Tax News & Views Tuition Tax Credits and Spares Roundup

July 1, 2020

U.S. Supreme Court Reverses Montana Scholarship Tax Credit Decision - Jennifer McLoughlin, Tax Notes ($)

“That ‘supreme law of the land’ condemns discrimination against religious schools and the families whose children attend them,” Roberts added. “They are ‘member[s] of the community too,’ and their exclusion from the scholarship program here is ‘odious to our Constitution’ and ‘cannot stand.’”

Many states, including Iowa, have private school tuition tax credit programs similar to the one reinstated by the Supreme Court. 

Other Coverage: 

Wall Street Journal, Supreme Court Strikes Down Montana Ban on State Aid to Church Schools

New York Times, Supreme Court Gives Religious Schools More Access to State Aid


California Governor Signs Budget Bill Curbing Business Tax Breaks - Paul Jones, Tax Notes ($):

For 2020, 2021, and 2022, the legislation suspends the use of NOLs by taxpayers with net business income or modified adjusted gross income of $1 million or more in a given year. For the same three years, it also limits taxpayers' ability to use business tax credits to offset more than $5 million of their annual tax liabilities. Those provisions are retroactive to the start of 2020.

Tax policy that inevitably taxes businesses on more income than they make. Some taxpayers with no net income at all over a period of years will still pay California income tax during those years as a result of this law.

Link to bill: Assembly Bill No. 85.

North Carolina Governor Signs IRC Conformity Bill - Lauren Loricchio, Tax Notes ($). The bill uncouples North Carolina from the CARES Act liberalized net operating loss carryback rules. Other CARES Act changes that won't apply to North Carolina taxes "...include changes to IRC section 163(j) that allow taxpayers to deduct more business interest expense for tax years beginning in 2019 and 2020 and that increase from 30 percent to 50 percent the percentage of a taxpayer’s adjusted taxable income used to calculate the deductibility of business interest expense." 

Link to bill here: H.B. 1080

Iowa Decouples from 163(j) and GILTI, Clarifies Non-Taxation of PPP Loans - Maxwell James, Tax Policy Blog. "Iowa’s HF 2614, which passed both chambers of the legislature and now waits for the governor’s signature, makes several changes to the state’s tax code, which, although they will affect revenue, will encourage economic growth and make the state’s tax code more competitive. This bill decouples from GILTI and the net interest limitation and exempts PPP loan forgiveness from taxation."


IRS makes it clear: July 15 is Tax Day 2020, but you can get an extension by then if you need - Kay Bell, Don't Mess With Taxes. "If you were hoping the Internal Revenue Service would push Tax Day 2020 beyond July 15, sorry. The agency says the already-delayed filing and tax paying deadline for 2019 returns is firm."

IRS News Release States There Will Be No Additional Delay of the 2020 Due Date Past July 15 - Ed Zollars, Current Federal Tax Developments. "Treasury Secretary Mnuchin had been quoted recently as saying that the Treasury had not yet ruled out extending the deadline a second time, but now it appears that decision has been made."

Tax Day Is Around the Corner: Who’s (Been) Ready? - Renu Zaretsky, TaxVox. "Refunds are slow even for some returns that were filed electronically and with direct deposit. Some of those who e-filed in late April still are awaiting refunds from the IRS. The good news: The IRS is paying interest on delayed refunds that is far more generous than any bank: 5% compounded daily for the second quarter and 3% compounded daily starting July 1."


IRS Expands Waiver of 2020 Required Minimum Distributions - Eide Bailly. "Specifically, with this Notice, the IRS gives a taxpayer who already received an RMD in 2020 the ability to roll it into an eligible retirement plan by the later of 60 days after the RMD is received or August 31, 2020."

Senate approves 5-week PPP extension - Jeff Drew, Journal of Accountancy:

The House of Representatives would have to pass the measure and President Donald Trump would have to sign it before the extension would take effect. Both chambers of Congress are expected to adjourn by the end of the week for a two-week recess.

The surprise move is intended to provide more time for small businesses to apply for the approximately $129 billion in PPP funding remaining. The PPP was launched in early April as the COVID-19 pandemic battered the U.S. economy and forced many businesses to close. The program provides forgivable loans that small businesses and other qualifying entities can use to cover payroll and other select costs.

Related: How to Ensure Proper Accounting for PPP Funding and Loan Forgiveness


Big News As IRS Opens Taxpayer Phone Lines & More - Kelly Phillips Erb, Forbes. "Automated phone lines are available to handle calls. But the big news is this: all IRS toll-free phone lines supported by customer service representatives for taxpayers and tax professionals are also now available. You should expect to wait, however, due to limited staffing."

With IRS personnel returning to work, the service is releasing an avalanche of tax notices tha thave been piling up, so watch out.

Related: Why is it important to read IRS notices?


A Primer on Employment and Self-Employment Taxes - Matthew Roberts, Freeman Lawa Tax Blog. "Employment and SECA tax audits can be frustrating to taxpayers. Many times, reclassification or additional assessments of employment tax can result in a significant drain to employer resources, particularly where the IRS (commonly) asserts penalties."

District Court Holds FBAR Nonwillful Penalty Is Per Form Rather than Per Account - Jack Townsend, Federal Tax Crimes Blog. "The Bittner result was significant, for it reduced the number of $10,000 per violation from 177 as asserted by the Government amounting to $1,770,000 to 4 as asserted by Bittner and held by the court, for an amount of $40,000." 

Middleton Sport Bowl owners sentenced to prison for tax evasion - Wisconsin State Journal, Via Mauled Again. This updates our "secret shopper" piece from last week - it appears the IRS secret shopper sting caught the bowling alley/bar owners, as well as their gambling machine vendor.


Famous Tax Quotes - Andrew Mitchel LLC.:

Regrettably, what was conceived and born in generosity was later debauched and disowned in avarice.

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