IRS Shuf­fle Raises Muni Con­cerns

The Bond Buyer - - Front Page - By Kyle GlAzier

WASH­ING­TON – Tax lawyers are con­cerned that a re­or­ga­ni­za­tion of In­ter­nal Rev­enue Ser­vice ad­vi­sory com­mit­tees could di­lute the in­put of tax-ex­empt bond prac­ti­tion­ers, though the IRS says the move will stream­line and im­prove com­mu­ni­ca­tion about tax is­sues.

The anx­i­ety is aris­ing out of the IRS’s Thurs­day an­nounce­ment that the Ad­vi­sory Com­mit­tee on Tax Ex­empt and Gov­ern­ment En­ti­ties (ACT), which has pro­vided the IRS with rec­om­men­da­tions on tax-ex­empt bonds for more than 15 years, will be ab­sorbed into a re­struc­tured In­ter­nal Rev­enue Ser­vice Ad­vi­sory Com­mit­tee.

The IRS said that the new edi­tion of IRSAC, which has ex­isted since 1953 and was re­named in 1998, would fo­cus on four sub­com­mit­tees: wage and in­vest­ment; small busi­ness and self-em­ployed; tax ex­empt and gov­ern­ment en­ti­ties; and large busi­ness and in­ter­na­tional. IRSAC will also con­tinue look­ing at other ar­eas be­yond those di­vi­sions, the IRS said.

Cur­rently, there are about 50

mem­bers be­tween IRSAC, ACT, and the In­for­ma­tion Re­port­ing Pro­gram Ad­vi­sory Com­mit­tee (IRPAC), which is also be­ing ab­sorbed into IRSAC.

For the ex­panded IRSAC in 2019, there will be 36 mem­bers on the com­bined group. For the first year of the group, there will be three co-chairs for IRSAC, rep­re­sent­ing the in­com­ing chairs from IRSAC, IRPAC and ACT. Be­gin­ning in 2020, there will be one chair.

IRS Com­mis­sioner Chuck Ret­tig touted the po­ten­tial ben­e­fits of a cen­tral­ized body to pro­vide rec­om­men­da­tions.

“As a for­mer chair of IRSAC, I’ve seen first-hand the value this com­mit­tee brings to the IRS and the tax com­mu­nity,” Ret­tig said. “The new com­mit­tee struc­ture will pro­vide the tax com­mu­nity a big­ger, more prom­i­nent plat­form to make rec­om­men­da­tions re­gard­ing tax­payer ser­vice, en­hance­ments in en­force­ment and uti­liza­tion of tech­nol­ogy. This new struc­ture will con­tinue to pro­vide an im­por­tant voice for the in­for­ma­tion re­port­ing and tax-ex­empt com­mu­ni­ties.”

Perry Is­rael, a tax lawyer with his own prac­tice in Sacra­mento, Cal­i­for­nia, said some bond lawyers are con­cerned that the re­duc­tion in com­mit­tee mem­bers and ab­sorp­tion into an ex­ist­ing body could mean less in­flu­ence for tax-ex­empts.

“There is some fear that this is go­ing to di­lute down the im­pact on tax-ex­empt bonds that ACT has had,” Is­rael said.

“I’m not sure that there will be,” Is­rael said for the po­ten­tial harm to muni prac­ti­tioner in­flu­ence, “but that’s a risk.”

The Na­tional As­so­ci­a­tion of Bond Lawyers high­lighted that risk in an alert sent to mem­bers.

“Many NABL mem­bers have par­tic­i­pated on the ACT over the years and have worked on help­ful projects im­por­tant to the tax-ex­empt bond com­mu­nity,” NABL said in the alert. “The merger of the ACT into the larger ad­vi­sory com­mit­tee means that there will no longer be a tar­geted ad­vi­sory com­mit­tee spe­cific to the is­sues we care about most, and ap­pears to mean that there will be fewer mem­bers fo­cused on those is­sues.”

Is­rael said that the im­pact could de­pend on the de­tails of the re­or­ga­ni­za­tion.

There was no pre­vail­ing sen­ti­ment that the ex­ist­ing or­ga­ni­za­tional struc­ture with sep­a­rate com­mit­tees was a prob­lem, Is­rael said. There will likely be at least some bud­getary sav­ings for the gov­ern­ment be­cause the IRS pays for the travel ex­penses of ad­vi­sory com­mit­tee mem­bers when they meet with IRS of­fi­cials.

The IRS had not made ma­jor changes to the ad­vi­sory group process since the 1990s.

Tax lawyer Perry Is­rael says some fear the changes will di­lute tax-ex­empts’ in­flu­ence.

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