Second Quarter Newsletter 2017

In February 2017, Ropes & Gray LLP published an article discussing recent reductions in the IRS budget and the resulting decline in enforcement, which has led to a gap of approximately $450 billion per year between the amount of tax that should be paid by U.S. taxpayers and the amount that is actually paid. The article also addressed possible changes to IRS funding in the new presidential administration.

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In January 2017, the IRS announced the rollout of 13 compliance campaigns to be undertaken by its Large Business and International Division (“LB&I”). The campaigns are part of a broader effort by the IRS to reorient LB&I to focus on high-risk issues in order to more efficiently address non-compliance in an era of smaller IRS budgets and greater IRS responsibilities. The campaigns cover subjects including repatriation of overseas funds by U.S. taxpayers, related-party transactions, and TEFRA partnership examinations.

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In February 2017, Ropes & Gray LLP issued a client alert discussing material aspects of the proposed regulations released by the Department of Treasury implementing the partnership audit provisions of the Bipartisan Budget Act of 2015. The Bipartisan Budget Act rules created a new regime for auditing partnerships, repealing the Tax Equity and Fiscal Responsibility Act rules that have been in place since 1982. The proposed regulations provide much-needed guidance on a number of issues.

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In the April-June 2017 issue of Risk & Compliance, Tax partner Kat Gregor and Tax associates Kathryn Seevers and Veronika Polakova discuss certain governance concerns raised by the new partnership audit regulations that were released by the Department of Treasury on January 18, 2017. The article focuses on two issues: (1) the ability of partnerships to opt out of the rules and (2) the approach to the selection of the partnership representative given the partnership representative’s powers under the rules.

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Kat Gregor and Nicholas Berg published an article in the Journal of Taxation and Regulation of Financial Institutions that examines the ways in which the IRS has recently brought its strategy of piggybacking onto SEC, DOJ, and other agencies’ enforcement actions to the asset management industry. This article describes the trend, the risks, and steps asset managers can take to prepare for IRS piggybacking.

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