December 1, 2021
Senators huddle on path forward for SALT deduction in spending bill - Naomi Jagoda, The Hill:
Senators said following the meeting that they did not come to a resolution on the issue but were nonetheless upbeat about the discussions.
Sen. Jon Tester (D-Mont.) said he thinks there is a “path forward.”
Sen. Bernie Sanders (I-Vt.) similarly told reporters it was a “good discussion.”
Optimism Fades for Retirement Provisions in Reconciliation - Caitlin Mullaney, Tax Notes ($):
Efforts to pass retirement provisions in the Senate are continuing but hopes for getting them back into the reconciliation bill appear to be stalling, according to a Senate Finance Committee member.
Reconciliation bill language introduced in September included retirement provisions that would create a requirement for businesses without employer-sponsored retirement plans to automatically enroll employees in IRAs or section 401(k)-type plans and make the savers credit refundable in the form of retirement account contributions for those without income tax liability.
Democrats push tax credits to bolster clean energy - Zack Budryk and Rachel Frazin, The Hill:
Under the bill, renewables like wind and solar would be able to use either a tax credit that gives them money based on how much power they produce or a tax credit that allows companies to deduct as much as 30 percent of their investment.
Both the production tax credit (PTC) and the investment tax credit (ITC) would last through 2026. These credits are currently already in existence, but the legislation would extend them and bring the ITC up from its current 26 percent cap.
Related: Energy Efficiency Incentives.
5th Circ. Says Max FBAR Penalty Applies To Each Account - David van den Berg, Law360 Tax Authority ($). "The Fifth Circuit ruled Tuesday that the $10,000 maximum penalty for a nonwillful failure to file a foreign bank account report applies to each account, not each year, reversing a lower court's decision and diverging from the Ninth Circuit."
This raises the stakes for making sure you report your foreign financial accounts.
Fifth Circuit Applies FBAR NonWillful Penalty Per Account and Not Per Form - Jack Townsend, Federal Tax Crimes. "Bittner may petition for certiorari, but the Supreme Court may want the issue to bubble around a bit more in the Circuits to see if a consensus can be reached, with all courts then moving to the consensus view. Alternatively, the Court might take certiorari to resolve the conflict, treating this as one of the few “tax” (or tax-related) cases it must take every year."
Del. Justices Back Verisign's Win On Net Operating Losses - Asha Glover, Law360 Tax Authority ($):
The Delaware Supreme Court said the state Division of Revenue exceeded its authority when it disallowed Verisign Inc.'s claims of large net operating losses in 2015 and 2016, invalidating a long-standing operating loss policy.
In a decision Monday, the justices affirmed a lower court's decision to invalidate a nonstatutory division policy that prohibited corporate taxpayers that filed federal tax returns with a consolidated group from claiming a net operating loss in Delaware that exceeded the deduction on the federal return in which it participated.
Delaware High Court Invalidates Revenue Division’s NOL Policy - Tax Notes ($).
Unfortunately, courts in many states are much more lax in their treatment of state revenue department practices.
Delaware corporations that file federal corporate income tax returns as part of a consolidated group must file separately for state tax purposes under 30 Del. C. sections 1901–1903, with each taxpayer calculating its own income. The division’s policy established that a single member of a federal group could not deduct a NOL that was larger than the total NOL claimed by the combined group. The policy applied only to Delaware corporations that belonged to groups with members outside the state.
Zachary T. Atkins of Pillsbury Winthrop Shaw Pittman LLP in a November 30 email to Tax Notes called the policy “one of the more blatant examples of overreach that I have seen.”
According to the supreme court, no one who works at the division can “recall how or why any part of the Policy was adopted,” only that it has been in place for over 30 years. The policy “was located in the Division’s internal manual for auditors,” according to the court, but not in the relevant statute.
California: Main Street Small Business Tax Credits Still Available - California Department of Tax and Fee Administration, Via Tax Notes:
The California Department of Tax and Fee Administration (CDTFA) is still accepting reservations for the 2021 Main Street Small Business Tax Credit II, which provides COVID-19 financial relief for qualified small businesses. CDTFAʼs online system will be accepting applications for qualified small business employers to reserve tax credits of up to $150,000 until November 30 at 11:59 p.m.
Tax credits will be allocated on a first-come, first-served basis through November 30 or until the $116 million in available credits runs out.
Qualified small business employers may apply to reserve $1,000 per net increase in qualified employees, up to $150,000, to offset income, or sales and use taxes, when filing a return. Businesses that received a tax credit under the first round of the Main Street Small Business Tax Credit (2020) can still apply for additional credits under the Main Street Small Business Tax Credit II. Credit reservation amounts will generally be reduced by the credit reserved or received under the first round of tax credits. CDTFA's online reservation system will perform all the qualification and tax credit calculations.
Read the instructions. The Iowa Department of Revenue has updated their Tax Credit Users' Manual, explaining 38 active state tax credits and 16 expired credits.
Hurricane season officially ends today, but stay prepared for year-round disasters - Kay Bell, Don't Mess With Taxes:
It's not that hard to prepare, both physically and financially. Here are some prior posts that can help.
- 6 hurricane prep tips for businesses
- Considerations in making a major disaster tax claim
- Reconstructing tax & other records after a natural disaster
- IRS and other government resources can help you deal with a natural disaster
There also are the ol' blog's special Storm Warnings pages. This multi-page collection of blog posts has tips on preparing for, recovering from, and helping those dealing with natural disasters.
The IRS Can’t Figure Out Where to Apply an Electronic Payment…Where the IRS Was Told Where to Apply It - Russ Fox, Taxable Talk. "This is another IRS issue caused by the IRS’s response to the pandemic. Yes, the IRS was not at fault for the pandemic, but the ongoing response (did you know that IRS employees are still not completely back at IRS Service Centers?) is a cause of this issue (and many others). This is costing taxpayers time and money. It’s also costing the IRS time and money (which means taxpayers) because (a) someone must read the response I sent and (b) my client can–and will be able to–get some penalties and interest abated once this amended return is processed (given that the IRS is at fault for the slow processing time). This episode also makes the IRS look stupid. My client told the IRS exactly where the payment should be applied…and the IRS still couldn’t figure it out."
2021 Form 1040 - what’s new? - NATP Blog. "The first proposed change we see is to the unnumbered line dealing with virtual currency. The proposed question states “At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?”"
The Taxation of “Staking” - Jason Freeman, Freeman Law."The meteoric rise of Proof-of-Stake (PoS) systems in 2021 have put a spotlight on “staking,” a process where users 'stake' their crypto assets to become a validator of blocks within a PoS network. Stakers, however, face an uncertain tax regulatory landscape with respect to the taxation of their activities on PoS systems."
Join the Annual PT Giving Tuesday Drive - Nina Olson, Procedurally Taxing. "It’s that time of year for the annual Procedurally Taxing tradition (among other traditions such as April Fool’s, Taxatturkeys, etc.) in which we provide an update on the Center for Taxpayer Rights’ activities over the last year and ask that you support the Center’s work. We know that PT readers are being bombarded with charitable solicitations for very worthy causes, but the Center’s work is directly on point for PT’s focus on procedural due process and taxpayer rights. We hope you’ll read on to learn about the things we’ve been able to accomplish given folks’ past support of the Center and the exciting things planned for 2022. And of course, we hope all this will motivate you to donate to the Center this year."
529 Contributions as a Holiday Gift - Salvatore Amato, Tax Warrior Chronicles. "Gift giving, while fun and exciting, can also pose its challenges. Well-intended toys and games just add to the growing stockpile many children have, and there is always the difficulty of finding the 'hot toy' of the season, if you don’t hit the stores early. This year, consider a contribution to a 529 college savings plan for a special child. Their parents, your tax bill, and, one day, the child, will thank you for it."
Iowans can deduct contributions to the College Savings Iowa Sec. 529 plan up to $3,474 per donor, per donee, on their Iowa 1040s
U.S. State Sales Tax Systems: Inefficient, Ineffective, and Obsolete - Council on State Taxation:
Worldwide consensus exists — except in the United States — regarding the importance of a well-designed and broad-based tax on household consumption that balances and supplements other sources of tax revenue. To that end, no advanced nation other than the United States relies on a retail sales and use tax — heavily dependent on taxing business inputs — as its primary consumption tax. And no advanced nation relies less on consumption taxes as a share of all taxes than the United States. These two characteristics animate an overall tax system that is dangerously imbalanced, and without a broad-based revenue source that can generate significant revenue while minimizing impacts on economic growth and international competitiveness.
Biden’s ‘aggressive’ use of a tax loophole he’s trying to shut down - Glenn Kessler, Washington Post ($). The "fact check" relates to President Biden's use of an S corporation to receive income on an S corporation K-1. S corporation K-1 income is not taxed as self-employment income. The IRS insists taxpayers take "reasonable compensation" from their S corporations, but opinions differ on what "reasonable" means.
From the article:
The Wall Street Journal quoted Steven Rosenthal, a senior fellow at the Tax Policy Center, as saying that to the extent that the Bidens’ income came directly from the couple’s consulting and public speaking, “to treat those as other than compensation is pretty aggressive.”
But is it cheating?
Robert Willens, a Columbia Business School professor who’s been educating The Fact Checker about intricate tax policy issues since the 1980s, said: “In light of the fact that ‘capital’ was not a material income-producing factor in connection with his business; and that his personal efforts produced the vast majority of the income the business reported, it would seem to me that his ‘reasonable compensation,’ in this case, could easily be at least 10 times the amount he reported as such.”
But, Willens said, “I don’t have any problem with what he did. In fact, he would have been almost derelict had he not channeled his earnings through an S corporation.” He added: “I’ll leave the morality of him adopting this strategy, particularly given his track record of attempting to ensure that everyone pays their fair share of taxes, to others to comment on.”
We go to war with the tax law we have, not the tax law we wish we had.
If you are reading this on a monitor, this may be your day. Today is Bifocals at the Monitor Day. Did you know you can get eyeglasses designed for monitor use? I have a set, and I don't know how I got by without it. But if you are blessed with perfect vision, you can still celebrate National Pie Day.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.