Tax News & Views Deduct it All Per-diem Roundup

November 17, 2021

IRS Explains Per Diem Eligibility for Business Meal Deduction - Caitlin Mullaney, Tax Notes ($). "Notice 2021-63, 2021-49 IRB 1, released November 16, clarifies that for the purpose of the temporary business deduction for restaurant food and beverage purchases, the meal portion of a per diem rate or allowance can be attributed as eligible restaurant purchases for taxpayers that properly apply the rules of Rev. Proc. 2019-48, 2019-51 IRB 1392."

This means the portion of the daily per-diem allowance for travelers for meals (but not incidental expenses) will be 100% deductible for 2021 and 2022.


IRS provides guidance on per diem rates and the temporary 100% deduction for food or beverages from restaurants (IRS):

The Internal Revenue Service today issued Notice 2021-63 PDF to make clear how the temporary 100% business deduction for food or beverages from restaurants applies to taxpayers properly applying the rules of Revenue Procedure 2019-48 PDF for using per diem rates.

Previously, the IRS issued Notice 2021-25 PDF providing guidance under the Taxpayer Certainty and Disaster Relief Act of 2020, which added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants, as long as the expense is paid or incurred in 2021 or 2022.

For a taxpayer properly applying the rules of Revenue Procedure 2019-48, Notice 2021-63 provides a special rule that allows the taxpayer to treat the full meal portion of a per diem rate or allowance as being attributable to food or beverages from a restaurant beginning January 1, 2021, through December 31, 2022.


IRS: Per Diem Is Food Provided by Restaurants - Russ Fox, Taxable Talk. "This is excellent news for individuals using the per diem rate.  You, too, get the benefit of the 100% meals deduction for 2021 and 2022."


Democrats to Launch Floor Debate Despite IRS, SALT Dilemmas - Doug Sword, Tax Notes ($):

Democrats face two questions in moving the mammoth bill. Will five moderates who insisted on getting official scores from the Congressional Budget Office before a vote be OK with a projection that says beefing up the IRS won’t produce the kind of tax boon the White House says it will? And will progressives bolt over the proposed $80,000 SALT cap and estimates that it would skew the bill’s benefits toward the wealthy? 

With a 221-213 majority, House Democrats can afford only three defections.


Biden Hits Road to Promote Infrastructure Law as Democrats Debate Spending Plans - Andrew Restuccia and Catherine Lucey, Wall Street Journal ($). While some House Democrats have insisted on a Congressional Budget Office score on the bill before they vote, it increasingly appears that the wait is just for show: 

Several of the holdout centrist Democrats have indicated that they will accept the Biden administration’s estimate for the IRS revenue and that their support wouldn’t be shaken by a lower CBO figure.

Rep. Kurt Schrader (D., Ore.) said that he had been in touch with the CBO about the apparent discrepancy and concluded that it was the result of “a legitimate difference of opinion.”

“I think it’s OK, that would not dissuade me at this point in time,” he said.


Democrats might drop union bonus for electric vehicle credit - Lindsey McPherson, Roll Call. "House Democrats are starting to acknowledge changes to their sweeping budget package that will be needed to get through the evenly divided Senate, such as dropping a special add-on tax credit for electric vehicles built with unionized labor."

The article also provides details on the process the budget bill must go through to pass, including a "privilege scrub" and "Byrd Bath." This probably pushes any final vote on the bill well into next month.

A Vote on BBB This Week? Maybe? - Renu Zaretsky, Daily Deduction:

Majority Leader Steny Hoyer said “most of” the floor debate on the House version of President Biden’s Build Back Better Act (BBB) will occur today. “And then,” he told reporters, “I expect a vote on… final passage at the earliest Thursday, and at hopefully the latest on Friday.” But he acknowledged it also could be Saturday. It all appears to depend on the Congressional Budget Office score, which is due Friday. 


JCT Analysis Shows Tax Windfalls for Wealthy in Budget Bill - Frederic Lee, Tax Notes ($). "The November 15 JCT analysis, released November 16 by Senate Finance Committee ranking member Mike Crapo, R-Idaho, shows that over 86 percent of those earning between $500,000 and $1 million will see a tax decrease of more than $500 in 2022 if the Build Back Better Act (H.R. 5376) becomes law."


Dems See Good Prospects For Tax On Corp. Stock Buybacks - Alan Ota, Law360 Tax Authority ($):

An analysis by the congressional Joint Committee on Taxation found the proposed 1% excise tax on corporate stock buybacks would raise $124 billion over 10 years.

The proposed levy would apply only to corporations listed on established securities markets. The bill would provide exemptions for shares donated to employee retirement and stock ownership plans and for buybacks worth $1 million or less in aggregate for a year.


Collins Asks IRS to Ease Up on Late Foreign Information Filers - William Hoffman, Tax Notes ($):

“I think that IRS does not have the legal authority to assess” automatic penalties for late foreign information reporting filers, National Taxpayer Advocate Erin Collins said November 16 at a conference hosted by the American Institute of CPAs and the Chartered Institute of Management Accountants.

The automatic penalties of $10,000 or more deprive taxpayers of the opportunity to be notified and mount a reasonable cause or other defense, Collins explained in her 2020 annual report to Congress. Moreover, remedial actions and penalty relief requests can be considered only after the penalties have been assessed, she said.

Collins denounced the IRS’s automatic assessment of international penalties under sections 6038 and 6038A in the 2020 report as “legally unsupportable, administratively problematic, and impos[ing] costs, delays, and stress for taxpayers.”

This is a bold and important statement by the National Taxpayer Advocate. The $10,000 foot-fault penalty applies to forms such as Form 8938, for foreign financial assets; Form 5471, for certain U.S. shareholders of foreign corporations, and Form 8621, for U.S. owners of "PFICs" - basically offshore mutual funds and investment companies. 

Related: IRS Trouble: International Penalty Abatement (video). 


IRS offers online tool for U.S. withholding agents to report foreign income - Michael Cohn, Accounting Today.

The tool does a quality review of data before it’s submitted to the IRS. The IRS noted, however, that use of the tool doesn’t change a withholding agent’s obligations to file Forms 1042-S with the IRS and furnish a copy of the Form 1042-S to the payee.

In general, withholding agents, such as banks, insurance companies, universities, entertainment venues and resorts, or other financial institutions are required to file an information return on Form 1042-S to report amounts paid from U.S. sources to foreign persons. 

Link: IRS news release IR-2021-223.


NC Gov. Says He'll Sign Budget That Phases Out Corp. Tax - Maria Koklanaris, Law360 Tax Authority ($).

Under the plan, billed as a compromise proposal between the conference committees of the North Carolina House and Senate, with input from Gov. Roy Cooper, the state would begin in 2025 to phase out its 2.5% corporate tax rate. By 2029, the rate would go to zero, according to the two-year budget plan. The plan would spend about $53 billion in state funds, not counting federal funding. North Carolina should have passed a budget July 1 and is the only state in the nation that hasn't enacted one yet. It was delayed because of significant disagreement between the legislature, controlled by Republicans, and Cooper, a Democrat.


Meanwhile, North Carolina would join the 20 states that established a new entity-level tax on pass-through businesses. These taxes, which offer partners a federal deduction and a state tax credit, are a way to mitigate the impact of the current $10,000 cap on federal deductions for state and local taxes paid.

The plan also reduces the 5.25% top individual tax rate to 3.99% over six years.


The tax impact of the infrastructure act - Roger Russell, Accounting Today, quoting Wolters Kluwer federal tax analyst Mark Luscombe:

Another provision in the infrastructure act is the early termination of the Employee Retention Credit, which had been originally in place through 2020 but was extended through 2021, according to Luscombe: “The infrastructure bill terminates it after Sept. 30, 2021, eliminating the fourth quarter from what had been allowed. But the fourth quarter has already started, so some are concerned about the retroactive application of the provision. But it seems as though people are desperate to hire right now rather than get rid of employees, so it’s not apparent how big an issue it will be.”

IRS Issues Applicable Federal Rates (AFR) for December 2021 - Bailey Finney, Eide Bailly. "The Section 382 long-term tax-exempt rate used to compute the loss carryforward limits for corporation ownership changes during December 2021 is 1.45%."


Medical tax provisions adjusted in 2022 for inflation - Kay Bell, Don't Mess With Taxes. "For the 2022 tax year, you can put up to $2,850 in your FSA. That's a $100 increase from 2021's $2,750 FSA contribution limit."

Personal Use of a Company Vehicle - Eide Bailly. "A company-owned vehicle used for business purposes (as long as it’s documented) is not considered taxable income. However, when your employee uses the vehicle for personal use, it becomes taxable and must be reported on their W-2."

When IRS Taxes “Loans” As Income - Robert Wood, Forbes. "If the litigation was a bust, he would have no obligation to pay. This probably sounded like D-I-Y common sense. But the Tax Court jumped all over it, citing some of the numerous cases holding that an obligation is not debt for tax purposes if it is contingent on the occurrence of a future event."

2022 Inflation Adjustments for Individuals in the International Tax Arena - International Tax Blog. "$112,000 --- Code § 911(b)(2)(D)(i) --- Foreign earned income exclusion. This amount is up from $108,700 in 2021."

Don’t throw this important tax notice away! - NATP Blog. Regarding advance child tax credits: "Taxpayers who received advance payments will receive Letter 6419 in the mail from the IRS in January 2022 and should bring this letter to their appointment with their tax professional when filing their 2021 return."

The Capital Gains Tax Break: Great Idea or Big Mistake? - Joseph Thorndike and Robert Goulder, Tax Notes Opinions. "Reason number one is growth. By reducing the tax rate on investment income, you increase the incentive to invest that can produce more economic growth. And, as the old saying goes, if you want more of something, tax it less. I want more growth, so I'll take lower taxes on investment gains. Thank you very much."


Iowa. Your author will spend tomorrow morning presenting a webinar on Iowa taxes for the Iowa Society of CPAs. I will discuss the big changes coming to Iowa's tax laws, and where they are now. And who doesn't want to spend a morning pondering the ins and outs of Iowa's tax system? Register here.


Strange day. Today is National Testosterone Awareness Day, National Homemade Bread Day, and National Hiking Day, so hike to your oven and whomp up a manly loaf of bread, I suppose.

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