Tax News & Views Executive Order Roundup

August 10, 2020

Trump Signs Order Extending Unemployment Benefits, But At A Reduced Amount – Kelly Phillips Erb, Forbes. “On Saturday, apparently frustrated with Congress' inaction, President Trump issued a number of Executive Orders and Memoranda affecting payroll taxes, unemployment benefits, eviction procedures, and student loans.”

Trump Signs Memo to Defer Payroll Taxes Through Year-End – Jonathan Curry and Wesley Elmore, Tax Notes ($). “Trump's payroll tax memo also indicated that he wants to go beyond deferring the taxes so workers and companies won't need to worry about paying the money in early 2021. The memo specifically instructed Treasury Secretary Steven Mnuchin to "explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum."

Democrats in Congress immediately criticized the actions as illegal and unworkable, stressing that the payroll tax provision would undermine funding for Medicare and Social Security. 

"While employers are unlikely to risk a massive tax liability by not collecting payroll taxes or having to double up collection later, if they do go along with this stunt, it would drain the Social Security trust fund," said Senate Finance Committee ranking member Ron Wyden, D-Wyo. "This fake tax cut would also be a big shock to workers who though they were getting a tax cut when it was only a delay. These workers would be hit with much bigger payments down the road." 


Executive Order to Defer Withholding and Payment of Employee OASDI FICA Taxes from September 1 to December 31 – Ed Zollars, Current Federal Tax Developments.

“The President has signed an Executive Order directing the Treasury Department to issue guidance under IRC §7508A deferring the withholding, deposit, and payment of the tax imposed under IRC §3101(a) (the old age, survivor and disability portion of social security taxes imposed on individuals) and IRC §3201(Railroad Retirement Act taxes tied to the rate of tax under IRC §3101(a)).[1]  The deferral will apply to the period from September 1, 2020 (note the delayed effective date) through December 31, 2020.[2]”

What’s in Trump’s Executive Actions on Coronavirus Aid—and What’s Not – WSJ($). “President Trump signed four executive actions Saturday to provide additional jobless aid, suspend the collection of payroll taxes, avoid evictions and assist with student-loan payments. Mr. Trump made the moves as talks in Congress over a broad new coronavirus aid package remained deadlocked and are seen as potentially accelerating talks.”

Trump Calls for Making Permanent Cuts to Both the Medicare and Social Security Payroll Taxes – Robert Laszewski, Forbes. “President Trump said over the weekend, "If I'm victorious on November 3rd, I plan to forgive these [payroll taxes for Social Security and Medicare] and make permanent cuts to the payroll tax."

“Both the Medicare and Social Security trust funds are running out of money––both face an inability to pay full benefits if their problems aren't solved by either increasing funding or cutting benefits. That is projected by the Congressional Budget Office to happen for Medicare in 2025 and Social Security in 2031. So, with their solvency teetering, why would you cut their taxpayer provided funding sources?”


With Congress Deadlocked Over Coronavirus Stimulus, State And Local Governments Eye Borrowing To Close Budget Gaps – Liz Farmer, Forbes. “Cities, counties and states are grappling with unprecedented budget gaps driven by a sharp drop in revenues with many businesses closed and tens of millions of people unemployed. Some states are projecting a nearly 20% shortfall over 2020 and 2021.”

Currently, three states and one local government (Illinois, Hawaii, New Jersey, and New York City) are planning to resort to borrowing money for operating costs unless Congress provides additional financial aid.


COVID-19 is screwing up sports and complicating some professional athletes' taxes – Kay Bell, Don’t Mess With Taxes. “As sports and tax fans know, athletes must pay so-called jock taxes. These are the levies assessed by states and some cities when athletes and all entertainers, as well as non-resident regular folk, work or perform within the jurisdictions' boundaries.”

"Florida, where the roundball pros are playing, is a no-income tax state. That means no jock taxes this season for these athletes. Hockey players are skating in Toronto and Edmonton. Those Canadian locations could create some international tax complications. Baseball players, meanwhile, still have the assortment of games in no-tax (for example, Texas and Florida) states and high-tax ones (such as New York and California)."

IRS Finds Daily Fantasy Sports Operators Liable for Excise Taxes  - Frederic Lee, Tax Notes ($). “In a legal advice memorandum dated July 23 and made public August 7, the IRS said a DFS operator is liable for the section 4411 occupational excise tax and the excise tax on wagers under section 4401, with rates varying by state.”

“The rate of tax [section] 4401(a) imposes on wagers accepted by a DFS operator depends on whether the wager is accepted in a state in which the wager is authorized. The rate of occupational tax [section] 4411 imposes on a DFS operator depends on whether the DFS operator accepts only state authorized wagers under [section] 4401(a)(1),” Holly Porter, IRS associate chief counsel (passthroughs and special industries), wrote in the memo.

The excise tax on wagers is either 0.25 percent of the amount of an authorized wager or 2 percent of the amount of any other (unauthorized) wager. The annual occupational excise tax is either $50 or $500, depending on whether the wager is authorized or unauthorized, respectively.”

Today in History:

On this day in 1846 President James K. Polk signed the Smithsonian Institution Act into law. Happy birthday Smithsonian!


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