Tax Update Blog

Tax News & Views Infrastructure and Podcast Vote Roundup

September 30, 2021 | Blog
By Joe Kristan, CPA

Manchin offers alternative plans to Democrats' 'fiscal insanity' - Burgess Everett, Politico:

Joe Manchin released a statement on Wednesday afternoon panning his colleagues’ spending plans as “fiscal insanity.” Then he started to lay out how he wants to work on President Joe Biden’s family plan.

...

The House will vote on the bipartisan infrastructure bill that Manchin helped negotiate on Thursday, but Manchin’s remarks aren’t helping his bill succeed. Progressives are eager to sink the legislation after he said Wednesday that it's "not possible" to get an agreement on the larger spending package before the infrastructure vote.

“This is why we’re not voting for the bipartisan bill until we get a reconciliation bill,” Rep. Pramila Jayapal (D-Wash.) told reporters. “After that statement we probably have even more people willing to vote no.”

Based on the article, we may be months away from anything big moving.

 

Biden, Pelosi embark on late scramble to save $1 trillion infrastructure bill - Tony Romm, Marianna Sotomayor, Jacqueline Alemany, and Seung Min Kim, Washington Post ($):

Democrats generally support the infrastructure bill, which includes major new investments in the country’s aging roads, bridges, pipes, ports and Internet connections. But the proposal has become a critical political bargaining chip for liberal-leaning lawmakers, who have threatened to scuttle it to preserve the breadth of a second, approximately $3.5 trillion economic package — one that moderates, including Sens. Kyrsten Sinema (D-Ariz.) and Joe Manchin III (D-W.Va.), want to scale back.

By Wednesday evening, however, the party’s days-long standoff only appeared to be worsening. Sinema spent another day huddling with Biden’s top aides, hoping to strike an agreement around a bill smaller than $3.5 trillion, yet a final number still had yet to materialize. Manchin, meanwhile, doubled down with a fiery statement in which he starkly opposed trillions of dollars in spending. And he cast doubt on the possibility that any such deal even could come together in time for the House’s scheduled Thursday vote on infrastructure.

“No, it’s not possible,” he told reporters.

"Not possible" does seem to cast doubt.

 

‘We Need to Get a Number,’ Neal Says of Reconciliation Stalemate - Doug Sword, Tax Notes ($):

The focus is on two moderate Senate Democrats — Kyrsten Sinema of Arizona and Joe Manchin III of West Virginia — who have balked at the reconciliation bill’s $3.5 trillion figure, but neither has been specific about what they would support. After meeting with President Biden and Sinema on September 28, Manchin declined to express a counteroffer on the House’s reconciliation bill.

Manchin told reporters the next day, “My number is basically, let's see what the people in America need; let's make sure we take care of them.”

But Neal says he needs a number.

Economist Tyler Cowen wonders whether maybe there's more to legislating than a blob of money:

My colleague Arnold Kling put it well: “With the reconciliation bill, there is no attempt to convince the public that it is desirable to enact an enormous child tax credit or to mandate ending use of fossil fuels in a decade. Instead, what we read is that if you’re on the blue team you want the number to be 3.5, but a few Democrats are holding out for something lower.”

The Democrats say they might be considering a carbon tax to fund their spending plans, and also to address climate change. You might have expected this news to be on the front page every day, and a dominant topic on Twitter and Substack. Isn’t the fate of the planet at stake, or perhaps an economic depression, depending on your point of view?

Details, shmetails.

 

Infrastructure Bill’s Fate Uncertain Heading Into Planned House Vote - Andrew Duehren and Kristina Peterson, Wall Street Journal:

Progressives want to see the larger measure advance as a condition of supporting the infrastructure bill in the narrowly divided House. Though 19 Senate Republicans backed the infrastructure bill and at least some House Republicans are also expected to do so, it isn’t clear whether there will be enough GOP support to offset opposition from liberal Democrats.

As of Wednesday night, House Speaker Nancy Pelosi (D., Calif.) was sticking to her plan to bring the infrastructure bill up for a vote on Thursday. She said she was taking it “one hour at a time,” though earlier in the day she opened the door to further delay, if talks didn’t

 

Close Vote Expected on Bipartisan Infrastructure Bill - Parker Tax Publishing. "The Bill also includes several important tax-related provisions including (1) the early termination of the employee retention credit; (2) modifications of filing deadlines for taxpayers experiencing certain disasters, (3) an extension of Tax Court filing deadlines and other events that affect certain filing deadlines, (4) a tolling of the time to file a petition with the Tax Court when the Tax Court is inaccessible; (5) additional time to file certain tax-related documents when a taxpayer is affected by a significant fire event; (6) the modification of tax treatment of contributions to the capital of a corporation; (7) new information reporting requirements for digital assets; (8) pension interest rate stabilization changes; and (9) the inclusion of qualified broadband projects and qualified carbon dioxide capture facilities in private activity bonds."

Congress Poised to Avert Shutdown Amid Deadlock on Biden Agenda - Erik Wasson, Laura Litvan, and Billy House, Bloomberg. "Biden canceled a planned trip Wednesday to Chicago to step up attempts to strike a compromise between warring progressive and moderate Democrats whose differences over the size and scope of a tax and spending bill worth as much as $3.5 trillion threaten to sink his entire domestic agenda."

 

Democrats’ split on energy policies threaten budget bill - Laura Weiss, Roll Call:

House and Senate Democrats are moving further away from each other on energy-related provisions of their sprawling budget reconciliation bill at a critical moment for President Joe Biden's domestic policy agenda.

The latest sign of trouble came Monday night when a trio of Texas Democrats released a letter asking party leaders to drop new taxes and fees from the budget bill they say would harm U.S. oil and gas producers.

 

Manchin says he could back reconciliation bill this year - Jordain Carney, The Hill. "Manchin suggested that overhauling the 2017 GOP tax bill should be the starting point for the reconciliation bill, because it unifies the party. Democrats are planning to change the corporate tax rate, which was set to 21 percent under the GOP bill, as well as make other tax changes."

Build Back Better Plan and Observations on Small Business Provisions - Annette Nellen, 21st Century Taxation. "Missing from the bill, as with the TCJA, are stated goals of what are we trying to do and will this bill meet those goals? I attribute this to the process and having just one party craft the bill and then enact it via budget reconciliation which limits what all can go into the bill, and limits useful discussion and public comment."

 

IRS Debuts Program To Help Pot Cos. Comply With Tax Law - Katryna Perera, Law360 Tax Authority ($). "The IRS has launched a program to help cannabis businesses that operate in states where marijuana is legal pay their federal taxes and properly comply with Internal Revenue Code Section 280E, which prohibits companies from taking a deduction for business expenses if their income is derived from the trafficking of controlled substances."

"Comply properly" means "forget business deductions."

Time To Change Your Estate Plan - Again - Peter Reilly, Forbes. "What BBB does is make the income tax and estate tax rules consistent. If the trust income gets pulled onto your income tax return, then the trust assets will be included in your estate. The rule will be applicable to trusts created after enactment and the portion of any trust that is added after enactment. Thinking about that portion thing, it strikes me as an accounting nightmare, so I would think that the smart thing to do is not to add to grandfathered trusts."

Related: Potential Significant Changes to Estate Plan & Gift Tax Rules May Be on the Horizon.

 

Most Americans OK with higher taxes for the rich - Kay Bell, Don't Mess With Taxes. "Overall, the survey says that 61 percent of respondents approve of raising ordinary income tax rates on their wealthier neighbors."

In other news, nobody thinks they are rich.

 

How to Receive Full Gain Exclusion with Qualified Small Business Stock (QSBS) - Adam Sweet, Eide Bailey:

Taxpayers may be surprised to learn that the appreciated stock they hold could, upon sale, be eligible for a full gain exclusion. This means that no federal income tax is owed. 

Generally, this full gain exclusion occurs when a taxpayer other than a corporation holds what is called “qualified small business stock” (QSBS) as defined under section 1202 of the Internal Revenue Code. Although the basic requirements for holding QSBS are relatively straight forward, the application of these requirements can sometimes create uncertainties and potential pitfalls for the unwary.

This exclusion, which only applies to original-issue C corporation stock, would be cut back by the tax plan passed by the House Ways and Means Committee.

 

Interview: Dying for a Basis Step-Up: Biden Says Take Your Time - Benjamin Willis and Jed Bodger, Tax Notes Opinions. "Given the growing popularity of fixing tax law inequalities that exacerbate the wealth gap and considering how the TCJA played out it, it is far from clear, just yet, that Congress is passing up a chance to close a tax loophole. It would be quite surprising if President Biden’s proposal were in fact dead, but rather it could very well step up out of the tax legislation grave and carryover into the Senate proposal."

Extended Livestock Replacement Period Applies in Areas of Extended Drought – IRS Updated Drought Areas - Roger McEowen, Agricultural Law and Taxation Blog. " Under I.R.C. §1033(e)(1), the sale or exchange of livestock that a taxpayer holds for draft, dairy or breeding purposes in an amount exceeding the number of livestock that the taxpayer would normally sell under the taxpayer’s usual business practice, is treated as a non-taxable involuntary conversion if the sale of the livestock is solely on account of drought, flood or other weather-related conditions."

Global Tax Talks Race to Resolve Hurdles With Time Running Out - Isabel Gottlieb and William Horobin, Bloomberg. "With just over a week until an Oct. 8 meeting of all the governments involved, negotiators are still wrestling over parameters of setting a global minimum corporate tax and sharing the spoils from levies on tech giants like Facebook Inc. and Alphabet Inc.’s Google, according to people familiar with the matter."

 

How Heavily Taxed Are U.S. Multinationals? - Cody Kallen, Tax Policy Blog:

Note that the combined effective tax rates on CFC profits are higher under current law than under pre-TCJA law, regardless of the measurement issues...

The Biden administration’s international tax proposals would substantially raise the effective tax rates on these profits. As a share of all CFC profits, the combined effective tax rate would rise by 5 percentage points in 2022 to 21.8 percent. Excluding dividends increases the measured tax rate hike to 7 percentage points, and prorating raises it to 7.7 percentage points. Under the Biden administration’s proposal, the effective tax rate on CFC profits would fall between 21.8 and 30.8 percent, depending on measurement, substantially higher than the foreign tax rates on CFC profits. The recent Ways and Means proposal would have similar but smaller effects.

Related: Reasons to Consider GILTI Amid Release of Final Regulations.

 

TPC Answers Two Questions About Its Analysis of the House Ways & Means Committee’s Tax Bill - Howard Gleckman, TaxVox. "There are reasonable differences in how people interpret Biden’s promise: Did he mean no one making $400,000 or less would pay any higher taxes, whether direct or indirect? Or did he mean no one would pay higher direct taxes, such as individual income, payroll, or estate and gift? TPC does not know which he meant (Biden never has said) so it produced both sets of tables. Interested parties can choose which they prefer."

Objecting to Chapter 11 Plan/Objecting to Judge’s Questions - Keith Fogg, Procedurally Taxing. "My former colleague in the Portland District Counsel Office and former director of the Lewis & Clark low income tax clinic, Jan Pierce, called this the raised eyebrow defense. In many small cases, it’s not cost effective or even feasible for the IRS to find a witness to actually contradict the testimony of the taxpayer.  So, the raised eyebrow defense has its place; however, if you want to attack financial projections it also has its severe limitations..."

Using a Tax Return Preparer? Take Steps to Verify What Is Filed on Your Behalf - Jim Maule, Mauled Again. "According to the complaint filed by the Department of Justice, the preparer in Beaumont, Texas, would charge customers a fee, as little as $200 or as much as $500, for preparing a “tentative income tax return” that showed a small refund. The preparer then modified the tentative return by inserting inflated and fabricated deductions, credits, and losses, which increased the tax refund on the return. The preparer filed those modified returns with the IRS, requesting that the refunds be deposited with a third party company. That company would pay to the customer the refund shown on the tentative return, and the preparer pocketed an additional fee."

I'm pretty sure you can't do that.

 

Georgia Tax Crimes Unit Illegally Spent Asset Forfeiture Funds on Trinkets and Swag - C.J. Ciaramella, Reason:

An office within the Georgia Department of Revenue illegally spent $3.1 million in money seized through civil asset forfeiture, according to a report from the Georgia Office of State Inspector General (OIG).

The state watchdog agency issued a report last week finding that the department's Office of Special Investigations (OSI) kept $5.3 million dollars in asset forfeiture revenues between 2015 and 2020 that should have gone into the state's general fund. It then illegally spent $3.1 million of that, including on items such as office furniture, vehicles, gym equipment, and Fitbits.

Sometimes increasing tax agency funding doesn't increase tax revenues.

 

Eide Bailly names next MP - Danielle Lee, Accounting Today:

Top 25 Firm Eide Bailly approved Jeremy Hauk as the Fargo, North Dakota-based firm’s next managing partner and CEO, effective May 1, 2022, succeeding Dave Stende, who will retire after nearly 40 years at the firm and nine years at the helm.

Currently the partner-in-charge of tax services, Hauk has also served as chairman of the Eide Bailly board of directors and tax department head of the firm’s Billings, Montana, office, where he resides and will continue to work once he assumes the new role.

Congratulations, Jeremy!

One of the many things I like about working here is that you don't have to go to the home office to do things like this blog, or to have a key technical role like our National Tax Office specialists. (Nothing against North Dakota, it's a great place!). We were remote before remote work was cool. And we're hiring!

 

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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.