Saturday, October 17, 2015

OMB Approves Extension of Agricultural Chemicals Security Credit ICR

Yesterday the OMB’s Office of Information and Regulatory Affairs (OIRA) announced that it had approved an information collection request (ICR) from the Internal Revenue Service for IRS Form 8931 [.DOC download], Agricultural Chemicals Security Credit. I was rather surprised to see this since the tax credit authorized by 26 USC 45O expired on December 31st, 2012. I last wrote about this credit in January 2011.

The IRS in its documentation [.DOC download] supporting the ICR extension explains that the form “has been identified as a historical form and cannot be used with a current year federal tax return”. It further goes on to explain that:

“The form can only be used by those taxpayers who are filing a late or amended return requiring the use of Form 8931 to report the credit.”

While that sounds reasonable on its face, the supporting document goes on to explain in paragraph 12 that the IRS expects an annual response rate of 66,000 and that each response will take 5 hours to complete. What is odd about this is that these are the same numbers that the IRS reported in 2012 when the ICR was extended for the last year that the program was in effect.

Now there might be a tax loophole here that these 66,000 agricultural tax payers are using. The actual wording of §45O(i) for the termination of the tax credit says:

“This section shall not apply to any amount paid or incurred [emphasis added] after December 31, 2012.”

Technically (Standard Disclaimer, I am not a lawyer and especially not a tax lawyer) it would seem that a cost incurred before December 31st, 2012, but paid after that date would still qualify for the 30% tax credit on the 2012 tax return. I suppose that the documentation of those incurred costs is subsequent years could require the filing of an amended return for 2012. It is odd, however, that the IRS would expect each and every taxpayer who filed for the Agricultural Chemicals Security Credit in 2012 would still be needing to file these amended returns.

Looking at the qualified expenditures listed under §45O(d) it does not look like any of the listed expenditures would extend beyond the 2012 deadline unless they were contracted for in 2012 for installation after 2012. Except that the requirement for “implementing a site security plan” might liberally be taken to require (or to‘incurr’) recurring expenditures in all of the categories listed.

If that loophole is being used by 66,000 people per year to continue to claim new tax credits on their 2012 income taxes, it will eventually be self-limiting. There is a maximum tax credit of $2,000,000 in any tax year for any single taxpayer set by §45O(c).

It would be extremely interesting to have the GAO do a study on the total cost to the Federal government of this tax credit. I doubt, however, that any congress critter would be interested in taking on the agriculture lobby by asking for such a report. After all, it is only money.

BTW: For those facilities that claimed these credits that were covered by the CFATS program, they are the only facilities that received any monetary support from the Federal government for any of the costs of complying with the CFATS program.

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