IRS chief counsel outlines goals at MACPA program

By Bill Sheridan
MACPA E-Communications Manager

Donald Korb was sworn in as chief counsel of the Internal Revenue Service on April 14, 2004. The next day, his hometown newspaper, The Plain Dealer of Cleveland, ran a front-page headline that read: "IRS gets it wrong 25% of the time."

Welcome aboard.

"I got a call from a friend who saw that and said, 'You've been there only one day and look what a mess you've made,'" Korb said with a laugh.

So began the job that leaves Korb feeling like he's "10 years old and every day is my birthday."

"Being chief counsel of the IRS is a tax lawyer's dream," he told MACPA members during at an Oct. 13 meeting of the association's Federal Tax Community. "I'm like a kid in a candy store."

Seeking settlements

There have been plenty of sweets to choose from lately, starting with a new get-tough stance on tax cheats that has Korb and his IRS colleagues thinking up creative ways to settle tax disputes before resorting to litigation.

As an example, Korb said the IRS will make increased use of "global settlements" like the one offered last year to taxpayers who invested in an abusive tax shelter known as "Son of Boss." The shelter was aggressively marketed in the late 1990s and 2000 to high net-worth individuals. In August 2000, the IRS declared the transactions abusive and required promoters to maintain a list of investors.

Under the IRS' settlement offer, eligible taxpayers who took part in "Son of Boss" must concede 100 percent of the claimed tax losses, pay all applicable interest and accept the imposition of a penalty unless they had previously disclosed their participation in the transaction. Participating taxpayers would be allowed to deduct as a loss their out-of-pocket transaction costs typically promoter and professional fees.

Even under such strict terms, Korb said nearly 80 percent of the approximately 2,000 offending taxpayers identified by the IRS agreed to settle.

"This was, by any measure, an astounding success," he said. "And it's good for the system, because it shows you can't get away with these things just because you're wealthy or have certain advisors. ... After the enactment of the new tax bill, we are at the point where it's no longer a matter of if we find you, but when we find you."

Tax bill highlights

Korb's MACPA appearance coincided with the passage of the American Jobs Creation Act of 2004, a corporate tax relief package that includes a wide range of tax incentives and revenue offsets. Some of the bill's more interesting provisions, he said, include the following:

With regard to small business corporations (which must have no more than 75 shareholders), husbands and wives are treated as one shareholder.
The provisions of Internal Revenue Code Section 179 which allow a sole proprietor, partnership or corporation to fully expense tangible property in the year it is purchased, and which were scheduled to expire in 2006 have been extended for two years, to 2008.
For individuals, sales tax can be treated as a deduction in areas where there is no state and local income tax.
The Office of Professional Responsibility now has the authority to censure tax practitioners for wrongdoing, and the offender's firm can be required to pay a monetary fine.
The "SUV deduction" available on sport utility vehicles that are used by the self-employed or purchased by a business for use in that business has been reduced from $100,000 to $25,000.

Perhaps the most interesting provision of the new law is one that allows the IRS to supplement its collection efforts by using contractors who would try to collect tax debts via phone.

"It is not as bad as it sounds," Korb said. "We're talking about (collecting from) people who owe money. Some people are not paying their fair share, and that's not fair to everyone else."

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