Deadline Day for Infrastructure and Budget Resolution Measures - Doug Sword, Tax Notes ($):
Republicans complain that while negotiators are close to ironing out differences on the bipartisan bill, there is no final agreement or legislative text to vote on. Schumer’s scheduling of a cloture vote for July 21 was premature and will doom the vote, they say.
It will be particularly easy to vote against the bipartisan bill because it will be simple for Schumer to reschedule a new vote afterward, said Senate Minority Leader Mitch McConnell, R-Ky.
What next? "If the bipartisan infrastructure talks were to collapse, Democrats say, the highway, rail, and other funding from those talks would be rolled into the $3.5 trillion budget resolution effort, expanding it to beyond $4 trillion."
Finance Chair adds revamped pass-thru deduction to legislative talks on Capitol Hill - Jay Heflin, Eide Bailly:
The pass-thru deduction became law as part of the 2017 tax reform bill and since its enactment Democratic lawmakers have argued it overwhelmingly benefits wealthier business owners. Wyden’s bill seeks to address this issue by phasing out the deduction for qualified business income over $400,000. The deduction is fully phased out at $500,000.
The pass-thru deduction is set to expire at the end of 2025. Between now and then, Wyden said his bill would keep $147 billion in deductions from being claimed by pass-thrus with more than $500,000 in taxable income. The phase out will drive down the overall cost of the bill.
The bill would also allow all businesses to qualify, including lawyers and accountants. That is, until they get too successful.
The text of the legislation can be found here.
A one-page explainer of the bill can be found here.
Wyden pitches curbs on tax break for noncorporate businesses - Laura Weiss, Roll Call. "Wyden’s bill would also get rid of special rules determining the amount of the deduction based on W-2 wages paid to employees, with an exemption for firms like real estate developers that may invest a lot of capital but not have many workers on payroll. Instead, there would be only the definition of eligible income and the $400,000 income limitation."
Wyden introduces bill to overhaul pass-through deduction and expand to accountants - Michael Cohn, Accounting Today. "The National Federation of Independent Businesses, an influential business group, expressed its opposition to the bill."
Wyden Passthrough Bill Pitched as Remedy to GOP Tax ‘Giveaways’ - Frederic Lee, Tax Notes ($. "The Senate’s top taxwriter has proposed phasing out the 20 percent passthrough deduction for individuals earning more than $400,000 in an attempt to limit it to true small business owners."
Size gets so confusing. The 2017 TCJA tax bill defined "small" as gross receipts under $25 million annually. Now it will be taxable income under $400,000, which means a lot of businesses would suddenly no longer be "small." Whether the self-esteem boost from getting "big" would adequately console them for a 20% tax increase remains to be seen.
California Governor Signs SALT Cap Workaround - Paul Jones, Tax Notes ($). " For tax years beginning on or after January 1, 2021, and ending before January 1, 2026, the legislation allows some passthrough entities taxed as S corporations and partnerships that do business in the state to opt to pay a 9.3 percent entity-level tax on income that the state would normally tax as personal income when passed through to owners. Only entities that are not publicly traded, don’t have owners that are partnerships, and aren’t part of a combined reporting group for corporate tax purposes are eligible to make the election."
Iowa DOR Summarizes COVID-19 Responses - Iowa Department of Revenue, Via Tax Notes. "The Iowa Department of Revenue released a summary of the various orders, guidance documents, and answers to frequently asked questions that it has produced since the outbreak of COVID-19, including tax filing extensions granted in 2020 and 2021; the state's small business relief program; and extensions for making contributions to 529 educational savings plans."
Advance Child Tax Credit amount less than you expected? Income, garnishments could be why - Kay Bell, Don't Mess With Taxes. "The main reason for the payment shortage is that the income information on file with the Internal Revenue Service — for most of the automatic AdvCTC recipients, that's what's on your 2019 or 2020 tax return filing — is more that the earnings threshold for the full payment."
Like-Kind Exchanges of Cryptocurrency—Recent IRS Guidance - Jason Freeman, Freeman Law. "In a recent Chief Council Advisory, the IRS found that certain cryptocurrencies did not qualify as like-kind exchanges under section 1031 prior to the Tax Cuts & Jobs Act of 2017. The IRS’s ruling, while limited to coin exchanges involving Bitcoin, Ether, or Litecoin, provides insight on the IRS’s current thinking on the subject."
Related: Bitcoin — What Should You Know.
Do I Issue a 1099 When I Pay a Contractor in Venmo? Jason Dinesen. "If you’re just paying via the contractor’s individual profile, you DO need to issue a 1099 yourself. The fact that such a payment violates Venmo’s terms of service is probably not your problem as the paying business (it’s the contractor’s problem). What you need to know is, this type of payment means you DO issue a 1099."
10th Circuit Rejects Constitutional Challenges to Passport Denial or Revocation for Seriously Delinquent Tax Debt - Jack Townsend, Federal Tax Procedure. "Basically, the Court held that there was no fundamental right to international travel and thus the review was limited to rational basis review which was easily passed because the Government has an interest in collecting taxes."
What the IRS should do - Robert D. Flach, The Wandering Tax Pro. "What the IRS should have done, and should do now, is put a temporary hold on all open balance due accounts and cease from sending out automatic notices and other collection activities for these accounts until the backlog of correspondence is processed."
Some In the Environmental Justice Movement Oppose A Carbon Tax. That Is A Problem - Howard Gleckman, TaxVox. "The Tax Policy Center estimates that while a carbon tax alone would be somewhat regressive, adding a rebate or dividend could make it highly progressive. Low-income households, for example, would receive an average tax cut of about 4.4 percent in one rebate design modeled by TPC."
Interview: Taxing College Athletes After NCAA v. Alston - David Stewart, Robert Goulder, and Andrew Dana, Tax Notes Opinions. "I think we're going to see a difference between those athletes who have the benefit of a robust advisory team and those that get ahead of themselves. There may be some interesting conversations next April."
Taxpayer Fails in Attempt to Use the Cohan Rule to Obtain a Deduction - Ed Zollars, Current Federal Tax Developments. "Essentially, a taxpayer looks to use the Cohan rule when the taxpayer has deficient or non-existent records to support a deduction, a problem which George M. Cohan successfully was able to overcome in his 1930 case."
Kardashians Win $13.5M Beauty Lawsuit, IRS Collects Taxes - Robert Woods, Forbes. "The Kardashians were owed a $1 million advance plus ongoing fees, but when they were shorted millions they sued. The trial court ruled for the Kardashians in 2018, and the Appeals court upheld it. The IRS will collect a share, and that share will be sizable. This was a royalty dispute, and royalties are taxed as ordinary income."
The next frontier: Spaceflight taxes? - Sam Mintz, Politico. "Rep. Earl Blumenauer (D-Ore.), who is spearheading the effort, said rich space dilettantes should have to pay taxes for those flights, and noted special concern about the environmental impact of sending people into space on trips with no 'scientific value.'"
Can Fraudulent Tax Return Preparation Become An Addiction? Jim Maule, Mauled Again. "It boggles the mind that someone who is told that they are under criminal investigation continues to engage in the activities that are the subject of the investigation."
Related: The fable of the frog and the scorpion.
Hungry? Go with it. Today is National Junk Food Day!