Tax News & Views Doesn't Want The Money Yet Roundup

June 23, 2021

Taxpayers now can go online to opt out of Advance Child Tax Credit payments, verify eligibility - Kay Bell, Don't Mess With Taxes:

 But the IRS also is working to ensure that taxpayers who do not want the tax credit cash early can refuse the money.

Why would they want to do that?

Because, as noted in my blog post yesterday (which just happened to be June 21, Child Tax Credit Awareness Day), they might have to pay back all or part of the advance credit amounts they get this year.

Not no, just not now: To prevent that from happening, the IRS today activated a new online tool where filers who don't want the advance payments can electronically say no thanks.


Tax Pros Bemoan Slow Rollout of IRS Child Tax Credit Tool - Allyson Versprille, Bloomberg ($). "The agency said in a news release that it will add new features to the update portal throughout the summer and fall, including the ability to update family status and note changes in income. But not having those capabilities before payments begin going out increases the chances that families will get the wrong amount and that some will end up owing the IRS for excess payments next tax-filing season, according to tax professionals."


Infrastructure Talks Focus on How to Pay for Bipartisan Package - Andrew Duehren and Kristina Peterson, Wall Street Journal ($):

The group has discussed financing the package through a variety of public-private partnerships, repurposing existing federal funds and enhancing enforcement at the IRS to collect taxes that are owed but not paid. A draft version also included indexing the gas tax to inflation and charging an annual fee on electric vehicles as other ways to pay for the spending, which would total $1.2 trillion if extended over eight years.

But the White House has opposed raising the gas tax, which was last increased in 1993, and charging fees on electric vehicles, instead proposing that the plan collect additional revenue from enhanced tax enforcement.

The politics make it hard to bring a deal together:

Many progressive Democrats have said the bipartisan deal would be inadequate if it weren’t accompanied by a bill focused on social programs and tax increases. But in a 50-50 Senate, Democrats would need unanimous support to move forward with a larger bill through a budget process called reconciliation.

And that's just the Senate. The Democratic majority in the House is tiny as well, and as few as three or four dissenting Democratic representatives can stop any bill. It could be a long summer for tax policy negotiators.


Race for Global Tax Revolution Faces Hurdles in Last Stretch - Isabel Gottlieb and William Horobin, Bloomberg:

Despite their breakthroughs on a minimum global corporate tax rate and a shift in philosophy allowing one country to apply levies to profits of another’s national champions, multiple technical details remain unresolved.

Agreeing which companies will be covered, and deciding how governments can still use tax incentives to encourage virtuous economic activity despite a minimum rate, are among several other challenges that have overshadowed years of talks hosted by the Organization for Economic Cooperation and Development.

My country's virtuous economic development tax incentive is your country's underhanded business subsidy.

Implementation of any accord may take years, requiring treaty amendments and domestic legislation, and concerns over whether it can stick could yet hamper a deal too.

Whatever the result of years of negotiation and legislation turns out to be, it's not likely to be simple.

Related: Reasons to Consider GILTI Amid Release of Final Regulations.

G-7 moves toward US on digital services, with details awaited - Ellyn Ferguson, Roll Call:

The recent agreement among the world’s seven leading industrialized countries could signal a shift in international consensus toward the Biden administration’s goal of ensuring that U.S. tech companies aren’t the only ones facing taxes on digital services...

The G-7 proposal lacks many specifics, and international tax experts say it’s a long way to a final agreement. But the outline described by officials suggests it will cast the digital services tax net wider than an exclusive club of U.S. multinationals such as Inc., Facebook Inc. and Google LLC. 

Will a Global Minimum Corporate Tax Work? - Knowledge@Wharton. “If all players don’t sign up and agree to some centralized management of the process, it falls apart.” 

Eight Ways to Compare the Biden Proposals to the Global Minimum Tax - Daniel Bunn, Tax Policy Blog:

President Biden is proposing a tax rate on foreign earnings of 21 percent, which could result in an effective rate of 26.25 percent or higher due to foreign tax credit and expense allocation rules.

As the G7 agreed recently, the rate of the global minimum tax could be 15 percent.

Tax Maximizers: Good Greed and Bad Greed - Pierre Lemieux, Econlog:

Tax competition pushing national states to levy lower taxes is apparently a “race to the bottom.” Like when your private suppliers compete to offer you a lower price?


New Hampshire Revenue Department Clarifies Taxation of PPP Loans - New Hampshire Department of Revenue via Tax Analysts. "The new guidance further explains that because of the enactment of S.B. 3, any qualified business expenses paid for with forgiven PPP loan proceeds will continue to be deductible."

Biden’s Vague Plan on Partnerships Sparks Rampant Speculation - Jonathan Curry, Tax Notes ($). "Buried in Treasury’s most recent green book is a provision stating that for purposes of the proposal to treat the transfers of appreciated property via gift and death as realization events, gain would also be recognized when property is transferred into or out of a 'partnership or other non-corporate entity.' Absent further context, tax observers say such a change could have dramatic consequences and reverse decades of policy underpinning the taxation of partnerships."

IRS Issues Guidance for Implementing ADS Change for Residential Rental Property - Andrea Mouw, Eide Bailly:

The Consolidated Appropriations Act of 2021 (CAA) retroactively modified the ADS recovery period for residential rental property placed-in-service prior to 2018 held by electing real property trades or businesses. Affected taxpayers are those who have elected to be exempt from the interest expense deduction limits of section 163(j).

If you are an affected taxpayer, you need to take action to modify the recovery period of these assets from 40 to 30 years. The IRS no longer views 40 years as a permissible recovery period.

Section 163(j) limits interest deductions to a percentage of income. Real estate operators can opt out of the limits, but at the cost of reduced depreciation deductions. The new guidance is for residential real estate subject to the opt-out election.


Tax Reform’s Broader Corporate Tax Base Opens More to Biden’s Proposed Rate Hike - Garrett Watson, Tax Policy Blog. "As Congress considers President Biden’s proposal to raise the corporate tax rate from 21 percent to 28 percent, it is important to remember that the Tax Cuts and Jobs Act (TCJA) of 2017 expanded the corporate tax base. A broader corporate tax base means that increasing the tax rate will have a larger impact on the economy and federal revenue than it would have prior to the TCJA’s passage."

Ownership Registry Brings Tax Enforcement Benefits and Risks - Nathan Richman, Tax Notes ($). A so-far underappreciated rule enacted last year requires business entities to report their ownership to the financial Crimes Enforcement Network. While billed as a rule to catch taxpayers evading taxes through "shell" companies, its reach is much broader. Guinevere M. Moore of Moore Tax Law Group LLC, is cited in the article:

The CTA, like some other information reporting regimes, brings traps for the unwary and compliance costs for taxpayers trying to get it right, Moore said.

At the moment, the IRS seems to apply reporting penalties by default, even when taxpayers make inadvertent mistakes — which a new regime seems likely to generate, Moore said. The IRS has been understaffed for a long time, and that anemia can make examiners more aggressive with those penalties, she said. 

It's not clear the compliance costs on innocent taxpayers will be worth the tax enforcement benefits.


Typing can dry you out. So celebrate National Hydration Day and National Typewriter Day together today.

Expand Full Article

We're Here to Help

We are here to help
From business growth to compliance and digital optimization, Eide Bailly is here to help you thrive and embrace opportunity.
Speak to our specialists