Lame Duck Talks May Be Stalled Through December 6 – Doug Sword, Tax Notes ($):
It’s still anyone’s guess whether the next three weeks will see Congress amass a big, complex lame-duck deal full of tax provisions, or do little other than leaving contentious issues for next year’s divided legislature.
Currently, there is an expectation that retirement legislation will pass Congress in the lame duck by being added to a bill that funds the federal government beyond December 16th, which must pass. Things are less clear on whether Congress will tackle a year-end tax bill that would extend expiring provisions and modify other tax measures.
Also, the notion that Congress will be in session during the holidays is becoming more real. If lawmakers are in town for a longer period of time, the odds for passing tax legislation could increase.
A late December on deck - Jake Sherman, John Bresnahan and Heather Caygle, Punchbowl News ($):
We can report that Democratic leaders are already discussing another one-week extension until Dec. 23. But even if they get a one-week CR, we’re not sure they will be able to cobble together a yearlong omnibus by that date, as we told you the other day. Christmas at the Capitol!
There are also several non-tax issues that might pre-empt Congress from passing tax legislation:
[T]he annual defense authorization package, same-sex marriage and reforming the Electoral College, among other topics. The Georgia Senate runoff is heading toward a high-stakes finish…
Bottom line: It's anyone guess on what Congress will accomplish before year-end.
But lawmakers must fund the federal government. This is the number one priority. Everything else is secondary.
And right now, funding talks aren't going well:
Negotiations at standstill on omnibus spending package – Paul Krawzak, Roll Call:
Bipartisan talks on an overdue fiscal 2023 spending package have stalled, with Democrats and Republicans accusing each other of resisting an agreement.
If negotiators cannot get the talks back on track, the result could be another stopgap spending bill into next year or potentially a partial government shutdown that neither party said it wants.
Democrats Racing Clock After Supreme Court Trump Tax Return Win – Chris Cioffi and Samantha Handler, Bloomberg ($):
With the Supreme Court refusing to block a House panel from obtaining former president Trump’s tax returns, attention now turns to Congress, where Democrats are racing against the clock before they lose their majority.
House Democrats will no longer be the majority party come January 3rd. Republicans will be the majority party and will not spend much time investigating Trump’s tax returns.
Rep. Vern Buchanan (R-Fla.), who is vying to succeed retiring GOP committee leader Kevin Brady (R-Texas), released a statement calling Democrats’ battle for the returns a ‘partisan attack against a political opponent that serves no legitimate or legislative purpose.’
More on Trump's tax returns is here.
A possible scenario that could play out in the House Ways and Means Committee is that Democrats hurry to investigate Trump’s tax returns before January 3rd. After this date, Republicans take the helm and use their investigative prowess on ProPublica or laptops belonging to the Biden family. Moving tax legislation - which is the committee's key function - might take a backseat to investigations.
Case in point:
Republicans Are Picking a Fight With ‘Woke’ Corporate America - Laura Davison, Bloomberg ($):
Republicans and their longtime corporate allies are going through a messy breakup as companies’ equality and climate goals run headlong into a GOP movement exploiting social and cultural issues to fire up conservatives.
The ensuing drama will unfold over the next two years in the US House, where the incoming GOP majority plans to pressure companies on immigration, equality and climate change stances that are now being assailed by key Republicans as ‘woke capitalism.’
Restore Housing Credit in Lame-Duck Session, Lawmakers Urge - Samantha Handler, Bloomberg ($):
A group of 54 Democrats and Republicans is asking congressional leaders of both parties to include an expansion of the Low-Income Housing Tax Credit in any year-end tax package to help increase the housing supply and reduce rents.
Senate Finance Chairman Ron Wyden (D-Ore.) has stated that providing housing relief will be a priority for his committee in the next Congress. It is unclear how important this issue is for House Republicans, who will be the majority party when the next congressional session starts in January.
Sale Of Clean Energy Credits Could Trigger Corp. AMT – Kat Lucero, Law360 Tax Authority ($):
Democrats' landmark climate law passed this summer will allow companies for the first time to sell tax credits earned from their renewable energy development projects, but the sales risk triggering the new corporate levy on book earnings that was included in the same law.
Further down the article:
At issue is the law's silence on how the earnings from the sale of the tax credits should be included in a company's adjusted financial statement income, or AFSI, which serves as the basis for the new corporate alternative minimum tax that aims to undermine tax avoidance strategies by large corporations.
IRS Criminal Investigation Unit Likely to See Slow Ramp Up - Naomi Jagoda, Bloomberg ($):
The Internal Revenue Service is mulling how to spend its new $80 billion in funds, but taxpayers shouldn’t expect a sudden, dramatic increase in the number of special agents who investigate criminal tax matters.
A portion of the money will likely go to the Criminal Investigation division, which probes possible criminal tax code violations and also works with other agencies to investigate money laundering, terrorist financing, and drug-related cases. At most, the division can hire several hundred special agents annually, and any new hiring will be partially offset by retirements and other attrition, current and former CI officials said.
Treasury Secretary Janet Yellen said that audit rates won’t go up for taxpayers earning less than $400,000 a year, according to the New York Times. But audit rates have fluctuated over the years. Which audit rate is she referring to?
IRS warns taxpayers about new $600 threshold for third-party payment reporting – Kate Dore, CNBC. “The IRS on Tuesday shared tips for the upcoming tax season — including a reminder about the new $600 threshold for receiving Form 1099-K for third-party payments.”
Further down the article:
Although the change aims to collect taxes on income, not personal transactions, experts say it’s possible some filers may receive Form 1099-K by mistake.
Someone reimburses you for lunch using Venmo, and you receive a 1099-K for it. Here’s how to fix it:
[I]f you receive the form for personal transactions, the agency says to contact the issuer for a correction. If the company doesn’t fix the error, you can attach an explanation to your tax return while reporting your income correctly, the IRS says.
Attaching an explanation to your forms doesn’t seem foolproof. But maybe I’m being too negative.
IRS Pitch on Appeals Office Sparks Fears of More Litigation - Naomi Jagoda, Bloomberg ($):
Proposed changes to the IRS Appeals office could result in more taxpayers needing to resolve disputes with the IRS through litigation, tax practitioners and other stakeholders warn.
The Appeals office is designed as an alternative to resolving tax controversies through litigation. The IRS and Treasury Department proposed rules in September implementing a portion of the 2019 Taxpayer First Act, which codified and outlined the office’s structure and function. A key portion of the proposed regulations describe 24 circumstances when controversies are not eligible for consideration by Appeals.
Clarity on Easement Rules May Soon Be Reality – Kristen Parillo, Tax Notes ($):
The latest Treasury-IRS priority guidance plan includes an item on conservation easements, but it’s unclear if the government intends to issue model easement deed language pushed by some lawmakers and advocacy groups.
The project, which appears under the General Tax Issues section of the 2022-2023 priority guidance plan released November 4, is described as 'guidance under section 170 regarding conservation easements, including facade easements.'
When asked to comment on the scope or form of the guidance project, an IRS spokesperson simply referred Tax Notes to the description in the guidance plan. It’s possible the government added it to the plan in response to requests from Senate Finance Committee member Rob Portman, R-Ohio, and others that the IRS publish model conservation easement deed language that complies with section 170(h) and the related regulations.
Adviser Asks Ala. Court For Broad Relief From IRS Notice – Anna Scott Farrell, Law360 Tax Authority ($). “A company that advises partnerships on donating conservation easements asked an Alabama federal court for districtwide relief from a requirement that the donations be disclosed to the Internal Revenue Service, saying it would be ‘unworkable’ to free the company but not its clients from regulation.”
California Updates Tax Rules Aimed at Online Marketplaces – Michael Bologna and Laura Mahoney, Bloomberg ($):
California’s sales and use tax department wants comments by Jan. 3 on proposed updates to its online marketplace rules, clarifying the kinds of sales to state customers that count toward triggering the rules and how an exclusion for advertising works.
The proposed amendments wouldn’t impose tax liability on any business as a marketplace facilitator that isn’t already liable, according to the California Department of Tax and Fee Administration. But the amendments represent an attempt to work out kinks that have arisen since the rules were adopted on an emergency basis in 2020 in response to the US Supreme Court’s 2018 Wayfair ruling and the new state law that followed in 2019.
Illinois Court Rejects Church’s Religious Property Tax Exemption – Michael Bologna, Bloomberg ($). “An Illinois appeals court denied Adventure Christian Church’s request that its religious property tax exemption be restored, finding the church should have exhausted various administrative remedies before seeking review in state court.”
New York Governor Signs Law Authorizing Brookhaven to Accept Religious Organization’s Property Tax Exemption Application – Bloomberg ($). “The New York Governor Nov. 22 signed a law authorizing the town of Brookhaven in Suffolk County to accept a religious organization’s application for real property tax exemptions on a parcel of real estate it owns.”
Wash. Hearing Could Clarify Status Of Capital Gains Tax – Maria Koklanaris, Law360 Tax Authority ($):
A hearing scheduled for Tuesday before Washington's highest court may provide some clarity on how the state's residents should handle the embattled capital gains tax, which sparked consternation and confusion even before it was passed.
The Washington Supreme Court is scheduled for an en banc hearing on a motion from Washington Attorney General Bob Ferguson for a stay of a lower court's March ruling to strike down the tax. In that ruling, Superior Court Judge Brian Huber agreed with a group of taxpayers who sued to strike the tax even before it was signed into law. Judge Huber held that it is an income tax, not an excise tax as the state characterized it, and that it violates two provisions of the state constitution.
Minnesota DOR Publishes Revised Fact Sheet on Local Sales and Use, Excise Taxes – Bloomberg ($). “The Minnesota Department of Revenue Nov. 1 published a revised fact sheet for sales and use and excise tax purposes.”
Did the Appeal of Tax Havens Change During the Pandemic? – Martin Sullivan, Tax Notes ($):
On November 18 the Commerce Department gave us our first glimpse of how U.S. multinationals have allocated profit across national borders since the onset of the pandemic in early 2020. In dollar terms, U.S. multinational profits in tax havens declined from 2019 to 2020. But that correlates with the decline in foreign and worldwide profits of U.S. corporations generally in 2020. So it doesn’t seem, at least through 2020, that U.S. multinationals in the aggregate lost interest in keeping profits in tax havens. As a share of total foreign profits, tax haven profits actually increased.
From the “Hey, can they do that?” file:
Information Return Penalty Assessment Fight Coming to a Head – Andrew Velarde, Tax Notes ($):
A case directly challenging the IRS’s legal authority to assess international information return penalties is advancing in Tax Court and could upend penalty collection procedures if the taxpayer prevails.
Although the timing of any decision remains uncertain, addressing the issue may ultimately be unavoidable if one is reached in Farhy v. Commissioner. In September simultaneous opening briefs were filed in the Tax Court. The taxpayer and the IRS subsequently filed simultaneous answering briefs that were served November 9. The sole legal issue revolves around whether the IRS can use its assessment powers for section 6038 penalties, which the taxpayer contends is unlawful because it is not authorized under the code.
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