The Treasury Department and IRS announce new plan to close tax loophole
The Treasury Department and IRS announce new plan to close tax loophole
The Treasury Department and the IRS announced a new initiative this week to close a tax loophole known as “partnership basis shifting.” That’s where businesses use different legal entities to move assets around to avoid paying taxes on them.
Businesses own certain things — like equipment — that qualify as tax write-offs. They also own assets —like land — that can’t be written off. The money each of these things cost is what’s known as its tax basis, and some businesses will shift that basis from one asset to another to lower their tax bills.
“It is a scheme, this partnership basis shifting, that is not permitted,” said U.S. Deputy Treasury Secretary Wally Adeyemo.
Adeyemo said the government is going to go after people that do this.
“This is something that can only be pulled off, frankly, by the wealthiest of wealthy taxpayers, because it takes an army of accountants and lawyers to set up this type of partnership structure,” he said.
Adeyemo called this movement of assets “a shell game.”
“The key here is these transactions in no way tie to any legitimate economic activity, their sole purpose is to avoid tax bills,” he said.
As part of this initiative, the government will be collecting more information about partnerships above $5 million.
“What they want to do is more closely examine these basically illegitimate transactions to identify the ones that have economic substance, and the ones that don’t,” said Matthew Gardner with the Institute on Taxation and Economic Policy.
By closing this loophole, the Treasury Department estimates it could raise more than $50 billion over 10 years.
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