Tax News & Views Funding, Tax Fights Roundup

December 12, 2022

GOP Strategizes Limiting IRS Funding in Year-End Spending Bill – Chris Cioffi and Naomi Jagoda, Bloomberg ($):

The fight over IRS funding has begun even before Republicans take over the House, with the GOP balking at the agency’s base budget amid year-end talks to keep the government running past Friday. Senate Democrats sought an increase to the agency’s budget in a July draft by about $1 billion over the previous year . They’re seeking a 12% increase in the spending bill that includes funding the agency this year, according to a Senate Republican aide. That ask is giving GOP appropriators heartburn after watching Democrats pass $80 billion in funding over 10 years for the agency in the tax-and-climate law.

Control of Congress will be divided in 2023 and 2024, with Republicans controlling the House and Democrats controlling the Senate. This fight over IRS funding will continue for the next two years.   


Meanwhile, the current spending bill eludes agreement:

Inching toward a spending deal - John Bresnahan, Punchbowl News ($):

With government funding expiring Friday, Democrats announced last night that there has been some progress in the talks over the FY2023 omnibus spending package. Due to this, House and Senate Democratic leaders will hold off on rolling out their own version of an omnibus package today. Here’s a statement from Senate Appropriations Committee Chair Patrick Leahy’s (D-Vt.) office:

'Chairman Leahy feels that sufficient progress in negotiations took place over the weekend to delay the introduction of the omnibus appropriations bill for the time being. Bipartisan and bicameral negotiations continue.'

Behind the scenes, there’s been some progress, but not a ton.

'Inching toward a spending deal' might be an exaggeration. It is not clear when lawmakers will approve a spending bill or if tax measures will be included in the legislation. 

We are unlikely to know until next week if tax provisions will pass Congress in a year-end bill:

Not dead yet: hopes for an omnibus - Katherine Tully-McManus, Politico Huddle:

Congress is expected to have to pass a stopgap spending patch this week that pushes the funding deadline for another week or more in order to continue negotiations, although Democrats have warned that a full-year continuing resolution is on the table in lieu of a deal.

Lawmakers contend that tax measures can only be added to an "Omnibus" spending bill and not to a "Continuing Resolution," i.e., a 'stopgap spending patch.' This is not accurate, but that is what they are saying.

Hopes Fade for Year-End Tax Deal in Congress to Aid Companies, Children – Richard Rubin, Wall Street Journal ($):

Lawmakers are struggling to reach bipartisan agreement on a year-end tax deal, and businesses and antipoverty advocates both look unlikely to get what they want. 

Republicans and many companies want to reverse, prevent or delay some tax increases on businesses that were scheduled in a GOP-backed 2017 tax law and that began taking effect this year. Democrats, who control the House and Senate, have expressed openness to some changes, but they want to expand the child tax credit at the same time. 

With just a few weeks remaining before the new Congress starts Jan. 3, key members of Congress haven’t agreed to any such deal, lawmakers and aides said. And even if they do reach an agreement, it would likely need to be included in a broad federal-spending package—which also is stalled.

White House tries to compromise, but will it be enough?

Let’s make a deal: White House ready to bargain over expanded Child Tax Credit – Adam Cancryn, Politico:

The White House has privately signaled to Democrats that it would support a compromise deal to revive the expanded Child Tax Credit, even if it includes work requirements it once opposed.

A remarkable shift for an administration that has resisted applying such conditions to anti-poverty programs, it comes amid a recent push in Congress to include an expansion in a year-end legislative package while Democrats still control both chambers. And it reflects the growing urgency within the administration to salvage a policy that ranks among President Joe Biden’s signature achievements.


Your 401(k) Plan Re-imagined, Again: SECURE Act 2.0 Explained - Austin Ramsey, Bloomberg ($):

Bipartisan measures lawmakers are pushing to get over the finish line before the start of the new congressional calendar next year could add $83.6 billion to the retirement savings marketplace and create an entirely new class of workplace savers.

The term used for this bill is “Secure 2.0” because it is the second installment of retirement legislation since the “Secure Act” became law. The House passed its Secure 2.0 bill, but the Senate has yet to pass its bill. Negotiations on the fate of Secure 2.0 are happening on Capitol Hill in the so-called “smoke-filled back room,” meaning they are occurring with no public hearings or discussions.

More from the article:

Congress is negotiating for passage before the end-of-year deadline when a new slate of decision-makers are set to take office and the process for passing bipartisan bills would restart and get a lot harder. Business and consumer-rights advocates are optimistic, however, that the package would make its way into a last-minute spending bill for adoption before the holidays.


Sinema Party Switch Expected to Have Minimal Impact on Tax Policy – Lauren Loricchio, Tax Notes ($):

Sen. Kyrsten Sinema’s announcement that she is leaving the Democratic Party to become an independent isn’t expected to have much effect on tax policy in the next Congress.

‘I could be wrong, but I don’t see her declaration of being an independent affecting tax policy much, at least in the next two years,’ said Dave Kautter of RSM US LLP.

Similarly, Garrett Watson of the Tax Foundation suggested that the change is unlikely to affect the dynamics of tax policymaking. ‘Even when she was registered with the party, she often was a difficult vote for leadership to win over on Democrats’ tax agenda,’ he said. ‘Democrats have always had to concede some tax priorities in order to win her vote in the past, and her leaving the party doesn’t change that moving forward.’


Supercharging EV Guidance, Maybe – Marie Sapirie, Tax Notes ($):

The climate objectives and domestic manufacturing priorities in the clean vehicle credit are on a collision course, and the IRS and Treasury have a tight deadline to produce guidance that both accelerates the uptake of electric vehicles and mollifies miffed trading partners while implementing requirements that were written to exclude them. The guidance also needs to provide a process that makes sense to car buyers and another to track the critical minerals that go into the vehicles.


Yellen Sees Rising Risk of Stimulus Fraud Unless Congress Acts - Mackenzie Hawkins, Bloomberg ($). “US Treasury Secretary Janet Yellen warned congressional leaders that their action is needed to strengthen her department’s dwindling ability to catch potential fraud in federal stimulus programs for state and local governments.”


Second Set of Beneficial Ownership Regs Clears OIRA – Andrew Velarde, Tax Notes ($):

The stage is set for release of the second set of beneficial ownership information regs now that proposed regs have cleared review at the Office of Management and Budget's Office of Information and Regulatory Affairs.

OIRA announced on its website that on December 8 it concluded its analysis of the proposed rules on beneficial ownership information retention and disclosure requirements and the use of Financial Crimes Enforcement Network identifiers for entities. The clearance comes six weeks after OIRA received the rules.


Supreme Court Agrees to Hear Case Over IRS Bank Summons Notice - Aysha Bagchi, Bloomberg ($):

The US Supreme Court agreed to hear a case over whether the IRS needed to notify bank account holders when it summoned their records to collect on a different taxpayer’s liabilities.

Hanna Karcho Polselli and two law firms brought the suit after the IRS seized their records without notification to try to collect on more than $2 million in tax liabilities for Polselli’s husband, Remo Polselli. The law firms—Abraham & Rose PLC and Jerry R. Abraham PC—had represented Remo Polselli.


New Jersey Moves to Strike Back at New York Remote-Work Taxes – Donna Borak, Bloomberg ($):

A bipartisan group of New Jersey lawmakers want to offer a new $2,000 tax credit for residents who can successfully appeal their New York personal income tax bills.

The credit is part of a much broader retaliatory tax plan aimed at New York that is currently advancing through the New Jersey Legislature, to put an end to what the state says is double taxation of its residents and roughly $1 billion in revenue lost to its neighbor.


Paying Your Taxes in Crypto? ‘Ehhh, I Don’t Think So’ – Michael Bologna, Bloomberg ($):

Colorado’s governor made a push for residents to pay their taxes in cryptocurrency, but very few have taken him up on it Meanwhile, the federal lawsuit challenging Maryland’s controversial digital advertising tax has been dismissed, taxpayers gave Washington state tax officials an earful on their plan to collect a new capital gains tax while the program is subject to a constitutional challenge, and a New York jury found the Trump Organization guilty of criminal tax fraud.


Vos wants ‘significantly’ more than $3 billion in tax cuts – Scott Bauer, Associated Press:

Wisconsin Assembly Speaker Robin Vos said Friday he wants to cut taxes by ‘significantly’ more than $3.4 billion in the next state budget, while remaining coy about how he wants to address major issues such as funding for schools and local governments.

Vos, along with Democratic state Rep. Kalan Haywood, discussed how they would like to see the Legislature handle the state’s projected $6.6 billion budget surplus during a virtual event Friday hosted by the nonpartisan Wisconsin Policy Forum.


IRS Releases Proposed Regs for Consolidated Groups With CFCs – Chandra Wallace, Tax Notes ($):

The IRS and Treasury released proposed regulations that would apply single-entity treatment to consolidated groups with controlled foreign corporations in calculating their subpart F income.

The proposed regs (REG-113839-22), released December 9, would foreclose a position taken by many consolidated group taxpayers that the group’s aggregate income inclusions under the global intangible low-taxed income regime can be reduced significantly by changing the location of ownership of stock in CFCs within the group, according to the notice.


From the “Beer is not Booze” file:

No Equality Among Liquors in the Tax Code - Philip McDaniel, Wall Street Journal letter to the editor.

The federal tax rate on distilled spirits is almost three times the rate on wine and more than two times the rate on beer.


Happy National Ding-a-Ling Day! Today “encourages us to reconnect with people we once talked to often,” according to National Day Calendar.

Funny story: A long time ago, my great aunt who lived in New York tried to call her sibling in another state. However, she misdialed the area code, which directed her call to another person in a different state. The person who answered the misdirected phone call was another sibling, who happened to be my grandmother. It turns out that my grandmother and her sibling from another state had the exact same phone number expect for the area code. And no one was aware of this fact until my great aunt misdialed the number.

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