Tax News & Views Tax Negotiation Roundup

April 9, 2021

Scheduling Note: Due to website maintenance, there will be no Tax News & Views post on Monday. We expect to return Tuesday, April 13.

Biden open to negotiating on corporate tax hike, but says U.S. must take bold action on infrastructure - Kevin Breuninger, CNBC. “President Joe Biden said Wednesday that he is willing to negotiate on the proposed corporate tax rate hike in his $2 trillion infrastructure plan. ‘I’m willing to listen to that,’ Biden said at the White House when asked if he would consider a lower corporate tax rate than 28%, as his plan currently calls for. ‘We’ve got to pay for this,’ Biden added, noting that there are ‘many other ways we can do it.’ ‘But I’m willing to negotiate that,’ he said.”

Biden says compromise 'inevitable' on infrastructure plan - Morgan Chalfant, The Hill.The White House says that Biden plans to meet with Republicans and Democrats after they return to Washington next week on how to move forward.”

New York Taxes Go Skyscraper High - the editorial board, Wall Street Journal. “Amid a Covid-caused urban exodus, with many workers unsure about going back to their Manhattan offices, the best and brightest of Albany have decided to crank up taxes on business, while also raising the income taxes paid by New York City residents to the nation’s highest rate.”

Study: Tax Increases Cause Major Job Losses, Harm U.S. Economy - John W. Diamond and George R. Zodrow, The National Association of Manufacturers. “[R]eversing course from the Tax Cuts and Jobs Act of 2017 by increasing corporate and individual rates, eliminating certain deductions and expensing options and reinstating the corporate alternate minimum tax could slow economic activity and cost 1 million jobs in the first two years after implementation and cause a loss of 600,000 jobs on average each year over the next decade. It would reduce GDP by hundreds of billions of dollars over the next decade, decrease capital investment and lower wages and compensation in the long run.”

New York City’s Wealthy Will Pay Nation’s Highest Tax Rates. How Will That Affect a Rebound? - Emily Glazer and Heather Gillers, Wall Street Journal. “New York this week agreed to increase taxes on its most affluent residents and raise corporate franchise taxes, aiming to boost public finances without further hobbling an economy hit by the pandemic and lockdowns that have spurred remote work.

Business leaders say the increases—which would result in top earners in New York City being charged the highest combined tax rate in the U.S.—could backfire by driving away the very people and companies the city relies on for its revenue.

IRS will recalculate taxes on 2020 unemployment benefits and start issuing refunds in May - press release, IRS. “Normally, any unemployment compensation someone receives is taxable. However, a recent law change allows some recipients to not pay tax on some 2020 unemployment compensation. The IRS will automatically refund money to eligible people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan. These refunds are expected to begin in May and continue into the summer.”

Under the new law, taxpayers who earned less than $150,000 in modified adjusted gross income can exclude some unemployment compensation from their income. This means they don't have to pay tax on some of it. People who are married filing jointly can exclude up to $20,400 – up to $10,200 for each spouse who received unemployment compensation. All other eligible taxpayers can exclude up to $10,200 from their income.

NC Bill Seeks Exemption For Feminine Hygiene Products - Jaqueline McCool, Law260 Tax Authority. “North Carolina would exempt feminine hygiene products from state sales and use tax under a bill introduced in the state Senate.” 

Treasury, IRS provide guidance on tax relief for deductions for food or beverages from restaurants - press release, IRS. “[…] Beginning January 1, 2021, through December 31, 2022, businesses can claim 100% of their food or beverage expenses paid to restaurants as long as the business owner (or an employee of the business) is present when food or beverages are provided and the expense is not lavish or extravagant under the circumstances.”

IRS reminds taxpayers to make April 15 estimated tax payment - press release, IRS. “The Internal Revenue Service today reminded self-employed individuals, retirees, investors, businesses, corporations, and others who pay their taxes quarterly that the payment for the first quarter of 2021 is due Thursday, April 15, 2021. The extension to May 17, 2021 for individuals to file their 2020 federal income taxes does not apply to estimated tax payments.”

Arcane Federal Tax on Sports Betting Is Too Much to Handle - Ulrik Boesen, Tax Foundation. “Have you ever wagered on sports or participated in daily fantasy sports? If you answer yes, you may have paid an obscure and little-known federal excise tax on sports betting. This month, Rep. Dina Titus (D-NV) and Rep. Guy Reschenthaler (R-PA) have reintroduced legislation, H.R. 2350, to repeal this tax.”

When the tax was introduced in 1951, it was intended, at least in part, to discourage gambling and aid states and the federal government in their anti-gambling efforts by imposing a prohibitively high 10 percent excise tax on sports betting and a $50 stamp tax. Today, however, it has the opposite effect: while now imposed at a far lower rate, it increases the cost for legal operators compared to their illegal counterparts, which are theoretically taxed but presumably rarely remit.

Bitcoin and Taxes: A Guide to the Tax Rules on Owning Cryptocurrency - Richard Rubin and Laura Saunders, Wall Street Journal. “Cryptocurrency owners, beware: by making a change to the 2020 tax form, the IRS is trying to strip away excuses for millions of cryptocurrency owners who it thinks are ignoring tax rules. The change moves a key question to the front page of the Form 1040, in a prominent position just below the taxpayer name and address. It says: At any time during 2020, did you sell, receive, send, exchange or otherwise acquire any financial interest in any virtual currency? The taxpayer must check the box ‘Yes’ or ‘No.’” 

Biden’s infrastructure tax hike worries some Democrats about impact on wealthy voters - Alex Roarty and Francesca Chambers, McClatchy. “The tax increases that Biden is proposing Congress pass into law have the support of most Americans, according to polls. But in swing congressional districts, even some supporters of the proposal say the president and his allies may have some work to do to convince voters. Republican and Democratic strategists alike say at stake in the argument over taxes is whether wealthy, suburban voters were only temporary Democratic supporters because of Trump and the pandemic, or whether they’re poised to snap back to the GOP in coming elections.”

Tax Talks Gain Momentum as U.S. Offers New Proposal Toward Global Deal - Paul Hannon and Richard Rubin, Wall Street Journal. “The Biden administration offered new proposals on taxing multinational companies in a bid to secure an international agreement aimed at reducing tax avoidance […] The proposal would focus the new tax rules on fewer than 100 companies, those that are very large and have high profit margins. The administration’s plan doesn’t set specific revenue or profit-margin thresholds, and those numbers will be part of the international negotiations in the months ahead, said a person familiar with the proposal.”

Biden Approach to Taxing Corporate Income Raises Complexity for Businesses - Daniel Bunn, Tax Foundation. “America is known for its exceptionalism, but when it comes to corporate tax policy, the Biden administration is embarking on an uncharted course that will set the U.S. apart from global tax policy norms and best practices. The proposed changes to our corporate tax rules could make the U.S. a less attractive place to do business in and to do business from. No other country has tried to enforce some of the policies that the Biden administration is proposing, which could set back U.S. competitiveness.”

GOP lawmaker offers bill to extend estimated tax payment deadline - Naomi Jagoda, The Hill. “Rep. Lloyd Smucker (R-Pa.) on Thursday rolled out legislation to extend the deadline for estimated tax payments for the first quarter of 2021, days before the current April 15 deadline. The bill would extend the deadline for first-quarter estimated payments to May 17 so that it aligns with the deadline for individuals to file their 2020 federal income tax returns.”

IRS Defines ‘Restaurant’ for Fully Deductible Business Meals - Kelley Taylor, Tax Notes ($). “Taxpayers now have guidance from the IRS on what constitutes a restaurant for purposes of claiming the temporary 100 percent deduction for food and beverages. Notice 2021-25, 2021-17 IRB 1, issued April 8, provides clarity for determining when the 100 percent deduction applies under a two-year expansion.”

Treasury Clears Up Some Ambiguity Related to Tax Offset Provision - Lauren Loricchio, Tax Notes ($). “States can adopt federal income tax changes to the Internal Revenue Code without having to repay federal aid from the recently adopted federal COVID-19 relief law, according to the U.S. Department of Treasury.” 

National Name Yourself Day! Finally, a day where I can rid myself of the name my parents bequeathed me. Let it be known, on April 9 my name is….um… Jay. 

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