Commissioner emphasizes paper backlog, modernization challenges in progress update.
The IRS is feeling positive about its progress toward processing outstanding tax returns and modernizing agency systems, but sustained, multiyear funding is needed to better serve taxpayers, Commissioner Chuck Rettig said on March 21 at a Tax Executives Institute (TEI) conference. According to Rettig, the IRS is “trending in a really good direction” and on track to “get current” on its inventory of unprocessed returns by next January. On March 15, President Biden signed a $1.5 trillion omnibus spending bill that included a 6% increase to the IRS’s budget, $675 million more than allocated for fiscal 2021. Rettig emphasized that, despite his optimism, the IRS has been underfunded for decades and “needs help.” Although the funding increase is welcome, consistent support over the long term would enable the IRS to improve taxpayer service and compliance enforcement, Rettig said. The original funding proposal in the spending bill would have given the IRS a 14% boost, and President Biden’s Build Back Better framework would have provided the IRS with $80 billion over the next decade. Modernized IRS systems would feature, among other things, an expansion of chat bot capabilities, Rettig told the TEI audience. Taxpayers receiving help online would free up customer service representatives to connect with callers, which failed to happen nearly 9 out of 10 times last year.
No heavy focus on perks for government assistance research project.
Trying to scope recognition and measurement accounting rules on government assistance could prove tricky, according to recent discussions at a FASB advisory meeting. When the board was developing disclosure rules, which took about seven years until their issuance last year, much of its efforts were hindered due to the plethora of items that are government incentives, FASB Vice Chair James Kroeker said at the March 15 Financial Accounting Standards Advisory Council (FASAC) meeting. “When you get into government assistance you could start thinking about when a state government airs a vaccine commercial—is that a form of government assistance to pharmaceutical companies?” Kroeker asked. “I don’t think that that’s the kind of thing that we’re looking at, but that’s what we got bogged down with in the disclosures—everywhere the government touches an entity, ‘is that in the scope or not?’ So I think parsing it between grants and assistance is a way to maybe produce achievable standard setting.”
Definition of SOFR to be amended for accounting rules.
FASB voted to amend the definition of the Secured Overnight Financing Rate (SOFR) in U.S. GAAP, another step aimed at facilitating the shift from the London Interbank Offered Rate (LIBOR), which will fully expire next year. The board will provide a generic definition of the SOFR swap rate so that any rate based on SOFR can qualify as a benchmark interest rate, according to the discussions. This means any SOFR-based swap would be able to use the less clunky fair value hedge accounting relief the board established four years ago. “Extending SOFR to other tenors or to term SOFR is just a logical extension of what we had already decided, as others have pointed out, as the market developed,” FASB Vice Chair James Kroeker said. “I would note that there’s a difference between SOFR and other rates that we’ve added post-LIBOR. And I think even at the time people argued that LIBOR effectively didn’t incorporate credit risk. We found out subsequently it incorporates more credit risk maybe than was appreciated by the entire market at that time, but the other rates that we’ve added are intended to include little or no credit risk.”
Seven topics make short list for new projects.
The IASB will consider adding seven new projects to its technical agenda, including climate-related risks, cryptocurrencies, intangible assets, and the statement of cash flows. Going concern disclosures, operating segments, and pollutant pricing mechanisms are the other three topics, according to board meeting papers. The topics were flagged by companies as having the most pressing financial reporting deficiencies that hinder investors from getting useful information when trying to make investment decisions; 15 other topics did not make the short list. The discussions will piggyback on—and appear to be consistent with—the board’s decisions last month to place limits on its technical agenda. The range of new projects will be narrowly drawn or done in phases, according to the meeting papers.
SEC official named PCAOB chief of staff.
PCAOB Chair Erica Williams hired Omid Harraf from the SEC and made him her chief of staff, effective immediately, the board announced on March 7. The chief of staff advises the chair on all PCAOB issues and works closely with other board members and staff. At the SEC, Harraf was deputy chief counsel in the Office of the Chief Accountant; before that, he was senior special counsel for legal policy in the SEC’s Office of the General Counsel. “The Chief of Staff plays a critical role in overseeing every part of the PCAOB,” Williams said in a statement. “We are fortunate to have Omid join us, given his strong commitment to investor protection and his wide range of experience in capital markets oversight, securities law, and public policy.”