Taxpayers May Be on Their Own as New Corporate Taxes Take Effect – Chandra Wallace, Tax Notes ($):
Treasury and the IRS are still early in the guidance development process for the new corporate alternative minimum tax and stock buyback tax, so taxpayers may have to navigate on their own as those taxes go into effect, a Treasury official said.
Brett York, Treasury deputy tax legislative counsel, acknowledged the high volume of questions and issues raised by the two new revenue raisers enacted August 16 as part of the Inflation Reduction Act (P.L. 117-169), both of which go into effect January 1, 2023. Although the government is hard at work on guidance implementing the taxes and understands the urgency, there is no timeline yet for when guidance will be issued, he said.
Tax Pros Air Concerns With S Corp Foot-Fault Guidance – Kristen Parillo, Tax Notes ($):
An IRS official said the agency will consider practitioners’ concerns that new relief for fixing invalid S corporation elections may be unavailable to some taxpayers with tainted operating agreements and disproportionate distributions.
Tax professionals at the American Institute of CPAs Fall Tax Division Meeting November 2 alerted IRS officials to what they view as problematic provisions in Rev. Proc. 2022-19, 2022-41 IRB 282.
IRS Guidance Plan Release Expected Imminently, Official Says - Naomi Jagoda, Bloomberg ($):
The IRS’s 2022-2023 priority guidance plan is expected 'any day now,' Holly Porter, associate chief counsel for pass-throughs and special industries, said Wednesday at an American Institute of CPAs conference.
The new plan will contain a number of items that were also on the previous year’s plan, including items relating to the 2017 tax law, disguised sales, and Section 752 related-party rules, Porter said.
Research Amortization Procedural Guidance Expected This Year – Nathan Richman, Tax Notes ($):
Treasury understands that taxpayers need guidance by year-end on making tax accounting method changes to meet the new requirement to amortize research costs, even before they need substantive guidance on what’s covered, according to an official.
Speaking November 2 at the American Institute of CPAs Fall Tax Division Meeting, Wendy Friese of the Treasury Office of Tax Legislative Counsel said that “there has been a lot of interest” in issuing procedural guidance so that taxpayers can switch to the Tax Cuts and Jobs Act version of section 174 by year-end without having to use the nonautomatic method change process.
More on R&D below.
Guidance on Monetization of Energy Tax Credits Priority for IRS – Erin Slowey, Bloomberg ($):
Guidance on the monetization of energy credits in President Joe Biden’s tax-and-climate law is a high priority for the IRS, an official said Wednesday.
Governments and exempt organizations can elect for the tax credits to be treated as a direct payment, as outlined in the law. Other taxpayers can choose to transfer all or some of the credits one time to a third party.
Treasury: Long-Awaited Basis Consistency Regs ‘Very Far Along’ – Jonathan Curry, Tax Notes ($). “The IRS and Treasury have promised for several years that final basis consistency regulations would be released soon, but a Treasury official insists they are, indeed, close to being finalized.”
‘We are very far along in developing the final regulations,’ Catherine Hughes of the Treasury Office of Tax Legislative Counsel assured attendees at the November 2 American Institute of CPAs Fall Tax Division Meeting, acknowledging that previous predictions that those final regs would be released soon had turned into a punchline. The final regs have been a regular item on Treasury’s priority guidance plan for years.
IRS Eyeing Permanent Benefit Plan Pre-Audit Compliance Program - Austin Ramsey, Bloomberg ($). “A 90-day pilot program that let private-sector worker benefit plans correct annual filing errors before IRS investigators come knocking will likely become a permanent fixture in the tax agency’s enforcement approach, according to agency officials.”
IRS to Finalize Consolidated Group Rules in Coming Months – Erin Slowey, Bloomberg ($):
The IRS plans to finalize consolidated group rules in eight to nine months before they expire in 2023, an IRS official said Wednesday.
The agency issued temporary rules in July 2020 ( T.D. 9900 ; RIN 1545–BP84) for consolidated groups who look to partially waive their ability to carry back losses after acquisitions of new members. The regulations expire July 3, 2023.
‘We’d like to finalize before they expire,’ said Russell Jones, an attorney with the IRS Office of Associate Chief Counsel (Corporate), at a conference hosted by the American Institute of CPAs.
IRS Says 1040 Cryptocurrency Question Is Meant to Be Broad – Nathan Richman, Tax Notes ($):
The income tax return question about cryptocurrency and digital assets is meant to capture more than just taxable transactions, according to IRS officials.
The question on the face of Form 1040 — the most recent draft replaced 'virtual currency' with 'digital asset' — isn’t meant to focus only on taxpayers’ taxable cryptocurrency transactions, but by checking “yes” they won’t trigger any sort of document matching program, said Ronald Goldstein of the IRS Office of Associate Chief Counsel (Income Tax and Accounting), speaking November 2 at the American Institute of CPA’s Fall Tax Division Meeting.
Crypto 1040 Tax Return Question Has ‘Educational’ Role, IRS Says - Isabel Gottlieb, Bloomberg ($). “The cryptocurrency question on tax Form 1040 serves an “educational” function beyond its enforcement role and has resulted in exponentially more people reporting transactions, an IRS official said Wednesday.”
Expedited Letter Ruling Pilot Program is Effective, IRS Says – Erin Slowey, Bloomberg ($):
An IRS pilot program to expedite private letter ruling procedures has proven effective, an agency official said Wednesday at an American Institute of CPAs conference.
The IRS started an 18-month pilot program that fast-tracked letter rulings in January. The program, set to expire next July, aims to issue letter rulings within 12 weeks of receiving the letter ruling request from taxpayers who requested their rulings to be expedited and met certain requirements.
Benefits Practitioners Clash With IRS Over RMD Guidance – Caitlin Mullaney, Tax Notes ($). “Members of the employee benefits community voiced concerns regarding the treatment of required minimum distributions (RMDs) implemented in recent guidance.”
GOP Congress Takeover Would Stymie Biden, Offer Business a Reset - Erik Wasson, Bloomberg ($):
A Republican takeover of Congress would reshape the fiscal and regulatory landscape for a wide range of businesses that have grappled for nearly two years with Democratic efforts to boost taxes and tighten rules.
Next week’s midterm elections are expected to usher in a new era of divided government, with polls showing Democrats losing control of the House and possibly the Senate. That would spell the end of President Joe Biden’s agenda.
What this means: Tax increases won't pass a Republican-run Congress.
Also: Republicans are already talking about extending 2017 tax reform relief in the next Congress even though those provisions expire in 2026.
My take: Extending 2017 tax reform relief might happen. My argument is here (Full disclosure: Some legislative folks don’t agree with me, but I’m going to die on this hill).
The House Republicans with power - Jake Sherman, Punchbowl News ($):
If Kevin McCarthybecomes speaker in January, he’s vowed to devolve much of the decision-making on policy issues to committee chairs.
Over time, majority leaders in both parties have usurped committee chairmen's power to write legislation. Instead, bills are written by offices of the House Speaker or Senate Majority Leader. McCarthy is not known for being a legislative wonk, so allowing committee chairs to do the legislative lifting might be a good idea.
Here’s our reporting,based on numerous conversations, about who will be the committee chairs if Republicans win the House majority... Ways and Means:We’ve covered this contest for months between Reps. Vern Buchanan (Fla.), Jason Smith (Mo.) and Adrian Smith (Neb.). We give a bit of an edge to Jason Smith right now, but as one aide put it, this is a jump ball.
All three of the aforementioned Congressmen support extending the 2017 tax reform measures asap. If Republican win the House expect to see committee action on renewing these measures long before they expire in 2026.
Expanded Child Credit Would Cost $1.3T Over Decade, Says Joint Tax - Chris Cioffi, Bloomberg ($):
Making the expanded child tax credit permanent would reduce government revenue by up to $1.4 trillion over the next decade, according to a new Joint Committee on Taxation report released by House Republican leaders Wednesday.
Some lawmakers are arguing that the expansion of the child tax credit should be tied to allowing R&D costs to be expensed. In other words, either both are enacted or neither becomes law. The argument has been around for months, but it is unclear how serious lawmakers are about it. It could be that arguing to tie these two provisions together goes away after the election. That would allow R&D expensing to become law again without having to enact a CTC expansion.
Supreme Court Petition Extended IRS Deadline to Collect Taxes - Aysha Bagchi, Bloomberg ($):
The IRS’s 10-year deadline to collect delinquent taxes after assessing them was paused by a taxpayer’s petition for Supreme Court review, an appeals court ruled.
Taxpayer Charles J. Weiss argued that petitions to the high court weren’t covered by a law—tax code Section 6330(e)(1)—that stops the 10-year clock from ticking when an IRS administrative hearing and 'appeals therein' are pending. However, a three-judge panel of the US Court of Appeals for the Third Circuit concluded Wednesday that such petitions are 'appeals therein' under the statute, and that appeals are still pending until the time to file such petitions runs out.
Fitch’s State Ratings Chief on Inflation, Recession (Podcast) – Donna Borak, Bloomberg ($):
State policy makers and budget officials are facing a period of greater economic uncertainty as forecasts increasingly point to the likelihood of at least a mild U.S. recession in 2023. Over the past year many states have sought to stay ahead of any downturn by managing their budgets more prudently.
A Look At DeSantis' Tax Policy As He Seeks 2nd Term In Fla. – Paul Williams, Law360 Tax Authority ($). “Florida Gov. Ron DeSantis oversaw several significant state tax code changes during his first term in office, including the addition of a tax on online sales that was offset by business tax breaks, and started the dissolution of a special taxing district for Disney.”
Arizona DOR Announces Update to Individual Income Tax Withholding Form A-4 Reflecting Lower Rates – Bloomberg ($). “The Arizona Department of Revenue (DOR) Nov. 1 announced that Arizona employees have new tax withholding options. The DOR updated Form A-4, Individual Income Tax Withholding Form, to reflect Arizona’s lower individual income tax rates due to legislative changes.”
A Flat Tax in Wisconsin Can Deliver Tax Relief for Everyone – Katherine Loughead, Tax Foundation:
As Wisconsin’s gubernatorial election draws near, the spotlight is on a potential flat individual income tax—and its effects on the state’s taxpayers and economy.
Unfortunately, there has been much confusion, with bold claims being made based on plans that don’t exist, including claims that a flat tax 'would increase taxes on the middle class and working poor.' It’s worth taking a step back to understand what is and isn’t under consideration in Wisconsin—and what the ramifications might be. It is especially important for stakeholders to know that a flat tax can indeed be adopted without raising taxes on low-income households.
Ohio Tax Department Issues Nov. 15 Deadline Reminder for Filing, Paying Third Quarter Severance Taxes – Bloomberg ($). “The Ohio Department of Taxation Nov. 1 issued a reminder to all severance tax practitioners and taxpayers that the third quarter 2022 severance tax return and payment are due Nov. 15, for excise tax purposes.”
Pennsylvania: Philadelphia DOR Announces Income Tax Net Operating Loss Carryforward Period Extension to 20 Years – Bloomberg ($). “…The announcement includes: 1) the 20-year carryforward period only applies to losses incurred for tax years beginning in 2022; 2) net losses incurred before 2022 may only be carried over for three years; and 3) no application or other submission is required to use this extension, however, taxpayers must properly track the carryover periods for each year with a net operating loss.”
Overseas Bank Account Fines Questioned at US Supreme Court - Greg Stohr, Bloomberg ($):
US Supreme Court justices questioned the legality of stiff penalties the federal government says it can impose on people who fail to file required reports listing their foreign bank accounts.
Hearing arguments in a case with special resonance for Americans living abroad, the justices tested the Biden administration’s interpretation of a law the government says deters money laundering and tax evasion.
IRS Shifts Audit Focus to Penalties for Transfer Pricing Cases – Erin Slowey, Bloomberg ($):
The IRS expects to see an increase in transfer pricing penalties—a shift in the agency’s audit focus, an official said Tuesday.
The agency will continue to look more closely at transfer pricing cases to determine when to assert penalties, Holly Paz, acting commissioner of the IRS’s Large Business and International division, said at a conference hosted by the American Institute of CPAs.
'We expect that we will see an increase in the number of penalties asserted in the future,' Paz said. 'We’re looking at ways to promote early resolution of these cases.'
Justices Press Gov't To Justify How It Calculates FBAR Fines – Dylan Moroses, Law360 Tax Authority ($). “The federal government's attempt to penalize a Texas man for unintentionally failing to report his foreign bank account information may prove problematic as the statute authorizing the penalty lacks specific language to levy the fine per undisclosed account, U.S. Supreme Court justices said Wednesday.”
From the ‘Could this affect my tax-exempt status?’ file:
Tax-Exempt Organizations Don’t Always Have to Say No to Politics - Kelly Phillips Erb, Bloomberg ($):
Section 501(c)(3) organizations are prohibited from participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office—that language appears directly in the statute. The IRS has confirmed that contributions to political campaign funds or public statements of position in favor of or opposition to any candidate for public office are violations of this rule. This includes comments and links on websites, podcasts, broadcasts, and any printed materials.
Other activities are fact and circumstance dependent. For example, certain voter education activities such as holding public forums and making voter education guides available are okay so long as they are nonpartisan. Efforts to encourage people to participate in the electoral process, such as voter registration and get-out-the-vote drives, would similarly not be prohibited—again, if they are conducted in a nonpartisan manner.
Some non-profits, like churches, have apparently crossed the line:
Churches Are Breaking the Law by Endorsing in Elections, Experts Say. The IRS Looks the Other Way. – Jeremy Schwartz and Jessica Priest, ProPublica:
For nearly 70 years, federal law has barred churches from directly involving themselves in political campaigns, but the IRS has largely abdicated its enforcement responsibilities as churches have become more brazen about publicly backing candidates.
It’s National Men Make Dinner Day. The website states that BBQ is not allowed on this day. Possible loophole: Grilling and BBQ are different. One could argue that BBQ is a meal that is grilled, and that grilling is much broader. For example, broccoli, pizza, and oysters can be grilled and fall outside the bounds of BBQ. So bring on National Men Make Dinner Day and fire up the grill!
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