- The US Treasury and IRS are closing a tax loophole used by the über-wealthy.
- They're cracking down on "opaque" business structures that "inflate" deductions.
The Treasury and IRS proposed new tax regulations Monday targeting the über-wealthy that they say could result in $50 billion in new tax revenue over the next decade.
The initiative seeks to crack down on "related party basis shifting transactions" — or the use of "opaque business structures to inflate tax deductions," a Treasury press release said.
The department said an example of that is when a single company operating as different legal entities shifts the tax basis from a property that doesn't generate deductions to one that does.
These kinds of tax loopholes contribute to the $160 billion annual tax gap among the top 1% of filers, the Treasury said.
Filings from pass-through businesses with more than $10 million in assets increased 70% from 2010 to 2019, the Treasury said, as audits fell from 3.8% to 0.1% over the same period.
The multistage initiative follows a year of research, the Treasury said, and proposes several new rules, including increasing reporting for basis-shifting transactions.
The agencies also issued a ruling to inform taxpayers that certain transactions will be challenged for lacking economic substance.
"Treasury and the IRS are focused on addressing high-end tax abuse from all angles," Treasury Secretary Janet Yellen said in a statement, noting that "resources from President Biden's Inflation Reduction Act" have helped combat "long-standing abuses."
The agencies said they will consider public comments before issuing final rules.