Energy spinoffs are moving into tax limbo
US energy companies have been using a simple and profitable strategy: spin off a piece of the business and secure a special tax treatment. Now, the IRS is wondering if some firms are pushing the popular tactic too far, Alison Sider of the Wall Street Journalwrote yesterday.
The IRS is conducting an internal review and taking a temporary break from giving guidance to companies looking to form or expand master limited partnerships (MLPs).
According to Sider, the MLP structure allows companies to forgo paying corporate income taxes. It has been long used by pipeline operators and other energy-logistics outfits to raise capital. But a crush of new inquiries from tangential businesses, including water recyclers and sand mines, has given the agency pause, energy lawyers said.
The IRS often acts as the gatekeeper for MLP qualification, because the partnerships forego paying corporate taxes to the federal government, throwing off most of their cash flow to shareholders in dividend-like payments instead, the article stated.
The IRS is temporarily stepping back from issuing so-called “private-letter rulings” – the guidance it provides to companies that want to know whether their line of business meets the requirements to be treated as a tax-exempt partnership – so it can conduct an internal review of its process.
Here’s the contempt resolution against Lois Lerner, plus an explainer
Josh Hicks of the Washington Post included for your downloading pleasure the resolution that the House Oversight and Government Reform Committee will vote on today to hold former IRS official Lois Lerner in contempt of Congress.
Lerner, who headed the IRS Exempt Organizations division that reviews tax-exemption applications, has twice invoked her Fifth Amendment right when asked to testify about the agency’s targeting of certain nonprofit advocacy groups for extra scrutiny based on their names and policy positions.
The outcome of the upcoming contempt vote is all but assured for the Republican-controlled committee, which already determined in a party-line vote last year that Lerner waived her right not to testify by declaring innocence before declining to answer questions at a June 2013 hearing, Hicks wrote.
Even if the committee votes in favor of the contempt resolution, the full House would still need to vote on the matter before Lerner could face meaningful consequences. In his article, Hicks provides some basics of contempt of Congress and what it means.
[Click here for an additional article on the contempt vote by Rachael Bade of Politico.]
GOP says IRS’ Lerner targeted Crossroads
As you probably know by now, the House Ways and Means Committee yesterday voted 23 to 14 to publicly release its evidence against Lerner and to send a letter to Attorney General Eric Holder requesting he take Lerner to court – even though the US Justice Department already has an ongoing investigation.
Included in that evidence is Lerner allegedly urging denial of tax-exempt status to Crossroads GPS, the giant political nonprofit founded by Karl Rove, Rachael Bade of Politicoreported yesterday. The panel released e-mails showing that Lerner took a special interest in Crossroads GPS in early 2013 – inquiring with IRS officials why they hadn’t been audited.
The letter calls Lerner’s actions an “aggressive and improper pursuit of Crossroads … but no evidence [that] she directed review of similarly situated left-leaning groups,” the article stated.
Republicans want her charged for improperly influencing the IRS to take action against conservative organizations, disclosing confidential taxpayer info (a felony), and impeding an investigation. Democrats cried foul play, accusing Ways and Means Committee Chairman Dave Camp (R-MI) of releasing private taxpayer information, and said its protests have nothing to do with holding Lerner accountable.
Lerner mentioned working for pro-Obama group amid scandal
Then we have this from Jamie Fuller of the Washington Post yesterday: “The letter also reveals that Lerner expressed interest in a job with Organizing for America on January 28, 2013, a 501(c)4 outgrowth of the Obama presidential campaigns. Lerner wrote to a fellow federal employee, ‘Oh – maybe I can get the DC office job!’ Regardless of Lerner's intended tone with that comment (it appears to be a joke), House Republicans – who have been looking into the IRS's treatment of conservative nonprofits for over a year – have clearly jumped on it as further evidence of wrongdoing, what the letter deems, ‘turning a blind eye to similarly-organized liberal groups, like Priorities USA.’”
Statements and remarks on Ways and Means Committee’s vote yesterday
[The following three statements or remarks were made by House lawmakers regarding the vote yesterday by the Ways and Means Committee regarding Lois Lerner. The fourth statement was made by her attorney (via Politico).]
Ways and Means Committee Chairman Dave Camp (R-MI): “This investigation has uncovered serious, unprecedented actions taken by Lois Lerner that deprived conservative groups of their rights under the Constitution. Almost a year ago, we learned that the IRS subjected certain groups to extra scrutiny because of their political beliefs. At the time, Lois Lerner shamefully attempted to blame the mistreatment on low-level employees in Cincinnati. The investigation to date has demonstrated that the targeting did not happen until IRS headquarters in [Washington] DC intervened. Today’s action highlights specific wrongdoing for the Department of Justice to pursue. DOJ has a responsibility to act, and Lois Lerner must be held accountable. It is also important that the American people know what really occurred at the IRS, so this powerful agency cannot target American taxpayers ever again.”
House Speaker John Boehner (R-OH): “The Ways and Means Committee, led by Chairman Camp, has conducted a serious and thorough investigation of the IRS, uncovering abuses and criminal acts that should be prosecuted to the fullest extent of the law. The House has also passed legislation to stop the IRS from targeting Americans over their political beliefs, but the president and Senate Democrats continue to block the bill. Our investigations at the Ways and Means and Oversight and Government Reform committees continue. As I've said, if Lois Lerner continues to refuse to testify, then the House will hold her in contempt. And we will continue to shine the light on the administration's abusive actions and use every tool at our disposal to expose the truth and ensure the American people get the answers they deserve."
Ways and Means Committee Ranking Member Sander Levin (D-MI) [excerpt from opening remarks at yesterday’s meeting]: “You claim that the only way you can point out to the Attorney General that you think you have found specific evidence that criminal activity has taken place by Ms. Lerner is to make all of this material – previously considered protected taxpayer information – public. Mr. Chairman, that is just not accurate. The Department of Justice has access to all of the same information. If you are afraid they might have missed something, you can designate the attorney general or his designee with your 6103 authority as chair of the Ways and Means Committee – just as you did for the other members of this committee – for him to review it.
“You certainly don’t need to erode the prestige of this committee by having us use – for political purposes – this sacred obligation we have to safeguard taxpayer information.
“I wish I could come up with some other rationale for what you are doing, but I cannot.”
Zuckerman Spaeder LLP Partner William Taylor III: “Ms. Lerner has done nothing wrong. She did not violate any law or regulation. She did not mislead Congress. She did not interfere with the rights of any organization to a tax exemption. Those are the facts.”
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- What’s behind that 1040? Check out TPC’s interactive tax forms (TaxVox)
- Seven tax issues facing small businesses (TaxVox)
- Computer problems for IRS, Canadian tax agency (Don’t Mess With Taxes)
About Jason Bramwell
Jason Bramwell is a staff writer and editor for AccountingWEB. He has nearly 20 years of experience in print and online media as a journalist and editor.