The new president has issued numerous executive orders during the first weeks of his term. Although these directives commonly occur when the administration changes party affiliation, tax professionals are left wondering if or how they should react.
The White House issued a memorandum on Jan. 20, 2017, temporarily freezing new or pending regulations that have not yet become effective. Regulations sent to, but not published in the Federal Register were immediately withdrawn. Regulations published, but not effective were postponed for a 60-day review.
The section 385 debt-equity regulations were finalized before the regulatory freezes, so for now, those rules stand. However, the proposed regulations on the new centralized partnership audit regime issued earlier this year were withdrawn and may need to be completely re-issued.
In addition, President Trump signed an executive order proposing that federal agencies repeal two existing regulations for every new proposed regulation. Most IRS regulations may be exempt from the two-for-one rule. (The executive orders do not apply to independent agencies.)
Another executive order also issued on Jan. 20 targeted certain Affordable Care Act (ACA) penalties such as the individual mandate. In response, the IRS announced Feb. 15 that it would allow electronic and paper returns to be accepted in instances where a taxpayer does not report their health coverage status. As of now, all other health coverage information reporting requirements and shared responsibility payments remain in place. Our members should understand that the announcement does not imply that the IRS will not act after processing such returns to then assess appropriate taxes, penalties and interest and our members should so advise their clients. Preparers should process existing health care forms and returns under current ACA regulations until the IRS or the Treasury Department issue further announcements.
On Jan. 23, the president ordered a 90-day hiring freeze of federal civilian employees in the executive branch. One big concern is that the IRS may not be fully staffed for the filing season, potentially delaying tax refunds and taxpayer assistance needed to complete and file accurate returns. At least one news article indicated that any new IRS hires prior to Jan. 22 with a start date prior to Feb. 22 might potentially bypass the freeze. We also have heard that the IRS believes it may get an exemption for seasonal hires through April 15. During the 90-day freeze, an audit will be conducted for a long-term plan to cut the federal government’s workforce through attrition.