Renesha N. Fountain 2022-11-16 13:38:12
During 2022, Congress passed legislation that included changes to the tax laws, while the Internal Revenue Service, or IRS, announced additional relief for taxpayers still recovering from the COVID-19 pandemic. Furthermore, the U.S. Supreme Court issued a favorable opinion for a taxpayer in a case involving a request for a collection due process, or CDP, hearing.
Inflation Reduction Act of 2022
On August 16, 2022, President Joe Biden signed the Inflation Reduction Act of 2022 into law.1 Under the act, there is a 15% alternative minimum tax imposed on publicly traded corporations (excluding S corporations, regulated investment companies, and real estate investment trusts) with average annual adjusted financial statement income over $1 billion over a three-year period.2 The minimum tax applies to tax years beginning after December 31, 2022. The act includes a nondeductible excise tax of 1% of the fair market value of corporate stock repurchases (subject to certain exceptions), occurring after December 31, 2022.3 The act also extended the excess business loss limitation under I.R.C. § 461(l) for noncorporate taxpayers through tax years beginning before January 1, 2029.4 Furthermore, the act increased IRS funding by approximately $79.6 billion over the next 10 years, the majority of which was allocated to enforcement actions and operations support. Taxpayers may also be eligible for several tax credits that were extended or expanded, including the following:
• Clean vehicle credit in an amount up to $7,500 for purchasing a qualifying new clean vehicle, subject to retail price and income limitations;5
• Clean vehicle credit equal to the lesser of $4,000 or 30% of the sales price of a used vehicle, subject to retail price and lower income limitations than for new vehicles;6
• Nonrefundable residential clean energy credit equal to 30% of eligible expenses if the taxpayer installs solar energy equipment in his or her residence from January 1, 2022, through December 31, 2032 (the percentage of eligible expenses is reduced in 2033 and again in 2034 until it expires in 2035);7 and
• Energy efficient home improvement credit equal to 30% of all eligible home improvement costs for property placed in service after December 31, 2022, and before January 1, 20338 [annual limits of $1,200 per taxpayer and $600 per item (except for heat pumps, heat pump water heaters, biomass stoves and boilers, which have a $2,000 credit limit)].
Penalty Relief
As a continuation of its efforts to assist taxpayers who have been adversely affected by the COVID-19 pandemic, the IRS issued Notice 2022-36, 2022-36 I.R.B. 188 (August 24, 2022), which provides penalty relief to individuals and businesses with respect to specific returns for the tax years 2019 and 2020.9 The taxpayer is not required to call or write the IRS to request this relief. Instead, the IRS will grant this relief automatically as long as certain conditions are met. The IRS will allow relief from failure to file penalties under I.R.C. § 6651(a)(1) with respect to the Form 1040, 1041, and 1120 series. Penalty relief is also applicable to civil penalties imposed on Forms 5471 or 5472 when these forms are attached to a late-filed Form 1120 or 1065, civil penalties related to Forms 3520 or 3520-A, and penalties assessed for late filing or failure to show required information on Forms 1065 or 1120. The taxpayer will receive a credit or refund if the penalty was previously paid. To qualify for relief, the particular form must be specifically identified in the notice,10 and the taxpayer must have filed the applicable 2019 or 2020 return on or before September 30, 2022. The IRS notes that this penalty relief initiative will allow the agency to concentrate on processing backlogged correspondence and tax returns to assist in resuming normal business operations by the 2023 filing season.11
Supreme Court Case Involving CDP Litigation
Under I.R.C. § 6330(d), if a taxpayer timely files a CDP request and subsequently does not agree with the determination by the IRS Independent Office of Appeals, the taxpayer may request judicial review by filing a petition in the U.S. Tax Court within 30 days of the date of appeals’ determination, and “the Tax Court shall have jurisdiction with respect to such matter.” In Boechler, P.C. v. Commissioner,12 the U.S. Supreme Court held that the 30-day time period to file a petition seeking review of a CDP case is a nonjurisdictional deadline subject to equitable tolling. In Boechler, P.C., the petitioner sent the petition to the U.S. Tax Court one day after the 30-day time period referenced in I.R.C. § 6330(d). Nevertheless, the Supreme Court concluded that the statutory language “does not clearly mandate the jurisdictional reading … given that ‘such matter’ lacks a clear antecedent.” Accordingly, the Supreme Court remanded the case for a determination of whether Boechler, P.C. is entitled to equitable tolling under the facts of the case.
NOTES
1 Pub. L. No. 117-169.
2 See § 10101 of the Act, which amends I.R.C. § 55(b).
3 See§ 10201 of the Act, which adds I.R.C. § 4501.
4 See§ 13903 of the Act.
5 See§ 13401 of the Act, which amends I.R.C. § 30D.
6 See§ 13402 of the Act, which adds I.R.C. § 25E.
7 See§ 13302 of the Act, which amends I.R.C. § 25D.
8 See § 13301 of the Act, which amends I.R.C. § 25C. The current rules still apply to property placed in service in 2022 (credit of 10% of qualified energy efficient costs or 100% of the costs for the installation of certain water heaters and air conditioners).
9 See IR-2022-155 (August 24, 2022), https://www.irs.gov/newsroom/covid-tax-reliefirs-provides-broad-based-penalty-relief-for-certain-2019-and-2020-returns-due-to-the-pandemic-1-point-2-billion-in-penalties-being-refunded-to-1-point-6-million-taxpayers.
10 Please note that penalty relief may be granted for other forms included in Notice 2022-36 as this article does not provide an exhaustive list.
11 See IR-2022-155 (August 24, 2022), https://www.irs.gov/newsroom/covid-tax-reliefirs-provides-broad-based-penalty-relief-for-certain-2019-and-2020-returns-due-to-the-pandemic-1-point-2-billion-in-penalties-being-refunded-to-1-point-6-million-taxpayers.
12 142 S. Ct. 1493, No. 20-1472 (April 21, 2022).
RENESHA N. FOUNTAIN serves as senior counsel in the Houston office of Chamberlain, Hrdlicka, White, Williams & Aughtry. She has extensive experience representing individuals and businesses in federal tax disputes before the Internal Revenue Service and in the U.S. Tax Court. Fountain is also the secretary of the State Bar of Texas Tax Section.
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