Tax Outlook for 2015
By Annette Nellen, CPA, CGMA, Esq.
Professor and Director of the MST Program
San Jose State University
Will a change in majority party in the U.S. Senate or the last two years of President Obama’s term result in any significant tax changes? What about the increased time and dollars for ACA compliance and the pending US Supreme Court decision on the Premium Tax Credit – any effect for 2015 and beyond? This article notes three items to watch out for this year.
- Affordable Care Act (ACA) –Since enactment in March 2010, a few tax provisions have become effective each year. Most notable were two complex provisions for 2014: the Premium Tax Credit (PTC), and the Individual Shared Responsibility Payment (ISRP). These two provisions have increased compliance time needed and required more individuals to get a better understanding of the ACA. And, applicable large employers – those with 50 or more full-time or full-time equivalent employees, needed to have plans at the start of 2015 to avoid significant penalties (the employer shared responsibility payment).
By late June, we should have the U.S. Supreme Court’s decision in King v. Burwell, 759 F.3d 358 (4th Cir. 2014), on whether individuals obtaining coverage through the federal Exchange (because their state did not create its own exchange), are entitled to the PTC they likely have been receiving since January 2014. If the government loses this case, millions of individuals will likely terminate their coverage as it is unaffordable without the PTC subsidy. Or, perhaps Congress will step in with a remedy.
- Preparer Regulation – In 2014, the IRS had to terminate most of what it wanted to do starting back in 2010 to regulate all paid return preparers. The IRS loss in Loving v. IRS, 742 F.3d 1013 (DC Cir 2014), meant that the IRS could not impose mandatory testing and continuing education on preparers who are not CPAs, Enrolled Agents, attorneys, or supervised/non-signing preparers. In June 2014, the IRS rolled out a voluntary system, but not one as significant as its original plan. And, out of the approximately 340,000 unregulated preparers, only about 42,000 joined the voluntary program for the current filing season (see IRS Return Preparer Statistics website).
At the start of the 114th Congress in January 2015, Senator Wyden introduced The Taxpayer Protection and Preparer Proficiency Act of 2015 (S. 137) to give the IRS authority to regulate preparers by having them “demonstrate competency to advise and assist persons in preparing tax return, claims for refund, and associated documents."
- Tax Reform – In the last few days of the 113rd Congress, key outgoing and incoming tax committee leaders indicated that tax reform discussions would continue. House Ways and Means Committee Chair Dave Camp formally introduced his tax reform proposal as H.R. 1. He had introduced it for discussion in February 2014, but formally introducing it as a bill means it easily lives on forever, even though Congressman Camp retired at the end of 2014. Also in December 2014, incoming Senate Finance Committee Chair Orrin Hatch and Republican staff released a 300+ page report – Comprehensive Tax Reform for 2015 and Beyond.
Since January 2015, tax reform has been on the agenda of both congressional tax committees with hearings, reports and working groups. In addition, President Obama’s FY2016 “Greenbook” released in February 2015 includes a section entitled: “Reserve for Business Tax Reform that is Revenue Neutral in the Long Run.” The fate of the 51 provisions that expired at the end of 2014 will likely be tied up as part of tax reform. If nothing happens by early December 2015, we are likely to see a repeat of December 2014 with most items extended retroactively for one year (back to 1/1/15).
These three areas will likely consume a significant portion of the agendas of Congress and the IRS. Along the way of course, we’re sure to see the usual interesting set of court decisions, Treasury regulations and IRS rulings.