Minnesota Governor Proposes New Income Bracket, Capital Gains Tax – Carolina Vargas, Tax Notes. “Minnesota Gov. Tim Walz (DFL) has proposed several tax changes to help the state recover from the pandemic, including higher taxes on wealthy residents and large corporations.”
“The proposed budget would establish a fifth-tier income tax rate for households with incomes over $1 million for married couples filing jointly, $750,000 for heads of household, and $500,000 for single filers. The new tier would affect only the top 0.7 percent of income tax returns and would raise $403 million over the biennium, according to the summary document. There are four tax brackets under current law, with a top rate of 9.8 percent for incomes over $276,000.
Walz is also proposing to increase the current corporate franchise tax rate starting in tax year 2021, from 9.8 percent to 11.25 percent, which would raise $424 million over the biennium by having profitable corporations “pay their fair share.””
Wisconsin’s PPP Loan Recipients Face Hundreds of Millions in Surprise Taxes – Katherine Loughead, Tax Policy Blog. “Nearly 90,000 Wisconsin small businesses that have taken out loans under the federal Paycheck Protection Program (PPP) will face hundreds of millions of dollars in state income tax liability on those loans this spring, despite the loans being tax-free at the federal level.”
“Under current Wisconsin law, first-round PPP loans (those issued in 2020) will not be treated as taxable income, but expenses paid for using those loans will be ineligible for the usual expense deduction. This means that Wisconsin businesses that took out PPP loans will have a higher level of Wisconsin taxable income than if they had not used the federal lifeline. Second-round PPP loans (those issued in 2021) are also on track to be taxed by the state, albeit in the opposite manner: expenses will be deductible, but the loans are set to be treated as taxable income.”
Repeal of State-Tax Deduction Cap Pitched for Covid-19 Relief Bill – Richard Rubin, WSJ ($). “Lawmakers from New York and New Jersey, looking to capitalize on new Democratic majorities in Congress, are trying to repeal the $10,000 cap on the state and local tax deduction as part of a pandemic-relief bill. But the Biden administration has been noncommittal, and the move looks likely to wait until later this year.”
“The House passed a temporary repeal of the cap in 2019 and did so again last year in a pandemic relief bill, but the Republican-controlled Senate wouldn’t consider the idea, with members saying the top sliver of households would benefit most. Now, with Democrats in charge of the Senate—and New York’s Chuck Schumer as majority leader—a repeal could be nearing its moment.”
Lawmakers offer bill to repeal cap on SALT deduction – Naomi Jagoda, The Hill. “Lawmakers in the House and Senate from high-tax, Democratic-leaning states introduced legislation on Thursday to repeal a provision in former President Trump's 2017 tax cut law that limits the state and local tax (SALT) deduction.”
Transitioning Your Wealth – Potential Tax Policy Changes with the New Administration – Ava Archibald. “With the new Biden administration and the results of the Georgia senate runoff election, there may be future changes in tax legislation that could affect the wealthy for income, estate and succession planning purposes.”
In the priorities suggested by nominated Senate Finance Chairman Ron Wyden, there appears to be three proposed areas of tax legislation that may affect clients looking to transition wealth and business interests down to the next, or lower, generation. Those areas are:
- Increase in Capital Gain Rates
- Loss of Stepped up Tax Basis
- Reduction in Estate Tax Exemption
What You Need To Know About Coronavirus-Related Distributions Before Filing Your 2020 Tax Return – Ron Carson, Forbes. “If you took a qualifying distribution from your retirement plan in 2020, here’s what you need to know before you file your tax return.”
Taxpayer Advocate seeks equal debt treatment for all COVID relief payments – Key Bell, Don’t Mess With Taxes. “By now, folks know that if they didn't get the full amounts, which included additional payments for eligible dependents, they need to claim the Recovery Rebate Credit (RRC). You'll do that on your 2020 Form 1040, which the IRS will start accepting and processing returns on Feb. 12. But what if your payment was short because the IRS withheld a portion because of debts you owed?”
AICPA Recommends IRS Allow Taxpayers to Count Wages Unnecessarily Reported on PPP Forgiveness Application in Computing Employee Retention Credit – Ed Zollars, Current Federal Tax Developments. “The AICPA has sent a comment letter to the IRS regarding how to deal with the issue of claiming the 2020 version of the employee retention credit when payroll costs have been reported on a Paycheck Protection Program loan forgiveness application.”
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