November 18, 2022
IRS in Crosshairs as Republicans Take Charge of Ways and Means – Chris Cioffi, Lauren Turenchalk, and Alex Ruoff, Bloomberg ($):
Renewing tax breaks and reining in the IRS are top priorities for Republicans on the House Ways and Means Committee, with several members vying to replace retiring ranking member Kevin Brady (R-Texas).
With Republicans in control, the committee will likely shift to extending expiring or expired provisions of the 2017 tax law, like a corporate tax break on research and development amortization. Extending some of the tax provisions that expired last year or are scheduled to expire in the next few years, if not addressed in the lame-duck session, could be areas where the two parties can find compromise.
Regarding the “reining in the IRS” part of the article:
Wary of the $80 billion funding boost for the IRS that Democrats included in their tax, health, and climate law known as the Inflation Reduction Act (Public Law 117-169), Republicans plan to increase oversight of the agency’s spending.
Even if the House passes legislation that cuts IRS funding to the bone, the bill will not pass the Senate (or become law) because Democrats have the majority in that chamber. An anti-funding bill will likely be used as a messaging tool in the run-up to the 2024 elections - and yes, the 2024 election season has already begun.
Pension Bill Almost Done, but Needs a Vehicle – Caitlin Mullaney and Doug Sword, Tax Notes ($). “House and Senate leaders from both parties see no difficulty in ironing out differences between the chambers’ retirement packages, but it’s uncertain whether there will be a legislative vehicle for the popular and bipartisan effort.”
‘There really are minor differences and the dollars are not that huge, so we should be able to get that done,’ Senate Finance Committee member Benjamin L. Cardin, D-Md., said before adding that lawmakers ‘could get caught up . . . with other issues and [that] could become a problem.’
‘But the merits of the pension bill — we’ve never had such a positive dynamic among the Democrats and Republicans in a House and Senate pension bill,’ Cardin added.
This bill is expected to be added to legislation that funds the federal government beyond December 16th. The "problem" Cardin refers to is lawmakers may want to add other provisions to the spending bill that could be divisive. If the problem becomes too problematic, all non-spending provisions could be struck from the bill, and, therefore, not become law. The retirement bill could be one of the non-spending provisions that gets struck. Having stated that, the retirement bill has broad, bipartisan support in both chambers of Congress, and cutting from the spending bill will be a big deal.
Democrats Push for Child, Earned Income Credits in Tax Bill - Jarrell Dillard, Bloomberg ($):
A group of House Democrats is asking party leaders not to attach corporate tax breaks to a year-end tax package compromise with Republicans -- unless extensions for the expanded child tax credit and the earned income tax credit are both included.
Republicans want to reverse a provision requiring businesses to amortize research and development expenses over five years, and instead allow companies to deduct the expenses every year. Some Democrats have also expressed support for the measure.
Further down the article:
‘We should not extend corporate tax breaks unless and until we deliver additional relief for families,’ the lawmakers wrote.
It appears the political fight over expanding and extending the Child Tax Credit versus expensing Research and Development costs that has played out over the past few months is not going away after the elections. Passing a year-end tax bill will be difficult to accomplish if lawmakers can't reach an agreement on this issue.
Related: Results from Midterm Elections could be Death Knell for Year-End Tax Bill – Jay Heflin, Eide Bailly.
Automakers Brace for GOP-Led House to Try to Erode EV Incentives - Keith Laing, Bloomberg ($). “Automakers have long relied on incentives to bolster the electric-vehicle market. With Republicans now set to take control of the US House of Representatives next year, the industry isn’t so sure it can count on those perks much longer.”
GOP’s House Majority Complicates Podesta’s Climate Spending Role - Stephen Lee, Bloomberg ($):
Clean energy czar John Podesta’s task in overseeing $369 billion under the climate and tax law got several degrees tougher now that Republicans have won control of the House—and the power to closely scrutinize his office.
A lack of trust from Republicans could throw sand in the gears of the Biden agenda, which seeks to cut emissions by 40% over the next eight years through a combination of tax credits and investments in solar panels, batteries, and other green technologies.
It’s important to note that Democrats control the Senate and it is highly unlikely that they would pass a bill that undoes pieces of the Inflation Reduction Act, which includes several tax provisions aimed at clean energy. In order for a bill to become law, it must pass both the House and Senate.
After a rough year for cryptocurrency, taxes may not be a top priority for digital currency investors battered by steep losses.
But the falling crypto market and the recent collapse of digital currency exchange FTX may affect next year’s tax bill — and beyond, according to financial experts.
Further down the article:
[I]t’s also possible to have profits even when the market drops, depending on when you bought and sold the assets.
Treasury Mulls Strict Rules for Tax-and-Climate Law’s Excise Tax - Erin Slowey, Bloomberg ($). “The Treasury Department is weighing whether to treat the stock buyback excise tax in President Joe Biden’s tax-and-climate law with strict rules, an official said Thursday.”
Further down the article:
Treasury is considering if taxpayers would benefit from strict rules on the excise tax, said Jim Wang, an attorney-adviser in Treasury’s Office of Tax Policy, speaking at a Practising Law Institute event… The strict rules could mean the tax is not as flexible as Subchapter C has become, Wang said.
Watchdog Recommends IRS Expand Use of Digital Communication Tools - Naomi Jagoda, Bloomberg ($). “The IRS should take steps to make digital communication tools more widely available to taxpayers, the Treasury Inspector General for Tax Administration said in a new report.”
The Internal Revenue Service [yesterday] reminded IRA owners age 70½ or over of their option to transfer up to $100,000 to charity tax-free each year.
These transfers, known as qualified charitable distributions or QCDs, offer eligible older Americans a great way to easily give to charity before the end of the year. Moreover, for those who are at least 72, QCDs count toward the IRA owner's required minimum distribution (RMD) for the year.
State General Fund Spending Hit Record as Stimulus Fueled Taxes - Allison Nicole Smith, Bloomberg ($):
General fund spending by US states surged by a record 18% in fiscal 2022 as lawmakers deployed surplus dollars after two consecutive years of double-digit revenue growth, according to a report by the National Association of State Budget Officers.
States spent their general fund dollars in all sectors, with transportation seeing the biggest jump. The growth in general fund spending -- the most in the association’s 36 years of tracking the data -- fueled the overall 7.3% increase in state spending to $2.86 trillion in the year that ended in June.
Federal Covid-19 stimulus aid helped bolster state economies and tax collections, and the insulation of highly-paid workers from the job losses touched off by the pandemic meant little impact on personal income taxes, the report said.
Utah lawmakers propose income tax cut, constitutional amendment on property taxes – Ben Winslow, Fox13. “The Utah State Legislature's powerful Executive Appropriations Committee announced a $1.3 billion surplus (up to $3.3 billion including reserves already allocated). With that much money from tax revenues and funding, lawmakers are looking at a tax cut.”
SF Board Extends Cannabis Business Tax Suspension – Jaqueline McCool, Law360 Tax Authority ($):
The San Francisco Board of Supervisors voted to extend the suspension of the city's gross receipts tax on cannabis business activities through 2025.
The board passed an ordinance by a 9-2 vote Tuesday extending the suspension of the city's progressive gross receipts tax on cannabis business activity through 2025. The ordinance, which was introduced by Supervisor Rafael Mandelman, will go to Mayor London Breed for approval. If Breed doesn't sign by the 10th day after receiving the ordinance, or returns it unsigned, the supervisors can override her veto and put it into effect.
Judge Won't Nix Calif. Case Over Online Biz Tax Shield Memo – Maria Koklanaris, Law360 Tax Authority ($). “A complaint against California's guidance disqualifying many internet activities from protections of P.L. 86-272, the federal law also called the Interstate Income Act, can go forward, a state court judge said Thursday in overruling an objection from the state Franchise Tax Board.”
Billionaire Wins Appeal Over $8 Million Colorado Tax Refund – Perry Cooper, Bloomberg ($). “Billionaire Philip Anschutz convinced the Colorado Court of Appeals that a change in federal tax law enacted during the pandemic allows him to seek an $8 million income tax refund from the state.”
New Jersey High Court Upholds Late Sale of Tax-Delinquent Condo – Perry Cooper, Bloomberg ($). “A late-arriving investor properly bought a condominium unit without first intervening in a pending foreclosure action, the New Jersey Supreme Court ruled.”
New Previously Taxed Income Regs Taking Longer Than Expected – Erin Slowey, Bloomberg ($):
New proposed rules on a foreign corporation’s previously taxed income are taking longer than expected, but the IRS still plans to release the regulations in the first half of 2023, an official said Thursday.
The IRS withdrew 2006 proposed regulations on the exclusion from gross income of previously taxed earnings and profits, or PTEP, in October due to concerns of inappropriate basis adjustments. The rules were never implemented.
The new regulations have presented tricky issues and are more time consuming than expected, said Shane McCarrick, special counsel at the Office of the Associate Chief Counsel (International) at the IRS, speaking at a Practising Law Institute event.
OECD Says Tax Pact Consultations, Guidance Expected in December - Michael Rapoport, Bloomberg ($). “The OECD expects to issue a slew of consultations and guidance in December on key issues surrounding the scope and implementation of the global tax agreement, an OECD official said Thursday.”
‘We have a few Christmas presents waiting for you in December,’ said Grace Perez-Navarro, director of the OECD’s Centre for Tax Policy and Administration, in an interview at the Bloomberg Tax Leadership Forum in New York.
IRS Seeking to Improve Its Work on Transfer Pricing Audits – Naomi Jagoda, Bloomberg ($):
The IRS is refining its work on transfer pricing audits, an agency official said Thursday.
Holly Paz, the acting commissioner of the IRS Large Business & International Division, said at a Bloomberg Tax event that the vast majority of returns that the division selects for audit have transfer pricing issues, so the IRS is ‘always trying to improve the way we are addressing those issues.’
U.K. Unveils Largest Tax Increases and Spending Cuts in a Decade – Max Colchester and Paul Hannon, Wall Street Journal ($). “The U.K. government announced sweeping tax increases and spending cuts on Thursday, becoming the first major Western economy to start sharply limiting its spending growth after years of ramped-up fiscal stimulus during the pandemic and recent energy subsidies. “
From the ‘ID.me gets ID’ed’ file:
House Dems say facial recognition company made 'baseless claims' – Alfred NG, Politico:
An identity verification company that received millions in government contracts allegedly misrepresented how well it was serving Americans, according to Democratic leaders on the House Oversight committee.
In findings released on Thursday, the committee chair Rep. Carolyn Maloney (D-NY) and Rep. James Clyburn (D-SC), the chair of the subcommittee on the coronavirus crisis, said ID.me downplayed how long Americans had to wait to have their identities verified when applying for unemployment benefits. The lawmakers also said the company made ‘baseless claims’ about how much the US government loses to unemployment fraud to ‘increase demand for its identity verification services.’
National Day Calendar:
His character got his start on film on November 18, 1928, but before that, the story begins in 1927, when Walt Disney first sketched a floppy-eared bunny while under contract to Universal Studios.
Mickey, you don’t look a day over 25! (Hopefully that is a compliment for a mouse.)
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.