those years.”

Flax also said there are “potential statute issues” for 2017 given that the IRS is opening exams later than anticipated. “We’ll just have to work through those as we start contacting taxpayers and see what the options might be,” she said.

Flax said the extended six-year statute of limitations for section 965 is a unique tool at the IRS’s disposal, but that the agency doesn’t plan to use it more broadly than Congress intended. “To the extent that taxpayers start having questions as we’re working 2017, if we can provide some clarity, we will,” she said.

Closing Cases Electronically

Flax noted that much of LB&I’s exam activity has continued in the wake of the pandemic, in part because 95 percent of the workforce was telework-ready before the virus hit. She added that much of the current work has carried over from before the outbreak began.

“We have been looking at our internal procedures and processes to see where we need to be more flexible so that we can work with taxpayers,” Flax said, adding that the IRS is trying to be mindful of the constraints taxpayers are under.

LB&I has been working with other operating divisions to ensure that cases can be completed remotely, Flax said. “There’s been a lot of work with the [Small Business/Self-Employed Division] to ensure that we can close cases electronically,” she said. “We’ve been exploring with Appeals opportunities to get cases to Appeals electronically.”

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