May 29, 2020 | Blog
House-Approved PPP Changes Face Problems in Senate – Jad Chamseddine, Tax Notes($). “A House-approved measure to expand the benefits of a federal small business loan program and lengthen the forgiveness period to 24 weeks could run into trouble in the Senate.”
A key change includes giving businesses 24 weeks rather than 8 to spend the loan money and still allowing those who qualify for forgiveness to defer payroll taxes. The bill provides a safe harbor for businesses to have loans forgiven if they are unable to hire workers back due to operating at a lower capacity.
Senator Rubio made the following statement on the bill: “I am concerned that inadvertent technical errors in the House’s PPP bill could create an unintended disincentive to rehiring and create new and serious burdens for PPP borrowers in terms of forgiveness.”
CARES Act Tax Benefits Largely Unused by Manufacturers – Alexis Gravely, Tax Notes($). “Payroll tax deferral has been used the most, but only by 15 percent of the 604 small, medium-size, and large manufacturers polled from May 4 to May 15. Other tax benefits afforded by the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136) — including the employee retention tax credit, changes to rules for net operating losses, and acceleration in the recovery of corporate alternative minimum tax credits — were used by less than 8 percent of respondents.”
Deadlines for Employment Tax Filing Pushed Back Amid Shutdowns – Eric Yauch, Tax Notes ($). “On May 28 the IRS issued Notice 2020-35, 2020-25 IRB 1, which postpones deadlines on actions for items related to employment taxes, employee benefit plans, and exempt organizations due between March 30 and July 15.”
Are We Headed For A New Era of Income Tax Deduction Creep? – Howard Gleckman, TaxVox. “Economic relief legislation has become a traditional opportunity for lawmakers to revert to bad habits. Though the large standard deduction requires them to be a bit more creative, they once again are using the tax code to reward what they see as good economic or social behavior.”
A few examples cited in the article include a $300 deduction for charitable contributions for non-itemizing taxpayers and items aimed at teachers and first responders in the HEROS act. Teachers would be eligible for a deduction up to $500 for buying school supplies and first responders could deduct up to $500 in non-reimbursed training expenses and $500 for uniforms.
The real kicker:
Finally, there is the big one that will add $136 billion to the deficit: The HEROES Act would reverse the TCJA’s $10,000 cap on the SALT deduction for two years—temporarily undoing the biggest assault in decades on itemized deductions. Combined with the law’s doubling of the standard deduction, capping the SALT deduction made itemizing the province of mostly high-income taxpayers. And, over the long run, it may have jeopardized political support for itemized deductions as a tool for social and economic policy.
Important to note: “In a progressive income tax system, deductions are inherently regressive. Reducing taxable income is three times more valuable to someone in the 37 percent tax bracket than to someone in the 12 percent bracket.”
Legal Sports Betting One Step Closer in Ohio – Ulrik Boesen, Tax Foundation.
This week, the Ohio House of Representatives passed House Bill 194, which would legalize and tax sports betting in the state. The bill now awaits action in the Ohio Senate. If enacted, the bill would legalize brick-and-mortar facilities and online betting while imposing a 10 percent excise tax on adjusted revenue (revenue minus winnings). The tax is estimated to raise $17.8 million in fiscal year 2022, which would be allocated to the Lottery Profits Education Fund (98 percent) and Problem Sports Gaming and Addiction Fund (2 percent).
California Considers Business Head Tax Plan that Seattle Repealed – Jared Walczak, Tax Foundation. “California lawmakers have proposed under the COVID-19 Local Government and School Recovery and Relief Act, which would impose a $275 per employee tax on all businesses with at least 500 employees. If adopted, it would be the only statewide business head tax in the country, and the largest imposed at any level of government.”
Remote-Working From a Different State? Beware of a Tax Surprise – Laura Saunders, WSJ ($). “Each state tax system is a unique mélange of rules that consider how long a worker is there, what income is earned, and where the worker’s true home, known as domicile, is. But nearly all states that have income taxes impose them on workers who are passing through. In two dozen states, that can be for just one day.”
Does The Covid-19 Pandemic Make A Carbon Tax More Likely? – Marie Sapirie, Forbes. “Carbon taxes have been kicked around in the United States for some time, but without a pressing economic problem, the idea has never taken off.”
The Tax Cuts and Jobs Act reduced the corporate rate without implementing a tax on greenhouse gases, and that seemed to be the end of the road for a carbon tax for a while. It’s back on the table now because of the economic damage caused by the coronavirus pandemic. The fundamental problem with a carbon tax is essentially the same: It raises revenue, but at the cost of increasing consumer prices, while not necessarily stemming pollution substantially. now because of the economic damage caused by the coronavirus pandemic. The fundamental problem with a carbon tax is essentially the same: It raises revenue, but at the cost of increasing consumer prices, while not necessarily stemming pollution substantially.
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.