Tax News & View Gauntlet Thrown Roundup

October 15, 2021

U.S. Senator Sinema rejects vote on big Biden package before infrastructure-source - Leah Millis, Reuters. “U.S. Senator Kyrsten Sinema, a key moderate, told fellow Democrats in the House of Representatives this week that she will not vote for a multitrillion-dollar package that is a top priority for President Joe Biden before Congress approves a $1 trillion infrastructure bill, according to a source briefed on the meeting.”

In an online meeting, Sinema and fellow Senate moderate Joe Manchin said they would not abide by any deadlines adopted by leadership to force votes on the package… Sinema and Manchin have balked at Biden's plan's initial $3.5 trillion price tag for a spending measure to fund social programs and fighting climate change. As a result, Biden faces a difficult balancing act in trying to bring down the cost but not alienate progressives who also are essential to passage.

Why this is important: Sen. Sinema is threatening to oppose the budget reconciliation tax and spending bill that some Democrats fully support. No Senate Republican is expected to support the budget bill and if one Senate Democrat opposes it, it fails. This means that the tax provisions in the bill do not become law. 

Also, Sinema ain’t the only Senator urging the House to move on the infrastructure bill:

Mark Warner, the Virginia Democrat, calls on Pelosi to put infrastructure bill on the floor. 'I think the president ought to tell the House that we ought to deliver the infrastructure bill…Let’s make it the law of the land,' he says to @JohnKingCNN.

There has been a long-standing fight between the two factions within the Democratic party on which of the two bills that comprise President Biden's economic agenda should be voted on first in the House. "Moderate" Democrats prefer infrastructure goes first. "Progressive" Democrats support budget reconciliation being the lead vote. 

Speaking of progressives, they penned a letter to House Speaker Nancy Pelosi (D-Calif.) on October 13th that outlined their priorities for the budget reconciliation tax and spending bill:

Specifically, the CPC [Congressional Progressive Caucus] settled on five core priority areas: 1) strengthening the care economy with child care, paid leave and investments in home- and community-based care; 2) investing in affordable housing; 3) reforming Medicare to lower prescription drug prices, while expanding the earned benefits to include vision, dental, and hearing benefits for our seniors; 4) meaningfully tackling the climate crisis; and 5) keeping our promise to pursue necessary immigration reform that benefits our economy and budget.

In the letter, they take a stand against shortening the lifespan of provisions they support:

We have been told that we can either adequately fund a small number of investments or legislate broadly, but only make a shallow, short-term impact. We would argue that this is a false choice. 

However, the following passage from the same letter seems to contradict their position:

If given a choice between legislating narrowly or broadly, we strongly encourage you to choose the latter, and make robust investments over a shorter window.


White House frustrated with reconciliation pace – Punchbowl News ($). “The White House is running out of patience with the ongoing reconciliation talks between House and Senate Democrats. That is driving much of the discussion in political circles today after we tweeted a comment from a source close to the White House.”

Backstory: We got a note this morning from a source close to the White House -- someone who would be in position to know the Biden administration’s private thinking -- that was meant as a warning shot to Democratic moderates and progressives on Capitol Hill bickering over the multi-trillion dollar legislation. The message is that it’s time to reach a compromise on the reconciliation package and send it to President Joe Biden -- ASAP.

Meanwhile, congressional Democrats are frustrated with White House:

Biden's soft touch with Manchin, Sinema frustrates Democrats – Alexander Bolton, The Hill. “A growing number of Senate Democrats are getting impatient with President Biden’s kid-glove approach to negotiating with Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.)."

Biden’s approach has involved a lot of facetime and personal attention, but little in the way of public concessions or discernible movement.

After talks on the scale and scope of the Democrats’ $3.5 trillion reconciliation spending bill stalled in September, Democratic senators expressed hope that Biden’s personal involvement would yield a breakthrough.

Yet after several one-on-one meetings between the president, Manchin and Sinema, Democrats don’t seem any closer to agreeing on a framework than a month ago.


Speaker Pelosi wants the infrastructure bill (which has already passed the Senate) and the budget reconciliation tax and spending bill (which hasn’t passed either chamber) to pass Congress by Halloween. This seems like a longshot, but pressure is being applied:

Democrats Float Possible $2.5 Trillion Compromise Reconciliation Framework – Tara Golshan, HuffPost. “Democratic leaders floated the contours of a $2.5 trillion spending and tax cut reconciliation framework before senators left last week for a brief recess, in hopes that the whole caucus would go along with a slightly smaller price tag.”

During a caucus meeting last Thursday with Senate Democrats, leadership pitched a top line of roughly $1.5 trillion in new spending on programs such as child care, housing, climate policies and Medicare expansions, according to presentation slides obtained by HuffPost and top Senate aides familiar with the presentation.

The bill would also provide around $1 trillion in ‘tax cuts for working families’ — including an extension to the boosted child tax credit, Affordable Care Act premium subsidy credits and housing and clean energy tax credits. Overall, the bill’s price tag would be around $2.5 trillion.

How the bill would be paid-for, per the slide show:

The compromise framework would fully pay for the spending in the Build Back Better Act through a variety of revenue offset including:

  • IRS Tax Compliance
  • Domestic Corporate Reform
  • International Corporate Reform
  • Tax Fairness for Millionaires and Billionaires
  • Trump Rebate Rule repeal
  • Prescription Drug Negotiation and Pricing Reform
  • Polluter Fees

Important point from the slides: 

‘This presentation was Leader Schumer informing Senate Democrats of what President Biden presented to the House Democrats the week prior,’ Justin Goodman, a spokesperson for Senate Majority Leader Chuck Schumer (N.Y.), said.


Still, the hand wringing and the arm twisting continues:

Biden, Allies Agonize Over Cutting Economy Plan to Eke Out a Win – Nancy Cook and Laura Davison, Bloomberg ($). “President Joe Biden’s team and Democratic lawmakers are agonizing over the size and scope of his multi-trillion dollar economic plan, as Biden’s approval rating sags and upcoming elections threaten to show his party’s vulnerability.”

Negotiations over the legislation -- a package of social programs, tax increases and climate measures Biden calls ‘Build Back Better’ -- have dragged on for weeks. White House officials are trying to raise pressure for the talks to wrap up, according to one administration official. 

Manchin and Sinema detail key disagreements over Biden agenda – Manu Raju, CNN. “The two leading Democratic moderates made clear to their colleagues this week that a deal on the party's sweeping economic package is far from secured, raising new questions about the fate of President Joe Biden's first-term agenda, according to sources familiar with the matter.”

Yet Sinema and Manchin both made clear this week that they had disagreements with their party on some of the central components of the larger package, the clearest sign yet that Democratic leaders' goal of passing both bills by their self-imposed October 31 deadline seems doubtful at best…

On a call with a small group of fellow Democrats this week, neither Sinema nor Manchin endorsed the $1.9 trillion-$2.2 trillion price tag that Biden has privately floated as a new topline number, saying they have yet to see details from the White House on such a proposal -- even as progressives have said that figure is far too small to include their main priorities from the original $3.5 trillion plan. The initial 10-year proposal -- which would touch nearly every aspect of American life from health care to the climate and raise taxes on corporations and high earners to pay for it -- needs the support of all 50 Senate Democrats to pass, and Manchin and Sinema remain the most prominent skeptics…

The two senators said they believed that their party should drop some programs offered in the larger package to cut its cost, breaking with progressives who want to maintain an array of programs but limit the number of years in which people would receive benefits. The senators indicated they should focus on a handful of new programs instead.


Taxpayers in Limbo After Lapse of Debt Collection Contracts – Allyson Versprille, Bloomberg ($). “More than 1 million taxpayer accounts have been transferred back to the IRS after two private tax debt collection agencies lost their contracts with the government, according to National Taxpayer Advocate Erin Collins.”

The IRS in late September awarded three new contracts to private agencies authorized to collect certain unpaid tax debts on its behalf. Two of the contracts went to companies the IRS had originally hired in 2016—CBE Group Inc. and Continental Service Group, or ConServe—and the third contract went to a new company, Coast Professional Inc.

Contracts with Performant Recovery Inc. and Pioneer Credit Recovery weren’t renewed, however, and the expiration of their arrangements with the IRS creates problems for taxpayers who were working with the agencies to pay down their tax debts, Collins noted in a blog post Thursday.


Nearly 1.26 million accounts that had been assigned to the companies have been transferred back to the IRS, and any payment arrangements that taxpayers entered into with Performant or Pioneer are no longer valid, Collins said. But that doesn’t mean the tax debt has been extinguished, she warned.


How Financial Reporting Helps American Workers and Ensures that Top Earners Pay Their Fair Share - Natasha Sarin, Deputy Assistant Secretary for Economic Policy, Treasury Department. “A centerpiece of the Administration’s tax compliance agenda includes an important reform proposal, known as financial reporting, which would expand the information available to the Internal Revenue Service (IRS). This information will help the IRS determine whether taxpayers with opaque sources of income are meeting their tax obligations.”

Congressional consideration of this proposal has been marred by misinformation, as opponents have elevated the pernicious myth that banks will have to report all individual customers’ transactions to the IRS. This is unequivocally false, and an incorrect representation of the proposals under consideration. Simply put, the financial reporting proposal in front of Congress does not mandate that individual transactions of any amount be reported to the IRS.

Instead, the proposal would direct banks to report basic, high-level information on aggregate account inflows and outflows. Banks would add just a bit of additional data to information that they already supply to taxpayers and the IRS: how much money went into the account over the course of the year, and how much came out.

Crapo, Idahoans Highlight Concern with IRS Banking Reporting Scheme – Senate Finance Republicans: "The Biden Administration and congressional Democrats are considering an $80 billion boost in IRS funding, and implementing a reporting dragnet under which local banks, credit unions and payment providers will essentially be turned into agents of the IRS, monitoring and reporting of inflows and outflows on deposits and withdrawals made in private accounts.  This proposal raises a number of serious concerns regarding Americans’ privacy; data security; and a massive amount of paperwork and confusion for taxpayers and the IRS.  In light of these proposals to massively expand the IRS with unprecedented amounts of mandatory funding, and the IRS’s continued abuses of taxpayer rights and privacy, Senator Crapo has introduced legislation to place important guardrails around and IRS funding to protect taxpayer rights and privacy, the Tax Gap Reform and IRS Enforcement Act."

U.S. Senator Mike Crapo, Idaho, Ranking Member of the Finance Committee

'I think this is the biggest violation of personal privacy that has ever even been proposed, let alone enacted, by the United States government, and it’s something that every American ought to be incredibly worried about.'

Tons of businesses speak out against the IRS proposal in a letter to congressional leaders, which, in part, states:

Lawmakers must fully understand the breadth of taxpayers who would be receiving a new form from their financial institution – almost every American who has a bank or credit union account and has gross inflow and outflow of at least $600. While recent proposals suggest that increasing the de minimis threshold to $10,000 is less objectionable, this is a flawed assumption and will not significantly reduce the scale of this new IRS program.


Crypto Industry’s Hard Lobbying Push Now Includes Coinbase – Joe Light, Bloomberg ($). “Add Coinbase Inc. to the ranks of cryptocurrency firms looking to write their own regulation before Washington does. The largest U.S.-based crypto exchange released a policy proposal on Thursday calling for the U.S. government to put a new regulator in charge of digital assets and to create a new set of crypto-specific rules, instead of applying decades-old law that governs the rest of the financial system.”

‘It didn’t make sense to take a legacy regulation and somehow transform it into an agency that would be able to look at these markets anew,’ Faryar Shirzad, Coinbase’s chief policy officer, said at a briefing with journalists.


Fossil Fuel Penalties, Breaks for Renewables Face Senate Review – Doug Sword, Tax Notes. “The climate portion of the House reconciliation bill includes tax subsidies that power companies could game and other benefits that disproportionately go to high-income households, according to a former top energy adviser to President Obama.”

Harvard University professor Joseph Aldy, speaking October 14 during a virtual event hosted by the Urban-Brookings Tax Policy Center, said he also expects that there will be major changes when the Senate counters on the House reconciliation bill. Of the three ways to cut emissions — regulations, incentives, and penalties — the House bill leans heavily on tax incentives, he said, adding that the “political calculus” in a 50-50 Senate will require some spending as well, particularly to help coal communities disadvantaged by the clean energy subsidies.


Group Pushes for Removal of Easement Proposal’s Curing Provision – Kristen Parillo, Tax Notes. “A curing provision included in the reconciliation bill’s proposal to limit conservation easement deductions would invite abuse and should be removed from final legislation, according to a group of scholars.”

If enacted, the provision — which permits donors to correct defective deed language in some circumstances — would undermine the goal of ensuring that tax-deductible conservation easements are protected in perpetuity, the group said in an October 11 letter to Senate Finance Committee members.

Others, however, say the provision would reassure legitimate easement donors wary of the IRS’s increased scrutiny of conservation easement deductions and reliance on so-called technical flaws when challenging claimed deductions.


Here are 5 benefits of a health savings account that you may not know about – Sarah O-Brien, CNBC. “You may want to get to know about a health savings account a little better. HSAs are known for their triple tax advantage — contributions are made pre-tax, growth is tax-free and withdrawals used for qualified health-care expenses are also are untaxed. Yet there are some aspects of these accounts that are less well-known but could come in handy.

If you contribute to your HSA through payroll withholdings, you can change that rate of deferral at any point during the year…

Like catch-up contributions for retirement accounts, this is for account holders who are at least age 55…

Adult children can be covered until age 26 under their parents’ insurance, even if they’re married or not living with the parents…

Because you can leave your HSA funds in your account as long as you want, one strategy for long-term savings is to pay cash for current medical expenses instead of using your HSA.

Then, later, when you face a large expense — i.e., college tuition, travel, down payment on a house — you can withdraw the amount you paid out of pocket earlier for qualified medical expenses…

The money in your account can be used for qualified health-care costs for yourself, of course, but also for any tax dependent.


Favorite U.S. Tax Haven of Rich and Powerful Holds $500 Billion – Anders Melin, Bloomberg ($). “There’s no telling where the vast fortunes hide on tree-softened Phillips Avenue here in Sioux Falls. No billionaires in Brioni tuck into the gravy-drenched roast beef sandwich at the Diner. No dark-windowed Escalades cruise past the Child’s Play Store, where the owner sports a pin that proclaims her a 'glow getter.'"

Yet the money is here, mind-boggling sums of it, along this avenue in South Dakota, as the wider world discovered one sunny Sunday in October.

Somehow, millions of private financial records — known as the Pandora Papers — had landed in the hands of journalists. They laid out how wealthy and powerful people with checkered pasts exploit the U.S. financial system to store assets. One of their favorite spots: Sioux Falls.

SALT Cap Workaround Bill Passed by Michigan House – Alex Ebert, Bloomberg ($). “A bill that could save Michigan pass-through entity owners roughly $200 million off their federal tax bills passed the Michigan House Thursday in a bipartisan push to provide an income tax break to owners of S-corps and LLCs.”

The bill (H.B. 5376) would allow owners to pay their state and local taxes (SALT) at the business-entity level instead of individually, creating a workaround so pass-through business owners can avoid the federal $10,000 limit on individuals’ deductions for state and local taxes.

Big Tech Calls Maryland’s Tax a ‘Penalty’ to Cure ‘Social Ills’ – Michael Bologna, Blomberg ($). “Big tech companies challenging Maryland’s tax on digital advertising accused the state of imposing a penalty on the likes of Google and Facebook for perceived 'social ills' rather than a legitimate tax protected under state and federal law.”

The U.S. Chamber of Commerce and three technology trade associations told a federal court that Maryland Attorney General Brian Frosh can’t shield the state and its first-in-the-nation Digital Advertising Gross Revenues Tax from federal court scrutiny under the Tax Injunction Act, or TIA.

New York Postpones Oct. 15 Tax Deadlines for Storm-Affected Counties – Jamie Rathjen, Bloomberg ($). “New York tax deadlines falling on Oct. 15 were extended for victims of Post-Tropical Depression Ida, the state Department of Taxation and Finance said Oct. 12. Tax filing and payment deadlines that were scheduled to occur on Oct. 15 are extended to Jan. 3, 2022, the department said in a notice.”

The Post-Tropical Depression Ida disaster area includes Bronx, Dutchess, Kings, Nassau, New York, Orange, Putnam, Queens, Richmond, Rockland, Suffolk, Sullivan, Ulster, and Westchester counties, as well as contiguous counties, the department said.

California Man Loses Chance to Wipe Out State Tax in Bankruptcy – Daniel Gill, Bloomberg ($). “A California man who failed to tell the state that the IRS changed his federal tax assessment lost his bid to eliminate his state tax debt through his bankruptcy.”

Federal bankruptcy law requires that debtors seeking to wipe out tax liabilities must have filed their tax returns, or an ‘equivalent report or notice,’ in a timely manner, the U.S. Court of Appeals for the Ninth Circuit said Thursday. A California resident’s alert to the state’s Franchise Tax Board of a new IRS assessment—as mandated by the state—is such a ‘report,’ the Ninth Circuit said.

Fed. Judge Tosses E-Biz Group's Calif. Sales Tax Challenge – Paul Williams, Law360 ($). “A federal judge dismissed an e-commerce trade group's attempt to block California from pursuing back sales taxes from sellers with inventory housed at in-state Amazon fulfillment centers, finding a federal law requires the claims to be filed in state courts.”

In an order issued Wednesday, U.S. District Judge Morrison C. England Jr. granted the California Department of Tax and Fee Administration's motion to dismiss a preliminary injunction bid from the Online Merchants Guild. Judge England said the Tax Injunction Act, which mandates most state tax cases to be heard in state courts, applied to the complaint.

‘As pled, plaintiff's claims are clearly barred here,’ Judge England said in a six-page order, but he added that the guild could file an amended complaint within 20 days.

Ariz. Tax Dept. Says Car Sharing Businesses Must Pay Tax – Asha Glover, Law360 ($). “Peer-to-peer car sharing businesses are required to pay transaction privilege tax on all rentals conducted through their platforms, the Arizona Department of Revenue said Thursday.”

Peer-to-peer business platform owners are responsible for paying the tax, the department said in a notice, and private vehicle owners do not need a transaction privilege tax license or to pay the tax to offer their vehicles for rent through a peer-to-peer sharing platform. However, private vehicle owners can certify to the department that their vehicle is an individual-owned shared vehicle and that transaction privilege tax, state use tax or out-of-state sales or use tax was paid on the vehicle when it was purchased.


U.S., Europe Vow to Remove Digital Taxes—But Details Scarce – Isabel Gottlieb and Hamza Ali, Bloomberg ($). “The U.S. and European countries have reached a deal to roll back digital tax measures as part of a larger multilateral agreement, officials on both sides say, but details have yet to emerge about how a global overhaul will mandate the repeal of digital levies around the world.”

French Finance Minister Bruno Le Maire told reporters Thursday—and a U.S. official confirmed—that the European countries with digital taxes labeled discriminatory by the U.S. had reached an agreement on how the measures would be rolled back as part of a global deal.

‘We have reached a political agreement with all European countries that have existing DSTs regarding transition mechanisms for the rollback of those taxes, and we expect more details on this agreement to be forthcoming in the coming days,’ said Alexandra LaManna, a spokesperson for the Treasury Department.

Global tax deal could drive changes in Democrats’ budget plan – Laura Weiss, Roll Call. “As they work to raise taxes on U.S. companies doing business abroad, Democrats are considering honing some details to align with a landmark deal for other countries to charge similar levies and curb tax avoidance in the process.”

House Democrats drafted their international tax plan with an eye on the global talks when they made it part of their budget reconciliation bill, a filibuster-proof package intended to implement much of President Joe Biden’s domestic agenda.

Now with the bill stalled as Democrats debate spending levels, details of the global deal are solidifying and influencing discussions on exactly how the U.S. will boost taxes on multinationals — if they can get the plan past business-friendly centrists. For starters, Democrats are discussing delaying tax increases to give time for other countries to set up their own minimum taxes on large multinationals’ earnings around the world. 


Happy National I Love Lucy Day! The iconic show debuted on this day in 1951 and was the first filmed and scripted program performed before a live audience.

“The studio literally knocked a hole in a concrete wall creating room for theater seating inviting the once-banned fans to see the stars perform – for free! The new format and I Love Lucy won five Emmy Awards and received numerous nominations,” according to National Day Calendar.

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