Please note: President Joe Biden is scheduled to sign into law the $1.2 trillion infrastructure bill at 3pm Eastern today. The blog will post an article on this occasion later today.
IRS commissioner: We desperately need resources so the agency can serve you and our country – IRS Commissioner Charles Rettig, Washington Post. “Over the past decade, the IRS budget has been decimated. Today’s historically low level of funding means that the agency is not equipped to provide the American people the service they deserve or to fully enforce the tax laws against those who evade them.”
This should be recognized as the crisis it is. The IRS plays a pivotal role in our country’s overall success: Last year, it collected more than $4 trillion, providing about 95 percent of the nation’s gross revenue. As IRS commissioner, I’m proud to note that the ability of the United States to provide its citizens with meaningful services and benefits — including defense, infrastructure, education and support for families — depends in large part on the agency’s work.
That is why, as IRS commissioner, I strongly urge Congress to enact the administration’s proposal to provide us with $80 billion in vital funding over the next decade.
Is the Appeals Pre-Conference Meeting Fair to the Exam Team? – Joel Cohen, Tax Notes ($):
In this article, Cohen argues that the pre-conference meeting process of the IRS Independent Office of Appeals is unfairly biased against the examination function.
IRS Can Collect Penalty From Biz Owner, 11th Circ. Affirms – Eric Kroch, Law360 ($). “The Eleventh Circuit ruled Friday that the Internal Revenue Service could collect on a penalty assessed against the owner of an environmental services company for unpaid payroll taxes, saying an agency settlement officer correctly found the penalty wasn't abated."
Although there was confusion over whether the IRS had abated the trust fund recovery penalty against Florida-based Erosion Stopper Inc. owner Kelvin Crews, the strongest available evidence showed it had not, the court said in a per curium opinion that affirmed the U.S. Tax Court. Crews had argued the agency had abated the penalty along with another related to his other business, K.C. Earthmovers Inc., but the determination letter sent to Crews said only the Erosion Stopper penalty was abated, the court said.
Centrist Democrats Await Cost Analysis on $2 Trillion Bill – Andrew Duehren, Wall Street Journal ($). “House Democrats’ hopes of passing their $2 trillion social-spending and climate package [this] week will hinge in part on how much a nonpartisan scorekeeper estimates the bill will cost and how much revenue it raises.”
Five centrist House Democrats who want to ensure the bill is fully paid for blocked House Speaker Nancy Pelosi (D., Calif.) from moving forward with a vote on the legislation last week, insisting that the Congressional Budget Office first analyze the bill. The group’s members committed to supporting the bill [ths] week as long as the CBO’s view on spending and revenue was consistent with the Biden administration’s estimates.
Democrats’ Agenda Hangs on Budget Office Working ‘Day and Night’ – Jack Fitzpatrick, Bloomberg ($). “Democratic lawmakers working to advance a $1.75 trillion social tax and spending bill in the House this week have balanced their legislative ambitions on an often overworked group of experts with a smaller budget than some D.C. think tanks.”
Key moderate Democrats have said they want to see a Congressional Budget Office score of the party’s major reconciliation bill before they vote on the bill in the House, though they’ve promised a vote no later than this week. That puts the spotlight on a small band of policy experts who are required to work around the clock when the congressional schedule heats up.
The CBO released estimates for six of the 13 portions of the bill last week, though Director Phillip Swagel hasn’t detailed how long the most difficult parts of the bill will take to analyze. Speaker Nancy Pelosi (D-Calif.) said in a letter to colleagues on Friday that CBO is likely on Monday to release three more reports, though she didn’t indicate which ones.
House Eyes Vote on Biden Agenda, But Slowdown Looms in Senate – Erik Wasson, Laura Litvan and Laura Davison, Bloomberg ($). “House Democrats aim to vote this week on President Joe Biden’s roughly $2 trillion tax and spending bill, despite lingering uncertainty over the bill’s cost, GOP attacks over its potential inflationary impact and a wide-spread expectation that the Senate won’t act until December at the earliest.
A key milepost this week will be more analysis of revenue and spending of the legislation’s various provisions from the Congressional Budget Office.
The CBO’s work is central to a deal worked out between moderate and progressive Democrats before last week’s congressional break. That agreement cleared the way for progressives to consent to passage of a $550 billion infrastructure bill, which Biden is set to sign later Monday, in exchange for moderates backing a vote on the broader economic package this week.
Regarding the Senate, the bill remains a work in progress:
Democrats in the Senate are still working to resolve disputes over taxes, Medicare spending, paid family leave, immigration and the top-line of the bill. On top of that, Senate officials will likely need to work through next week’s Thanksgiving recess to scrub the House bill to make sure it complies with the chamber’s intricate rules before bringing it to the floor.
Schumer shakes up schedule as reconciliation bill slog continues – Burgess Everett, Politico Pro ($). “President Joe Biden’s $1 trillion-plus social spending plan will probably have to wait several weeks to hit the Senate floor.”
With Congress reconvening Monday and the House still working to pass the massive climate, safety net and tax package, the Senate will likely turn instead this week to the massive annual defense policy bill, Senate Majority Leader Chuck Schumer said Sunday. That’s because even if the House passes the so-called budget reconciliation bill this week, there’s still work to do to ready the legislation for the Senate floor.
‘Due to the House pushing back consideration of the [Build Back Better Act ] to the week of November 15th, it is likely that the Senate considers the NDAA this upcoming week as we await House passage of the BBBA,’ Schumer told Democrats in a Dear Colleague letter on Sunday morning. After one week in session, Congress is scheduled for a Thanksgiving break next weekend.
The move toward NDAA on the Senate floor in the coming days makes it all the more likely Congress will be working well into December to finish out Biden’s domestic agenda.
FWIW: Washington insiders would have been surprised if the Senate voted on the bill before December. For quite a while it has been common knowledge that this bill would not pass Congress (if it passes) until the holidays are upon us.
Inflation-Wary Manchin Voters Put Biden’s Agenda in Peril – Gregory Korte, Bloomberg ($). “When Senator Joe Manchin says President Joe Biden’s $1.75 trillion social spending package will worsen inflation and leave the most basic government services like Social Security and Medicare in danger, he’s reflecting the fears of his aging and vulnerable West Virginia constituents.”
Manchin has been one of two major holdouts imperiling Senate passage of Biden’s so-called Build Back Better legislation, which includes universal pre-kindergarten, child-care subsidies, and, possibly, paid family leave and free community college, as well as addressing elder care and prescription drug prices. It also includes measures to address climate change.
Delayed ‘mega IRA’ provisions boost budget bill’s revenue take - Laura Weiss, Roll Call. “Democrats are getting more revenue they can count toward paying for their roughly $2 trillion social spending and climate package thanks to tweaks to a provision that would set new limits on how much cash can be stowed away in tax-free retirement accounts.”
The proposal to crack down on ‘mega IRAs’ will generate about $7.3 billion in revenue over a decade, up from $1.8 billion in its original form in legislation the House Ways and Means Committee approved in September, according to Joint Committee on Taxation estimates.
That’s because a delay in implementing the first-time mandates makes for beneficial math within the decade-long budget window used to calculate the cost of the filibuster-proof reconciliation bill. At the same time, Democrats swapped in a tighter income limit for households that have to adhere to the new rules.
Besides Biden’s economic agenda, Congress has a mammoth to-do list by year end:
Democrats Race to Rack Up Accomplishments Before Campaign Starts – Nancy Ognanovich, Bloomberg ($). “Next week’s rush to move along a massive spending package is only the first item on a holiday season list Democrats must check off.”
They’ll return from recess under a time crunch to build on their success clearing the infrastructure bill with a series of other priorities they hope to showcase to start the election year. Beyond the president’s $1.75 trillion social spending and tax package, must-do items include appropriations bills to keep the federal government running and the Pentagon’s annual budget bill.
House and Senate leaders are already tearing up their personal holiday plans as legislative work days dwindle and the push intensifies to make a dent in President Joe Biden’s agenda.
GOP’s Mace to Offer Low-Tax Pot Plan to Counter Schumer’s Bill – Tiffany Kary, Bloomberg ($). “A Republican bill to legalize marijuana at the federal level in the U.S., expected to be unveiled soon, would have a lighter regulatory touch, lower taxes and fewer provisions to help minorities compared to prior legislative efforts, two people who’ve seen the draft legislation said.”
South Carolina Representative Nancy Mace has been reported to be leading the draft. Mace, who has declined to comment when asked about the initiative, has a press conference scheduled for Monday about the proposal. Her legislation follows a bill from Democrat and Senate Majority Leader Chuck Schumer, the Cannabis Administration & Opportunity Act, which hasn’t gained traction.
Covid-19 Aid Rules Unlikely to Sway State Suits, Attorneys Say – Sam McQuillan, Bloomberg ($). “States may receive final details soon on how they can spend the $350 billion the federal government sent to them under the latest pandemic relief law.”
But Treasury Department final rules may not sway states or judges one way or another when it comes to the 13 states suing the department over a provision in the law that prevents them from using the funds to offset revenue lost from tax cuts. Those disputes have “morphed into something bigger,” as one attorney put it.
‘Even if the final guidance gives states a lot of flexibility, which I expect it will, the states will continue to pursue their cases,’ said Chris Moran, a lawyer at Venable LLP in Baltimore who has been following the litigation. ‘I think these lawsuits are more about states vs. federal regulatory authority than the actual issue of how the states can spend the ARPA funds.’
Cooperation, Uniformity on Display at Multistate Tax Meeting – Michael Bologna, Bloomberg ($). “Who says the states can’t get on the same page when it comes to tax policy?:
Taxation of the digital economy is one of the hottest issues in tax. Several states are experimenting with innovative laws and regulations that capture revenue from companies—such as Google, Facebook, Amazon, and Netflix—that profit from online advertising, data aggregation, computing services, and entertainment.
Louisiana Voters Reject Plan Overhauling Sales Tax Collections – Michael Bologna, Bloomberg ($). “Louisiana voters rebuffed creation of a centralized sales tax collection system, keeping in place a complicated tax set-up that disperses collection duties among more than 60 jurisdictions.”
However, a separate ballot question cutting individual and corporate income tax rates won voter approval during a low-turnout, off-year election Saturday.
The Louisiana secretary of state reported 52% of voters opposed constitutional Amendment No. 1, which would have streamlined sales tax collections across the state through creation of the State and Local Streamlined Sales and Use Tax Commission. As a practical matter, the amendment would have shifted authority for sales tax administration from the 64 separate taxing jurisdictions to a single electronic system operated by the commission, reducing complexity and compliance costs for retailers.
EU adopts public country-by-country reporting to deter corporate tax avoidance - Doug Connolly, MNE Tax. “The EU’s new requirement for multinationals to publicly disclose the amount of tax they pay in each EU country will become law following the approval by the European Parliament on November 11. Multinationals will have to begin complying with the rules starting sometime in 2024. EU member states will have 18 months to transpose the directive into national law after it enters into effect, which will occur 20 days after it is published.”
‘Today’s adoption is a long-awaited step in increasing corporate transparency, setting a precedent for the world,’ said Spanish parliamentary member Ibán García del Blanco. ‘The EU must put an end to the cloak of secrecy around where and how large multinationals do business and how much taxes they pay in each country.’
Income Taxation of Cryptocurrency — A Country Comparison – Jasmin Kollmann, Liu Qichao, Wu Fangbei, Tax Notes ($). “In this article, the authors examine the relationship between cryptocurrencies and legal tender, outline key taxable events, and explain how treating cryptocurrencies as assets subjects them to various taxes.”
A Few Talking Points on That Minimum Tax on Book Income – Martin Sullivan, Tax Notes ($). “The overwhelmingly popular appeal of imposing tax on tax-free, mega-profit corporations won’t be easy to overcome. From a political perspective, the loud objections — mostly from academic accounting types — are minor.”
Doubts Swirl Over US' Ability To Ratify Global Tax Deal – Kevin Pinner, Law360 ($). “An absence of faith in the U.S.' ability to enact international accords championed by its own executive, such as the global tax deal and Paris climate change agreement, is fueling calls for alternative compliance paths that present their own challenges.":
The latest version of the OECD agreement says no new DSTs will be imposed if the multilateral treaty comes into force before Dec. 31, 2023. But the issues still being negotiated at the OECD are myriad.
Countries still need to agree on which "regulated financial services" are excluded from Pillar One, how the "dispute prevention and resolution mechanisms" to prevent double taxation will work and whether more certainty about DST removal can be added. In addition, they need to decide what the "common approach" for applying a 15% minimum tax will be. The OECD said it expects to publish model legislation for Pillar Two in November.
Make Room! That’s today’s goal because it’s National Clean Out Your Refrigerator Day! With Thanksgiving right around the corner, making room in your fridge is instrumental to maximizing space for leftovers. Besides, week-old pizza and days-old meatloaf has lost its luster. Begone!
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