The longest US government shutdown in history is over – for now.
After a 35-day closure, the federal government re-opened on January 25 for a three week period, but could shut again if a border security deal is not reached by Congress during that time.
In the interim, government agencies such as the IRS will most likely have a backlog of requests and files to deal with.
The shutdown left members of the industry with no way of asking the IRS questions related to the Tax Cuts and Jobs Act, which President Trump signed into law at the end of 2017 and on which the industry has been eagerly awaiting guidance.
This “increased uncertainty in tax filings and left businesses without guidance or even anyone to speak to at the IRS at a critical time,” Joshua-Cherry Seto, chief financial officer and chief compliance officer at Blue Wolf Capital Partners, told pfm.
“Tax reform was a rushed and poorly-reviewed set of significant changes with well-documented mistakes and open issues you could drive a truck through.”
Omar Hassan, CFO of Pennsylvania-based private markets firm Cloverlay told pfm he expects industry professionals to have questions about the tax reform law, and the shutdown has only further postponed any answers.
“With tax reform, there is still a lot of work to be done. This will just heighten the delay,” Hassan said.
The IRS will also have to catch up on issuing employer identification numbers that might have been needed for foreign entities formed right before or during the shutdown. For foreign entities, EINs – necessary to open bank accounts – can only be obtained by calling the IRS, unlike US entities, which can be done online. An average call could take about one hour, and with a backlog, it could take longer.
“I can see the EINs taking a bit of time,” Michael Bolotin, a tax partner at Debevoise & Plimpton told pfm. “The EINs happen more frequently and more quickly, so that will take a bit, because anyone who’s formed a foreign entity over the past month and a half is probably going to call up.”
In the three weeks that the government is open, it would be wise for private equity firms to at least call the IRS for EINs, says Bolotin.
“If you were to form a new entity, for instance overseas, I would say don’t wait to get an EIN, because in the next few weeks you might not be able to,” he said.
Trump said the 800,000 federal employees who missed two weeks of paychecks will be repaid, but this won’t make up for the time lost.
“Even if [federal employees are] being guaranteed back pay, they are permanently harmed and all the businesses that count on these families’ spending have no disaster relief coming,” Cherry-Seto said.
The IRS did not respond to a request for comment by press time.