Three New Issues to be Addressed by IRS Industry Issue Resolution Program

In their newest press release, the Internal Revenue Service and Treasury Department announced that guidance will be developed and published under the IRS’s Industry Issue Resolution (IIR) program for several significant issues affecting the telecommunications and retail industries.

Telecommunication issues include the proper treatment of unit of property for network assets, and the appropriate asset class for wireless telecommunications assets. The retail industry issue selected will address vendor mark-down allowances under the retail inventory method. These issues affect nearly all taxpayers in the respective industries.

Since its inception in 2000, the IIR program has resulted in resolution of many different tax issues cumulatively affecting thousands of taxpayers in many different lines of business. For each issue selected, a multi-functional team gathers and analyzes the relevant facts and recommends guidance.

At any time, business associations and taxpayers may submit tax issues that they believe could be resolved through the IIR program. IIR project selection criteria and submission procedures are outlined in Revenue Procedure 2003-36, which is available on the IRS Web site at IRS.gov. While issues may be submitted for consideration for inclusion in the IIR program at anytime, submissions must be received by August 31st for the summer screening of submissions.

Tax Rates for Millionaires Continue to Fall

From Tax.com:

Households with incomes over $1 million paid income tax equal to 22.1 percent of their adjusted gross income in 2007. This is down from 23.4 percent in 2004. And from 30.8 percent in 1996. See the chart below. The 2007 data were just released by the Statistics of Income Division of the IRS.

The main reasons for this decline are: the May 7, 1997 cut in the capital gains rate to 20 percent; the 2001 Bush cut in tax rates (scheduled to expire at the end of 2010); the reduction in the capital gains tax rate from 20 to 15 percent in 2003; and the 15 percent rate available for qualified dividends starting in 2003. In addition to these statutory changes, the decline in the rate over the last few years can be attributed to an increasing share of millionaire income coming in the form of capital gains and dividends.

This declining trend is likely to reverse itself shortly. When data becomes available for 2008 and 2009 the rate will probably increase because the size of capital gain realizations typically follow stock prices. The rate will also rise in 2011 if, as President Obama intends, Congress agrees to let the Bush tax cuts expire for incomes over $250,000. This would restore the top individual rate to 39.6 percent and the capital gains rate to 20 percent.

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