Tax News & Views Senate's Been Busy Roundup

August 11, 2021

Infrastructure Bill Heads to House for Potential Crypto Changes - Frederic Lee, Tax Notes ($). "The Senate voted 69 to 30 to advance a bipartisan bill that includes $550 billion of new spending over five years on infrastructure, leaving for now the cryptocurrency reporting requirements as they were introduced in the bill."


Enhanced cryptocurrency transaction reporting would be the largest revenue raiser in the bill, according to estimates by the Joint Committee on Taxation, with an estimated $28 billion raised over 10 years.

Renewing Superfund excise taxes on 42 chemicals would bring in $14.5 billion, and an early end to the employee retention credit would provide $8.2 billion.

The bill would raise $2.9 billion over 10 years by extending through 2031 the interest-rate-smoothing provision that allows single-employer defined benefit pension plans to use lower interest rates when computing pension liabilities.


Senate OKs $1.2T Bill With Enhanced IRS Crypto Oversight - Stephen Cooper, Law360 Tax Authority ($). "The infrastructure legislation's ultimate success could hinge on a separate $3.5 trillion budget bill that Senate Democrats unveiled Monday and are seeking to advance through a special filibuster-proof process called reconciliation that allows it to clear the Senate with a simple majority."

Cryptocurrencies are poised for a tax overhaul. Here’s what it’ll mean. - Brian Faler and Kellie Mejdrich, Politico. "Lawmakers aren’t creating any new taxes on cryptocurrencies. The main thing they’re doing is imposing on cryptocurrencies the sort of reporting requirements that apply when people sell stocks and other securities."

Understanding the Heated Debate Over Cryptocurrencies and Tax Compliance - John Buhl, TaxVox. "Cryptocurrency miners put new currency into circulation and create the blocks that form the blockchain by validating transactions. But miners don’t have individual consumer data. Neither do “nodes,” which basically are servers that validate the validity of blockchain data. They have pieces of information but not enough to prepare a Form 1099 and ensure the IRS gets the full picture of gains and losses."

Related: Blockchain & Cryptocurrency Forensics



Senate Passes Democrats’ $3.5 Trillion Budget Blueprint - Kristina Peterson, Andrew Duehren, and Eliza Collins, Wall Street Journal ($):

The Senate passed a $3.5 trillion budget blueprint early Wednesday, the first step in an arduous process designed to allow Democrats to push through a sweeping package of education, healthcare, climate and other provisions without GOP support.


An amendment from Sen. Catherine Cortez Masto (D., Nev.) calling for “protecting family farms, ranches, and small businesses while ensuring the wealthy pay their fair share” failed when Sen. Kyrsten Sinema (D., Ariz.) sided with Republicans in opposition.

The Biden administration is pushing to tax unrealized capital gains upon death, an effort that has raised alarm among Republicans and some Democrats who worry about the potential impact of the changes on family farms. Ms. Sinema’s decision to side with Republicans on the amendment is a sign that Democrats may have difficulty reaching unanimous consensus on changing how unrealized capital gains are taxed.

There remains a long way to go.


Senate Democrats approve $3.5 trillion budget resolution in key step toward passing major economic package without GOP votes - Claire Foran and Zli Zaslav, CNN. "Passage of the budget resolution by both chambers will unlock the ability for Democrats to use a process known as budget reconciliation to pass legislation on a party-line vote addressing health care, aid for families, the climate crisis and more. Tuesday’s vote is only the first step in what will be a lengthy process. The resolution needs to be approved by both chambers before Democrats can move on to the reconciliation plan, which still must be drafted and will be considered in the fall."


Democrats Promise, GOP Fumes as $3.5 Trillion Package Advances- Doug Sword, Tax Notes ($):

Senate Democrats launched their $3.5 trillion rewrite of the U.S. tax code on a party-line 50-49 vote as the top Senate Republican warned it would amount to “the largest peacetime tax hike on record.”

Democrats focused on the more than $1 trillion in tax cuts — largely for less well-off families — and their intention to pay for the package with tax increases on the wealthy and corporations. Republicans predicted that the spending increase would fuel already worrisome inflation and push the federal debt above $40 trillion over the next decade.


While centrist Sens. Joe Manchin IIID-W.Va., and Kyrsten Sinema, D-Ariz., voted to bring the resolution to the floor, it is far from certain that the two — both of whom have expressed discomfort with the $3.5 trillion price tag — will go along with the package once it is written into legislation and comes up for expected votes this fall.


Senate Vote Won’t End Battle Over IRS Financial Info Oversight - William Hoffman, Tax Notes ($):

The Wyden amendment would create a reserve fund to support the reporting of “large financial account balances to ensure those evading the tax system pay what they owe while protecting the privacy of American taxpayers and small business tax information.”

The amendment comes after the Biden administration’s American Families Plan in May proposed new information reporting to the IRS by banks and financial institutions on gross incomes and outflows of U.S. account holders. Treasury estimated in its green book in June that the reporting proposal would reduce the nation’s estimated $7 trillion, 10-year tax gap by over $460 billion.

This battle too will continue into the fall.


IRS Offers Safe Harbor for Employers Using Retention Credit - Caitlin Mullaney, Tax Notes:

New IRS guidance will allow employers to exclude some items from their gross receipts to be able to claim the employee retention credit provided in coronavirus pandemic response laws.

Rev. Proc. 2021-33, 2021-34 IRB 1, provides a safe harbor under sections 448 and 6033 that permits the gross receipts exclusion of amounts involving the forgiveness of Paycheck Protection Program loans; shuttered venue operators grants received under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act; and restaurant revitalization grants received under the American Rescue Plan Act of 2021 (P.L. 117-2). 

IRS provides relief for certain employers claiming the Work Opportunity Tax Credit - IRS:

The Internal Revenue Service today announced it is providing transition relief to certain employers claiming the Work Opportunity Tax Credit (WOTC).  The WOTC is a federal income tax credit available to employers that hire certified members of certain groups specified in the Internal Revenue Code who face significant barriers to employment, including Designated Community Residents or Qualified Summer Youth Employees.

The IRS today issued Notice 2021-43, which extends the 28-day deadline for employers to submit a request to a designated local agency (DLA) to certify that an employee hired between January 1 and October 8 of this year is a Designated Community Resident or a Qualified Summer Youth Employee.


Paid leave business tax credit expanded to encourage more COVID-19 vaccinations - Kay Bell, Don't Mess With Taxes. "Uncle Sam is encouraging employers to cut their job-focused unvaccinated workers some slack. Eligible businesses who let their employees have paid time off to get the vaccine will get a tax break."

Selling your home when you've taken depreciation deductions - Jason Dinesen. "What if you’ve claimed a home-office deduction relating to your house? In that situation, it’s likely that some of your sale IS taxable."

Have you Recently Filed a Petition with the U.S. Tax Court? - National Taxpayer Advocate Blog. " Unaware that petitions have been filed, the IRS has been following its procedures, closing many of these petitioned cases and assessing these unagreed examination deficiencies. Some petitioning taxpayers may be receiving bills or experiencing IRS collection actions as a product of these erroneous, premature assessments. Unfortunately, many taxpayers may not understand the prohibition against assessment and collection while their case in pending in the Tax Court and are now dealing with collection issues."

Related: Why Did the IRS File a Tax Lien Against Me?


Interview: A Look at Life in Lockdown and Beyond for Women in Tax - David Stewart, Amanda Athanasiou, and Lauren Loricchio, Tax Notes Opinions. "The women that we spoke with who seemed to have the most difficulty juggling work and life were those with caregiving responsibilities, whether it was for a child or a family member. The lack of day care and kids being out of school seemed to really make things difficult for some women."

Will FDII Stay or Will it Go? - Daniel Bunn, Tax Policy Blog. "Last week the Organisation for Economic Co-operation and Development (OECD) released an updated list of “Harmful Tax Practices” that have been identified as part of a country peer review process. One notable element of the recent list states that the United States has committed to abolish the deduction for Foreign Derived Intangible Income (FDII). However, while the Biden administration has certainly proposed to remove FDII, it is not clear that Congress is on board with that approach."


Taxpayers Not Allowed to Provide Other Proof of Timely Mailing When USPS Failed to Place a Postmark on Their Claim for Refund - Ed Zollars, Current Federal Tax Developments:

The Court found that the envelope clearly lacked a postmark and the taxpayers had not used certified or registered mail (where the date stamped on the receipt by a USPS employee would establish a postmark date).  Thus, the issue was if there was a way to show timely filing of an envelope that lacked the postmark.


Thus, the Court of Federal Claims concludes that the missing postmark means automatically that the filing was late when it was not received by the IRS by the last date in the statute. 

The Tax Court allows taxpayers to try to demonstrate timely filing by testimony and other evidence. Still, life is much easier if you file any paper return Certified Mail, Return Receipt Requested, to protect yourself if your filing goes astray in the mail.


Kids? Today is National Son's and Daughter's Day. It would seem to be a holiday we all would qualify for, except it's apparently about children.


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