IRS Proposal Would Remove 298 Regulations From Tax Code

The Federal Register now includes IRS proposal REG-132197-17 that would remove 298 regulations from the tax code, as part of an effort to reduce bureaucracy.

Written or electronic comments, or requests for a public hearing, must be submitted by May 14 to one of the addresses listed near the top of the above linked document. There also are two contacts for anyone needing further information about the proposal, submission of comments or scheduling a public hearing.

The proposal is in response to Executive Orders 13777 and 13789, and seeks to streamline IRS regulations. The 298 regulations are considered unnecessary because they don’t apply to the code.

Removing the regulations from the Code of Federal Regulations (CFR) will streamline title 26 of Federal Tax Regulations, reduce the number of regulations that taxpayers must review, and make the tax law clearer, according to the notice.

The removal has nothing to do with the substance of rules in the regulations “and no negative inference regarding the stated rules should be made,” the notice states. The removal is proposed “solely because the regulations have no current or future applicability.”

Removing the regulations doesn’t change any non-regulatory guidance that cites or relies upon the regulations.

The proposal also amends 79 regulations to remove cross-references to the 298 regulations. These amendments also will streamline title 26 of the CFR, reduce the volume of regulations taxpayers need to review, and increase clarity of the tax law.

Here’s how this evolved.

Early last year, President Trump issued Executive Order 13777, directing each agency to set up a regulatory reform task force. Each task force was to review existing regulations that are outdated or unnecessary, eliminate jobs or hinder job creation, cost more than the benefits they provide, are inconsistent with or interfere with regulatory reforms, are inconsistent with the Information Quality Act requirements, or are the result of prior presidents’ executive orders that have been rescinded or modified.

A few months later, Trump issued Executive Order 13789, which intended that the “Federal tax system should be simple, fair, efficient, and pro-growth” and that “[t]he purposes of tax regulations should be to bring clarity to the already complex Internal Revenue Code… and to provide useful guidance to taxpayers,” according to a direct quote from the Federal Register notice. The order also called for immediate action to ease the burden of tax regulations on taxpayers, provide tax relief and “useful, simplified tax guidance.”

Tax preparers can reference specific regulations in the Federal Register notice, but the proposed removals fall into these three categories:

• Regulations interpreting code provisions that have been repealed and no longer are in title 26 of the code.
• Regulations interpreting code provisions that have been significantly revised but that don’t reflect statutory changes. This category refers to statutory changes that must have made the entire regulation inapplicable.
• Regulations that are no longer applicable. This includes expired temporary regulations, a code provision that only applies to returns filed before Jan. 1, 1996, or regulations providing for a transition rule applicable to transactions done between Jan. 1, 2000 and March 1, 2001.

The 79 tax regulations proposed to be amended refer to the 298 tax regulations proposed to be removed. Each amendment removes one or more references to a regulation that is proposed to be removed. The proposed amendments also remove references to regulations in the authority citation for part 602 of title 26 of the CFR, OMB Control Numbers Under the Paperwork Reduction Act, in cases where regulations are proposed to be removed from the CFR or, in some cases, because these regulations were previously removed from the CFR without corresponding amendment to Part 602.