May 14, 2021
Biden's 'core conviction' drives his push to tax corporations and the rich. It could cost him – Phil Mattingly, CNN. “President Joe Biden's steadfast belief in taxing corporations and the rich has become a central plank in his legislative agenda, even as he's warned of political peril and red lines from Republicans. GOP senators, some of whom Biden hosted in the Oval Office on Thursday as he seeks a bipartisan infrastructure deal, have rejected them outright. Some Democrats, cognizant of the political backlash past increases have wrought, have quietly warned of their unease.”
Top business lobbying groups are already laying the groundwork to attack the proposals and considering the kind of moneyed opposition that simply didn't materialize in Biden's successful $1.9 trillion Covid relief plan.
GOP Senators See Possible Infrastructure Deal After Biden Talks – Josh Wingrove, Erik Wasson and Jennifer Jacobs, Bloomberg ($). “Republican senators say they’re encouraged about the prospects for a deal with President Joe Biden on his $2.25 trillion infrastructure proposal after an Oval Office meeting to negotiate over significant areas of disagreement. Shelley Moore Capito of West Virginia, one of a half dozen senators who attended the talks, called the Thursday discussion “very productive” and said “we’re very encouraged.”
Senator: Capturing Bipartisan Support for Biden’s Plan is an Elusive Goal – Jay Heflin, Eide Bailly. “As political leaders in the nation’s capital seek bipartisan support for President Joe Biden’s Jobs and Families Plans, one Senator admitted on May 13th that pursuing common ground between the political parties is an elusive goal because of over-reach […] ‘We have some serious distance to cover,’ the Senator said.”
Business Leaders Push for Infrastructure Deal, Minus the Corporate Tax Hikes – Alex Leary and Emily Glazer, Wall Street Journal ($). “In private talks with dozens of business leaders, Biden administration officials are pitching the president’s $2.3 trillion infrastructure proposal as an investment they will benefit from, emphasizing support for new job-training programs as much as better roads, officials and executives say.
Some companies have suggested alternative ways to fund infrastructure projects, while others haven’t offered specifics. Several executives and business groups have said they are eager for Mr. Biden to fulfill a pledge to seek compromise with Republican lawmakers—some of whom have proposed a narrower infrastructure package funded by gas taxes and other user fees, not corporate tax increases.
Biden to release full budget proposal on May 27 – Niv Elis, The Hill. “President Biden will unveil his full 2022 fiscal year budget proposal on May 27, Office of Management and Budget (OMB) spokesman Rob Friedlander said Thursday […] In terms of financing, Biden has proposed paying for his infrastructure and families plans with tax increases on corporations and high earners, though he has not said whether or how to pay for additional spending in the regular discretionary areas covered in the ‘skinny’ budget.”
Will Biden’s IRS be coming after your clients? – Alexis Leondis, Accounting Today. “President Joe Biden wants to give the Internal Revenue Service sharper teeth. He’s proposed increasing the agency's funding by almost 70% so it can better police tax avoidance and evasion. The focus is supposed to be on wealthy taxpayers and corporations, since they're the ones who account for the majority of tax misconduct, but what does that mean exactly? Who should be on notice?”
Progressive Wealth Taxes Could Slow Growth, Panel Told – Stephen Cooper. Law360 Tax Authority ($). “Higher taxes on wealthy Americans and corporations could finance President Joe Biden's infrastructure proposals and boost progressivity in the code, a panel of tax experts said Wednesday at a hearing to lay the groundwork for congressional action this year.”
Biden’s Bank Reporting Plan Leans on Voluntary Compliance – David Hood, Blomberg Tax ($). “A Biden proposal meant to give the IRS more insight into the financial activities of the wealthy would likely raise revenue through voluntary changes in behavior, according to a Treasury official. Kimberly Clausing, Treasury’s deputy assistant secretary for tax analysis, said the Biden administration’s plan to make banks report information on aggregate account outflows and inflows to their annual reports to the IRS won’t require any extra enforcement from the agency.”
Trump tax break for certain businesses gets a pass in Biden plan – Kate Dore, CNBC. “President Joe Biden is calling for higher taxes on wealthy Americans to cover child care, paid family leave, education programs and other priorities. Yet the plans exclude a policy he vowed to reel in during the campaign: the 20% deduction for certain businesses.”
SALT Cap Repeal Advocates Say Write-Off Vital for State Budgets – Laura Davison, Bloomberg Tax ($). “The two Democrats leading the fight to repeal the $10,000 cap on state and local tax deductions argued that the break is important to their states to prevent high-income residents -- and the budget revenue they generate -- from fleeing to lower-tax areas. Representatives Josh Gottheimer of New Jersey and Tom Suozzi of New York said that restoring the state and local tax, or SALT, deduction on federal taxes benefits taxpayers who, through the state income levies and property taxes they pay, substantially help fund schools, children’s health insurance and services for the elderly."
‘There are wealthy people that benefit from this. There is no question about it whatsoever,’ Suozzi said Thursday at a USA Today event. ‘We don’t want to lose these wealthy people leaving us because it leaves a hole in our revenue sources and as a result the middle class and lower-income people are left holding the bag.’
Neal Wants Hearings to Shed Light on Tax Hikes; SALT Cap Looms – Jad Chamseddine, Tax Notes ($). “House Ways and Means Committee Chair Richard E. Neal, D-Mass., wants to hold more hearings to better understand concerns with some of the tax increases proposed by the Biden administration, while opponents of the state and local tax deduction cap demand attention.”
Michigan House Votes For Entity-Level Tax To Skirt SALT Cap – Abraham Gross, Law360 Tax Authority ($). “Michigan would establish an optional entity-level tax for pass-through businesses as a workaround to the $10,000 federal cap on state and local tax deductions under a bill passed by the state House of Representatives on Thursday.”
IRS Eyeing More Relief for S Corporations, Official Says – Lydia O’Neal, Bloomberg Tax ($). “The IRS is weighing relief for entities that elect to be considered S corporations but have operating agreements classifying them otherwise, according to an official. ‘This is something obviously that we’re studying,’ said Richard Probst, an IRS senior technician reviewer, during a virtual conference hosted by the American Bar Association’s tax section.
Probst’s remarks came in response to a question about whether the agency will provide automatic and expeditious relief for businesses classified as limited liability companies under state law that are running into problems when they elect to be S corporations.
Advance Covid-19 Credit Payments Forms Being Updated at IRS – Allyson Versprille, Bloomberg Tax ($). “The IRS is warning employers not to use the current form for requesting advance payment of Covid-19 relief credits because it doesn’t reflect changes enacted in March. The agency is almost finished revising the document, Form 7200, said Janine Cook, deputy associate chief counsel for Employee Benefits, Exempt Organizations, and Employment Taxes in the IRS Office of Chief Counsel. ‘You cannot use our first quarter 7200 for the second quarter,’ she said, noting that if people attempt that, their request for advance payment of credits will be rejected.”
Improper payments for refundable credits prove hard to combat for IRS – Michael Cohn, Accounting Today. “The Earned Income Tax Credit, the Additional Child Tax Credit and the American Opportunity Tax Credit continue to have high rates of improper payments, despite efforts by the IRS."
A new report, released Thursday by the Treasury Inspector General for Tax Administration, found that for fiscal year 2020, the IRS estimated that 24% ($16 billion) of the total EITC payments of $68.2 billion were improper. For the ACTC, the IRS estimated 12% ($4.5 billion) of total payments of $39.1 billion were improper. For the AOTC, the IRS estimated 26% ($2.3 billion) of total payments of $8.9 billion were improper.
States' fiscal windfall during the coronavirus pandemic – Felix Salmon, Axios. “Remember the massive fiscal crisis that was about to befall the states, unable to print their way out of the recession? Well, it's over before it even really began. Driving the news: California's catastrophic $54 billion anticipated budget deficit has become a $75 billion budget surplus over this fiscal year and next. In New York, the 2021-22 budget is $212 billion. That's a massive 10% increase over the previous year.”
The states have been helped by the aid earmarked for them in the most recent stimulus bill, as well as by an unanticipated spike in income tax revenues.
Treasury Will Allow States to Take ARP Funds and Cut Taxes, With Some Guardrails – Richard Auxier, Tax Policy Center. “On Monday, the U.S. Treasury Department released much-anticipated guidance for the American Recovery Plan’s (ARP) $350 billion in direct state and local aid, including details on how it will implement the law’s restriction on using ARP funds for state tax cuts. Treasury’s rules give states plenty of flexibility. But there are limits, and until states spend all their ARP funds, they need to focus on two numbers: Their inflation-adjusted fiscal year 2019 tax revenue and 1 percent.”
Largest tax cut in Idaho history signed by governor - KTVB Staff, KTVB7. “The state of Idaho has achieved its single largest tax cut in state history. Gov. Brad Little signed House Bill 380 into law Monday, providing Idahoans $220 million in immediate one-time income tax rebates and $163 million in ongoing income tax relief.”
The tax rebates will go out to all Idahoans who filed a state income tax return in 2019. You will get at least $50 per person or 9% of your 2019 taxes, whichever amount is greater.
Nevada High Court Strikes Down Corporate Payroll Tax Measure – Michael Bologna. Bloomberg Tax ($). “Nevada officials are studying budget implications of a state Supreme Court decision Thursday striking down two 2019 laws that have raised more than $100 million through an extension of the corporate payroll tax and a bump in motor vehicle fees.”
Major Estate Tax Case on Insurance Setup Gets Mixed Ruling – Aysha Bagchi, Bloomberg Tax ($). “A deceased woman’s taxable estate was right to exclude $30 million in premiums paid toward six life insurance policies, but it undervalued the rights that did belong in the estate as a result of the life insurance setup, the U.S. Tax Court ruled. The Thursday decision from Judge Joseph Robert Goeke comes after several years of litigation over whether the amount of the transferred premiums or the cash-surrender value of the policies belonged in Clara Morrissette’s estate. The cash-surrender value is the money that would come from cashing out the policies.”
Biden, Yellen Inject New Life Into Global Tax Talks – Isabel Gottlieb, Bloomberg Tax ($). “The Biden administration has given a boost to a years-long effort toward global agreement on digital tax rules as negotiators work to strike a deal in the coming months.”
House Committee Approves Tax Haven Disclosure Bill – David van den Berg, Law360 Tax Authority ($). “The House Financial Services Committee approved legislation Wednesday that would require multinationals to publicly disclose country-by-country financial reporting, which its proponents say would document corporate abuse of tax havens. The committee voted 28-23 to send the Disclosure of Tax Havens and Offshoring Act to the full House.
Under the bill, each subsidiary of a large multinational corporation would have to file a report with financial information including its full legal name, the tax jurisdiction it's a resident of for tax purposes, the tax jurisdiction it's organized or incorporated in if it's not the same, and its main business activity.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.