December 8, 2022
Pot Banking Supporters Eye Omnibus After Defense Bill Omission - Tax Notes ($):
The House Rules Committee on December 7 approved for full House consideration the James M. Inhofe National Defense Authorization Act for Fiscal 2023 (NDAA), the latest version of the defense bill that lawmakers consider a must-pass during the lame duck. But absent from the bill are the provisions of the Secure and Fair Enforcement (SAFE) Banking Act of 2021 (H.R. 1996).
The SAFE Banking Act would allow access to banking services for cannabis businesses operating in states where marijuana sales are legal by exempting financial institutions from federal investigation or prosecution for providing those services.
It would also make paying taxes easier for those businesses. Because so many cannabis businesses operate on cash only, they pay federal and state taxes in cash and only at designated offices where the tax authorities can accept it — roadblocks that most other legal businesses don’t face.
Not many businesses would require you to pay them with bags of cash. The federal government insists on it when taxes are owed by state-legal weed businesses.
Dems Say R&D Renewal Hinges On Child Tax Credit Extension - Asha Glover, Law360 Tax Authority ($):
Democrats will not support the R&D tax credit renewal unless the American Rescue Plan Act's expanded child tax credit for families earning up to $150,000 per year is also extended, Senate Finance Committee member Sherrod Brown, D-Ohio, said during a news briefing.
Democrats also are willing to address other corporate tax issues that have arisen or will arise under the Tax Cuts and Jobs Act if Republicans work with them on extending the child tax credit provisions, Brown said. He didn't specify which provisions Democrats are interested in addressing.
He may be referring to the business interest limitations of Sec. 163(j), which become more strict in 2022. 100% bonus depreciation begins to phase out in 2023.
Advocates hopeful about getting expanded child tax credit over lame-duck finish line - Tobias Burns, The Hill:
“Senator [Bill] Cassidy and Senator [Shelley] Moore Capito both have openness to something,” Adam Ruben, campaigns director of the progressive advocacy group Economic Security Project, said on the sidelines of a rally for the CTC held outside the Capitol on Wednesday, referring to the senior senator from Louisiana and the junior senator from West Virginia, both Republicans.
“We think there’s openness from [Lisa] Murkowski and [Susan] Collins as well,” Ruben said of the Alaska and Maine senators, adding that his organization has talked to six Republican congressional offices in the last week and a half. He also mentioned Republican Sens. Mitt Romney (Utah), Richard Burr (N.C.) and Steve Daines (Mont.), who co-sponsored their own version of a CTC earlier this year.
Return to R&D Expensing Crucial for Manufacturing and Technology Investment - Alex Muresianu, Tax Policy Blog. "The tax treatment of research and development (R&D) expenses is one of the biggest issues facing Congress as the year winds down. Since the beginning of 2022, companies have had to spread deductions for R&D costs out over five years, instead of deducting them immediately. This policy, known as R&D amortization, reduces economic growth by penalizing investment generally, especially in R&D-intensive industries."
‘Flip a Coin’ One Lawmaker’s Odds for Passing a Year-End Tax Bill - Jay Heflin, Eide Bailly. "A large contingent of Democratic lawmakers currently want to extend the Child Tax Credit rules to what they were in the American Rescue Plan. Most Republicans oppose this move."
State, Local Officials Defend Tax-Sale Policies to Supreme Court - Perry Cooper, Bloomberg ($):
Nebraska and Minnesota’s tax sale laws don’t present constitutional problems because they give homeowners plenty of time to sell their homes and keep the proceeds after delinquent taxes are satisfied, the states told the US Supreme Court, trying to dissuade the justices from taking up the issue.
Homeowners Kevin Fair and Sandra K. Nieveen challenge Nebraska’s law that allowed a private third party to seize Fair’s home worth $60,000 over a $588.21 tax deficiency and Nieveen’s home worth $61,000 over $3,796. Geraldine Tyler challenges Minnesota’s law that allowed Hennepin County to keep the full $40,000 tax sales price to satisfy $15,000 in tax debt. A number of interest groups are backing their petitions.
Lawmakers Downplay Book Tax's Effect On Accounting Board - Stephen Cooper, Law360 Tax Authority ($). "With billions in tax revenue at stake, corporations could pressure the Financial Accounting Standards Board's seven-member panel to make changes to generally accepted accounting principles, or GAAP. That would allow them to reduce their book income below the $1 billion threshold to pay the new corporate alternative minimum tax that will go into effect starting next year under the Inflation Reduction Act."
Also, politicians could pressure to standard-setters to increase revenue or punish enemies.
Eight Major Tax Hikes Considered in Taming-the-Deficit Report - Doug Sword, Tax ($):
In its “Options for Reducing the Deficit, 2023 to 2032,” the CBO looked at 17 options that would cut deficits by $300 billion or more over 10 years, including eight tax provisions. The agency also explored 59 options that would save or raise less than $300 billion.
“To put the federal budget on a sustainable long-term path, lawmakers would need to make significant policy changes,” CBO Director Phillip Swagel said in a December 7 release about the new estimates. He said those policy changes would include “taking actions to cause revenues to rise more than they would under current law, reducing spending to amounts below those currently projected, or adopting some combination of those approaches.”
What about spending? "Most of the nontax options involve cutting or limiting benefits for federal mandatory programs — Social Security and Medicare."
Figuring Tax on Year-End Bonuses, Gifts, and Perks at the Office - Kelly Phillips Erb, Bloomberg. "There’s often a great deal of hand-wringing over bonus income because of the suggestion that it’s taxed at a different rate—only that’s not the case. A significant bonus could push you into a higher tax bracket, but the higher tax rate would only apply to the amount over the threshold. In other words, it’s taxed the same as any other additional income."
Severance pay helps after a layoff, but it still is taxable - Kay Bell, Don't Mess With Taxes. "That final check you get will reflect all the usual payroll tax deductions you've been used to seeing on your previous pay stubs. And the severance amount will be included on the W-2 form you receive from your former employer."
IRS Announces Plan to Release Proposed Regulations to Add Listed Transactions Whose Status Has Been Brought Into Question by Recent Court Decisions - Ed Zollars, Current Federal Tax Developments. "The IRS in Announcement 2022-28 explained the reasons why it issued proposed regulations involving certain syndicated conservation easement cases."
Breathing American Air – Hazardous to your Wealth? (Part II) - Virginia La Torre Jeker, Virginia-US Tax Talk. "US tax issues can be notoriously complicated. Despite the complexities, the tax rules cannot be ignored. Foreign persons often view the US as a “safe” place to make significant investments or to do business. While this may have merit, the tax issues can have a huge impact on that plan, so do the tax planning legwork beforehand."
Fiduciary tax 101 - Thomson Reuters Tax & Accounting. "While fiduciary income tax is the income taxation of a person‘s estate or trust assets, estate tax is a tax on the right to transfer property when a person passes away."
Why You Should Hire a Tax Professional to Review Your Trust - Matthew Roberts, Freeman Law. "As discussed supra, the stakes can often be high when a taxpayer elects to establish a trust, particularly if the taxpayer does not necessarily understand the tax ramifications of executing the operative trust agreement."
Related: The Pros and Cons of Revocable Living Trusts.
The IRS’s Aggressive Enforcement of Foreign Information Return Penalties Has Created Ethical Dilemmas For Practitioners (Part 2) - Megan Brackney, Procedurally Taxing. "On the other side, the IRS should re-think its enforcement of these penalties in order to encourage, rather than punish, voluntary compliance, and, as the IRM provides, live up to its own obligations to ensure that penalties 'encourage noncompliant taxpayers to comply,' and are 'objectively proportioned to the offense.' I genuinely want to encourage tax compliance, but it is challenging when it is so harshly penalized. The IRS could help tax practitioners, as well as taxpayers, by providing some reasonable options for correcting past failures to file foreign information returns."
Related: Eide Bailly Offshore Voluntary Disclosure Services.
Tax Court Says $180K In Payments From Biz Are Dividends - Theresa Schliep, Law360 Tax Authority ($). "A Pennsylvania company's nearly $180,000 in payments to cover one of its owner's personal expenses count as dividends paid to him and thus part of his income, the U.S. Tax Court said Wednesday."
You can tell it's going to be a messy case from the start of the court's summary of the opinion:
Neither P Corp. nor P–H maintained books or records to determine their tax liabilities for 2013 and 2014, and the reporting of P Corp.’s income and expenses was split between P Corp.’s returns and P–H’s Schedules C, “Profit or Loss From Business”, attached to the returns he filed jointly with P–W.
The returns were self-prepared, and they changed often: "The seventh amended return for 2013, filed June 25, 2015, claimed a much larger amount—$38,290."
The taxpayer didn't supply the IRS agent with any books and records, so the examiner reconstructed income from banking information. It's just possible that it would have been worthwhile to hire a bookkeeper. From Judge Gustafson's opinion) (my emphasis, taxpayer neme omitted):
Taxpayer Inc.’s disorganized recordkeeping (if it can be called recordkeeping) does not enable one to verify the business purpose and specific amounts paid for “other” expenses. His documents show a tangle of business and personal, of capital and ordinary, and of mixed lines of potential business. His information was in such disarray that he himself, preparing returns in the months after the close of the years at issue, was unable to determine with reasonable certainty his own deductible expenses, so he filed a series of amended returns claiming deductions inexplicably “not included” in a return filed days before, or stating “[m]ore deductions found in Line 26.” He now insists that he had (and that he presented to the IRS statements from) “10 credit cards with huge charge expenses on them in 2013”; but he offers no explanation as to why he did not report the expenses from those cards on his sixth and seventh amended returns for 2013, on which he did report expenses attributed to “Amex card ending 5107”, “BOA card ending 9744”, “Visa card ending 2031”, “Bank of America card ending 9141”, “Credit card ending 7732”, and “Card ending C68-640”. The years that have passed since he prepared those amended returns in 2015 have not improved the situation, as papers scatter, memories fade, document retention periods expire. The best time to tally business expenses for 2013 and 2014 was when the returns were due, in 2014 and 2015; but Mr. Taxpayer now unwittingly discredits his own contemporaneous reporting by years-late allegations of substantial additional expenses. To the extent that Taxpayer Inc. argues for deductions greater than the Commissioner has elsewhere conceded, it has failed to carry its burden of proof, and the Commissioner’s revised determination is sustained.
The moral? Keep decent records, and try to get the tax return right the first time. Or at least the fifth or sixth time.
Rapper who boasted in music video about committing COVID fraud sentenced to over 6 years in prison on fraud, gun and drug crimes - IRS.gov (Defendant name omitted).
A rapper who boasted in a YouTube music video about getting rich quickly by scamming a COVID relief program was sentenced today to 77 months in federal prison.
Defendant, a.k.a. “Nuke Bizzle,” of Memphis, Tennessee, was sentenced by United States District Judge Michael W. Fitzgerald, who also ordered him to pay $704,760 in restitution to the California Employment Development Department (EDD).
How do you suppose this crime was ever solved?
Choose your dessert. Today we celebrate both National Brownie Day and Lard Day.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.