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Tuesday September 30, 2014

Washington News

Washington Hotline

Bipartisan Support for Budget Deal

Senate Budget Chair Patty Murray (D-WA) and House Budget Chair Paul Ryan (R-WI) have spent the last several weeks negotiating over the federal budget.  On December 11, they announced that they had come to a two-year budget agreement. 
 
Under the Bipartisan Budget Act of 2013, discretionary spending for fiscal year 2014 will be set at $1.012 trillion.  It will increase to $1.013 trillion for fiscal year 2015.  There are an estimated $85 billion in various savings and increased fees.  This allows a $45 billion increase in 2014 and an $18 billion increase in 2015 over the sequestration limits. The increase over the amounts set under the sequestration rules will be allocated in part to domestic programs and in part to the Defense Department.
 
The day following the agreement the House voted 332 to 94 to pass the budget compromise.  The bipartisan vote was supported by 169 Republicans and 163 Democrats. 
 
As might be expected with a compromise agreement, there was a mixed response to the vote.  Speaker of the House John Boehner (R-OH) stated, “Is it perfect?  Does it go far enough?  No, not at all.”  However, he urged his colleagues to join with him and other leaders to support the plan because it complies with the expectation of the American people that members of Congress would come “together and find common ground.”
 
House Budget Chair Ryan also indicated that it was time for the two parties to join together.  He indicated that the parties have “been at each other’s throats for a long time” and the compromise agreement was a step forward in the House and Senate working together.
 
Ranking Member of the House Budget Committee Chris Van Hollen (D-MD) agreed that it was appropriate to move toward compromise.  He called the budget agreement “a small positive step forward.”
 
Editor’s Note:  This is the first bipartisan agreement by the House and Senate Budget Chairs in several years.  Both parties were able to gain some benefits.  The Republicans noted that there were no new tax increases – the increased revenue comes from the airport passenger user fee and other various fees.  Democrats were able to reduce the impact of some of the sequestration limits.  Both parties were pleased that a more normal order for Congress was finally followed.  As the two parties face the potential challenges of tax reform in 2014, the hope is that this spirit of cooperation will facilitate future action.
 
 

Koskinen to Senate for Confirmation

 
On December 10, there was a hearing by the Senate Finance Committee to review the nomination of John Koskinen to serve as Commissioner of the Internal Revenue Service.  Following the hearing, Koskinen was approved on a voice vote.  Senate Finance Chair Max Baucus (D-MT) sent the nomination to the full Senate where Koskinen is expected to be confirmed.
 
Koskinen is not a tax expert.  However, he has extensive background as a turnaround expert for both government and private industry.  Koskinen was involved in the efforts to turn around Penn Central Railroad and also served as Chairman of the Board of Fannie Mae following the 2008 financial crisis.  In his submitted testimony, Koskinen recognized several challenges that he will need to address as the new IRS Commissioner.  These include the following.
 
1.  Refund Fraud – The IRS has stepped up efforts to combat fraud but still loses billions of dollars each year in fraudulent refunds. 
 
2.  Investigations – The House and Senate continue the investigations into the improper activities of the IRS in considering Sec. 501(c)(4) tax exemptions. 
 
3.  Affordable Care Act – The IRS is tasked with implementing the penalties and taxes on both individuals and corporations who are not in compliance with the requirements to have personal health insurance or provide employees with health insurance.  This will be a major function for the IRS in coming years under the Affordable Care Act. 
 
4.  Employee Morale – With the Treasury Inspector General report highlighting the improper actions by the IRS Exempt Organizations Department and the ensuing negative publicity, there needs to be substantial improvement in the morale of the IRS. 
 
Koskinen noted that there also are major budget limitations.  With the reduction of the IRS budget by $1 billion the past year, Koskinen suggested that there are 11,000 fewer workers and a loss in revenue of $8 billion due to lower compliance.  Koskinen noted that he hopes to work with the House and Senate to restore IRS funding to prior levels. 
 
Chairman Max Baucus was generally positive about the nomination of Koskinen.  Baucus stated, “The IRS plays an important role in tax reform.  It is key to the Affordable Care Act’s implementation.  And perhaps most importantly, it must win back the American people’s trust.  That means undoing the damage done by the Inspector General’s report on the IRS handling of the 501(c)(4) applications.”
 
Sen. Orrin Hatch (R-UT) is the Ranking Member of the Committee.  He cautioned Koskinen that the IRS is a powerful agency and, “Consequently, it is both feared and loathed by millions of Americans.”
 
Hatch continued, “That being the case, it is vital that the IRS maintain its credibility.  The American people should be able to trust that the IRS will enforce our nation’s tax laws without bias or prejudice.  Any hint of impropriety on the part of the IRS or its leadership damages its credibility and that of our entire government.”
 
Editor’s Note:  Koskinen has high recommendations from many Washington observers.  His extensive experience in both finance and government organizations will certainly be helpful.  Because the government of the U.S. is dependent upon the willingness of Americans to pay their fair share of taxes, it is essential for Koskinen to restore the credibility of the IRS. 
 
 

IRS Standard Miles Rates for 2014

 
In Notice 2013-80; 2013-52 IRB 1 (6 Dec 2013), the IRS published standard mileage rates for 2014.  Each year, the IRS publishes rates that will be applicable for business, charitable and medical care mileage reimbursements or deductions. 
 
For 2014 the rates include the following.
 
1.  Business Mileage – 56 cents per mile.
 
2.  Charitable Mileage – 14 cents per mile. 
 
3.  Medical Mileage – 23.5 cents per mile.
 
Individuals who use a vehicle to assist a charitable organization may deduct 14 cents per mile if they have a written record.  The trip or travel is deductible so long as there is “no significant element of personal pleasure.” 
 
Donors to charities should maintain appropriate records.  The record may include the date of the travel, the destination, the mileage and the charitable purpose. 

Published December 13, 2013


Previous Articles

Chairman Camp – No 2013 Tax Reform or Extenders

Affordable Care Act Guidance

Baucus Tackles Identity Theft

Camp and Baucus Face Time Limits

IRS May Reduce Services

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