Tax News & Views Infrastructure Slow Go Roundup

August 9, 2021

Biden's infrastructure bill on cruise control to Senate passage – Burgess Everett and Marianne Levine, Politico. “President Joe Biden’s bipartisan infrastructure deal cleared its final serious Senate hurdle Sunday night, putting the legislation on a glide path to passage as soon as late Monday. In a 68-29 vote, the Senate closed down debate on a bill negotiated by a bipartisan group of 10 senators that spends $550 billion in new money on the nation’s physical infrastructure. Sunday’s vote came after senators spent the weekend haggling over amendments and time agreements to consider them.”

A vote to amend the cryptocurrency provision in the bill looks unlikely:

Prior to the vote Sunday evening, senators spent the weekend trying to negotiate amendments changing the infrastructure bill’s cryptocurrency regulations and allowing coronavirus aid money to be spent on infrastructure. But they did not reach an agreement… The infrastructure bill could theoretically be amended after Sunday’s vote. But that would require cooperation from all 100 senators, making the prospects unlikely.

A final vote on the legislation will likely happen late tonight:

Final passage of the legislation is expected late Monday night, or the wee hours of Tuesday at the latest, unless a deal is reached among all 100 senators to speed it up. 

Once the bill passes the Senate, it will go to the House, where it will sit for weeks (if not months) before it gets a floor vote:

Senate votes to end debate on $1T infrastructure bill – Jordain Carney, The Hill. “The bill faces a less certain fate in the House, where Speaker Nancy Pelosi (D-Calif.) has vowed that she won't bring up the bipartisan deal until the Senate votes on a massive $3.5 trillion spending package not expected to come to the floor until this fall.”

The "massive $3.5 trillion spending package" is expected to include tax increases on corporations and wealthier taxpayers. 

Trouble is brewing on this front as moderate House Democrats want to vote on the infrastructure bill now and not wait for the other bill to pass the Senate.

Punchbowl News reports on a letter sent to Speaker Nancy Pelosi (D-Calif) asking her to expedite a vote on the infrastructure bill:

This [letter] was penned by Democratic Reps. Josh Gottheimer (N.J.), Ed Case (Hawaii), Jared Golden (Maine), Kurt Schrader (Ore.), Vicente Gonzalezand Filemon Velaof Texas, all moderates. This letter makes two critical points: first, these moderates want Speaker Nancy Pelosi to bring the infrastructure bill up for a vote as soon as the Senate passes it; secondly, they seem a bit squeamish about the price tag for the Democrats’ upcoming $3.5 trillion budget resolution.

Meanwhile, progressive House Democrats are not onboard with what the moderates are asking from Pelosi:

Progressives aren’t going to vote for the Senate bipartisan infrastructure bill without seeing the rest of the agenda, meaning the reconciliation package [i.e., the bill that increases taxes].

One unanswered question: Could Pelosi rely on Republican support to pass the infrastructure bill ahead of schedule?

There may be some Republican votes for the infrastructure bill -- especially among the Problem Solvers Caucus that Gottheimer co-chairs, provided the House doesn't change the legislation. That will give Pelosi and the moderates some wiggle room on that bill that doesn’t exist on the budget resolution, which only Democrats will support. In that case, every Democratic vote will be needed.

The letter can be found here.


Next step for the Senate: Approve a budget that will include rules for increasing taxes.

Senate Moves Closer to Passing Infrastructure Bill – Andrew Duehren, Wall Street Journal ($). “Senate Majority Leader Chuck Schumer (D., N.Y.) is also pushing for Democrats to approve the budget outline for the $3.5 trillion package in the coming days.”

Important note: The budget itself does not include tax increases. It includes instructions for tax increases.

Senate Budget Chairman Bernie Sanders (I-Vt) has released the budget and it provides the following instructions for the tax-writing Senate Finance Committee:

COMMITTEE ON FINANCE —The Committee on Finance of the Senate shall report changes in laws within its jurisdiction that reduce the deficit by not less than $1,000,000,000 for the period of fiscal years 2022 through 2031.

Translation: The Senate Finance Committee must write a bill that increases revenue (i.e., increase taxes) by at least $1 billion between 2022 and 2031. 

Spoiler alert: The Senate Finance Committee will write tax legislation that increases revenue by a lot more than $1 billion. President Biden has requested $2.4 trillion in tax increases. The final figure will likely be closer to Biden's number than what the budget requires. The Treasury's Green Book has the details on what Biden has proposed for tax increases.

Here is where lawmakers on the Senate Finance Committee will seek to increase revenue, as prescribed by the Senate Budget Committee:

Corporate and international tax reform

Tax fairness for high-income individuals

IRS tax enforcement

Health care savings

Carbon Polluter Import Fee

The text of the budget can be found here.

A summary of the budget can be found here.

Worth noting: The House must approve the same budget before committees can turn its rules for tax increases into legislation. It is expected that tax legislation could be written in the fall, at the earliest.


To the Olympic Victors Go the Spoils (and Maybe a Tax Bill) – Sam McQuillan, Bloomberg ($). “As the Olympic flame goes out in Tokyo on Sunday, marking the end of the 2020 Games, swimming phenom Katie Ledecky and pole vaulting sensation Katie Nageotte will both be leaving with gold. A hefty tax bill awaits back in the U.S., but only for one of them."

Ledecky, now the most decorated female swimmer of all time, likely owes the U.S. government about $44,000 from her two gold and two silver medal wins. That estimate is based on her lucrative corporate sponsorships and the prize money attached to her medals.


Tax Pros Got 99 Stresses, and COVID’s Just One – William Hoffman and Jonathan Curry, Tax Notes ($). “COVID-19 made almost everything worse in the tax business, but almost everything was already bad, practitioners said about the professional burnout that’s driven some to consider quitting over the last two years.”

Enrolled agent Kristin A. Roberts of the Roberts Group said she found herself snappish and turning inward as COVID lockdowns and interpersonal restrictions spread. ‘I don’t think I have heard from any of my colleagues who are not burned out,’ she noted.

After ‘by far the craziest’ two years in his 30-year tax career, David Weinstein, an enrolled agent in Connecticut, said the IRS’s pandemic-inspired decision to extend the 2021 filing season to May 15 pushed him to the brink of quitting the tax business altogether. ‘I’m 63, and I just can’t deal with that anymore,’ he said.


IRS Outlines $200M Acquisition for Taxpayer Information Platform – Cameron Leuthy, Bloomberg ($). “The IRS plans to upgrade information systems that provide a single repository of taxpayer data, an acquisition valued at as much as $200 million over five years.”

The Internal Revenue Service issued a sources sought notice to find companies capable of providing software development and integration support services for a proposed contract, known as Enterprise Case Management (ECM) Solution Development Services. The winning contractor will play a key role in replacing more than 60 aging legacy case management systems, which provide a common tax record for tens of millions of Americans, with a cloud-based platform built on Pegasystems Inc. software. The new enterprise case management solution will enhance information sharing and eliminate the need for manual workarounds.

IRS Issues Guidance on Changes to Pension Plan Funding Rules – Tax Notes ($):

The IRS has issued guidance (Notice 2021-48, 2021-33 IRB 1) on changes to the funding rules for single-employer defined benefit pension plans under section 430 made by the American Rescue Plan Act of 2021 (P.L. 117-2) that also affect the application of the funding-based limits on benefits under section 436.


Determining Gains and Losses From Selling the Family Farm – Richard Ray, Tax Notes ($). “Even though some U.S. farms are organized as corporate or partnership farms, most are small family farms, organized as sole proprietorships or small family corporations in which only a few family members have ownership. Thus, in most cases when a farm is sold, it is the sale of its assets and not the sale of stock or partnership interests that is at issue. This article examines the methods used for determining gains and losses from the sale of farm assets. Also, because many farm sales occur under an installment sale agreement, this article explores previous guidance on the allocation of installment payments for installment agreement assets.”


Arizona Education Group Sues Over Income Tax Increase Workaround – Brenna Goth, Bloomberg ($). “An Arizona law that circumvents a voter-approved income tax surcharge by creating a new tax structure for small businesses violates state limits on the changes lawmakers can make to citizen-passed measures, a lawsuit filed Thursday alleges."

The complaint, filed in Arizona Superior Court in Maricopa County, argues the Legislature ran afoul of the state’s Voter Protection Act, which prevents it from overriding voter-approved laws, when it passed S.B. 1783. Invest in Arizona, which backed the 2020 ballot initiative to raise taxes on high earners to fund education, is asking the court to strike down the new business tax structure and stop the Arizona Department of Revenue from implementing it.

Kansas Supreme Court Backs Counties’ Gas Lease Appraisal – Aysha Bagchi, Bloomberg ($). “An energy company challenging an appraisal of its gas well interests and equipment failed to prove that a longstanding oil and gas valuation guide wasn’t appropriate for the valuation, the Kansas Supreme Court ruled.”

Surviving Spouse Ineligible for Veteran Property Tax Exemption – Laura Mahoney, Bloomberg ($). “A South Carolina property tax exemption for surviving spouses of disabled veterans applies only under certain circumstances, a state appeals court said."

More: Mary Cromey moved to South Carolina from Maryland in 2010 after her husband died, and successfully claimed the property tax exemption for the first home she bought in her new home state. The court rejected her claim for an exemption on the next home she bought in 2016, saying it applies only to a jointly owned home, or the house acquired from the deceased spouse and one subsequently acquired house.

DoorDash, Instacart on Notice to Collect Taxes in Alabama – Michael Bologna and Tripp Baltz, Bloomberg ($). “Alabama put third-party food delivery services such as DoorDash, UberEats, and Instacart on notice that they need to collect the state’s use tax on behalf of restaurants and grocery stores using their platforms. And they must implement their compliance plans no later than Oct. 1.”

State Trust Taxation Still Pushing Due Process Limits – Maria Koklanaris, Law360 ($). “An Oregon Supreme Court decision allowing the inclusion of Montana trust property in the state's estate tax valuation suggests continued testing of due process limits by states despite the U.S. Supreme Court's rejection of a similar North Carolina regime.”

Personal Income Taxes And Private Collectors: SALT In Review – David Brunori, Law360 ($). “From calls to eliminate the personal income tax in Arkansas to private collectors in Maine, here are my thoughts on noteworthy state and local tax news.”

Minn. Tax Court Won't Nix Evidence In Pipeline Value Row – Daniel Tay, Law360 ($). “A company contesting a pipeline's value cannot exclude an appraisal from the Minnesota tax commissioner, as it complies with all state law requirements, the state tax court said, rejecting the owner's argument that the report lacked important information.”

Ark. Biz Denied Refund For Tax On Manufacturing Purchases – Abraham Gross, Law360 ($). “An Arkansas business was properly denied a refund of sales and use tax paid on purchases related to its manufacturing and processing facilities, a state administrative law judge ruled, rejecting the business' claimed tax exemptions.”


The BEAT Is Down but Not Out – Martin Sullivan, Tax Notes ($). “New data from the IRS show that fewer than 500 corporations paid $1.8 billion of base erosion and antiabuse tax in 2018. That number of taxpayers is only one-seventh of about 3,500 corporations that may be subject to the BEAT because they are in a group with more than $500 million of gross receipts. And that number is less than half of about 1,000 corporations with a base erosion percentage — a ratio of specific payments to foreign related parties over total deductions — exceeding the 3 percent threshold necessary to be potentially subject to the BEAT.”

With the BEAT rate doubling from 5 percent in 2018 to 10 percent in 2019 through 2025 (and 12.5 percent thereafter), there is good reason to expect revenue to be more than double the 2018 figure in 2019, 2020, and 2021 even if the number of BEAT taxpayers remains roughly the same. Contrary to conventional wisdom, there is no reason — based on the data presented below — to rule out the spiraling revenue increase originally estimated by the Joint Committee on Taxation in 2017 to be $150 billion over 10 years.


Book lovers Unite! It's National Book Lovers Day

"A day for all those who love to read, National Book Lovers Day encourages you to find your favorite reading place, a good book (whether it be fiction or non-fiction) and read the day away."

Personally, I'm lobbying for a National Nap Day where I can sleep the day away. 

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