November 11, 2020
Biden’s Tax Agenda Faces Blockade if GOP Holds Senate - Richard Rubin, Wall Street Journal. "President-elect Joe Biden’s tax plan is on life support even before he takes office, and his chances of raising taxes on businesses and high-income individuals likely rest on whether Democrats can win two January runoffs in Georgia to take control of the U.S. Senate."
Retroactive Tax Hikes Seen as Unlikely Under Biden Administration - Jonathan Curry, Tax Notes. "Separately, Jonathan Traub of Deloitte Tax LLP acknowledged on a November 10 webinar hosted by his firm that while it's possible that future tax increases could be made retroactive to January 1, 2021, it’s very unlikely."
PPP Borrowers Brace for Potentially Problematic IRS Guidance - Erich Yauch, Tax Notes. The guidance will address the timing of deductions relating to Paycheck Protection Program loans:
Edward S. Karl of the American Institute of CPAs said Treasury officials told him they anticipated issuing additional guidance before the end of the year, and possibly by the end of November, generally stating that if a borrower has a reasonable expectation of loan forgiveness, the expenses can’t be deducted to the extent they’re paid for with the loan. That’s true regardless of when the loan is forgiven, Karl added.
There is also a need for Treasury to confirm the proper treatment of S corporations in computing their ability to distribute earnings without triggering dividends. Tax exempt income and related expenses do not affect the ability of former C corporations to distribute S corporation income, and it would be helpful for Treasury to affirm that treatment for PPP loan forgiveness and related expenses.
Prospects for Federal Tax Policy After the 2020 Election - Garrett Watson, Tax Policy Blog. "One of the first priorities of a new Congress and a Biden administration is to revisit the economic relief currently being negotiated by the Trump administration and Speaker Nancy Pelosi (D-CA). While there is a chance that a relief package could come together over the next two months, it is more likely that the next Congress and Biden administration will have to revisit this discussion and come to a compromise over core areas of disagreement."
Recent Developments in Micro-Captive Insurance—A Reportable Transaction - Ben Peeler, Eide Bailly:
The IRS had indicated it is no longer providing settlement offers to those engaged in micro-captive insurance arrangements as part of examination resolutions. They have apparently reversed this position for some taxpayers and have indicated they will be sending settlement letters under a new settlement procedure. The terms are far less generous than previous settlements. This includes a minimum 5% penalty on taxes required under the terms provided, and only if the taxpayer can demonstrate they received affirmative advice independent of the captive management company.
Also: "However, if you want to mitigate the potential 5% to 40% penalty, there is still an opportunity to amend your return and protect against this result. Additionally, amending to remove the deduction for premiums paid will allow you to follow up with a protective claim to take those deductions if later court rulings find in favor of your type of captive/pooling arrangement."
Supreme Court Seems Inclined Not to Let Mandate Doom ACA - Kristen A. Parillo, Tax Notes ($) "The fact that Congress left the rest of the law untouched when it reduced the individual mandate penalty to zero under the Tax Cuts and Jobs Act 'seems to be compelling evidence' that it would want the ACA to survive if an unconstitutional provision were severed, Chief Justice John G. Roberts Jr. said during November 10 arguments in California v. Texas."
Supreme Court Justices Question GOP States’ Case Against ACA - Jess Bravin, Wall Street Journal ($). "Justice Brett Kavanaugh said that even if elimination of the penalty made the mandate unconstitutional, the court’s precedents required upholding as much of a statute as possible."
Pennsylvania DOR Issues COVID-19 Tax Guidance for Teleworkers - Pennsylvania Department of Revenue via Tax Notes. "For non-residents who were working in Pennsylvania before the pandemic, their compensation would remain Pennsylvania sourced income for all tax purposes, including PA-40 reporting, employer withholding and three-factor business income apportionment purposes for S Corporations, partnerships and individuals. Conversely, for Pennsylvania residents who were working out-of-state before the pandemic, their compensation would remain sourced to the other state and they would still be able to claim a resident credit for tax paid to the other state on the compensation."
Getting the tax info needed to complete FAFSA - Kay Bell, Don't Mess With Taxes. "FAFSA, the awkward acronym for the Free Application for Federal Student Aid, is how students and their parents apply for financial help from the federal and state governments, as well as institutions of higher learning."
Thoughts on NonProsecution for Trump - Jack Townsend, Federal Tax Crimes. "I understand that prosecuting Trump for crimes is probably not good for the country, given the passion that almost half the country has for Trump."
Interview: 50 Years Later: The Fight for Tax Transparency - Chuck O'Toole and Cara Griffith, Tax Notes Opinions:
Earlier in the year, we put our code and regulations outside of the paywall, and that really was a first effort for us. Going forward, we will be looking to put additional content, in fact most federal tax-related law and guidance will be outside of the paywall. This is a fundamental change for Tax Analysts but really takes us to a place that feels right.
When you look at private letter rulings back in 1972, we sued to get these documents. It's only fitting that in our 50th year, we are able to say, "Let's make it so that all of those documents that we have acquired are available to anyone at any point who needs them." It's a really nice way of taking a hard look at what we can do. And that's one thing we definitely can. We sue for access to documents, and now we make them available to everyone.
Wonderful news. Tax Analysts is a great resource.
Today in History. World War I ended on November 11, 1918 at 11:00 local time.
Today is also National Sundae Day. "Two Rivers, Wisconsin claims Druggist Edward Berners served the first ice cream sundae in 1881."
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.