The IRS and U.S. Treasury Department are tightening the screws on tax loopholes used by big corporations and the wealthy, with new measures aimed at curbing tax avoidance and boosting government revenue.
The Treasury announced that the crackdown on opaque business structures could potentially bring in over $50 billion in revenue over a decade, compared to letting these practices continue unchecked.
Some entities have been using convoluted structures to reduce taxable income by manipulating tax rules, maximizing deductions, and minimizing tax liabilities.
According to the government, these maneuvers go against the intent of Congress, costing the federal government billions annually without real economic consequences for the businesses involved.
After a year of investigation, new guidance is being provided to taxpayers to increase reporting of such transactions to the IRS and challenge those lacking economic substance.
Treasury Secretary Janet Yellen emphasized that the move is about creating a fairer tax system and reducing the deficit.
IRS Commissioner Danny Werfel highlighted the urgency to combat high-end tax abuse in the partnership arena, indicating billions are at stake.
The proposed regulations are subject to review and public input before being finalized, with the agencies seeking feedback to refine the rules further.