Senate To Study Treasury's New Tax Gap Proposals

by Mike Godfrey, for LawAndTax-News.com, New York

24 October 2006

Senator Max Baucus has been holding up confirmation of the US administration's nomination of a top Treasury official since June because he doesn't accept that the Treasury is doing enough to close the 'tax gap'. Last week, he agreed to study eight strategies to close the gap drafted by the Joint Committee on Taxation.

Baucus, leader of the Senate Democrats and Senator Charles Grassley, chairman of the Senate Finance Committee, said they would look closely at the measures. Eric Solomon was nominated as Assistant Treasury Secretary for Tax Policy and everyone, including Senator Baucus, agrees that he is the right man for the job. Recently, the Treasury turned down an invitation from Baucus to Henry Paulson, the Treasury Secretary, to attend a committee hearing in November to elaborate on the Treasury's plans to close the gap.

In September, the Treasury unveiled a comprehensive strategy for reducing the tax gap, explaining that: "An unacceptably large amount of the tax that should be paid every year is not, requiring compliant taxpayers to make up for the shortfall and giving rise to the 'tax gap'."

The strategy document outlined an aggressive strategy for addressing the tax gap - but it wasn't enough for Senator Baucus.

The Treasury's latest eight proposals are set out in a 47-page document under the following headings:

• Impose basis reporting requirements for publicly traded securities;
• Reporting requirements for real estate taxes;
• Provide reporting for proceeds of auction sales;
• Improved 3rd party information reporting relating to the mortgage interest deduction;
• Reporting requirements for individuals with an interest in offshore bank accounts and offshore trusts;
• Modify the determination of amounts subject to self-employment tax for partners and S corporation shareholders in personal service businesses;
• Denial of deductions and credits with respect to untimely returns of non-resident aliens and foreign corporations;
• Compliance with earnings stripping provision.

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