May 3, 2021
What Business Thinks of Biden’s Plans on Infrastructure, Taxes – Ryan Tracy, Yuka Hayashi and Katy Stech Ferek, Wall Street Journal ($). “Executives in manufacturing, automotive, construction and other industries say they see opportunity in the trillions of dollars Mr. Biden wants to spend to build infrastructure, boost domestic manufacturing, and curb greenhouse-gas emissions linked to climate change. That is tempered by wariness over Mr. Biden’s plans to achieve those goals via higher corporate taxes, and expected new regulations on fossil fuels, telecommunications and other industries.”
Like-Kind Exchange Proposal Is a Job Killer, Say Pros – Kristen Parillo, Tax Notes ($). “Real estate professionals have slammed President Biden’s proposal to limit like-kind exchange treatment to gains under $500,000, saying it would kill jobs and not actually raise revenue.”
Democrats signal they’re open to concessions on infrastructure – Matt Viser, Annie Linskey and Seung Min Kim, Washington Post. “President Biden and top Democrats are signaling privately they are willing to make concessions over Biden’s $2.3 trillion infrastructure plan, or break it into chunks, if that will attract even a handful of Republican votes and allow them to notch a bipartisan win, people familiar with the strategy say.”
Democrats See Room for Improvement in Some Biden Tax Proposals – Jad Chamseddine, Tax Notes ($). “Congressional Democrats say the White House’s latest tax plan would help middle-income families while closing the gap between the country’s rich and poor, but they want to see more done regarding refundable tax credits and the taxation of trusts and estates.”
Biden’s Plan to Spend $4.5 Trillion Without Boosting Deficits Depends on Factors Beyond His Control – Kate Davidson, Wall Street Journal ($). “President Biden’s $1.9 trillion Covid-19 relief package was financed entirely with borrowed money. Now, he is proposing to spend another roughly $4.5 trillion on infrastructure and social programs—without adding to the red ink […] Mr. Biden’s ability to achieve that goal depends on a range of political and economic variables, some beyond his control. Among them: Whether moderate Democrats will go along with his proposed tax increases, and whether those increases will stay in place long enough to cover all of the extra costs.”
Biden’s $4 Trillion Plan Now Gets Test in Congress – Andrew Duehren and Kristina Peterson, Wall Street Journal. “President Biden’s $1.8 trillion child-care and education plan complicates an already rocky legislative landscape on Capitol Hill, where Democratic leaders are balancing competing demands as they also juggle the White House’s $2.3 trillion infrastructure package.”
With Republicans largely lining up against most of the roughly $4 trillion in proposed spending and related tax increases, Democrats face a series of political and logistical questions. Among them: Should party lawmakers seek a compromise on narrower infrastructure legislation with the GOP, or plunge ahead with a Democratic plan that ignores Republicans’ concerns and can be passed on party lines? Should they expand the scope of the proposals even further? And should they attempt to pass several pieces of legislation or combine everything into one package?
Biden Tax Gap Plans Prompt Business and Taxpayer Rights Concerns – William Hoffman, Tax Notes ($). “Treasury has filled in some of the blanks in President Biden’s ambitious tax administration agenda, which aims to collect some of the $7 trillion in unpaid taxes the administration estimates will be lost over the next decade without IRS action.”
Treasury said the new enforcement funds, which include money for hiring and training auditors, wouldn’t target American households with less than $400,000 in annual income.
The administration will ask for more third-party information reporting to the IRS to reduce noncompliance by increasing the agency’s access to investment and business activity financial records, the statement said.
Treasury said the administration would also modernize IRS technology to help revenue agents use data analytics to unspool complex structures, such as partnerships, where income is hard to trace.
The administration will also ask for legal authority for the IRS to regulate tax return preparers and enact stricter penalties for unscrupulous preparers, Treasury said.
Death and Taxes: Biden Wants to Step Down the ‘Step-Up’ on Investment Gains – Laura Saunders, Wall Street Journal ($). “A landmark proposal in President Biden’s newly announced American Families Plan would end the longstanding tax exemption for investment appreciation when a taxpayer dies. This break is known as the “step-up in basis,” and changing it could raise taxes at death significantly for affluent Americans.”
Affluent Americans Rush to Retire in New ‘Life-Is-Short’ Mindset – Alexandre Tanzi and Michael Sasso, Bloomberg ($). “About 2.7 million Americans age 55 or older are contemplating retirement years earlier than they’d imagined because of the pandemic, government data show. They’re more likely to be White, a group that typically has a larger amount of accumulated wealth, and many cite robust retirement accounts and Covid-19 fatigue for their early exit, according to interviews with wealth managers and federal surveys.”
What Financial Advisers Are Telling Rich Clients About Biden’s Tax Hike – Laura Davison and Ben Steverman, Bloomberg ($). “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.”
Wealthy would dodge 90% of Biden's capital gains tax increase, study says – Stephen Gandel, CBS News. “Wealthy Americans will avoid paying 90% of the estimated $1 trillion increase in investment taxes that President Joe Biden is proposing this week, according to new study from the University of Pennsylvania's Wharton Business School. The Wharton researchers concluded that tax avoidance, much of it legal, would cut nearly $900 billion of what the proposed increase on capital gains taxes could raise for the government.”
SPACs Fizzle on SEC Reporting Questions – Lee Sheppard, Tax Notes. “Special purpose acquisition companies (SPACs) did something productive before the SEC essentially killed off this investing trend […] The SPAC fad died when the SEC questioned reporting about warrants for financial accounting purposes. Many SPACs will have to delay their offerings or file restatements. Newly confirmed SEC Chair Gary Gensler will be able to say he tried to pop the SPAC bubble.”
Can LLC Members Avoid Self-Employment Tax on LLC Profits? – James Browne, Tax Notes ($). “One frequently cited disadvantage of choosing a limited liability company to own and operate a business is the uncertainty of whether self-employment tax is imposed on a member’s distributive share of the LLC’s profits.”
This article concludes that, under existing law, an LLC member should not be subject to self-employment tax on the member’s distributive share of the LLC’s profits if the member receives reasonable compensation, in the form of a guaranteed payment, for any services the member provides to or on behalf of the LLC.
Tax Court Denies Minnesota Man Spousal Relief – Eric Kroh, Law360 Tax Authority ($). “A Minnesota man doesn't qualify for innocent spouse relief from taxes arising from a withdrawal from his ex-wife's retirement account because he enjoyed the economic benefits of a joint household, the U.S. Tax Court ruled in an opinion released Friday.”
California Governor Signs Pandemic Aid Tax Relief Bill – Paul Jones, Tax Notes. “California’s governor has signed legislation exempting pandemic aid provided through loans and grants from state taxes for most businesses.”
Woman Must Pay Back Health Care Tax Subsidies, Tax Court Says – Theresa Schliep, Law360 Tax Authority. “A woman who used retirement savings to pay for cancer treatment and other expenses must pay back the health care tax subsidies she received after the withdrawals made her ineligible for the subsidies, the U.S. Tax Court said Friday.”
Colo. Localities Can Exempt 100% Of Biz Personal Property – Asha Glover, Law360 Tax Authority. “A Colorado bill allowing counties, municipalities and special districts to exempt up to 100% of business personal property from the levy and collection of property taxes for the 2021 property tax year was signed by the governor. Democratic Gov. Jared Polis signed S.B. 21-130 Thursday. The exemption, which took effect immediately, applies to items owned by a business, including machinery, computers and furniture.”
The Push for a Higher, Worldwide Minimum Tax Rate, Explained – Michael Rapoport and Isabel Gottlieb, Bloomberg. “The U.S. and other countries are striving to reach a deal by this summer on a global minimum tax rate for multinationals, to combat corporate profit-shifting and stop race-to-the-bottom tax competition among countries.”
Global Tax Pact Won't Require All Nations, Saint-Amans Says – Alex Parker, Law360 Tax Authority ($). “A global minimum tax agreement would not need to involve all countries, but needs a "critical mass" to protect against big loopholes in the new system, Pascal Saint-Amans, the Organization for Economic Cooperation and Development's top tax official, said Friday.”
IRS previews proposed K-2 and K-3 for int'l taxes – Michael Cohn, Accounting Today. “The Internal Revenue Service and the Treasury Department released updated early draft versions Friday of Schedules K-2 and K-3 for pass-through businesses to report international tax information. The new Schedules K-2 and K-3 will go along with Forms 1065, 1120-S, and 8865 for tax year 2021 (filed in 2022). The goal is to offer more clarity for partners and shareholders on how to figure their U.S. income tax liability when claiming international tax deductions, credits and other items.”
Colombian President Drops Tax Plan After Bloody Protests – Ezra Fieser, Bloomberg ($). “President Ivan Duque withdrew a plan to raise taxes on many Colombians after it triggered days of bloody street clashes and a political crisis. Duque is giving up on some of the most unpopular ideas, such as extending the value-added tax to additional goods and services and making more people subject to income tax.”
Biden, Congress Again Delay Decision on Releasing Trump Taxes – David Yaffe-Bellany, Bloomberg ($). “Congress and the Biden administration have once again asked for more time to determine whether the Treasury Department will hand over former President Donald Trump’s tax returns. In a joint filing, they asked a federal judge in Washington to give them until May 28 to offer an update on the negotiations.”
Happy National Lumpy Rug Day! Yes, it’s a thing. People today rejoice either by spring cleaning their rugs or acknowledging that they have swept unwelcome facts and issues “under the rug.”
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.