Tax News & Views Piecing Tax Puzzle Together Roundup

December 2, 2022

Dems Ready to Deal; GOP Is a ‘Maybe,’ Former Top Pelosi Aide Says – Doug Sword, Tax Notes ($):

The prospects for pairing the child tax credit with business tax preferences in a year-end omnibus spending deal isn’t so much about matching price tags as it is about political will, according to a former top aide to House Speaker Nancy Pelosi, D-Calif.

‘As we all know, every tax provision is dialable,’ said Arshi Siddiqui, senior policy adviser and counsel to Pelosi during her first stint as House Speaker and now a lobbyist at Akin Gump Strauss Hauer & Feld LLP. She was referring to the ability to alter a tax provision’s features and terms to meet negotiating goals.

Um. It might be about matching price tags. Requests have been made to the Joint Committee on Taxation – the Capitol Hill group that determines the cost of tax provisions – on whether extending or modifying certain business tax breaks (R&D expensing, expanding 163(j), and others) would equal the cost of expanding and extending the Child Tax Credit. So far, the costs don’t match.

Also, as of yesterday, negotiations have yet to ramp-up on the tax bill between tax staffers who represent the two political parties. So figuring out the business tax breaks v. Child Tax Credit puzzle has yet to begin.

VA health care funds, military vaccine rule gum up omnibus talks – Aidan Quigley, Lindsey McPherson and Paul Krawzak, Roll Call:

Democrats were prepping a counteroffer on a fiscal 2023 omnibus framework Thursday, as negotiators contended with a range of divisive issues, such as how to treat veterans medical care spending and the military’s requirement for servicemembers to be fully vaccinated against COVID-19.

There were no imminent signs of a breakthrough, and no high-level bipartisan meetings were yet planned. But Senate Appropriations ranking member Richard C. Shelby, R-Ala., said ‘serious discussions’ were underway.

Question: Why include an article about the budget in a tax blog?

Answer: How Congress funds the federal government could determine if there is a year-end tax bill.

Explanation: Congress currently has two legislative paths to fund the federal government beyond the current funding expiration date of December 16th.

  • First path: Omnibus spending bill, which would provide a funding boost to most federal departments and agencies.
  • Second path: Continuing Resolution, which would NOT provide a funding boost to most federal departments and agencies. Instead, it provides the same funding level to these entities that was received last year - so no increase in funding.
  • Congressional leaders have stated that a year-end tax bill will only happen if lawmakers approve an omnibus spending bill.
  • Important to note: Just because Congress approves an omnibus spending bill doesn’t mean that a year-end tax bill will also pass. These two measures are not tethered together and a lot of work must happen in a short amount of time for a year-end tax bill to materialize (see comments on above article).
  • State of play: It is not clear which path Congress will take to extend federal government funding.


EBay, Lawmakers Push to Change Tax Reporting Rule in Lame Duck - Samantha Handler, Bloomberg ($):

Momentum is building in Congress to increase the business transaction threshold as lawmakers from both parties and e-commerce platforms clamor for changes to new tax reporting requirements.

The 2021 pandemic aid law included a provision to help gig economy workers correctly pay their taxes by requiring Uber, eBay, and other companies to tell contract workers how much money they had made on those platforms. The law requires those platforms to send 1099-K forms to taxpayers with more than $600 in business transactions, without setting a minimum threshold for number of transactions, starting for tax year 2022.

The change threatens to confuse casual sellers who haven’t actually made any income, lawmakers and lobbyists say—like anyone reselling Taylor Swift tickets. Because forms will be sent in January, the ideal time to stop the rollout would be in the lame-duck session, said Arshi Siddiqui, a lobbyist for the Coalition for 1099-K Fairness, a group eBay launched in response to the decrease.

Further down the article:

Republicans in the House and Senate have introduced legislation to revert the requirement back to the $20,000 threshold, while some Democrats are pushing for a new minimum of $5,000. 

Two observations:

  1. Selling Taylor Swift tickets at a profit is income and taxable. Are people flabbergasted by income being taxed?
  2. Is momentum really building for this change?

While members from both parties and both chambers are eager to raise the threshold, it’s unclear if there’s agreement on the $5,000 threshold, full repeal, or something in between.


College Sports Data Fuel Pascrell’s Push for Tougher Taxes – Fred Stokeld, Tax Notes ($). “Information compiled from nine major universities suggests the level of spending on coaches' salaries may be at odds with the conditions for the schools' tax-exempt status, according to the chair of the House Ways and Means Oversight Subcommittee.”

‘Universities’ tax-exempt status is an important pillar of our higher education system, but it is not a blank check from taxpayers to dole out gargantuan coaching contracts with lavish benefits,’ Rep. Bill Pascrell Jr., D-N.J., said in a statement accompanying the committee's December 1 report.

Reality check: House Democrats have control over the Ways and Means Committee for roughly another month. This is very little time to pass anything from the committee that would become law. Also, this committee is fully focused on doing something about Trump’s tax returns. This leaves little time to work on any other legislative priority.  


New Reports - Samantha Handler, Bloomberg ($):

[A]n Urban-Brookings Tax Policy Center analysis finds that permanently extending all personal income provisions from the 2017 tax law would add $3.1 trillion to the federal deficit over a decade from 2027-36.

Yesterday’s Roundup included this article, but a direct link to the cost of each provision is here.


National Tax Security Awareness Week, Day 4: Choosing a unique Identity Protection PIN adds extra safety for taxpayers – IRS:

As part of a broader effort to increase security, the Internal Revenue Service and the Security Summit partners today reminded taxpayers they could get extra protection starting in January by joining the agency's Identity Protection Personal Identification Number (IP PIN) program.

Anyone who has a Social Security number (SSN) or an Individual Taxpayer Identification Number (ITIN) and is able to verify their identity is eligible to enroll in the IP PIN program. More than 6.6 million taxpayers are now protecting themselves against tax-related identity theft by participating in the IP PIN program. Last year, the IRS made changes to the program to make it easier for more taxpayers to join.


IRS Corrects Final Regs on So-Called 'Family Glitch' – Tax Notes ($):

The IRS has corrected final regulations (T.D. 9968) addressing eligibility for the premium tax credit and affordability of employer-sponsored minimum essential coverage for family members of an employee.

The document is here.


Supreme Court to Hear Student-Loan Case, Keeps Plan on Hold - Greg Stohr, Bloomberg ($). “The US Supreme Court kept President Joe Biden’s student-loan relief plan on hold while agreeing to hear arguments likely to produce a definitive ruling by June in a high-stakes showdown over presidential power.”


Litigant Takes Access-to-Appeals Case to Supreme Court – Kristen Parillo, Tax Notes ($). “A partnership is seeking Supreme Court review of an Eleventh Circuit decision holding that the Anti-Injunction Act barred its lawsuit challenging the IRS’s refusal to refer its $180 million easement case to Appeals.”

‘The decision below conflicts with this Court’s application of the Anti-Injunction Act in other pre-enforcement actions,’ the partnership asserted in its November 15 petition for certiorari in Hancock County Land Acquisitions LLC v. United States.


State, Local Biz Tax Payments Jumped To $1T, Report Says – Sanjay Talwani, Law360 Tax Authority ($):

Businesses paid nearly $1 trillion in state and local taxes in fiscal year 2021, a rise of more than 13% over fiscal year 2020, according to a report released Thursday by the Council on State Taxation.

COST, a group representing business taxpayers, and its affiliate, the State Tax Research Institute, said in the report that state and local governments experienced an 'unprecedented increase' in business taxes, totaling about $951 billion. Overall state business tax payments grew by 17% over the previous year, and local business taxes grew by 10.2%, the report said.


Texas Rakes in Cash With Record $4 Billion Sales Tax Revenue - Danielle Moran, Bloomberg ($). “Texas collected $3.96 billion of sales tax revenue in November, the highest monthly tally on record, according to state Comptroller Glenn Hegar.”

‘With persistently elevated inflation continuing to drive prices -- and consequently revenues -- higher, November sales tax collections were once again led by growth in non-retail sectors, with mining sector receipts showing the largest percentage increase from a year ago,’ Hegar said in a statement on Thursday.


Illinois Lawmakers Move Forward With Tax Benefits for EV Makers - Michael Bologna, Bloomberg ($):

Illinois turbocharged its menu of tax incentives for electric vehicle manufacturers under a bill that streaked through the state Legislature Thursday and now heads to Gov. J.B. Pritzker.

Lawmakers quickly passed an amendment to an omnibus tax bill (H.B. 5189) that expands benefits established under the Reimagining Electric Vehicles Act, which passed the Illinois General Assembly last year. The Pritzker administration requested the enhancements after the state failed to land key investments to produce electric vehicles, vehicle component parts, and power systems.


Rhode Island Launches Cannabis Sales, With a Total 20% Tax Rate - Angélica Serrano-Román, Bloomberg ($):

Rhode Island launched sales of recreational marijuana Thursday after legalizing cannabis earlier this year.

The state charges Rhode Island’s 7% sales tax on retail sales, as well as a 10% cannabis excise tax, and a 3% local tax. Recreational marijuana has been legal to possess, use, and grow since May.


Wash. Tax Dept. OKs Penalties For Failure To Correct Returns – Sanjay Talwani, Law360 Tax Authority ($). “The Washington state Department of Revenue upheld penalties against five entities that failed to file annual reconciliation returns to correct prior returns as required by law.”


Biden Says He Won’t Apologize for the Climate Law That Angers EU – Samy Adghirni and Justin Sink, Bloomberg ($):

President Joe Biden said he wouldn’t apologize for a new climate and tax law that European leaders say unfairly subsidize American companies, threatening to overshadow a visit by his French counterpart Emmanuel Macron.

Macron and European Union leaders have been outspoken over the Inflation Reduction Act, which they say provides an unfair advantage to North American electric-vehicle producers. The EU has said it may take the US to the World Trade Organization over the law.


Biden Open to ‘Tweaks’ to Subsidies That Angered U.S. Allies – Noemie Bisserbe, Andrew Restuccia and Tarini Parti, Wall Street Journal ($):

President Biden said he was open to making concessions to American allies who have objected to new U.S. subsidies for North American manufacturers, but he didn’t commit to specifics after a meeting with French President Emmanuel Macron, as the two leaders sought to project unity following months of tensions.

Mr. Biden said he makes no apology for the Inflation Reduction Act, which provides subsidies to U.S. manufacturers and tax incentives for electric vehicles and other products that are assembled in North America. But he said changes may be needed to ensure the law doesn’t have unintended consequences.

During the press conference, President Biden seemed to suggest that “allies” of the U.S. should not be blocked from IRA benefits. The bill’s benefits generally go to countries with U.S. free trade agreements.

Meanwhile, our allies seem angry over the Inflation Reduction Act:

Top EU Official Pulls Out of US Summit Over Climate Law Dispute - Jillian Deutsch, Bloomberg ($). “A top European Union commissioner pulled out of a key meeting with US officials, saying the summit dedicates too little time to addressing EU leaders’ concerns about a new US climate and tax law.”


From the “what are the odds?” file:

IRS Audits Sweeping up Ex-FBI Chiefs Not Improper, Watchdog Says - Naomi Jagoda, Bloomberg ($):

A Treasury Department watchdog said in a report released Thursday it didn’t find misconduct during a review conducted in the wake of revelations of IRS audits of former FBI Director James Comey and former acting and deputy FBI Director Andrew McCabe.

Here’s what happened:

  • Comey was audited for his 2017 tax return and McCabe was audited for his 2019 tax return.
  • Both had irked President Trump for allowing the FBI to investigate the President on certain matters.
  • Both were audited by the IRS while Trump’s tax chief ran the agency.
  • Both underwent the comprehensive effort by the IRS to determine tax compliance through the National Research Program.

Here’s how the New York Times described this program when reporting on the Comey, McCabe audits:

Among tax lawyers, the most invasive type of random audit carried out by the I.R.S. is known, only partly jokingly, as ‘an autopsy without the benefit of death.’

What are the odds of this happening to just one of these individuals?

For a “regular” audit, taxpayers earning roughly $200,000 a year, which is an FBI Director’s salary, according to Glassdoor, would have an 0.2% chance for being audited, according to the IRS.

Audit prospects for the National Research Program is more unique, according to the New York Times:

The odds of being selected for that audit in any given year are tiny — out of nearly 153 million individual returns filed for 2017, for example, the I.R.S. targeted about 5,000, or roughly one out of 30,600.

That is roughly a 0.0032% chance for one of these individuals to be audited under this Program. Yet within the span of roughly two years, two FBI chiefs who annoyed the President of the United States underwent this particular audit. The Treasury Inspector General for Tax Administration report said nothing nefarious happened.



Bottoms Up! It’s National Bartender Day! Get to it!

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