Tax News & Views 'I Quit' Roundup

January 7, 2022

‘Great Resignation’ Hitting Accounting Industry Hard (Podcast) – David Schultz, Bloomberg ($). “A severe talent shortage caused by the ‘Great Resignation’ will be the most important issue affecting accounting work in 2022, according to three senior accountants.”

Labor shortages, along with a loss of institutional knowledge, will cause problems not only at the firms accountants are auditing, but within the accounting firms themselves. Given how widespread this phenomenon is across different sectors, it’s a problem that can’t necessarily be solved with higher salaries and bonuses.


Support for ‘Billionaires Tax’ – Patrick Ambrosio, Bloomberg ($). “More than 200 economists and other academics signed on to an open letter released Thursday supporting a proposed tax on billionaires.”

The proposal from Senate Finance Chairman Ron Wyden (D-Ore.) would establish an annual tax on the unrealized gains of stocks and other tradeable assets held by the wealthy. It also would tweak the way taxes are owed for selling less-liquid assets, like real estate.

The proposal 'would significantly improve our nation’s tax system' by making sure that ultra-wealthy taxpayers can’t avoid paying their fair share of taxes, said the 219 signers of the letter, who include Nobel Prize-winning economist Joseph Stiglitz of Columbia University and University of California at Berkeley economists Emmanuel Saez and Gabriel Zucman.

There is a saying in Washington that goes like this: ‘The camel’s nose is under the tent.’ It means that even though a law is written for certain individuals (like rich people) it eventually pertains to everyone else. A billionaire tax is the perfect example for this saying. If enacted, initially it would only hit the ultra-wealthy, but over time lawmakers would likely broaden the tax to engulf the rest of us.

Also, some high ranking Democrats do not support this tax so the odds for enactment are likely a long shot.


Opportunity Zones - Patrick Ambrosio, Bloomberg ($). “Congress should either improve or cap the opportunity zones incentives established in the 2017 tax law, said David Wessel, director of the Brookings Institution’s Hutchins Center on Fiscal and Monetary Policy and author of a 2021 book on the topic.”

Opportunity zones offer capital gains tax perks to investors who put their money into over 8,000 designated census tracts across the country.

Wessel, during a Thursday virtual event, said the policy has done more to cut taxes for the wealthy than to actually improve living conditions in those neighborhoods. He said his research showed that a lot of tax-advantaged investments went to communities that didn’t need the help, singling out downtown Portland, Ore.


ABA Tax Section Calls for Delay in Research Credit Changes – Mary Katherine Browne, Tax Notes ($). “The IRS should issue proposed regulations on recent changes to the research credit refund claim requirements and delay the January 10 implementation, the American Bar Association Section of Taxation says. In a January 6 letter to the agency, the tax section responded to changes by the IRS in requirements for valid refund claims under section 41 and a corresponding chief counsel memorandum, which were released October 15, 2021."

According to the recent memorandum, taxpayers will be required to provide the following five items to validly claim a refund for a section 41 research credit:

  • all the business components that form the factual basis for the section 41 research credit claim for the claim year;
  • all research activities performed by business components;
  • all individuals who performed each research activity by business component;
  • all the information each individual sought to discover by business component; and
  • the total qualified employee wage expenses, supply expenses, and contract research expenses.


‘Non-Charitable’ Nonprofit Hospital Ordered to Start Paying Property Taxes – William Kennedy and Jared Johnson, Bloomberg ($):

A recent Pennsylvania trial court decision may be the warning shot across the bow of non-profit organizations whose operations—and compensation schemes—are more akin to those of for-profit real property taxpaying companies. A judge in the suburban-and-rural Chester County in southeastern Pennsylvania ruled that three local, nonprofit hospitals were not tax-exempt ‘charities,’ thereby exposing them to begin paying millions in annual local property taxes. The decision is leading municipalities and school districts to consider sending property tax bills to nonprofit healthcare organizations.

IRS Details Exemption Revocations and Other EO Activity in 2021 – Fred Stokeld, Tax Notes ($). “Most IRS revocations of organizations’ tax-exempt status in fiscal 2021 occurred because the entities in question weren’t organized and operated for exempt purposes.”

The IRS completed 3,249 examinations of exempt organizations in fiscal 2021, 94 of which led to proposed revocations, according to the IRS Tax-Exempt and Government Entities Division’s fiscal 2021 accomplishments letter, released January 6.

Failure to meet the organizational and operational tests for exempt status was the most common reason for revocation, the letter says. Other reasons were inurement, commercial activities, nonmember income, and political activity.


Timing Considerations for Expatriation, Tax Compliance and Form 8854 – Virginia La Torre Jeker, Bloomberg ($):

As a tax practitioner assisting taxpayers with expatriation issues, I sometimes see a question arise in cases when the taxpayer has not sought my advice prior to expatriating—for example, before renouncing U.S. citizenship or surrendering a green card held for at least eight tax years. The question is: When must an individual meet what tax professionals call the ‘tax compliance test’ to avoid ‘covered expatriate,’ or C.E., status? Is it at the time of expatriation, or when the final tax return together with Form 8854 is signed?


Erroneous Employee Retention Credits to Be Repaid Using Form 941 – Benjamin Guggenhem, Tax Notes ($). “An IRS official confirmed that employers issued erroneous employee retention credits should repay them using Form 941, ‘Employer’s Quarterly Federal Tax Return.’”

Questions arose on a payroll industry call January 6 after officials explained that return preparers should refer to IRS Notice 2021-65, 2021-51 IRB 880, released December 6, 2021, for guidance regarding the retroactive early end of the ERC.

The notice said that employers would avoid failure-to-pay penalties for any advance payments of the ERC for the fourth quarter of 2021 if they repay the amounts by the due date of their applicable tax returns.


BTAX OnPoint: Final Rules Explain Interbank Offered Rate Changes – Albert Kish and Lisa Pfeffinger, Bloomberg ($). “The IRS released final regulations addressing the tax consequences of transitions from the use of interbank offered rates (IBORs) in debt instruments, derivative contracts, and other financial contracts, to qualified rates.”

The regulations (T.D. 9961)—released Dec. 30— affect various financial institutions including banks, insurance companies, real estate mortgage investment conduits, taxpayers that lend or borrow funds at variable rates, taxpayers that issue derivative contracts, and taxpayers engaged in hedging transactions.

The document is here.


Supplier Owes Tennessee $140,000 on Retail, Not Wholesale Sales – Sam McQuillan, Bloomberg ($). “An industrial equipment company is on the hook for unpaid Tennessee taxes after a state appeals court ruled its sales to manufacturers were subject to retail tax rates.”

The Tennessee Court of Appeals on Wednesday affirmed a lower court opinion upholding the state Department of Revenue’s retail rate-based tax assessment of Bearing Distributors Inc., which had paid the department $140,000 less than its original assessment.

NY Gov. Kathy Hochul proposes $2.3 billion in tax relief for middle-class, small businesses – Mark Weiner, “Gov. Kathy Hochul wants to give middle-class New Yorkers and small businesses a series of tax cuts and rebates totaling $2.3 billion to help speed the state’s economic recovery from the Covid-19 pandemic.”

The plan includes a $1 billion tax rebate program for New York property owners. More than 2 million New Yorkers would be eligible for rebates, with middle- and low-income households receiving higher benefits.

Hochul also wants to speed up a series of middle-class tax cuts that were due to be phased in across the state from 2018 through 2025.

She would cut two years off the schedule, providing $1.2 billion worth of tax cuts to 6.1 million New Yorkers next year.

Change in law leads to massive December tax haul – Matt Murphy, “BOSTON (State House News Service) - December tax collections of $4.24 billion shattered last year’s mark for the final month of the year and exceed estimates by more than 40 percent, but the windfall is likely temporary with state revenue officials attributing much of gains to a change in state law that allows certain businesses to avoid federal limits on state and local tax deductions.”

The Department of Revenue reported Wednesday that the state in December 2021 collected $1.4 billion more than in December 2020 and $1.23 billion more than estimates for the month. But DOR also said much of that money will be returned through refunds. Still, even after adjusting for the business tax changes, the department said December tax collections exceeded last year’s haul by $520 million, or 18.3 percent, and beat estimates by $635 million.

Calif. Tax Plan Would Fund Single-Payer Health Care - Maria Koklanaris and Lauren Berg, Law360 ($). “Single-payer health care in California would be funded via a sweeping tax package that includes a new gross receipts tax, a new payroll tax and a surcharge on personal income taxes for certain earners under a proposed constitutional amendment introduced Thursday.”

The proposed constitutional amendment would be the funding mechanism for an existing bill to create a new single-payer system called Cal-Care. The amendment calls for a 2.3% tax on business gross receipts, a 1.25% payroll tax on businesses with at least 50 employees and an increased personal income tax rate, in the form of a progressive surcharge, for earners who make $149,000 and up. In addition, there would be another payroll tax of 1% on employers who have employees making at least $49,900 a year.

North Dakota AG Says Tribes' Oil Taxes Are Not State Revenue - Victoria McKenzie, Law360 ($). “Taxes related to oil extraction and production on reservations and tribal trust lands cannot be considered state revenue, North Dakota's attorney general has said in a letter to the state treasurer.”

Attorney General Wayne Stenehjem's nine-page opinion and analysis Tuesday came as a response to an inquiry from state Treasurer Thomas Beadle about the way oil and gas taxes designated for tribes are accounted for, and whether they should be distributed to the four investment funds created under the state constitution. In short, Stenehjem said, the answer is no.

Texas Natural Gas Tax Revenue Breaks Monthly Record - Asha Glover, Law360 ($). “Texas natural gas production tax revenue totaled $384 million in December, the state's comptroller said, adding that it was the highest-ever monthly remittance for the tax.”

Comptroller Glenn Hegar said in a statement Monday that natural gas production tax revenue increased by 349% compared with December 2020. Texas oil production tax amounted to $450 million last month, marking a 128% increase from the previous December, the comptroller said.


OECD Rules on Minimum Tax Are Too Complex, Advisory Group Says – Michael Rapoport and Isabel Gottlieb, Bloomberg ($). “The OECD’s model rules to implement a global minimum tax are too complex and some provisions could distort how the tax is calculated, the organization’s main business advisory group said Thursday.”

The model rules to implement the 15% minimum corporate tax—Pillar Two of the OECD’s 137-nation global tax agreement—could lead to ‘an administrative and compliance struggle’ and ‘significantly increased uncertainty and instability’ for tax authorities and taxpayers, said Business at OECD, or BIAC. The OECD should consider amending the rules to address some specific problems, BIAC said in a letter to the officials who are formulating the rules.

Among other issues, BIAC said a provision in the model rules leads to minimum tax being applied even when a company has no profits in a jurisdiction in a given year. That’s inconsistent with the principle in the rules that the minimum tax should apply on income, BIAC said.


Global Minimum Tax: Making Sense Of OECD’s Pillar Two Model Rules – Shefali Goradia, Bloomberg/Quint. “The Organisation for Economic Co-operation and Development has published Model Rules under Pillar Two—Global Anti-Base Erosion or ‘GloBE’ Rules—to help domestic governments implement a 15% global minimum tax on multinational enterprises from 2023."

It is the first step towards the implementation of the historic political agreement reached in October 2021. This marks the transition from consensus to implementation phase. The rules are designed to ensure large multinational enterprises pay a minimum level of tax on the income arising in each jurisdiction where they operate, and provide a template that jurisdictions can translate into domestic law which would assist in the implementation of Pillar Two.


It’s not only Friday, but also National Bobblehead Day! 

From National Day Calendar:

For over 100 years, bobbleheads have been entertaining and fascinating fans and collectors. They come in a variety of shapes and sizes, too. Bobbleheads commemorate iconic teams, movies, and cartoon characters. Individually, they represent some of our most exciting athletes or thrilling television and movie characters. 

My first memory of bobbleheads were those glued to the dashboard of teenagers’ cars. The tiger bobblehead was quite popular. Yes, I’m dating myself and am old.

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