May 19, 2020
New PPP Loan Forgiveness Guidance Issued - Adam Sweet, Eide Bailly. Adam covers what we learned - and didn't learn - about PPP forgiveness from the forgiveness application form and instructions released on Friday:
Eligible payroll expenses are the key to maximizing loan forgiveness because at least 75% of eligible expenditures giving rise to forgiveness during the covered period must relate to payroll. Fortunately, the new application confirms that failing to meet this 75% threshold only results in a proportionate reduction of the forgiveness amount, rather than total loss of forgiveness.
One issue for many borrowers is aligning their payroll periods with the eight-week covered period. Recognizing that borrowers could begin their covered period during the middle of a payroll period, the new application gives borrowers several choices.
And lots more, including the determination of borrower "Full Time Equivalent" employees, treatment of bonuses, measurement of other costs qualifying for forgiveness, and more.
PPP Forgiveness Guidance Leaves Several Issues Open for Borrowers - Eric Yauch, Tax Notes ($). "But according to the American Institute of CPAs, the guidance doesn’t go far enough and still leaves open too many issues for the process to function as intended."
A Silver Linings Guidebook: Corporate Planning for Coronavirus Losses - Josiah Child, Moshe Dlott, Elizabeth Stevens, J. Clark Armitage, Tax Notes. "In principle, a corporation could expense a 100x purchase of depreciable property in 2020, carry the 100x loss back against income from 2015 taxable at a 35 percent rate, dispose of the property for 100x in 2021, and include the ordinary income at a 21 percent rate for 2021."
Questionable PPP Certifications Are Poor Prosecution Targets - Nathan Richman, Tax Notes ($):
“It’s really hard to see how, based on a subjective certification of need that was included in the application, any criminal charges are going to occur unless there was an outright lie in the information submitted,” Larry A. Campagna of Chamberlain, Hrdlicka, White, Williams & Aughtry told Tax Notes.
Be sure to tell the Senators.
Foreign Affiliates Count for PPP Loan 500 Employee Test But Applicants Before May 5 Qualify for Relief - Ed Zollars, Current Federal Tax Developments. "However, the SBA concludes that the agency’s guidance prior to May 5 may have led a borrower to reasonably conclude that foreign affiliates could be excluded from the 500-employee test. Thus, the IFR provides relief for a borrower who applied before the issuance of the May 5 frequently asked questions (FAQ)."
Nearly 4 Million Stimulus Checks Will Go Out By Prepaid Debit Card Starting This Week - Kelly Phillips Erb, Forbes. "It’s important to note that the cards will come from MetaBank, not the IRS. Each mailing will include instructions on how to activate and use the card."
Some taxpayers due a refund and COVID relief money haven't gotten either - Kay Bell, Don't Mess With Taxes. "What's the holdup? It's no secret that as the IRS has increased security measures in recent years to combat tax refund fraud, its screening system of 1040 forms has gotten tougher."
District Court Rejects Eighth Amendment's Applicability to FBARs - Andrew Velarde, Tax Notes ($). "A district court has rejected the premise that foreign bank account reporting penalties are subject to the Eighth Amendment’s excessive fines clause, in one of the strongest rebukes yet in FBAR litigation."
Free link to order: Case No. 18-cv-81147-BLOOM/Reinhart
Lesson From Tax Court: Selling Home Not Always Required For Installment Agreement - Bryan Camp, TaxProf Blog. "Last week’s decision in Martin D. Kirkley and Sheila G. Kirkley, T.C. Memo. 2020-57 (May 13, 2020) (Judge Colvin) teaches us that nothing in the law requires taxpayers to sell their home as a pre-condition to an installment agreement."
Exercise Caution When Using Extended Tax Court Due Date - Keith Fogg, Procedurally Taxing. "At this point we do not know if the time to file a petition for those with a due date between March 19 and July 15, 2020, will be governed by a combination of Guralnik and Notice 2020-23, just Notice 2020-23 or just Guralnik."
Syndicated Conservation Easements- An Industry Based On Nonsense - Peter Reilly, Forbes. "The notion that an easement on land can be worth more than the land itself doesn’t even make good nonsense."
Options for Improving the Tax Treatment of Structures - Erica York, Tax Policy Blog. "A neutral tax would allow an immediate deduction for these outlays, the policy of full expensing. Alternatively, a policy that maintains the present value of deductions over time by adjusting the depreciation allowances would also be neutral toward investment; this policy is called neutral cost recovery."
Solar “Farms” and The Associated Tax Credit - Roger McEowen, Agricultural Law and Taxation Blog. "The tax credit for solar energy electricity production is designed to incentivize solar energy production. But, there are other considerations besides tax in determining whether a “solar farm” investment is a good one for any particular farmer or rancher."
Missouri Lawmakers Adjourn Without Addressing Wayfair - Lauren Loricchio, Tax Notes ($). "The state is one of two remaining sales tax states that have not yet adopted remote seller rules to address the U.S. Supreme Court’s 2018 decision in South Dakota v. Wayfair Inc.; the other state is Florida." Related: States Respond to SCOTUS Wayfair Decision
Shifting tax base to consumption tax is bad idea - Annette Nellen, 21st Century Taxation. "In January 2020, a Nebraska legislator introduced LR300CA, to amend the state constitution to prohibit all forms of taxation other than a consumption tax."
One in four low-wage workers face marginal net tax rates above 70 percent, effectively locking them into poverty. Over half face remaining lifetime marginal net tax rates above 45 percent. The richest 1 percent also face a high median lifetime marginal tax rate – roughly 50 percent.
These high marginal rates - the effective cost of an additional dollar earned - on low incomes are caused by the phase-out of benefits, such as the earned income tax credit and other poverty assistance - as income rises. This "poverty trap" effect is one of the toughest and most ignored tax and poverty policy problems.
Very Sneaky. An audit by the Treasury Inspector General for Tax Administration shows that undercover IRS agents might have been just a bit too careful in documenting their travel expenses. William Hoffman of Tax Notes reports ($):
Fifty-three percent of 49 fiscal 2018 vouchers reviewed by the Treasury Inspector General for Tax Administration included cash receipts with CI agents’ actual names, and in some cases their affiliation with the government, on the documents, according to a TIGTA audit released May 18.
“This practice raises concerns that either agent safety was potentially compromised or the imprest [i.e., cash] fund may have been used unnecessarily,” TIGTA said.
Blowing your cover is bad, but using the imprest fund unnecessarily, that's beyond the pale.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.