Washington, D.C. (April 10, 2024) The American Institute of CPAs (AICPA) submitted a letter to the Internal Revenue Service (IRS) requesting simplified procedures for when taxpayers either fail to make a timely election out of automatic allocation of Generation-Skipping Tax (GST) exemption or make a section 2632(c) election inadvertently. These recommendations will simplify filing for taxpayers and practitioners and will reduce the administrative burden on the IRS as well.
The GST exemption is an exemption from an estate tax imposed on beneficiaries who are two or more generations removed from a deceased individual. It is aimed at preventing someone from intentionally skipping over a generation in order to avoid certain taxes. Section 2632(c) provides for the allocation of the GST exemption.
The AICPA’s recommendations include:
A simplified procedure for obtaining an extension of time to elect out of automatic allocation of GST exemption to indirect skips. Using the simplified method already provided under Rev. Proc. 2004-46 as a model, the Department of the Treasury and the IRS should provide a similar revenue procedure for situations in which the donor’s GST exemption is automatically allocated to a transfer, but the donor did not want GST exemption to be allocated.
A procedure for retroactively revoking an inadvertent section 2632(c) election. Implementing a streamlined process for taxpayers to retroactively revoke inadvertent elections would benefit both taxpayers and the IRS. Taxpayers would gain peace of mind knowing they can rectify mistakes without facing undue hardship. This would reduce stress, potential penalties, and the need for complex legal challenges. The implementation of a simplified procedure would promote efficiency, reduce compliance costs, and align with broader efforts to simplify tax administration.
“The AICPA believes these GST exemption simplification suggestions will ease administrative burdens for taxpayers and practitioners,” said Eileen Sherr, AICPA Director – Tax Policy and Advocacy.
About the American Institute of CPAs
The American Institute of CPAs® (AICPA®) is the world’s largest member association representing the CPA profession, with more than 415,000 members in the United States and worldwide, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. AICPA sets ethical standards for its members and U.S. auditing standards for private companies, not-for-profit organizations, and federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives continuing education to advance the vitality, relevance and quality of the profession.
Contact: Veronica L. Vera
202-434-9215
Veronica.Vera@aicpa-cima.com