Tax Update Blog

Tax News & Views is Dumbfounded Roundup

August 31, 2021 | Blog
By Joe Kristan, CPA

Business groups aim to divide Democrats on $3.5T spending bill - Karl Evers-Hillstrom, The Hill:

Lobbyists expect Democrats to raise the top corporate tax rate from 21 percent to 25 percent. That’s lower than the 28 percent rate proposed by Biden, but right in line with what Manchin said he’d be comfortable with.

Other revenue raisers are being targeted by monied interests, threatening to drastically reduce the size of the final bill if Democrats cut them out.

A “dark money” group run by former Sen. Heidi Heitkamp (D-N.D.) announced a six-figure ad campaign Friday opposing Democrats’ proposal to tax capital gains at death, a key source of funding for the spending plan.

 

Progressives Dumbfounded by Opposition to Ending Stepped-Up Basis - Jonathan Curry, Tax Notes ($). "Mounting opposition among some wings of the Democratic Party to President Biden’s plan to tax unrealized gains has progressive activists frustrated that some of their own are breaking ranks over what they see as a policy slam-dunk."

The sources quoted in the article fail to address the administrative and cash flow problems that come from having to reconstruct the basis of ancient assets, valuing non-liquid businesses interests, and having to pay taxes on assets without a sale to provide the needed cash. A quick review of the Michael Jackson estate case provides a taste of these problems. The bill could turn the administration of a moderately-sized estate from a time-consuming headache to an expensive and drawn-out nightmare.

Treasury pushes global crypto data-sharing rules in budget bill - Laura Weiss, The Hill. "The administration is hoping to add to the filibuster-proof package requirements that cryptocurrency businesses report information on foreign account holders so that the U.S. can share information with global trading partners, according to an administration official who wasn't authorized to speak for the record."

 

Employers and employees hit by tax issues from remote work out of state - Michael Cohn, Accounting Today. "As states seek to recoup the costs they’ve borne over the past year and a half due to the pandemic, taxing out-of-state workers may be a relatively painless way for them to regain some of the revenue they might otherwise lose from people who move away in hopes of reducing their tax bills and housing costs."

Related: Telecommuting Workers in Refuge States Complicate State Taxes.

 

Domicile Changes In Remote-Work Era Draw States' Scrutiny - Maria Koklanaris, Law360 Tax Authority:

The increase in remote work during the coronavirus pandemic has motivated many Americans to move to lower-tax states, unaware that changing one's domicile is not as easy as it may appear, especially with states scrutinizing the moves.

...

Still, changing one's domicile is not as easy as one might like, and people are often surprised by what they have to do and the amount of documentation they have to provide, said Leighanne Scott, state and local tax specialist and member at Caplin & Drysdale Chtd

"It is not as straightforward as establishing a new home and reporting a change of address on a state tax return," Scott said, noting that in many states, residents must prove intent to abandon the previous domicile.

 

States Divided on More Income Tax Relief for Remote Workers - Sam McQuillan, Bloomberg ($). "Companies with workers punching in from a smattering of different zip codes during the pandemic continue to receive mixed messages on where they owe taxes on employee income."

 

Access to human capital may be factor in Winnebago HQ move; taxes, not so much - Joe Gardyasz, Des Moines Business Record:

Winnebago Industries’ recently announced decision to relocate its corporate headquarters to Eden Prairie, Minn., a suburb of Minneapolis-St. Paul, can be viewed in the context of increasing competition for strategic human capital, especially among larger, multinational companies, says Carl Vieregger, an associate professor of management at Drake University.

...

The Business Record also asked a corporate tax expert to weigh in. While tax climate is an important factor, there likely would be little, if any, corporate tax advantage that would have prompted a headquarters shift from Iowa to Minnesota, said Joe Kristan, a partner with accounting firm Eide Bailly in Des Moines.

 

Tech Giants Mount Challenge to State Digital Services Taxes - Lauren Loricchio, Tax Notes. "In what is shaping up to be the next Quill Corp. v. North Dakota, corporations like Amazon and Google are pouring money into lobbying efforts and hiring white-shoe law firms to oppose state efforts to impose digital services taxes."

Louisiana sports betting expected this football season - Kay Bell, Don't Mess With Taxes. "Louisiana will tax the net gaming proceeds of the sports betting operators, with a 10 percent tax collected on wagering at onsite locations. If a wager is made through mobile apps and electronic devices, the tax take is 15 percent."

 

The DASH Act Isn’t the Best Way to Solve the Housing Crisis - Alex Muresianu, Tax Policy Blog:

It does not make a lot of sense to use the tax code to create new subsidies for housing construction without first addressing the way the tax code is currently biased against housing construction. Under current law, investments in residential structures must be deducted over the course of 27.5 years. Thanks to inflation and the time value of money, that means companies cannot deduct the full real value of their investments. Allowing investment in residential structures to be deducted immediately (or letting them adjust their deductions for inflation and a base rate of return) would effectively reduce housing construction costs and make more projects more viable.

 

Tax Agencies Need to Modify Deadlines to Account for Post Office Delays - Russ Fox, Taxable Talk. "How can clients timely respond to notices when the Post Office (an agency of the United States Government) does not timely deliver the mail?"

Converting to an S-Corp - the QBI Deduction Complicates the Choice - Jason Dinesen. "This example turns out the way it does because of the QBI deduction. The self-employment taxes the proprietor saves are wiped out by the increase in income taxes because of the decrease in the QBI deduction. As income gets close to the phase-in thresholds for QBI (but still below the threshold), it’s better to be a sole proprietor. Once income gets past the phase-in level, then it’s better to be an S-corporation because W-2 wages become a part of the calculation."

More Necessary But Overlooked Tax Changes - Annette Nellen, 21st Century Taxation. "Update §170(f)(11) on qualified appraisals to expand situations where an appraisal is not needed because there are public listings of value, such as for most virtual currencies."

Advance Child Tax Credit: What You Should Know: Part III - NTA Blog. "How should the law be simplified to provide the much-needed assistance to individuals and their families with the least amount of confusion and complexities?"

 

Ex-Cisco Systems Exec Who Ran Secret Side Biz Gets 3 Years - Craig Clough, Law360 Tax Authority. "A California federal judge has sentenced an ex-Cisco Systems Inc. executive to three years in prison and over $3 million in restitution following his guilty plea on tax and wire fraud charges after he set up a secret side company to generate business from Cisco and solicited kickbacks from Cisco vendors."

 

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This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.