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October 14, 2022 | Blog
By Jay Heflin

IRS Commissioner Rettig Touts Agency Track Record During Tenure - Erin Slowey, Bloomberg ($):

With just a few weeks left in his term, IRS Commissioner Charles Rettig took to the stage to defend the agency’s track record.

He praised the agency for its work during COVID—answering phone calls, issuing three rounds of economic impact payments and transitioning to more virtual options. The employees performed flawlessly, he said Thursday in a keynote address at the American Bar Association tax section conference in Dallas.

Rettig acknowledged that the agency faced many challenges during his term.

‘Many occasions this has been an emotional journey,’ Rettig said. ‘I ran into things that we couldn’t fix.’

Rettig is scheduled to leave the post on November 12th - four days after the mid-term elections. His replacement could have a more daunting task than Rettig. If Republicans win control of either chamber after the November elections IRS funding is expected to be cut significantly. 

Better IRS Service Could Thwart GOP Budget Cuts, Rettig Says – Stephen Cooper and David van den Berg, Law360 Tax Authority ($):

Marked improvements in IRS customer service paid for by an $80 billion funding boost under the Inflation Reduction Act could sideline potential efforts by congressional Republicans to cut the agency's budget next year, IRS Commissioner Chuck Rettig told Law360 Thursday.

Ask Republican leaders if their plan to gut the IRS budget will be cancelled if agents are friendlier on the phone. I’m guessing the answer would be ‘no.’ Their effort to shrink the tax agency is a decades-long pursuit and has no relationship to how the agency functions. 

To wit:

House Republicans already have begun introducing legislation to repeal the IRS funding boost, saying the money will be spent incorrectly and harm the very taxpayers that Democrats say they want to protect from IRS overreach.

 

IRS to Contact People Who Qualify for Unclaimed Tax Benefits – Bloomberg ($):

The IRS aims to send letters to more than 9 million individuals and families who qualify for certain tax benefits but didn’t claim them by filing a 2021 federal income tax return, according to the agency Thursday.

The letters will address the Recovery Rebate Credit, Child Tax Credit, and Earned Income Tax Credit, which can be claimed with a filed 2021 tax return, the IRS said.

 

New Foot-Fault Guidance Covers LLCs With Invalid S Corp Elections – Kristen Parillo, Tax Notes ($). “The IRS has clarified that a new self-help remedy for retroactively fixing invalid S corporation elections applies to limited liability companies that failed to update their operating agreement before filing an election.”

An IRS spokesperson told Tax Notes in an October 12 email that ‘LLCs in that situation are covered’ by the retroactive corrective relief procedures described in section 3.06 of Rev. Proc. 2022-19, 2022-41 IRB 282.

 

Despite Dismissal, IRS Goes After Other Captive Adviser Clients – Erin McManus, Tax Notes ($). “Rather than backing off after requesting a dismissal from the Tax Court in Puglisi, the IRS is leaning into its pursuit of the clients of captive manager the Taft Companies and Oxford Risk Management Group.”

Further down the article:

As of April 5, the agency has issued at least 26 deficiency notices to captive insurance entities advised by Oxford and Taft. The first eight petitions had deficiencies totaling $2.93 million and penalties $585,926.

 

Tax Credits at Core of Industrial Strategy, Says NEC Director – Alexander Rifaat, Tax Notes ($):

White House National Economic Council Director Brian Deese says that several recently enacted tax credits will drive the Biden administration’s plan to rejuvenate the U.S. economy.

Speaking at an October 13 forum in Cleveland, Deese highlighted the tax incentives for clean hydrogen and semiconductor production to illustrate the administration’s aim of promoting green technology development and domestic manufacturing.

The Inflation Reduction Act (P.L. 117-169) introduced a new clean hydrogen tax credit (section 45V) tied to the amount of greenhouse gas emissions released during the hydrogen manufacturing process, while the CHIPS and Science Act of 2022 (P.L. 117-167) provides an advanced manufacturing tax credit worth 25 percent of the value of qualified investments in domestic semiconductor production.

Related: Residential builders stand to benefit from energy-efficiency credit extension

 

IRS Expects Simultaneous Release of Preapproved Plan Letters – Fred Stokeld, Tax Notes ($):

The IRS anticipates a simultaneous release of almost all opinion letters from the second remedial amendment cycle of the agency’s preapproved section 403(b) plan program.

Virtually all the letters should be issued in November 2024 — the first federal fiscal quarter, said Donald Kieffer Jr. of the IRS Tax-Exempt and Government Entities Division. He spoke October 13 during an American Law Institute Continuing Legal Education program.

 

Contest to Lead GOP’s Power Panel Pits Wall Street Against Trump - Laura Davison, Bloomberg ($):

The contest to lead the House tax-writing committee should Republicans win control of Congress in November may signal whether the GOP will maintain its traditional Wall Street-friendly stance or pivot more to Trump-style populist tax and trade policies.

The three lawmakers vying to chair the powerful Ways and Means Committee -- Vern Buchanan of Florida, Jason Smith of Missouri and Adrian Smith of Nebraska -- embody the ideological tension within the Republican Party.

The selection of Buchanan would indicate that, at least for tax and trade issues, House Republicans are looking to continue to let the business-oriented wing of the party lead economic policy. Jason Smith, who wants the GOP to be the party of the working class, would represent a shift in Republican economic strategy, highlighting the growing divide between the party and the business community. Adrian Smith would steer a middle course between those two, emphasizing a pragmatic approach to legislating.

Bottom line: None of these gents will introduce legislation that raises taxes.

Speaking of committees:

Who Is My Member of Congress? Here’s How to Find Out What Your Reps Have Been Up To – Karim Doumar and Cynthia Gordy Giwa, ProPublica.

This article provides a realistic look at how laws are supposed to be made and how they actually come to fruition.

How a bill is supposed to be made:

Here’s a refresher how the lawmakers we elect are supposed to make laws.

1. A senator or representative introduces a bill.

2. The bill goes to a committee for hearings and approval.

3. It is debated and voted on from the House and Senate floors.

4. Often, a compromise version is worked out.

5. The resulting bill is voted on.

6. If it passes and the president signs it, it becomes a law.

How a bill is actually made:

[B]ills addressing big, national issues are written under the supervision of the Senate majority leader and the House speaker. (Currently, that’s Sen. Chuck Schumer and Rep. Nancy Pelosi, respectively.) They often receive guidance from only a small group of other congressional power brokers rather than the rank-and-file lawmakers who used to contribute to the process by working on legislation in committees.

For example: The recent Inflation Reduction Act was mostly hammered out in secret by Schumer and Sen. Joe Manchin. After it became public, lawmakers made just a couple of changes to get other senators on board, and it passed.

This has been slowly changing since the mid-2000s and has intensified during the past decade, according to a 2018 deep dive from ProPublica and The Washington Post. 

I have personally witnessed the decline of bills that see committee action. Over twenty years ago, the tax-writing committees had weekly hearings (and meetings called "mark ups") on tax legislation. Now, they rarely occur. The question becomes how important are committee chairs if fewer and fewer bills go through committee?

 

R&D Coalition Urges Congress to Revive Expensing Break This Year - Chris Cioffi, Bloomberg ($):

Congress can’t end 2022 without reviving an expired corporate tax break on research and development, a letter from the R&D Coalition said.

I love this sentence. Why? Because Congress can do anything it wants. It can end 2022 with fixing the R&D snafu or not fix it. Currently, the odds seem more likely that lawmakers will not do anything to the tax measure until 2023 – if then. Whether Congress acts or not will likely be determined by the outcome of November’s elections.

The aforementioned letter is here

 

Pair of Fortress SPACs Join Rush to Shut Down Early to Avoid Tax - Bailey Lipschultz, Bloomberg ($). “Fortress Value Acquisition Corp. III and Fortress Value Acquisition Corp. IV are seeking shareholder approval to join a flurry of SPACs to shut down early and return money to investors before a new tax becomes effective next year.”

Details on the recently enacted Inflation Reduction Act are here.  

 

Social Security benefits to see biggest boost in four decades – Aidan Quigley, Roll Call:

Tens of millions of retirees and disabled workers will see their monthly benefits rise by 8.7 percent in 2023 to help combat rampant inflation, the Social Security Administration announced Thursday.

It’ll be the highest cost-of-living adjustment for Social Security beneficiaries since the last period of sustained inflation in 1981, according to agency records.

Starting in January, the big COLA amounts to an average of $146 extra per month above this year’s payments for more than 65 million retirees, survivors and disabled workers. An additional 7 million beneficiaries of Supplemental Security Income benefits for low-income elderly, blind or disabled adults and children will also see the 8.7 percent increase.

 

Minnesota DOR Issues Reminder on Oct. 31 Due Date for Third Quarter Withholding Tax Return – Bloomberg ($):

The Minnesota Department of Revenue (DOR) Oct. 12 issued a reminder for taxpayers that the third quarter withholding tax return is due Oct. 31, for individual income and corporate income tax purposes.

 

Indiana Supreme Court Amends Tax Court Rules for Income, Sales, Excise, Property Tax Appeals – Bloomberg ($). “The Indiana Supreme Court Sept. 29 amended the Indiana tax court appeals rules for sales and use, excise, property individual income, corporate income, and trust income tax purposes.”

 

Michigan Tax Sales Unconstitutional, Appeals Court Rules – Perry Cooper, Bloomberg ($). “Michigan’s law allowing the state and its counties to take absolute title to a homeowner’s property to settle a tax debt violates the US Constitution, a federal appeals court ruled.”

 

Ark. Clarifies Income Tax Consequences Of ARPA – Jaqueline McCool, Law360 Tax Authority ($). “Paycheck protection loans granted by the American Rescue Plan Act are not subject to Arkansas state income tax, but emergency U.S. Small Business Administration economic injury disaster loan grants are, the state Department of Revenue clarified.”

 

California Controller Announces Issuance of First Round of Middle Class Tax Refund Payments – Bloomberg ($). “The California Controller Oct. 7 announced that the first round of Middle Class Tax Refund payments has been issued.”

 

Colorado DOR Amends Excise, Sales Tax Regulations on Regulated Marijuana Business – Bloomberg ($). “The Colorado Department of Revenue (DOR) Oct. 11 amended regulations on regulated marijuana businesses for sales and use and excise tax purposes.”

 

Colorado DOR Announces Income, Sales, Excise Tax Relief for Taxpayers Impacted by Hurricane Ian – Bloomberg ($):

The Colorado Department of Revenue (DOR) Oct. 12 announced tax relief for taxpayers impacted by Hurricane Ian for individual income, corporate income, excise, and sales and use tax purposes.

North Carolina DOR Issues Notice Regarding Income, Excise Tax Relief for Hurricane Ian Victims – Bloomberg ($):

The North Carolina Department of Revenue (DOR) Oct. 7 issued a notice regarding tax relief for victims of Hurricane Ian, for corporate income, individual income, trust income, and excise tax purposes. 

Ga. Extends Filing Deadline For Hurricane Ian Victims – Jared Serre, Law360 Tax Authority ($):

Taxpayers with Georgia filing requirements who were affected by Hurricane Ian now have until Feb. 15 to file certain state tax returns, the state's Department of Revenue announced Thursday.

The extension applies to those who have yet to file their state income tax returns for the 2021 tax year and comes just days before the prior extension deadline of Oct. 17 was set to expire, the department said in a news release. The change also applies to most returns to be filed between now and Feb. 15, according to the release, such as on quarterly payroll and excise taxes and quarterly income tax returns, as well as the state's sales and use tax and annual income tax returns due in January.

 

More Concerns with the Massachusetts Millionaire’s Tax – Alex Brill, American Enterprise Institute (AEI). “Yesterday, the Wall Street Journal editorial board rightly noted multiple concerns with a November ballot initiative in Massachusetts that would amend the state constitution and establish a millionaire’s tax. The Bay State will let voters decide whether to adopt a 4 percent surtax on incomes above $1 million, on top of the existing 5 percent flat income tax rate. The WSJ warns that a 9 percent top marginal tax rate will ‘speed up a wealth exodus’ from Massachusetts.”

 

New Jersey Tax Division Issues Individual Income Tax Information on Child Tax Credit – Bloomberg ($). “The New Jersey Division of Taxation Oct. 12 issued information on the Child Tax Credit for individual income tax purposes.”

 

New York Tax and Finance Department Announces Income Tax Relief Being Mailed to Eligible Residents – Bloomberg ($). “The New York Department of Taxation and Finance Oct. 12 announced that it has started mailing additional financial relief to eligible taxpayers, for individual income tax purposes.”

 

From the "if you talk the talk then walk the walk" file:

U.K. officials are working on a U-turn for Truss tax-cut plan – Kitty Donaldson, Accounting Today:

U.K. officials are discussing how to back down from Prime Minister Liz Truss's massive package of unfunded tax cuts, amid pressure from financial markets and members of the ruling Conservative Party to restore economic credibility.

Officials at 10 Downing Street and the Treasury are drafting options for Truss but no final decision has been taken on any U-turns, according to a person familiar with the matter who asked not to be identified commenting on private discussions. They're also waiting for Chancellor of the Exchequer Kwasi Kwarteng to return to London from Washington, where he has been attending meetings of the International Monetary Fund, the person said.

The premier could scrap her pledge to keep corporation tax at its current level next year — and instead raise it as originally planned by her predecessor Boris Johnson's administration, the Sun reported.

 

All Hallows’ Eve is right around the corner, so pumpkin purchases could be top to mind. Below is guidance for such acquisitions.

Choose the Best Pumpkin for Carving this Halloween! – Almanac.com:

1. How do you know when a pumpkin is ripe and ready for harvest?

2. Color: Look for a pumpkin that has a deep-orange color.

3. Give Them a Thump: Knock on the pumpkin to check that it is hollow (and therefore ripe).

4. The Skin is Hard: Use a fingernail and gently push your thumbnail into the skin; it should dent but not puncture it. 

5. A Hard Stem: When a pumpkin is ripe, it’s stem is also hard. Check that the stem is also secure—but never pick a pumpkin up from the stem! It may break off, which leads to faster decay.

6. Make sure the bottom of the pumpkin isn’t soft and mushy! Also, if you are carving the pumpkin, make sure that the bottom is flat so that it doesn’t roll.

 

Happy National Dessert Day and National Real Sugar Day! Celebrate both with one tasty bite of your favorite sweet!


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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.