April 19, 2021
California Democrats urge Biden to address SALT cap in infrastructure bill – Naomi Jagoda, The Hill. “House Democrats from California sent a letter to President Biden this week urging him to undo the cap on the state and local tax (SALT) deduction in infrastructure legislation. ‘As you turn your attention to the American Jobs Plan, we urge you to address the $10,000 cap President Trump placed on the State and Local Tax (SALT) deduction, which has hurt our constituents and people across the country since long before the COVID-19 pandemic began,’ the California Democrats wrote in a letter dated Thursday. ‘The removal of this arbitrary cap is necessary and prudent as we seek remedies to help the American people during this time of recovery.’”
Forty-one House Democrats from California — all but Speaker Nancy Pelosi (D-Calif.) — signed the letter.
Differences Emerge Between Biden, Senate R&D Tax Plans – Natalie Olivo, Law 360 Tax Authority ($). “Senate Democrats have floated tax deductions for domestic research and development in a proposal that largely aligns with the White House's tax plan, but significant daylight may exist between them if the senators' provision ultimately ties deductions to foreign-derived income.”
Justice Department sues Trump ally Roger Stone, alleging millions in unpaid taxes – Peter Williams and Dennis Romero, NBC News. “The Justice Department on Friday sued Roger Stone, a longtime ally of former President Donald Trump, accusing Stone and his wife, Nydia, of owing nearly $2 million in unpaid federal income taxes and fees. The lawsuit, filed in federal court in Fort Lauderdale, Florida, says the couple underpaid their income taxes by $1,590,361 from 2007 to 2011. It further says Stone, 68, did not pay his full tax bill in 2018, coming up $407,036 short.”
Taxing Corporations Is Always Popular — Until It Isn’t – Joseph Thorndike, Tax Notes ($). “In a recent Morning Consult survey, 62 percent of registered voters said they strongly or somewhat supported the administration’s plan to pay for infrastructure with corporate tax hikes, 26 percent opposed the approach, and 12 percent said they were unsure. Those are good numbers for Biden. But they are less good than they were a few weeks ago, when an earlier version of the Morning Consult poll found even broader support for the tax plan. Overall support for Biden’s corporate tax proposals dropped 3 percentage points between the beginning and the middle of April, just barely outside the poll’s margin of error. But support among Republicans slid from 42 percent to 29 percent. Independents cooled on the revenue proposals, too, with support declining from 60 percent to 54 percent.”
The GOP’s fallout with big business is already mending – Shawn Zeller, Roll Call. “Some of America’s most prominent corporations infuriated Republicans in Congress earlier this month when they protested a Georgia law setting state voting rules. The longtime alliance between the GOP and business seemed on the verge of cracking up. But when it comes to Democrats’ priority bills in Congress, the old allies are still on the same side. Indeed, corporate America is joining Republicans in opposing both the House-passed voting rights measure, or HR 1, that is Democrats’ answer to the Georgia law, as well as President Joe Biden’s pending infrastructure bill.”
On infrastructure, lofty ideas are colliding with congressional reality – Seung Min Kim, Marianna Sotomayor, Jeff Stein and Tony Romm, Washington Post. “As Biden and Democratic lawmakers begin assembling a massive bill that they hope will echo the New Deal and literally rebuild parts of America, they are quickly finding that their ambitions are colliding with the complicated reality of precisely how to do it. Only now is Congress starting the arduous task of turning Biden’s $2.25 trillion infrastructure blueprint into legislation, and it’s proving inordinately complex. Even before pen has been put to legislative paper, some Democrats in the narrowly divided House are noisily raising demands, sensing a fleeting moment of leverage.”
Senate Democrats settling on 25% corporate tax rate – Hans Nichols, Axios. “The universe of Democratic senators concerned about raising the corporate tax rate to 28% is broader than Sen. Joe Manchin, and the rate will likely land at 25%, parties close to the discussion tell Axios.”
Democrats Target Corporations, Wealthy To Cut $1T Tax Gap – Alan Ota, Law 360 Tax Authority ($). “A drive by Democrats to strengthen tax enforcement aimed at corporations and the wealthy has gained momentum on Capitol Hill following estimates the IRS is losing out on as much as $1 trillion annually in taxes owed but not paid. Several key Democrats said the rough estimate by the Internal Revenue Service commissioner, Chuck Rettig, of a current annual tax gap of $1 trillion would bolster support for more IRS funding and enforcement measures targeting businesses and wealthy taxpayers.”
Speculation Swirls on Unanswered Issues in GILTI, SHIELD Reform – Andrew Velarde, Tax Notes ($). “With little more than high-level plans and frameworks to go off, practitioners can only speculate on the finer technical points surrounding proposed reform of the global intangible low-taxed income and base erosion provisions.”
Make Tax-Dodging Companies Pay for Biden’s Infrastructure Plan – Editorial Board, New York Times. “The corporate income tax has been gutted. Raising rates and cracking down on evasion are sensible ways to come up with trillions of dollars.”
The federal government lets companies avoid taxes by shifting profits earned in the United States to countries with lower tax rates. Every year, American firms, especially in the technology and pharmaceutical sectors, brazenly pretend to earn billions of dollars in microstates like Barbados, Bermuda and the Cayman Islands, which are more than happy to play along. Companies and countries both profit, at the expense of the United States.
The tax compliance burden has eased, but law changes could bump it back up – Kay Bell, Don’t Mess With Taxes. “We made it through April 15, 2021. The problem, though, is that for most individual taxpayers and the tax pros who handle their filings, yesterday wasn't really Tax Day. That's still more than a month away. Or, to be precise per [shameless plug] the clicking away countdown clock in the ol' blog's right column, 31 days and some odd hours away. Those extra days and hours until the new 2021 Tax Day on May 17, regardless of how well-intentioned (but incomplete), also should be added to the overall compliance burden taxpayers face every tax season.”
A Simple Tax Question Isn’t So Simple, and Neither are the Answers - Prof. James Edward Maule, MauledAgain. “The question, asked on nj.com True Jersey, was simple: 'I got a tax refund. Will it be taxed as income?' The answer, 'Nope,' and the reasoning, 'it is a return of your own funds,' was correct to the extent it was a question about the taxation in New Jersey of a federal income tax refund. But the answer was framed in very general terms, specifically, 'A refund is not taxed as income.' It was then modified with the provision that 'state income tax refunds may be taxable income for federal purposes for individuals who itemized their deductions on their federal tax return in the previous year.' The difficulty was the generality of the question […] There actually are four questions embedded within that one question.”
IRS gives taxpayers a break on repaying extra Obamacare tax credits – Michael Cohn, Accounting Today. “The Internal Revenue Service is suspending a requirement for taxpayers who received too much on their advance payments for the Premium Tax Credit last year to repay the excess amount.”
Calif. Donor Law Requires Narrow Tailoring, Justices Told – Daniel Tay, Law 360 Tax Authority ($). “California's law requiring charitable organizations to disclose donor tax information should be narrowly tailored because such tailoring is required whenever a law is subject to heightened scrutiny, the law's challengers told the U.S. Supreme Court on Friday.”
Kraken Crypto Customer Info Summons Trimmed By IRS – Theresa Schliep, Law 360 Tax Authority ($). “The Internal Revenue Service has narrowed a proposed summons on cryptocurrency exchange Kraken Inc. seeking customer data after a California federal judge questioned the scope of the information sought, according to a recent filing.”
Prepare For Global Collaboration In Crypto Tax Enforcement – Carlos Ortiz, Joseph Evans and Katharine Suominen, Law 360 Tax Authority ($). “Over the past few years, the U.S. Department of Justice and the U.S. Securities and Exchange Commission have been two of the most active cryptocurrency regulators in high-profile enforcement actions. However, their partners in the Joint Chiefs of Global Tax Enforcement, or J5, and the Internal Revenue Service continue to keep pace with these efforts, and have increasingly become important cryptocurrency regulatory agencies."
Helping clients with trust-owned life insurance – Henry Montag, Accounting Today. “Accountants sometimes need to decide whether to accept the invitation to become a trustee of a client’s trust-owned life insurance. If you do, how should you approach your fiduciary responsibility to ensure you do the best job for the grantor’s beneficiaries, while avoiding any of the fiduciary liability that comes along with the title of trustee?”
Kan. Gov. Vetoes Marketplace Tax, GILTI Tax Break – Paul Williams, Law 360 Tax Authority ($). “Kansas' governor vetoed a bill Friday seeking to require marketplace facilitators to collect sales and use tax and decouple the state from several provisions of the 2017 federal tax overhaul, calling the omnibus legislation too costly for the state's budget.”
The bill, S.B. 50, would mandate marketplace facilitators like Ebay.com to collect tax on third-party sales starting July 1, subject to a $100,000 annual sales threshold that would also apply to remote sellers, which currently must collect tax on every sale into Kansas. It also would decouple the state from certain elements of the 2017 Tax Cuts and Jobs Act , including the federal tax treatment of global intangible low-taxed income.
Springing the End of Zero-Basis Debt for S Corporations – Benjamin Willis, Tax Notes ($). “The IRS frequently whipsaws taxpayers. While the IRS accounts for springing debt as a deemed section 351(b) distribution of boot, it hypocritically ignores springing debt for purposes of section 357(c) gain and section 1366(d) limited losses to maximize tax revenue. Springing debt issues show the IRS’s attempts to take as much as possible from taxpayers. It has even supported use of the open transaction doctrine for debt in what are far from rare and extraordinary cases. The IRS should not cherry-pick instances when to respect true debt solely to maximize revenue.”
Comcast, Verizon Sue Maryland Over Digital Ad Tax – Maria Koklanaris, Law 360 Tax Authority ($). “Maryland's first-in-the-nation tax on digital advertising is illegal under federal law and violates both the U.S. and the Maryland constitutions, telecommunications giants Comcast and Verizon said in a complaint filed in state court.”
Don't Loiter, Hang Out! Today is National Hanging Out Day, not to be confused with hanging with homies. Today is about the benefits of using clotheslines for drying laundry instead of dryers, which can account from 6% to 10% of residential energy consumption.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.