Tax News & Views Reboot on Regulating Preparers Roundup

April 30, 2021

Arming IRS to Stop Tax Preparer Fraud Raised in Biden Plan – Allyson Versprille, Bloomberg ($). “President Joe Biden is urging Congress to enable the IRS to regulate paid tax preparers, a step the agency has said is needed to address a persistent area of fraud […] The agency tried about a decade ago to require return preparers to pass a certification exam, pay yearly fees, and complete continuing education courses annually. But that system was struck down in 2014 in Loving v. IRS with the U.S. Court of Appeals for the District of Columbia Circuit finding Congress hadn’t given the IRS authority to issue the regulations."


Biden Disappoints SALT Democrats, Setting Up Headache for Pelosi – Laura Davison and Kaustuv Basu, Bloomberg ($). “President Joe Biden’s decision, in a raft of individual tax proposals released Wednesday, to leave in place a cap on state and local tax deductions threatens to complicate congressional negotiations over his sweeping new social-spending program.”

The omission disappoints a group of Democratic lawmakers pushing to remove the $10,000 cap on state and local tax, or SALT, deductions that went to help pay for a slice of President Donald Trump’s 2017 tax cuts. That’s a particular headache for House Speaker Nancy Pelosi, who has to kick off shepherding the White House’s plan through the razor-thin margins in her chamber.


Exclusive: Biden's $400,000 tax cap for individual earnings, not joint filers – Hans Nichols, Axios. “President Biden's promise not to raise taxes on Americans who make less than $400,000 only applies to individuals — not married couples filing jointly, a White House official clarified to Axios on Wednesday […] Biden plans to raise the top tax rate to from 37% to 39.6% for families with taxable income above $509,300, and for individuals above $452,700, to help fund his $1.8 trillion American Families Plan, the official said.”


Biden Musters Early Congress Momentum for Tax-Spend Vision – Billy House and Erik Wasson, Bloomberg ($). “President Joe Biden is likely to see some version of his $4 trillion economic plan passed in Congress by September or October if he can keep various Democratic factions from splintering the party and continue fending off Republican attempts to paint it as radical.”


Democrats face big headaches on Biden's $4T spending plan – Jordain Carney, The Hill. “Democrats are scrambling to figure out how they can get President Biden’s $4 trillion spending plan through Congress […] The two proposals are supposed to be Biden’s next big legislative achievement, but there are deep divisions among Senate Democrats about the scope and strategy: Centrists want at least part of the proposals to be bipartisan, while progressives want Biden to go even bigger.”

‘We’re probably going to have some work to do in our own caucus,] said Sen. Bob Casey (D-Pa.). ‘I think we’re still a ways away from that. I don’t think there's a 50-vote consensus yet.’


Biden Tax Plan Leans on Banks to Help Find Unreported Income – Orla McCaffrey and Richard Rubin, Wall Street Journal ($). “Part of the funding for President Biden’s $1.8 trillion American Families Plan hinges on a beefed-up reporting requirement for banks designed to identify unreported income. The proposal would require banks to report annual account inflows and outflows to the Internal Revenue Service. The requirement would also extend to peer-to-peer payment services such as Venmo but wouldn’t require individuals and businesses to report any additional information to the government.”


‘Get the Deal Done’: Biden Tax Hikes Spark Wealth-Adviser Frenzy – Laura Davison and Ben Steverman, Bloomberg ($). “President Joe Biden’s proposal to roughly double the capital-gains tax for the rich has put financial advisers in the unusual position of acting as part therapist and part fortune teller. Frantic calls are coming in from clients surprised to see that what they’d dismissed as rhetoric from the 2020 election campaign has come out this week as concrete White House proposals.”


ITEP: Families Plan Tax Changes Wouldn't Affect Most Taxpayers – Tax Notes ($). “The tax proposals of the American Families Plan, including an increase in the top personal income tax rate to 39.6 percent, would affect only the wealthiest 1 percent of taxpayers, and the income tax increases would raise $88.4 billion in tax year 2022, the Institute on Taxation and Economic Policy said in a report released April 29.”


N.Y., New Jersey, California Hit Hardest by Biden Tax Changes – Donna Borak, Bloomberg ($). “President Joe Biden’s plan to ramp up the income tax rate and capital gains tax rate as part of a $1.8 trillion stimulus plan would hit high-tax states like New York and California the hardest, while New Mexico and Mississippi would be least affected, according to research from the Institute on Taxation and Economic Policy.”


Voters Back Corporate Income Taxes Over Targeted Gas, Mileage Taxes to Pay for Infrastructure Investments – Lisa Martine Jenkins, Morning Consult. “While Biden initially proposed paying for his plan in part through upping the country’s corporate income tax rate to 28 percent, certain lawmakers — including key swing vote Sen. Joe Manchin (D-W.Va.) — have resisted the possibility, instead pushing for other taxes that would target those benefiting from the infrastructure investments most, such as raising the existing rate for  gasoline. However, new polling from Morning Consult polling found that none of these more targeted options is as popular with voters as a 25 percent corporate income tax (a rate Manchin has said he would be open to), backed by a share of 54 percent and opposed by 31 percent.”

54% of voters back a 25% corporate income tax, and 31% oppose.

The controversial but largely bipartisan proposal of a carbon tax on those emitting greenhouse gases was roughly as popular as the corporate income taxes, at 52% in support and 34% opposed.

An increased gasoline tax is comparably unpopular with voters (at 31% in support and 59% opposed), especially with Republicans (16% vs. 76%).


Sen. Wyden's Bill Seeks Matching Of Student Loan Payments – Theresa Schliep and Emlyn Cameron, Law360 Tax Authority ($). “Employers could contribute to employee retirement accounts when workers make payments toward their student loan debts under a bill released Thursday by Sen. Ron Wyden, chairman of the Senate Finance Committee.”


The Nation's Upcoming Fiscal Challenges – Committee for a Responsible Federal Budget. “Once the pandemic ends and the economy fully recovers, the nation will have to prepare for the daunting set of fiscal challenges ahead. President Biden entered office facing high debt and deficits, the end of discretionary spending caps, a series of looming fiscal deadlines, major trust fund shortfalls, and no agreement on how to address these challenges.  The unprecedented challenges we face should motivate lawmakers to fully pay for all new legislation and to work together on a plan to control the growth of debt, ultimately placing it on a downward path.”


What You Need to Know About Offsets, Tax Refunds and Stimulus Checks - Kelly Phillips Erb, Bloomberg ($). “When the IRS began issuing the first round of stimulus checks (EIP1) in 2020, I received thousands (yes, really) of emails with related questions. One of the issues that routinely perplexed taxpayers was why stimulus checks might be offset […] The offset program is not new. It has long been the case that if you owe money to state and federal agencies, the government can seize certain federal payments, including your tax refund, to satisfy your debt. When that happens, it’s referred to as “offsetting the payment” or an “administrative offset” or, for short, an offset.”

Not all stimulus checks are exempt from offset. The second and third rounds of stimulus checks (EIP2 and EIP3) are exempt from offset for debts, including delinquent taxes and child support arrears. However, the first round of stimulus checks (EIP1), while exempt from offset for most debts, remains subject to offset for past-due child support.


Consumer-fueled economy pushes GDP to 6.4% first-quarter gain – Jeff Cox, CNBC. “Economic activity boomed to start 2021, as widespread vaccinations and more fuel from government spending helped get the U.S. closer to where it was before the Covid-19 pandemic struck, the Commerce Department reported Thursday. Gross domestic product, the sum of all goods and services produced in the economy, jumped 6.4% for the first three months of the year on an annualized basis. Outside of the reopening-fueled third-quarter surge last year, it was the best period for GDP since the third quarter of 2003.”


IRS Provides Info for Gig Workers, Unemployment Comp Recipients – Tax Notes ($). “The IRS has reminded (IR-2021-97) workers in the gig economy and those who claimed unemployment compensation in 2020 of their filing and payment options and where to find information on meeting their tax obligations.”


MTC Advances Combined Reporting, Online Biz Tax Projects – Paul Williams, Law360 Tax Authority ($). “The Multistate Tax Commission is poised to adopt a model combined reporting statute and guidance on when internet business activities exceed federal protections against state income tax, after MTC members announced Thursday that states indicated they would support those provisions.”


AICPA Joins Auto Dealers’ Request for Inventory Relief – Nathan Richman, Tax Notes ($). “The IRS should exercise its discretion to provide relief to taxpayers with potential surprise income arising out of inventory replacement difficulties induced by foreign trade disruption, according to the American Institute of CPAs.”


Md. Tax Court Says Refund Interest Rate Isn't Rights Violation – Maria Koklanaris, Law360 Tax Authority ($). “A Maryland couple's rights under both the state and federal constitutions were not violated when Maryland applied a reduced interest rate to a refund of income taxes they paid, the Maryland Tax Court ruled.”


Ariz. Gun Range Taxable As Amusement Biz, Panel Says – Asha Glover, Law360 Tax Authority ($). “An Arizona shooting range's lane rental receipts are subject to the state's transaction privilege tax under the amusement classification, a state appeals court said, affirming the state tax court's decision.”


California Law Allows PPP Recipients to Deduct Business Expenses – Laura Mahoney, Bloomberg ($). “California businesses can write off business expenses paid with forgiven Paycheck Protection Program loan funds under a bill Gov. Gavin Newsom signed Thursday.”


San Francisco Feels a Tax-Base Chill With First Drop in 25 Years – Romy Varghese, Bloomberg ($). “For the first time in more than 25 years, San Francisco is forecasting that its property tax base will fall -- a decline that reflects the tough straits of the city that is among the hardest hit by the pandemic downturn.”


State and Local Individual Income Tax Collections Per Capita – Janelle Cammenga, Tax Foundation. “The individual income tax is one of the most significant sources of revenue for state and local governments. In fiscal year 2018, the most recent year for which data are available, individual income taxes generated 24.2 percent of state and local tax collections, just ahead of general sales taxes (23.3 percent).”

State and Local Income Taxes per Capita 2021 Individual Income Tax Collections Per Capita (Income Tax Per Capita Collections)


Biden Plan Adds Momentum To Int'l Talks, EU Parliament Says – Todd Buell, Law360 Tax Authority ($). “A proposal to change the way corporations are taxed in the United States is giving momentum toward finding an agreement on rewriting the rules of corporate taxation, the European Parliament said in a resolution it passed Thursday.”


EU Countries Balk at Accepting 21% Global Minimum Tax Rate – Hamza Ali, Bloomberg ($). “Opposition in the EU to a high corporate minimum tax rate could be a deciding factor in the OECD-led negotiations on a global tax overhaul. After the Biden administration proposed that the U.S. apply a 21% global minimum rate—sparking speculation that it would push for a high rate in the multilateral talks, too—several European Union countries said they wouldn’t agree to such a high number.”


Truth Be Told – it’s National Honesty Day, honestly. It is also National Arbor Day and National Oatmeal Cookie Day. I’m more inclined to celebrate by eating cookies than planting a tree. If I’m being honest.

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