Tax News & Views Child Credits and Umbrellas Roundup

February 10, 2021

House Democrats on tax-writing committee release proposals for President Biden’s rescue package - Jay Heflin, Eide Bailly. "It is important to note that the provisions mentioned below are not the final product that will come from the tax-writing committee. The entire Ways and Means Committee will begin vetting these proposals on Wednesday, and changes to the legislation could occur. That vetting process is expected to last until Friday."


Congressional Democrats Propose Expanding Child Tax Credit as Monthly Payment for Pandemic Relief - Garrett Watson and Erica York, Tax Policy Blog. "The Child Tax Credit (CTC) would be expanded from $2,000 today to $3,000 for children over the age of 6 and $3,600 for children aged 6 and under. The credit would be advanced to families monthly, at $250/month for older children and $300/month for younger children. It would be fully available and refundable to households with no income, unlike the Child Tax Credit’s current design."

Advancing Child Tax Credit Payments Makes Good Sense, But the IRS Will Need Funds to Pull It Off - Elaine Maag and Howard Gleckman, Tax Policy Blog. "The plan to expand the Child Tax Credit (CTC) proposed yesterday by House Ways & Means Committee Democrats included an important new feature—the IRS would distribute the refundable credits monthly or quarterly so that cash-strapped families would not have to wait until they file their next tax return before receiving the support. Senator Mitt Romney (R-UT) has suggested a similar idea, though he’d have the Social Security Administration distribute the payments."

Democrats Propose Round Three Of COVID-Related Stimulus Checks: What You Need To Know - Tony Nitti, Forbes ($). "Included in the proposal are a number of significant provisions, including an extension of supplemental unemployment benefits, an expanded child tax credit (more on this in a subsequent article), and an extension of the recently enhanced employee retention credit."

Interest Allocation Election Kill Shot Is Puzzling - Andrew Velarde, Tax Notes ($):

If House Democrats get their way, they may kill a long-awaited and long-deferred worldwide interest expense allocation election provision that would have proven advantageous for many multinational taxpayers.

Buried deep in the coronavirus relief package unveiled by House Democrats is a repeal of the provision allowing U.S. affiliated groups to elect to allocate interest on a worldwide basis. 

Increase Cash Flow with Available Tax Credits, Deduction and Incentives - Eide Bailly. "Tax credits and deductions help organizations save cash and keep more money invested in their businesses. The challenge for taxpayers is knowing what benefits exist and how they can qualify."


When the “Routine” Morphs into a “Ticket to Tax Court” - Steve Jager, Procedurally Taxing:

Steve brings us the story of one of his clients driven to Tax Court by the pandemic and the inability of the IRS to process its mail. Steve’s case probably represents one of many in this situation where taxpayers receive a notice of deficiency (or notice of determination) not through any fault of their own or of the IRS but because the significant delays in processing mail cause the IRS system to move the case into the deficiency procedure process rather than allowing resolution at the administrative stage.

This is an important problem. We continue to see the IRS issue scary follow-up notices that make no mention of responses sent months ago addressing the initial notice. 

Related: How to Address COVID-19-Related Tax Collection Issues.


23 tax deductions, no itemizing required, on Schedule 1 - Kay Bell, don't Mess With Taxes. "The beauty of these tax breaks is that they are available to any taxpayer who qualifies, regardless of whether you take the standard deduction or itemize."

Recent Tax Court Conservation Easement Decision Demonstrates Continued IRS Enforcement Efforts and Penalty Defenses - Freeman Law Blog. "The decision in Sells shows that the IRS will continue to aggressively go after perceived, abusive conservation easement deductions."

The IRS Does Not Need to Obtain Written Supervisory Approval of the 10% Additional Tax For Early Withdrawals From Retirement Accounts - Chaim Gordon. "Taxpayers should be mindful that exactions that they think are penalties (because that’s what it feels like) may in reality be taxes for purposes of the Internal Revenue Code."

Home Office Deductions and the Coronavirus - Ashley Hampton, Tax Warrior Chronicles. "Do you now qualify for the home office deduction? Did the CARES Act account for this wave of remote workers? Does my state follow the federal tax law?"


Indiana DOR Issues Bulletin on Federal Changes to NOLs, Interest Deductions - Carolina Vargas, Tax Notes. "Federal tax changes related to net operating losses, excess interest deductions, and loss limitations are among the changes with which Indiana has not conformed, according to the state revenue department."

Related: Telecommuting Workers in Refuge States Complicate State Taxes 

State Sales Tax Breadth and Reliance, Fiscal Year 2020 - Jared Walczak, Tax Foundation. "Despite the importance of sales taxes to state coffers, and notwithstanding the economic arguments for reliance on a broad-based, low-rate sales tax regime (for which the case is made below), state sales tax bases are narrowing, forcing states to either raise rates or shift to other sources of tax revenue in response to this continuous erosion. These trends will continue until states undertake meaningful sales tax modernization."

Interview: State Legislature Check-In: Tax Priorities in 2021 - Paul Jones and Morgan Scarboro, Tax Notes Opinions. "Most states are facing some sort of challenge, but it's not nearly as significant as folks were predicting back when COVID-19 was originally starting to have an impact on state economies."


Prospects Dim for Minimum Wage Hike in COVID-19 Relief Bill - Jonathan Curry, Tax Notes ($):

The CBO’s findings don’t necessarily have to be the end of the road for the fight for a $15 minimum wage — tax mechanisms could potentially help achieve the same result.

“The Senate can use tax tools to encourage employers to pay above $15 per hour and to discourage employers from paying below $15, and that can be structured in a way that will pass even very stringent interpretations of the Byrd rule,” Daniel Hemel of the University of Chicago School of Law told Tax Notes.


Looking for something to celebrate during the current cold snap? Today is National Umbrella Day! Think beach umbrellas.

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