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Unified Agenda Adds Items on Penalty Approval, COVID-19 Credits

Posted on July 1, 2020

The Office of Management and Budget’s latest unified agenda includes several new projects, including guidance on supervisory approval of proposed penalties and the recapture of credits enacted as part of coronavirus relief.

The OMB’s spring 2020 unified agenda, released June 30, lists 187 projects for the IRS — the same number that appeared on the fall 2019 agenda. But it adds about three dozen projects that weren’t on the fall agenda, including a handful that don’t appear on the most recent Treasury-IRS priority guidance plan.

One of those, the new project on supervisory approval of proposed penalties, comes in the midst of a wave of litigation over the IRS’s application of section 6751(b), which states that the agency may not assess a penalty unless the initial determination is approved in writing by the immediate supervisor of the employee making it.

According to the unified agenda, the guidance will provide that for penalties and other additions to tax that are subject to section 6751(b)(1) and deficiency procedures, “written supervisory approval must be obtained no later than the date the IRS sends a taxpayer a written communication that (1) includes the penalty; and (2) offers the taxpayer an opportunity to protest the penalty with the IRS Independent Office of Appeals.”

“If the IRS sends such a written communication, written supervisory approval is not required to be obtained earlier than the date of the written communication,” the agenda item continues.

Recapture of Erroneous Payments

The agenda also includes a new project on the recapture of erroneously paid or refunded tax credits enacted in the Families First Coronavirus Response Act (P.L. 116-127) and the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136). The former provides payroll tax credits for employers providing paid sick, family, and medical leave, and the latter offers an employee retention credit equal to 50 percent of qualified wages paid to workers.

The IRS has issued FAQs on those credits and has been updating them regularly.

Estate tax planners might be irked by another new item on the agenda indicating that the IRS intends to propose a user fee on requests for the issuance of an estate tax closing letter.

Such a closing letter provides the executor of an estate with evidence that the IRS has accepted a filed Form 706, “United States Estate (and Generation-Skipping Transfer) Tax Return,” and that the agency has closed its exam of the return — information that serves several important functions in the administration of an estate.

Practitioners were already miffed by the IRS’s announcement in 2015 that it would issue estate tax closing letters only upon request, rather than automatically to every estate that filed a Form 706 as it had previously done. That change was driven by IRS budget cuts, a Treasury official said at the time.

Other new agenda items include one to revise the regulations under section 1400Z-2 to address foreign investors in qualified Opportunity Zones. Another on the reporting obligations of virtual currency brokers under section 6045 appears to expand on a previously listed priority guidance plan project to incorporate guidance under section 6050W on reporting for those brokers who are also third-party settlement organizations.

Some of the items added to the unified agenda have already made their way to the OMB’s Office of Information and Regulatory Affairs, but their descriptions could offer more hints to taxpayers on what to expect when the guidance is released.

For example, in June the OMB received two sets of regulations — one final and one proposed — on business interest deductions. But the unified agenda item provides a lengthy description of what the proposed regs will address and who they will apply to.

Jonathan Curry contributed to this article.

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