Tax News & Views It Lives! Roundup

November 5, 2021

House Set to Vote Friday on Biden’s $1.75 Trillion Economic Plan – Billy House and Erik Wasson, Bloomberg ($). “The House plans to vote Friday on President Joe Biden’s $1.75 trillion economic package and a separate infrastructure bill, after intense 11th-hour negotiations by Speaker Nancy Pelosi appeared to settle lingering differences."

A vote on the massive tax and spending measure follows months of intra-party tension and disputes that carried into late Thursday night. Although much of the bill had been written, there were last- minute changes on modifying the state and local income tax deduction and a provision allowing Medicare to negotiate drug prices.

FYI: The infrastructure bill can be signed into law after the House passes it. The budget reconciliation bill (aka Build Back Better "BBB") will go to the Senate after House passage and likely be amended. This will not be a quick process. 

Punchbowl News:

After the BBB passes, it needs a score, then it will go onto the Senate, where it will get, umm, amended if we put it kindly, by various Democrats ranging from Sens. Bernie Sanders to Bob Menendezto Kyrsten SinemaandJoe Manchin and others. Senate Parliamentarian Elizabeth MacDonough and her staff will scrub it to see if it comports with the Byrd Rule, which controls the reconciliation process. There will be a vote-a-rama, and Senate Republicans will get to offer hundreds, maybe thousands of amendments. Then, at some point. Senate Majority Leader Chuck Schumerwill have to get it across the finish line for final passage. And after that, it’s back to the House for even more drama.

FWIW: For House Democratic leaders to bring the BBB up for a vote, the assumption is it will pass. We'll see if that assumption holds true. 


JCT score for reconciliation bill shows it will raise roughly $1.5 trillion in revenue – Claire Rafford, Politico Pro ($). The Biden Administration has said that the budget reconciliation bill will not cost anyone a dime. The article reports that the legislation will cost corporate and international interests $813 billion and cost individuals $640 billion. That’s a lot of dimes.

Tax Hikes in House Social Spending Bill Total $1.48 Trillion - Laura Davison, Bloomberg ($). “The House’s version of President Joe Biden’s signature social-spending bill raises nearly $1.48 trillion in new tax revenue, according to the Joint Committee on Taxation.”

The plan also includes $24.8 billion for a fee on businesses that pollute, pushing the total of new revenue to roughly $1.5 trillion. Still, the money from tax increases on the wealthy and corporations falls short of the $1.75 trillion that Democrats say they want to spend on new social programs.

Budget group finds tax-and-spend package a slight drag on economy – Bernie Becker, Politico Pro ($). Using data from the Penn Wharton Budget Model, the article reports if the budget reconciliation bill that is being negotiated in the House were to become law, gross domestic product would be reduced by 0.1% by 2050 and federal debt would increase 2% over the same time frame.


SALT Cap Gets Another Boost in Latest Talks on Biden Agenda – Erik Wasson, Bloomberg ($). “House Speaker Nancy Pelosi has signed off on a change to the state and local tax deduction provisions in President Joe Biden’s $1.75 trillion economic agenda as she hunts for votes to squeak the bill through the House.”

Instead of moving forward with a proposal to lift the $10,000 cap on state and local tax deductions to $72,500 through 2031, the bill will now raise it to $80,000 through 2030 according to a person familiar with the negotiations. 

The cap would snap back to $10,000 in 2031. Compared to current law where there is no cap after 2025, the provision would raise $14.8 billion in revenue over 10 years.

This is not the final product for SALT. The Senate is expected to change the measure so that the $10,000 cap remains for taxpayers with AGIs above $400,000. We'll see how negotiations go. 


IRS Chief Anticipates Filing Errors in Complicated Tax Season – Laura Mahoney, Bloomberg ($). “The Internal Revenue Service is expecting a difficult 2021 income tax return filing season due to errors involving advanced child credit payments and economic impact payments, Commissioner Charles Rettig said Thursday.”

‘If that many folks had difficulty combining two numbers and matching it to ours it’s going to be as difficult this year,’ Rettig told attendees of the California Lawyers Association 2021 Annual Meeting of the California Tax Bar and California Tax Policy Conference in San Diego.


IRS Failing to Act On Wealthy Tax Delinquencies, Watchdog Says – Colin Wilhelm, Bloomberg ($). “The IRS hasn’t been successful in collecting a substantial amount of the taxes it believes wealthy non-filers owe, according to a Treasury Department watchdog analysis.”

The Treasury Inspector General for Tax Administration, in an updated analysis of alleged tax delinquency by wealthy non-filers, found that the IRS has yet to collect money from 39% of a set of 300 households the IRS believes still owe a substantial amount of taxes from 2014 to 2016. Those 117 taxpayers owe an estimated $5.2 billion in unpaid taxes, with no enforcement action underway to collect, according to the watchdog report.


IRS Boosts 401(k) Contribution Annual Cap to $20,500 – Richard Rubin, Wall Street Journal ($). “Workers will be able to set aside up to $20,500 in their 401(k) accounts in 2022, up $1,000 from this year, the Internal Revenue Service said Thursday.”

The change is part of the tax code’s annual inflation adjustments and doesn’t require Congress to act. The benefits will go to the small fraction of higher-income people who are able to max out their 401(k) contributions, setting aside more than $20,000 from their current incomes.


Year-end giving reminder: Special tax deduction helps most people give up to $600 to charity, even if they don’t itemize – IRS:

The Internal Revenue Service today reminded taxpayers that a special tax provision will allow more Americans to easily deduct up to $600 in donations to qualifying charities on their 2021 federal income tax return.

Ordinarily, people who choose to take the standard deduction cannot claim a deduction for their charitable contributions. But a temporary law change now permits them to claim a limited deduction on their 2021 federal income tax returns for cash contributions made to qualifying charitable organizations. Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify.

Under this provision, individual tax filers, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions made to qualifying charities during 2021. The maximum deduction is increased to $600 for married individuals filing joint returns.


IRS to Offer Fixes for 17,000 Canceled Tax Debt Payment Plans - Allyson Versprille, Bloomberg. “The Internal Revenue Service is taking steps to help people who had payment plans for their past-due tax debts terminated because of changes to the agency’s private debt collection program, according to National Taxpayer Advocate Erin Collins."

The agency in September awarded three new contracts to private companies that are authorized to collect certain unpaid tax debts on behalf of the federal government. Contracts for two companies that had been working with the IRS since 2016—Performant Recovery Inc. and Pioneer Credit Recovery Inc.—weren’t renewed, resulting in the termination of informal payment arrangements taxpayers had entered into with those companies.

The IRS this month will send letters to roughly 17,000 taxpayers, informing them that they can enter installment plans with the agency that mirror the canceled arrangement they had with private collectors, Collins said in a blog posted Wednesday. Taxpayers may even be eligible for agreements with the IRS that have better terms than their old installment plans, she said.


IRS Looking Into Phone Line-Jumping Service – Kristen Parillo, Tax Notes ($). “The IRS is reviewing complaints that a private company’s service of selling slots at the front of the hold queue for the agency’s clogged phone lines is making it tougher for others to get their calls answered.”

‘We’re studying that issue to understand if we can identify how frequently it’s happening and then what we can do about it,’ Douglas O’Donnell, IRS deputy commissioner for services and enforcement, said at the Bank & Capital Markets Tax Institute webinar November 4.


Tax and Practical Strategies to Mitigate No-Shows in Business - Kelly Phillips Erb, Bloomberg ($). “With budgets tight, every dollar matters—especially for small businesses. Recently, some business owners have taken to social media to complain about 'no-shows.' Whether you run a salon or an accounting firm, chances are that sometimes folks make appointments and then don’t bother to attend. And it adds up. Across all industries, the average no-show rate is about 10-15%. For a small business earning $250,000 per year, that’s a five-figure hole.”

While it’s always annoying to be stood up, there’s a more serious issue: What happens to that “lost” revenue? Business owners often wonder whether the time that was squandered could be deductible.

It seems like a fair question since you can often quantify the actual value of the missed time. For example, if my billable rate is $400 per hour and I schedule an hour for a client who doesn’t show up, then in theory, I’ve lost $400, right? Or if a customer skips out on a $100 haircut appointment, that looks like a $100 loss.

And maybe it feels like that. But for federal tax purposes, it doesn’t work like that. A missed opportunity to make money is not deductible—even if it’s the result of a no-show.

Imagine the possibilities if no-shows were tax deductible. 'Drat, my client didn't show! I was going to charge him $1 million.' 


No Wealth Tax, New York Governor Vows: ‘Have Right Balance Now’ - Keshia Clukey, Bloomberg ($). “New York Gov. Kathy Hochul said she’s not in favor of taxing the wealthy, and instead is focused on bringing businesses back to the state.”

‘I believe we have the right balance right now,’ Hochul (D) said when asked about taxing the rich during a webinar sponsored by City & State New York and AARP on Thursday. She said she doesn’t want to drive people to Florida. ‘Those individuals, high-net-worth individuals, allow us to have the revenue generated, as well as their many philanthropic contributions that I need to be able to support the progressive programs I want to have funded,’ she said. 

Colorado Voters Reject Property Tax Cut Initiative – Asha Glover, Law360 ($). “Colorado voters rejected an initiative that would reduce the taxable rate of residential and commercial property, according to unofficial results as of Thursday.”

Proposition 120, which proposes decreasing the assessment rate, or the percentage of actual property value that is taxed, for residential property from 7.15% to 6.5%, appeared to be heading toward failure, according to unofficial results from the Colorado secretary of state. Under the proposal, the rate for commercial property would be reduced from 29% to 27%. As of Thursday, the vote stood at 43% in favor and 57% against.

Murphy Faces Pressure on N.J. Taxes, Jobs Growth in Second Term - Stacie Sherman, Bloomberg ($). “Phil Murphy will start a rare second term for a Democratic New Jersey governor facing pressure to rein in taxes, fund mass transit and finish the job on Covid-19 recovery.”

Murphy enacted a millionaire’s income tax during his first term and used the money to provide rebates for middle-class homeowners. He has pledged not to raise taxes in his second term. That doesn’t mean that New Jersey’s property taxes -- which are set and collected by local governments -- won’t continue to increase, as they have done each year for more than two decades.

New Jerseyans paid an average property-tax bill of $9,112 in 2020, the highest rate in the nation. Murphy’s predecessor, Republican Chris Christie, enacted a tax cap that has helped limit annual growth in recent years.

California Tax Appeals Office Will Launch Online Portal in 2022 – Laura Mahoney, Bloomberg ($). “California’s administrative tax appeals office will launch an online portal in early 2022 for taxpayers and their representatives to submit documents, track their cases, and communicate with parties.”

Taxpayers will be able to file their initial appeals, briefs and motions, power of attorney forms, extension requests, and other documents through the Office of Tax Appeals portal, Assistant Chief Counsel Michele Brown said. They will have instant access to details such as case status and deadlines as well.


US Must Ratify New Global Tax Treaty, OECD Official Says – Natalie Olivo, Law360 ($). “New global corporate tax rules involve an upcoming treaty requiring international ratification — including from the U.S. Congress, which is "reluctant" to agree to multilateral tax accords, Organization for Economic Cooperation and Development tax chief Pascal Saint-Amans said Thursday.”

The corporate tax overhaul is a political deal that doesn't yet have the legal instruments needed for implementation, according to Saint-Amans, who spoke during the Web Summit technology conference in Lisbon, Portugal. Accordingly, the OECD is working with countries to negotiate a multilateral convention, which must be ratified by the nearly 140 jurisdictions that on Oct. 8 agreed to the political deal, including the U.S., he said.  


Donut Freak Out, but its National Donut Day! Plus Friday!! Bring on the stretchy pants and outsized shirts!

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