IRS seeks to close loophole used by ultra-wealthy

What happened

The Internal Revenue Service and Treasury Department launched a new initiative Monday aimed at closing a significant tax loophole often used by the super wealthy . The IRS said ending "partnership basis shifting," in which financial assets are shuttled through related corporate entities to avoid being taxed, could capture at least $50 billion in revenue over the coming decade.

Who said what

"Wealthy taxpayers and businesses are paying accountants and lawyers millions of dollars to develop these complex, abusive transactions," the IRS said. Years of underfunding limited the government's ability to audit such transactions as well as multimillionaires and large corporations more generally.

Legally, basis shifting transactions must have "'economic substance' rather than merely reducing tax bills," The Washington Post said. That requirement is the "root of the agency's belief" that most of those transactions are illegal tax dodges.

The new initiative is funded through the Biden administration's Inflation Reduction Act , which featured programs "aimed at improving tax compliance among big corporations and wealthy Americans and shrinking the estimated $600 billion tax gap" between money owed and paid, Fox News said. That influx in funds has "elicited fierce pushback from Republicans" claiming it will contribute to government overreach.

What next?

The new initiative is on shakier legal ground than if Congress had acted, The Wall Street Journal said. And with Republicans pushing for more IRS cuts , "the fate of the agency's budget — and its tougher enforcement push — hinge on November's elections."