Tax News & Views Congressional Agenda Roundup

August 30, 2021

Centrist Dems Hold Cards As Congress Mulls $3.5T Relief Plan – Alan Ota, Law360 ($). “The fate of a $3.5 trillion fiscal 2022 budget reconciliation bill designed to finance priorities in President Joe Biden's recovery agenda will likely hinge on undecided centrist House Democrats who have concerns about the scope of the plan's tax hikes… Rep. David Price, D-N.C., a senior appropriator and former professor of public policy at Duke University, said some House members had reservations about voting for a big tax package without knowing whether it would be shrunk in the 50-50 Senate. Sen. Joe Manchin, D-W.Va., a key swing vote, has argued the new reconciliation bill should be roughly the size of the recently enacted$1.9 trillion American Rescue Plan Act or smaller.”

‘What I'm hearing is that there are some of our members who don't want to vote on something that doesn't even have a prayer in the Senate. Since the numbers might be high, there might be some political liability,’ Price told Law360.

Ocasio-Cortez Foresees Democratic Row Over Biden’s Economic Plan – Billy House, Bloomberg ($). “House Democrats are careening toward an ‘ugly’ intra-party collision over parts of President Joe Biden’s $4.1 trillion economic agenda, warns Representative Alexandria Ocasio-Cortez. The New York lawmaker predicted Friday that she and other progressives would come under increasing pressure to help pass a $550 billion public works bill -- as a stand-alone legislation -- and to drop their insistence on pairing it with a sweeping $3.5 trillion package of social, climate and immigration-reform initiatives.”

[S]he said that a group of nine or 10 ‘conservative’ Democrats this week tried to kill the larger bill and ‘put a stick of dynamite into all of this,’ by blocking that budget framework from advancing. The intention of those lawmakers, she said, without naming them, is getting only their ‘conservative’ infrastructure package passed. She asserted that lobbyists for oil companies are bragging they ‘have these Democrats on speed dial.’

‘I will not vote for a conservative infrastructure bill alone,’ she added, explaining that she’d agree to do so only if it were paired with passage of the second, Build Back Better measure.

Question: Will Hurricane Ida delay congressional action on President Biden's economic legislative agenda? 

Ida makes landfall as one of the strongest hurricanes to ever hit Louisiana – Sean Ash, WHTR. “It's not the history we want to see. Hurricane Ida made landfall Sunday at 12:55 p.m. near Port Fourchon, Louisiana, with winds of 150 mph."

That makes Ida one of only three hurricanes with wind that strong at landfall in Louisiana... joining Laura (2020) and the Last Island Hurricane (1856). Ida and Laura make Louisiana the only state in the U.S. to have 150+ mph hurricanes in back-to-back years. Any way you slice it, Ida is a historic storm and its catastrophic impact is just getting started. The northeast quadrant, which has the strongest wind, lashed Grand Isle and Golden Meadow... and won't be too far from downtown New Orleans.

Follow up question: What about Afghanistan?

‘We can’t do enough’: Lawmakers flooded by evacuation pleas – Kevin Freking and Lisa Mascaro, Associated Press. “Tissue holders sit atop the conference table where the congressman’s aides field frantic requests from constituents desperate for help in getting friends and loved ones out of Afghanistan before it’s too late. The stories have poured in by the thousands with heartbreaking pleas not to be left behind. The tissues are used for crying breaks, one of the aides explained. ‘The hardest part is just the sense of helplessness,’ said Rep. Eric Swalwell, D-Calif. ‘We’re seeing all of this, you know, anxiety, and we can’t do enough.’

Across the county, the offices of members of Congress have become makeshift crisis centers, flooded with requests for help getting people onto one of the last flights leaving the Kabul airport before President Joe Biden’s Tuesday deadline for the withdrawal of all U.S. military forces out of Afghanistan.

Answer: It is unlikely that Congress will abandon Biden's legislative agenda, but Hurricane Ida and the turmoil in Afghanistan are emergencies and will likely require congressional attention. That could slow the process down for moving Biden's economic priorities forward.  


IRS Delays Effective Date of Final Partnership Withholding Regs – Kiarra Strocko, Tax Notes ($). “To facilitate “orderly implementation,” the IRS and Treasury have deferred the effective date of final partnership withholding regulations to January 1, 2023, which practitioners said was a necessary move.”

In Notice 2021-51, 2021-36 IRB 1, released August 24, the IRS and Treasury said the deferment applies to regulations under section 1446(a) and (f). According to the notice, the IRS and Treasury received comments saying there would be significant challenges in complying with the new withholding and reporting requirements by the January 1, 2022, effective date. Those challenges include ‘designing, building, and testing new withholding and reporting infrastructure; analyzing new forms and withholding statements; and implementing systems to capture required data,’ the notice says.


Ramp Up Crypto Reporting Now, Say Tax Pros – Tax Notes ($). “Taxpayers potentially subject to lawmakers’ proposed cryptocurrency broker reporting regime should start preparing now, even as the industry continues to push for refinements to the ‘broker’ definition. Given the likelihood that the reporting rules will be enacted with no amendments — and possibly leaving it to Treasury and the IRS to flesh out who must report — taxpayers will need to stay engaged and develop a plan so they’re ready by the anticipated January 1, 2023, effective date, according to practitioners who spoke with Tax Notes.”


Digging Into the Bank Info Reporting Plan – Marie Sapirie, Tax Notes ($). “The scramble to find revenue for the next spending package is on, and significantly broader bank account information reporting for all American taxpayers could have its breakthrough moment. How much gold there is in those hills for the IRS to unearth, or perhaps to have delivered to it by taxpayers newly reformed by the persuasiveness of third-party information reporting, is far from settled.”

The prospects for the introduction of ‘comprehensive financial account reporting to improve tax compliance,’ as Treasury put it, seemed somewhat dim back in the spring and early summer. But with the advent of August and spending pay-fors on the horizon, it’s looking more likely. The Biden administration released its American Families Plan in April, proposing increased information reporting by banks.


Small Online Sellers Face Specter of New State Income Taxes – Michael Bologna and Tripp Baltz, Bloomberg ($). “Online merchants face paying income taxes in dozens of additional states if revenue agencies adopt a new interpretation of a federal law that has protected out-of-state sellers for 60 years.”

Revenue officials in Colorado, Illinois, Oregon, and Utah are studying how to implement some or all of a statement on Public Law 86-272, recently revised by the influential Multistate Tax Commission to reflect the impact of e-commerce on the broader economy. Other states could take similar action, based on their previous adoptions of the commission’s principles through guidance and tax positions taken during audits.

Illinois Enacts SALT Cap Workaround for Pass-Through Businesses – Michael Bologna, Bloomberg ($). “Illinois pass-through businesses will be able to avoid the federal $10,000 cap on deductions for state and local taxes—or SALT cap—under legislation signed Friday by Gov. J.B. Pritzker.”

Pritzker signed S.B. 2531, which allows partnerships and S corporations to pay their income tax at the entity-level rate of 4.95% and then claim a credit on their state return. The bill essentially permits such businesses to circumvent the $10,000 SALT cap added to the 2017 tax law because the cap doesn’t apply to business taxes.

Killing Fed. Tax Offset Rule Creates 'Loophole,' Treasury Says – James Nani, Las360 ($). “A challenge by a group of states led by Alabama to kill the American Rescue Plan's state tax-cut limitation would create a loophole big enough to undermine the law's purpose, the U.S. Treasury told a federal court. Treasury, in a reply Thursday, told the Alabama federal court that Congress provided the American Rescue Plan funds to help states economically recover from the coronavirus pandemic, not to replace ‘purposeful decreases’ in net tax revenue.”

‘So if a state could use Rescue Plan funds to replace its own planned state expenditures and then use the money it had originally budgeted to offset a reduction in net tax revenue — an undisputedly 'indirect' offset — it would create a loophole big enough to undo the very purpose of the Rescue Plan,’ Treasury said.

Colo. Property Tax Reduction Initiative Wins Ballot Spot – Asha Glover, Law360 ($). “A Colorado initiative that would reduce the taxable proportion of Coloradans' real property received enough signatures to qualify for a vote on the ballot, the state Secretary of State's Office announced.”

The office of Secretary of State Jena Griswold said in a news release Thursday that the initiative had received nearly 139,000 valid signatures, qualifying Initiative 27 for the ballot. The assessment rate, or the percentage of actual property value that is taxed, for residential property would go from 7.15% to 6.5% while the rate for commercial property would go from 29% to 27%, according to the proposal.

Under the proposal, which was submitted by Michael Fields and Lindsey Singer of Colorado Rising State Action, rate cuts would be effective for property tax years beginning on or after Jan. 1, 2023.

Wash. Court Told Capital Gains Row Not Solved By Prior Cases – Abraham Gross, Law360 ($):

A Washington court cannot rely on prior income tax cases to resolve whether a group of challengers can proceed with their complaints against the state's newly enacted capital gains tax, the state and the challengers told the court. In supplemental briefs filed this week, the state Department of Revenue and the challengers told the court that prior decisions on the constitutionality of income tax laws did not address whether there are procedural bars to seeking a declaratory judgment against an excise tax law.

DC Poised To Hike Taxes On High Earners In 2022 – Asha Glover, Law360 ($). “The mayor of the District of Columbia signed a $2.8 billion budget that would raise taxes on individuals earning more than $250,000 annually to fund legislative goals, including homelessness assistance.

Democratic Mayor Muriel Bowser's signing Monday came weeks after the District of Columbia Council unanimously approved the fiscal year 2022 budget. It was amended last month to increase the tax on annual individual income between $250,000 and $500,000 to 9.25%, on income between $500,000 and $1 million to 9.75% and on income above $1 million to 10.75%. Under current law, income between $250,000 and $350,000 is taxed at 8.5%, income between $350,000 and $1 million is taxed at 8.75%, and income over $1 million is taxed at 8.95%.

The bill must be sent to Congress for review before becoming law.


Taxing companies' overseas profits could be the next rift among Democrats – Brian Faler, Politico. “Democratic leaders are coming under growing pressure to dial back their bid to hike taxes on corporations’ overseas profits — a key component of their plans to finance their coming reconciliation spending package."

A significant number of Democratic lawmakers are concerned that proposals by the White House and others to beef up a minimum tax on big companies go too far and will put American firms at a competitive disadvantage, sources familiar with Democrats’ internal negotiations say.

They worry that the tax increases would be much larger than what more than 130 other countries, including the EU, have tentatively agreed to as part of a push by the Biden administration to remake the international tax system...

Party leaders are at odds over how to respond.

EY’s GILTI Study Flawed on Data and Tax Rates – Patrick Driessen, Tax Notes ($). “It’s Lewis Carroll’s Through the Looking-Glass time again, complete with reversals and stretches of logic, in the buildup to major tax legislation. Policy analysis, income and wealth distributions, macroeconomic studies, and revenue estimates are flying in front of and beyond the mirror. In particular, the Biden administration’s proposals to change the taxation of foreign-source income, offered in some (although not full) detail in Treasury’s green book, have attracted criticism, including a recent report by EY’s consulting arm.”

The EY report gauges the effect on ‘U.S. domestic income activity’ of the green book proposals to change the U.S. taxation of global intangible low-taxed income of controlled foreign corporations (that is, controlled by U.S. persons). EY qualifies much of its analysis, with three of the report’s 18 pages formally devoted to ‘caveats and limitations’ and many other warnings about the study’s results sprinkled throughout the text and endnotes. Yet the report’s takeaway has been condensed into the assertion that the green book’s GILTI proposals ‘could eliminate up to a million jobs and $20 billion in lost U.S. investments.’


It’s National Beach Day! With Labor Day approaching, today is a good day to remember the summer fun that has been had.

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