Tax News & Views Seeking Mojo Roundup

October 1, 2021

Pelosi Delays Infrastructure Vote as Democratic Rift Persists – Erik Wasson, Laura Litvan and Emily Wilkins, Bloomberg ($). “House Speaker Nancy Pelosi sent lawmakers home Thursday night without voting on a $550 billion infrastructure bill, with plans to try again Friday after moderate and progressive Democrats failed to reach an agreement on the rest of President Joe Biden’s economic agenda. Top White House officials deployed to the Capitol to meet with warring Democratic factions at odds over the size and scope of Biden’s agenda, which includes a tax and spending plan totaling as much as $3.5 trillion and the infrastructure legislation."

‘A great deal of progress has been made this week, and we are closer to an agreement than ever. But we are not there yet, and so, we will need some additional time to finish the work, starting tomorrow morning first thing,’ White House press secretary Jen Psaki said in a statement.

‘There Will Be a Vote Today’ on Infrastructure, Pelosi Says – New York Times:

The House of Representatives is expected to try for a second day to hold a vote on the $1 trillion infrastructure bill amid a stalemate among Democrats on a critical piece of the president’s economic agenda.

Fun fact: It's still Thursday in the House of Representatives. The chamber gaveled into session on Thursday and never gaveled out. So is today's vote actually yesterday's vote?

State of Play: What’s Up with the Tax Bill? – Jay Heflin, Eide Bailly. “For the past several weeks it has been unclear if Congress can pass the budget reconciliation bill that, in part, increases taxes on corporations and wealthier taxpayers. That lack of clarity persists.”

Democrats in both chambers are at odds over this bill, and its price is at the top of the list. 

Some House and Senate Democrats have said that the bill’s price tag should not drop below $3.5 trillion. Other members within the party contend the price should be much lower. Democratic leaders have acknowledged that the bill’s price will likely shrink.

Manchin Wants Biden Social Spending Plan Cut to $1.5 Trillion – Laura Litvan and Mike Dorning, Bloomberg ($). “Democratic Senator Joe Manchin wants the social spending package that would encompass the bulk of President Joe Biden’s economic agenda cut by more than half to $1.5 trillion.”

Manchin’s position, reinforced by him on Thursday, leaves Democrats far from an agreement on the so-called reconciliation bill, which spans spending on health, education and climate initiatives. Progressive Democrats have argued that they already compromised down in reducing their demands from the $6 trillion that Senate Budget Committee Chair Bernie Sanders had originally sought.

Important to note: Senator Manchin is not the only moderate Senate Democrat who opposes a $3.5 trillion tax and spending bill, and that list does not stop at Senator Krysten Sinema (D-Ariz.). These two Senators don't face re-election until 2024 and that gives them the luxury of announcing their positions to the world. Moderate Senate Democrats facing re-election in 2022 can't afford to speak their minds, so Manchin and Sinema are essentially talking for them.  

Speaking of Sinema:

Cracking the Sinema code – Hans Nichols, Axios:

  • She’s suggested to some allies that she’s reluctant to support any increase in the corporate tax rate, but she’s more likely to accept a smaller increase to the headline rate — likely in the 24% range, well short of Biden's proposed 28%.
  • She's raised flags about increasing the rate on corporations' international profits, which she believes could harm their competitiveness.
  • On capital gains, she’s also indicated that she’s opposed to Biden’s headline 39.6% rate but could accept a number in the mid-twenties...
  • The bottom line: Manchin is looking for a way to get to 'yes' on a spending bill, as long as he can stomach the final price tag.

  • Sinema has always been slightly more skeptical and has indicated she's comfortable voting no.

Infrastructure uncertainty rankles vulnerable Democrats – Bridget Bowman and Stephanie Akin, Roll Call. “Democrats clashed this week over whether the more than $1 trillion infrastructure bill should move in tandem with a $3.5 trillion reconciliation package covering a range of Biden administration priorities, including early childhood education and free community college as well as climate policy and expanded health insurance access. Progressives pledged to vote against the infrastructure package, raising questions about whether Speaker Nancy Pelosi would delay the vote.”

‘I'm frustrated by the back and forth and the politicking we see on all sides,’ New Hampshire Democratic Rep. Chris Pappas said Wednesday as negotiations gridlocked. 

‘It's past the time for people to be issuing ultimatums and it's the time for people to get in a room and hash this out,’ said Pappas, a Republican target in 2022.  


Carbon Tax ‘In Vogue’ – Sony Kassam and Joe Stanley-Smith, Bloomberg ($). “Revived carbon tax discussions are increasingly becoming “in vogue” around the world and in the U.S. Senate, according to Rohit Kumar, former deputy chief of staff and domestic policy director for Senate Minority Leader Mitch McConnell (R-Ky.).”

Much of the discussion currently centers around a proposal from Sen. Ben Cardin (D-Md.) that Kumar described as a value-added tax for carbon emissions, or an alternate version of a ‘border-adjusted carbon tax.’

The ideas are being revived because they achieve two outcomes attractive to Democrats: lowering carbon emissions and raising revenue. But it’s unlikely to manifest into anything substantive in the next two weeks, said Kumar, who now works as a principal and co-leader of the Washington National Tax Services practice at PwC.


Defending Bank Reporting Measure – Sony Kassam and Joe Stanley-Smith, Bloomberg ($). “Treasury Secretary Janet Yellen again defended the Biden administration’s plans to require more data collection to the IRS from financial companies. ‘There is no transaction-level data’ in the proposed information, Yellen told the House Financial Services Committee during a Thursday appearance alongside Federal Reserve Chairman Jerome Powell.”

Treasury has proposed that banks, credit unions, and other nonbank financial companies be required to report data on accounts with annual inflows or outflows totaling over $600, as part of a push to beef up IRS enforcement resources. Congressional Democrats have begun to negotiate a higher threshold and to discuss other exemptions to reduce the number of accounts the proposal would affect.

Banks Enlist Customers to Kill Biden’s Account Data Reporting – Allyson Versprille and Laura Davison, Blomberg ($). “Financial institutions are recruiting their customers to help stop a measure under consideration in Congress that would require banks to hand over some account information to the Internal Revenue Service. The effort, including shareable social media posts, direct emails from customers and pressure from Republicans, may be working.”

Democrats, who are contemplating adding a new bank reporting provision to the multi-trillion dollar tax and spending proposal, are already planning ways to scale back the original idea from President Joe Biden’s Treasury Department as a way to increase tax compliance. Advocates say the measure is necessary to help the IRS target high-income taxpayers who are shielding income from tax collectors.

Republicans, Banks Team Up to Trash IRS Reporting Requirement – Jonathan Curry, Tax Notes ($). “Republican lawmakers have picked up on the lobbying and grassroots efforts by bank and credit union organizations in an effort to undermine Democrats’ plan to give the IRS more financial data to work with. For two days, Treasury Secretary Janet Yellen has been grilled over the Biden administration and congressional Democrats’ intention to require financial institutions to report to the IRS gross annual inflows and outflows for bank accounts exceeding a $600 threshold, a provision that is estimated to raise $462 billion in revenue over a decade.”

During a September 30 hearing of the House Financial Services Committee, Rep. Trey Hollingsworth, R-Ind., said that constituents in his district have voiced concern that the proposal would compromise their privacy and that they are 'deeply afraid about the emergence of an apparatus that can be used against them.'


EV Tax Credit - Sony Kassam and Joe Stanley-Smith, Bloomberg ($):

Executives from 12 multinational auto companies, including American Honda Motor Co. and Toyota Motor North America, oppose proposed changes to an electric vehicle tax credit in the House tax plan, arguing in a letter that the incentive would limit consumer choice and discriminate against autoworkers.

The proposed measure would create a $4,500 supplemental tax credit given only to buyers of electric vehicles assembled by organized labor.

A link to the letter is here.


Marriage Penalty - Sony Kassam and Joe Stanley-Smith, Bloomberg ($): "Sen. Mitt Romney (R-Utah) and 34 other Republican senators are concerned about a marriage penalty tucked within an expanded earned income tax credit in the tax-and-spend proposal. The lawmakers argued in a Thursday letter that married couples would see less in tax credits under the marriage penalty than unmarried couples with children."

A link to the letter is here.


Marijuana Excise Tax Bill Clears House Judiciary Committee Again – Tax Notes:

The House Judiciary Committee has again approved legislation to decriminalize marijuana and impose an excise tax on sales of cannabis products.

The committee approved the Marijuana Opportunity Reinvestment and Expungement (MORE) Act of 2021 (H.R. 3617) on a 26-15 vote September 30. The bill, introduced by Judiciary Committee Chair Jerrold Nadler, D-N.Y., would remove marijuana from the Controlled Substances Act and provide for the expungement of federal marijuana convictions and arrests.

Not sure when or if this bill will ever gain enough momentum to become law, but this issue is gaining traction on Capitol Hill.


High Court Review Offers Chance at Tax Suit Deadline Flexibility – Aysha Bagchi and Jeffery Leon, Bloomberg ($). “The U.S. Supreme Court’s interest in a North Dakota law firm’s late lawsuit against the IRS is seen as potentially good news for low-income taxpayers who want to challenge the agency in court."

The case, Boechler, P.C. v. Commissioner , involves a 30-day deadline under tax code Section 6330(d)(1) for challenging the Internal Revenue Service’s decisions to seize property to satisfy outstanding tax debts. Boechler missed that deadline by one day, which courts so far have said means its petition can’t be considered.

The high court on Thursday announced it would take the case and review whether that deadline is absolute or allows courts to hear late cases if they decide that pausing the deadline would be equitable. It is the latest example of the Supreme Court trying to sort out which legal deadlines deprive courts of jurisdiction to hear disputes and which can be paused, otherwise known as 'tolled.'

4 Supreme Court Bouts Tax Pros Should Watch – Amy Lee Rosen, Law360 ($). “In its termthat kicks off Monday, the U.S. Supreme Court will consider the boundaries of the U.S. Tax Court's jurisdiction and could evaluate how attorney-client privilege extends to law firms' client lists, among other tax cases."

Here, Law360 looks at four federal tax cases to watch at the Supreme Court this term.

Boechler PC v. Commissioner… Taylor Lohmeyer Law Firm PLLC v. US… Perkins v. Commissioner… Willis et al. v. U.S.


Retirement Plan Distribution Rules Nearing IRS Release – Fred Stokeld, Tax Notes ($). “Proposed guidance under section 401(a)(9) on changes to rules under the Setting Every Community Up for Enhancement (SECURE) Act on required minimum distributions from retirement plans is moving closer to completion, an IRS official said. The proposed regulations ‘are very far along,’ according to Laura Warshawsky of the IRS Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes).”

‘The working group has basically finished its job, and it’s now above our heads, [making] its way through the various offices,’ Warshawsky said September 30 during an ALI-CLE program on employee benefit plans of tax-exempt organizations.


California FTB Offers Guidance for Optional SALT Cap Workaround – Laura Mahoney, Bloomberg ($). “The California Franchise Tax Board outlined procedures for partnerships, S corporations, and limited liability companies to elect to pay income tax and get around the $10,000 federal cap on individual deductions for state and local taxes in guidance issued Thursday.”

In answers to frequently asked questions posted on its website, the board offered guidance about what entities qualify, what is included in qualified net income, who gets the credit in exchange for the tax, how to make payments, and what forms are necessary.

California Governor Signs Inherited-Property Tax Law Fix – Laura Mahoney, Bloomberg ($). “Gov. Gavin Newsom signed a bill Thursday clarifying California’s new tax rules for inherited property and homes purchased by disaster victims, seniors, and people with disabilities.”

The Democratic governor signed the bill (S.B. 539) introduced by Sen. Robert Hertzberg (D), which makes technical fixes to Proposition 19, approved by voters in November 2020. The ballot measure expanded property tax breaks for the identified groups of people who sell a home and buy another anywhere in the state. It also narrowed property tax breaks for people who inherit homes from their parents or grandparents.

Washington Court Says Tax Increase on Banks Is Constitutional – Laura Mahoney, Bloomberg ($). “Washington state’s 2019 tax increase on financial institutions with more than $1 billion in income is constitutional because it applies equally to all institutions, the Washington Supreme Court said Thursday.”

A unaminous court rejected arguments from the Washington Bankers Association and American Bankers Association that the tax discriminates against out-of-state banks and violates the commerce clause of the U.S. Constitution. It applies evenly whether an institution is inside or outside Washington and is apportioned to apply only to income generated in the state, the court said.

Michigan Governor Line-Item Vetoes Budget Law Containing Various Tax Provisions – Bloomberg ($):

The Michigan Governor Sept. 29 vetoed some line items from a budget law with provisions concerning corporate income, individual income, trust income, sales and use, excise, and property taxes. The law includes measures: 1) requiring the Department of Agriculture and Rural Development to coordinate with the Department of Treasury to improve timely processing of open space tax credits under the Farmland and Open Space Preservation Program; 2) prohibiting Economic Development Corporation staff involved in fundraising from being party to decisions concerning tax abatements or incentives; 3) authorizing the treasury to contract with private collection agencies and law firms to collect taxes and accounts due to the state; and 4) requiring report submission related to tobacco tax enforcement activities and expenditures. 


Global Tax Talks Race to Resolve Hurdles With Time Running Out – Isabel Gottlieb and William Horobin, Bloomberg ($). “The 140 countries attempting to conclude years of negotiations to overhaul global tax rules for an increasingly digitized economy are racing to resolve key details against a ticking clock."

With just over a week until an Oct. 8 meeting of all the governments involved, negotiators are still wrestling over parameters of setting a global minimum corporate tax and sharing the spoils from levies on tech giants like Facebook Inc. and Alphabet Inc.’s Google, according to people familiar with the matter.

They are also trying to work out how the global deal will coordinate countries on halting new unilateral digital taxes and unwinding existing measures -- a hot-button issue for governments seeking to protect revenues, and for the U.S., which sees such levies as discriminatory against its firms.

Wyden Sees Path To Addressing Global Tax Deal ‘Comprehensively’ – Laura Davison, Bloomberg ($):

Senate Finance Committee Chairman Ron Wyden says he is confident there is a path forward to address the global tax deal comprehensively.

  • ’I think Secretary Yellen is working in a very constructive way with us here and the international partners to make sure we address this in a comprehensive way,’ Wyden says in interview
  • NOTE: Group of 20 nations plan to finalize the details of a landmark global minimum tax and a rewrite of international tax rules at a summit in late October.


How Accountants Can Learn to Love the Robots (Podcast) – David Schultz, Bloomberg ($). “In the field of accounting, the robots have most definitely arrived.”

Front-line accountants may already use some of type of bot, also known as robotics process automation, or RPA. Or maybe they would love to have a bot on their team. Others, of course, may be a bit fearful that automation is going to erase their jobs.


One begets the other! It’s National Homemade Cookies Day and World Smile Day! Put Quiz: How do you turn a frown upside down? Cookies!

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