Tax News & Views CTC dilemma Roundup

December 5, 2022

Democrats Look for Path to Deal on Expanded Child Tax Credit - Chris Cioffi, Bloomberg ($):

Prospects are dimming for Republican and Democratic lawmakers to find agreement on expanding business tax credits and reviving an expanded child tax credit—but the light isn’t completely out.

Finding consensus could mean Democrats, who lose their hold on unified government in January, will have to decide which parts of the now-expired expanded child tax credit they could live without. But with a Senate seat undecided and congressional leadership quarreling over how much to spend in an appropriations package, comity on what tax provisions should make an end-of-year bill deal remains elusive.

State of play: Extending and expanding the Child Tax Credit to what Democrats want would cost roughly $1 trillion over ten years. Democrats know this price tag is too high and are trying to narrow the tax provision so fewer people can claim it and lower its cost. One option, according to a Democratic staffer on the Senate Finance Committee, would be to enact Sen. Mitt Romney’s (R-Utah) proposal that combines the Child Tax Credit and the Earned Income Tax Credit. This measure is not refundable and has an earning requirement, which Democrats might oppose because refundability and no earning requirement allowed more families to qualify for the credit, which lifted many children out of poverty.

Current Whip Count: If the CTC is narrowed, enough House Democrats could oppose it so it doesn't pass the chamber because few House Republicans are expected to support any change to the CTC. If the CTC is expanded, enough Senate Republicans could oppose it, and the support from at least ten of them is needed for the measure to pass the upper chamber. 

Bottom line: It is very unclear if the political parties will reach an agreement on the Child Tax Credit this year. If they don’t, the odds lessen for Congress passing a year-end tax bill. But remember: Nearly every bill that has passed Congress was unlikely to pass - until it passed. 

Punchbowl News ($) on a broader year-end tax bill:

Tax extenders: There’s a lot of buzz about a potential tax extenders bill, possibly even a package including an renewal of the expanded Child Tax Credit, but the outlook here is hazy. There’s been bipartisan back-and-forth between senior members of the House Ways and Means and Senate Finance panels, yet not a lot of concrete action. No one can seem to agree what would be in a tax extender package. Again, Republican leaders are the key here. McConnell and House Minority Leader Kevin McCarthy haven’t expressed much support. So we’ll have to see.

Yep: We're in wait and see mode. 


Tax Pros Can't Reach IRS Despite 'Line-Jumping' Deterrent – David van den Berg, Law360 Tax Authority ($):

An Internal Revenue Service pilot program meant to thwart use of commercial so-called line-jumping technology to access the agency'spriority phone line for practitioners doesn't appear to be clearly improving access, and other steps could be more effective, observers told Law360.


Documents Shed Light on IRS Scrutiny of Employee Retention Credit – Lauren Loricchio, Tax Notes ($):

IRS training materials explain how examiners should scrutinize the use of the employee retention credit, which the agency warns is being abused by third parties with schemes targeting employers that are ineligible for it.

The training materials, obtained by Tax Notes, follow past guidance from the IRS on the ERC, including Notice 2021-20, 2021-11 IRB 922, according to practitioners, who expect further instruction from the agency.


12 AGs Ask IRS For Prompt Guidance On Tax, Climate Bill – Theresa Schliep, Law360 Tax Authority ($). “Twelve attorneys general asked Treasury and the IRS for ‘prompt, effective and equitable’ implementation of the Inflation Reduction Act, recommending that the government make tax credits for electric vehicles immediately available and impose stringent employer documentation requirements for other incentives.”


What Could Be Next for Syndicated Conservation Easements? - Sarah Adkisson, Bloomberg ($):

Conservation easement provisions included in the EARN Act were added as revenue offsets for some popular provisions, and with the death of Notice 2017-10, the IRS likely will push Congress for this legislative fix to address syndicated easements issues…


When Can Hodlers Recognize FTX Losses? – Lee Shepard, Tax Notes ($):

Customers and creditors of FTX and other distressed crypto outfits may not be able to claim theft losses on their 2022 tax returns because those losses are not final and crystallized, and they may not be attributable to theft even if they are. The IRS may have to step in and issue guidance permitting those losses, as it did in the wake of the Madoff fraud.


Earliest Rules Won’t Address How to Exit Corporate AMT’s Reach – Andrew Velarde, Tax Notes ($). “The first tranche of guidance on the corporate alternative minimum tax likely won't address questions on how a taxpayer that qualifies as an applicable corporation later sheds that classification.”


States Defend Tax-Sale Practices Before SCOTUS – Bloomberg ($):

A joint brief by the Nebraska attorney general and a third party was filed at the US Supreme Court late Friday defending a state law allowing governments to keep the surplus proceeds after a delinquent tax bill is paid off—an excess that could be hundreds of thousands of dollars—when the property is sold through a tax sale.

Responses from government officials in similar cases against Nebraska and Minnesota officials are due early this week.


Mass. educators say colleges are top priority for 'millionaires tax' money - Sam Drysdale, State House News Service via MetroWest Daily News. “After winning a long fight to impose a surtax on the state's highest earners designed to fund education and transportation, unions and educators from throughout Massachusetts are making it clear that public higher education is on the top of their priority list for the newfound funds.”

‘This is the perfect moment to send a message to House and Senate leadership, to our next governor, that we need to make sure that as this money comes in out of the millionaire's tax that we're committing that to public higher education,’ said state Sen. Jamie Eldridge, D-Acton, during a coalition meeting Thursday at the State House.

Back in the day, my mom was a schoolteacher in a state that passed a law allowing for a lottery. The proceeds were to go to education. My mom said the budgets for our local schools never saw a dime of that money. Let’s hope things work out differently in Massachusetts.


Maryland Digital Ad Tax Case Mooted By Federal Judge – Sanjay Talwani, Law360 Tax Authority ($). “A federal case challenging the constitutionality of Maryland's digital advertising tax is moot, a judge said Friday, because a state judge has already thrown out the tax in a separate case, leaving no need for relief by the federal court.”


Oil Profits Top Agenda as California Legislators Open Session - Tiffany Stecker, Bloomberg ($):

California’s Legislature is set to meet Monday to kick off the 2023 session officially and set the stage for an investigation of oil industry profits.

While the meeting is largely ceremonial, lasting one day to swear members in, elect leaders, and approve the chambers’ governing rules, the Legislature ultimately will accede to the governor’s October request to hold oil companies accountable for rising fuel prices. Industry officials say that blame is misplaced.


Has Bob Iger Brokered a Truce With Florida? – Andrew Ross Sorkin, Ravi Mattu, Bernhard Warner, Sarah Kessler, Stephen Gandel, Michael J. de la Merced, Lauren Hirsch and Ephrat Livni, New York Times:

Florida lawmakers are reportedly working to reverse a law stripping Disney of its special tax status in the state, The Financial Times reports, after a feud between Gov. Ron DeSantis and Bob Chapek, the company’s former C.E.O.

If passed, that new legislation would undo much of the fallout from what critics call the 'Don’t Say Gay' bill that had made the entertainment giant a target of conservative critics. And it would be a quick victory for Disney’s newly returned chief, Robert A. Iger.


Cannabis Industry Tax Penalty Gets Attention From More States - Michael Bologna, Bloomberg ($):

A growing number of states are decoupling from a federal rule that imposes a tax penalty on legitimate cannabis companies by barring them from claiming business deductions for their operations.


Foreign Tax Credit Reg Redux – Mindy Herzfeld, Tax Notes ($):

The latest foreign tax credit guidance published by Treasury includes yet another set of changes to the definition of a creditable tax under section 901 (REG-112096-22; prop. reg. section 1.901-2). The proposed regs are the latest installment in Treasury’s century-old effort to find the sweet spot in interpreting the statutory grant of a credit to U.S. taxpayers for foreign taxes paid — between providing taxpayers a credit that promotes U.S. foreign policy by encouraging overseas investment and preventing double taxation, and protecting the U.S. fisc and incentives for domestic investment. These regs highlight the tension between Treasury’s role of protecting the interests of U.S. taxpayers and the administration’s stated goal of increasing the tax burden on multinationals, as reflected in Treasury’s flip-flops on FTC guidance but also in the administration’s negotiating positions on the OECD multilateral tax agreements.


From the "Wasn't this in Friday's Roundup?" file:

IRA “Glitch” Fixes? – Chris Cioffi and Alex Clearfield, Bloomberg ($). “White House Press Secretary Karine Jean-Pierre told reporters Friday the White House does not plan to go back to Congress and ask for changes to “glitches” in the Inflation Reduction Act that other countries have complained about.”

Further down the article:

‘There is a complex implementation process which is actively underway,’ she said. ‘We’re not going to be addressing any glitches.’


Macron Says He and Biden Will ‘Fix’ US Climate-Subsidy Conflict - Tony Czuczka, Bloomberg ($):

French President Emmanuel Macron said he and Joe Biden agreed to 'fix' a dispute over the US president’s Inflation Reduction Act, which includes new subsidies for North American-made electric vehicles that allies have criticized.

The two leaders discussed the matter when they met in Washington last week, Macron said. Before his talks with Biden, Macron warned that the act risks causing division among western countries and triggering a trade war.

‘I can tell you that what we decided with President Biden is precisely to fix these issues -- and they are fixable,’ Macron said in an interview with CBS’s “60 Minutes” broadcast Sunday.

Biden told a joint news conference on Dec. 1 there are ‘tweaks that we can make that can fundamentally make it easier for European countries to participate.’

A link to Friday’s Roundup is here. Different responses to the same question happen often in D.C. The reasons are many for why they occur. As a former reporter, my colleagues and I used to joke about the many answers we received for asking the same question. We would joke: "Keep asking the question, at some point the lawmaker will provide the answer that fits with the article you're writing."


Happy Bathtub Party Day! Back-off partiers. It’s not what it sounds like. This is about relieving stress.

National Day Calendar:

Gather your favorite bath bomb, a good book, and a glass of Moscato, and let the worries of the day fade away while you relax in the tub.


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