Busy December Ahead for Returning Lawmakers – Kaustuv Basu and Patrick Ambrosio, Bloomberg ($). “The House and the Senate are back in session this week after the Thanksgiving break, returning to face what is shaping up to be one of the busiest months on the legislative calendar in recent memory. A House-passed, tax-and-spend package is in the Senate’s hands, with many provisions expected to change.”
The budget reconciliation package is one of several legislative priorities facing Democrats. More immediately, lawmakers face a Friday deadline to pass a stopgap funding bill to keep the federal government open. House Appropriations Chair Rosa DeLauro (D-Conn.) told reporters recently that she would like a short-term continuing resolution that would set up another deadline later in December, which would keep the pressure on lawmakers to negotiate a full-year funding package…
Lawmakers in December will also need to act to raise or suspend the debt ceiling. The Treasury Department has projected that Congress faces a deadline as early as Dec. 15 to avoid a default on the government’s debt…
The Senate this week is also working to complete debate on a fiscal 2022 defense authorization package (H.R. 4350).
Punchbowl News sums it up:
[T]his is shaping up to be the busiest December in years. Think back to 2010 when the Bush tax cuts were expiring or 2012’s ‘fiscal cliff.’ Those seem like simpler, happier times compared to what we’re about to get into during these next few weeks. Government funding, the debt limit, the National Defense Authorization Act, Build Back Better Act, the Jan. 6 committee and executive-branch nominations -- the list of issues that require immediate action is long and difficult. There’s a very good chance that the BBB could slip into 2022.
The timeless lyrics from the Talking Heads is also a spot-on description of the situation:
This ain't no party, this ain't no disco,
This ain't no fooling around
No time for dancing, or lovey dovey,
I ain't got time for that now
Budget Hot Spots in a Single Simple Picture – Martin Sullivan, Tax Notes ($). “Tax policy isn’t painted on a clean canvas. Special interest politics, arcane legislative rules, over-the-top partisanship, and periodic crises (like recession, war, and disease) overwhelm all efforts to move to a simpler and more predictable system. On top of all that, the ever-changing budget situation hangs like a dark cloud over Capitol Hill. So here we’ll highlight some of the more prominent fiscal facts that shape tax policy.”
Individual income taxes will increase because — even though the tax rates and standard deduction are indexed for inflation — inflation-adjusted economic growth will gradually push the taxpaying population into higher income tax brackets. This phenomenon has the eerie label of ‘real bracket creep.’
Tax hikes for companies likely come by hook or by crook in 2022 - Andrew Silverman, Bloomberg ($). “Business taxes at the state, federal and international levels are likely to increase in 2022. Rule changes along with sunsets on tax credits will augment these tax hikes, and many businesses’ state taxes will rise. A replacement for foreign digital taxes will, we think, fall apart. A silver lining for clean energy companies may be eleventh hour ‘tax extenders.’”
November 2022’s U.S. elections, typically a predictor of governmental inaction, is a red herring as businesses may still see marked tax changes in 2022. Not much gets done in election years because representatives ratchet up rhetoric to shore up their support base. But if the Build Back Better (BBB) bill passes in 2021, most tax changes in the legislation will begin in 2022. The BBB isn’t the Democrats’ last bite at the tax reform apple this term — the lame duck period at the end of 2022 offers them another chance to pass tax reforms that fall out of the BBB. Counterintuitively, gridlock next year will also give rise to tax perk sunsets that occur due to inaction. Finally, when congressional wheels grind to a halt, the White House can further tax reform through regulations, guidance and litigation.
Local News Outlets Could Reap $1.7 Billion in Build Back Better Aid – Marc Tracy, New York Times:
If the $2.2 trillion social safety net and climate package makes it through the Senate, where it faces a stiff challenge, it will provide $1.67 billion over the next five years for newspapers, websites, radio and TV stations, and other outlets that primarily cover local news. If eligible, they could reap up to $25,000 for each locally focused journalist they employ in the first year and $15,000 in each of the next four.
Hedge Fund Set for Tax Breaks in Shift to Vegas Opportunity Zone - Miles Weiss, Bloomberg ($):
Opportunity zones have also come under criticism for failing to generate enough economic development to justify the tax breaks. That’s partly because of the limited information available on operating businesses that established themselves in those areas.
Corp. AMT Plan May Blur Line Between Tax, Financial Data – Natalie Olivo, Law360 ($). “A proposed alternative minimum tax based on financial statements has sparked concerns among accounting experts, who worry that blending two separate systems for measuring corporate income could undermine the underlying — and intentionally different — purposes of each one.”
Tucked into the $1.75 trillion domestic spending legislation that passed the House of Representatives on Nov. 19 is a 15% alternative minimum tax, or AMT, that would apply to large companies with low tax payments as compared with the profits reported in their financial statements. Lawmakers say the proposal is a backstop against corporate tax avoidance, but opponents have warned against blurring the line between income that's reported to the Internal Revenue Service and what's filed with the U.S. Securities and Exchange Commission.
Nov. 29 is the final day to make changes for the last child tax credit payment this year – Carmen Reinicke, CNBC. “Time is running out for families with kids to make any changes to information the IRS has on file for their last child tax credit payment of the year. Families have until Monday, Nov. 29, to reach out to the agency and have it reflected in the final monthly payment, set to go out on Dec. 15.”
There are a few reasons why families may want to send the IRS any new information, which they can do through the agency’s child tax credit portal.
They can change the address where checks are mailed or shift the bank account to which their payment is deposited. They can also opt out of receiving the final monthly installment.
IRS proposes tax rules related to COVID-19 testing – Michael Cohn, Accounting Today. “The Internal Revenue Service released an advance copy of a set of proposed regulations that can help taxpayers, employers and insurers navigate the complex tax rules surrounding COVID-19 testing and health insurance coverage.”
REG-109128-21 includes proposed regulations saying that “minimum essential coverage,” as that term is used in health insurance-related tax laws, doesn’t include Medicaid coverage that’s limited to COVID-19 testing and diagnostic services provided under the Families First Coronavirus Response Act of 2020.
The proposed regulations also have a bearing on the “minimum essential coverage” rules of the Affordable Care Act of 2010. They provide an automatic extension of time for providers of minimum essential coverage to furnish individual statements regarding such coverage, and an alternative method for furnishing individual statements when the shared responsibility payment amount is zero.
The IRS reg is here.
3 Things Tax Pros Should Know About House's SALT Plan – Maria Koklanaris, Law360 ($). “The House-passed $1.75 trillion reconciliation bill contains an eightfold increase in the federal deduction cap on state and local taxes paid that, if enacted, could have profound effects on tax policy… [O]ne of the biggest provisions in the bill would raise the so-called SALT cap from the $10,000 established in the 2017 federal tax overhaul to $80,000, allowing for a much larger deduction and possibly creating other lesser-known changes in tax policy.”
"Here, Law360 presents three things tax professionals should know about the House plan for SALT.":
It Reverses More Than Just $10K Cap
One of the provisions of the 2017 tax overhaul, the Tax Cuts and Jobs Act, significantly scaled back the number of taxpayers who paid the alternative minimum tax. The number of people paying the AMT, an alternative tax calculation with different rates and a higher exemption amount, went from about 4.5 million in 2017, the tax year before the TCJA went into effect, to about 300,000 now.
A higher SALT cap of $80,000, however, would reverse some of that trend. The Tax Policy Center estimates that under the House bill, with its expanded SALT deduction, the number of taxpayers paying the AMT would go up to about 800,000.
It Could Add to Tax Complexity…
Marc Goldwein, senior vice president and senior policy director of the Committee for a Responsible Federal Budget, …said the higher cap takes away from what he considered to be a benefit of the TCJA. Taking deductions became a lot simpler for many taxpayers, and going back to a higher SALT cap will move those taxpayers back in the opposite direction.
It May Dampen States' Enthusiasm for Workarounds
… [S]tates' establishment of pass-through taxes at the entity level, which offered the owners of such businesses a federal deduction and either a state tax credit or an exclusion. A year ago, Treasury and the IRS indicated via a notice that they found such taxes acceptable and said they would issue guidance, although that guidance has still not materialized. A few states had adopted such taxes before the agencies' notice, but after it, the number about tripled. Now, 21 states have them.
States have been in a rush, but with the adoption of a much higher SALT cap, that rush will probably slow, said Charlie Kearns, tax partner at Eversheds Sutherland.
Colorado DOR Proposes to Amend Regulations on Cigarette, Tobacco, Nicotine Product License, Permit Fees, Penalties – Bloomberg ($):
The Colorado Department of Revenue Nov. 25 proposed to amend regulations on fees and penalties related to certain cigarette and tobacco licenses and permits issued by the Liquor and Tobacco Enforcement Division, for excise tax purposes. The proposal includes measures to: 1) require a retailer that operates more than 10 retail locations under the same corporate or business entity, including franchises, to apply as a large operator and use one application to obtain licenses for each retail location; and 2) subject a retailer with four prior violations within the preceding 24 months for failure to post signs requiring proof of age and that receives a fifth violation, to a fine of from $250 to $1,000. A public hearing will be held on Dec. 16 and comments on the proposed rules are due by Dec. 14.
Texas Makes Massive Tax Bet on Payoff From Samsung Chip Plant – Michael Bologna, Bloomberg ($). “What is a $17 billion high-tech plant bringing 2,000 jobs worth to state and local policy makers? Apparently a great deal. The state of Texas and the tiny city of Taylor, 30 miles north of Austin, proved the point Tuesday in announcing they would give up hundreds of millions of dollars in property taxes and even more in other incentives to land a massive Samsung Electronics Co. chip plant.”
The full price tag from state and local units of government remains unclear, but the deal includes Taylor’s commitment to waive roughly 90% of property taxes over decades. An analysis by the Texas Comptroller of Public Accounts estimated the property tax provisions would cost $314 million in tax losses to local schools.
In addition, Texas is giving Samsung a $27 million grant from its Texas Enterprise Fund. The company could also get help with construction and operation of the facility, such as exempting sales tax on materials.
The deal raises plenty of questions about the long-term value of massive manufacturing projects and heavy subsidies from state and local units of government.
California Employment Department Publishes December Payroll Tax Due Date – Bloomberg ($):
The California Employment Development Department Nov. 1 published the December payroll tax calendar. The November payroll report and deposit due date is Dec. 15, for individual income and corporate income tax purposes.
Minimum Tax Rules Give First Look Into World Under Global Pact - Isabel Gottlieb, Bloomberg ($). “The OECD is working on rules that will give companies a clearer idea of how nearly 140 countries may levy a 15% global minimum tax rate.”
The rules—or model legislation—will serve as a guide for governments to implement the 15% rate domestically as part of a broader Oct. 8 deal to overhaul global tax rules. For tax advisers, the legislation could answer long-awaited questions on how exactly the 15% levy will hit tax bills and how to comply.
Bipartisan Bill Seeks to Simplify Returns for Taxpayers Abroad – Andrew Velarde, Tax Notes ($). “Newly introduced bipartisan House legislation aims to simplify the return filing process for individuals living abroad by mandating that Treasury or the IRS create a new short filing form and expand the foreign earned income exclusion.”
The Tax Simplification for Americans Abroad Act (H.R. 6057) was introduced by Ways and Means member Donald S. Beyer Jr., D-Va., on November 19. It is cosponsored by Reps. Dina Titus, D-Nev.; Carolyn B. Maloney, D-N.Y.; and Maria Elvira Salazar, R-Fla.
In calling for the replacement of other forms for disclosing income and deductions, the legislation dictates the new form 'shall be as similar to Form 1040-EZ as it existed in 2017' with some exceptions.
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