December 13, 2022
Lawmakers said to be on verge of a bipartisan omnibus agreement - Aidan Quigley and Lindsey McPherson, Roll Call:
"Later this week members should be prepared to take quick action on a CR, a one-week CR, so we can give appropriators more time to finish a full funding bill before the holidays," Schumer, D-N.Y., said on the floor. "I am optimistic we could take action on a CR rather quickly and avoid the shutdown that neither side wants."
Discussions turned more positive over the weekend, Schumer said, giving party leaders enough confidence to keep the talks going beyond this Friday night's scheduled continuing resolution lapse. The one-week stopgap measure would give lawmakers until nearly Christmas Eve to wrap up an omnibus package and go home for the holidays — or require a lengthier funding extension into the new year.
Whatever slim hopes there are of passing tax provisions require passing the Omnibus. Tax items that might ride the omnibus include allowing expensing of research credits and an expanded child tax credit.
Let’s make a deal: White House ready to bargain over expanded Child Tax Credit - Adam Cancryn, Politico. "But should the long-shot deal get done, it would pair a multiyear expansion of the Child Tax Credit’s benefits sought by Democrats with a set of corporate tax breaks that Republicans and business groups want to include into a year-end bill."
Congress Struggles to Make a Deal, Child Tax Credit Hopes Fade - Rebekah Barton, TaxBuzz. "Unless a last-minute compromise can be reached, many businesses will pay higher taxes and the child tax credit will remain at its current level."
IRS Allows Automatic Accounting Method Changes for R&D Expensing - Caitlin Mullaney and Nathan Richman, Tax Notes ($). "Rev. Proc. 2023-8, 2023-2 IRB 1, released December 12, contains the procedural rules taxpayers can apply to implement the change from immediately deducting research and development costs under section 174 to the Tax Cuts and Jobs Act’s version of the provision, which requires five- or 15-year amortization of those expenditures."
New IRS guidance provides simplified accounting method change to capitalize research costs - Eide Bailly:
Taxpayers have to start capitalizing and amortizing research expenses in 2022 to comply with tax changes enacted in 2017. Under prior law, such expenses could be deducted as incurred. The IRS today gave taxpayers instructions for implementing this change.
Some taxpayers may have already filed returns for short tax years beginning in 2022. Such taxpayers will be deemed in compliance if they capitalized and amortized their post-2021 research expenses. Otherwise, taxpayers who fail to properly capitalize post 2021 research expenses for their first post-2021 tax year will have to file a Form 3115 under "automatic" accounting method change procedures.
Related: Understanding How R&D Capitalization Works.
IRS Details Reporting Rules for Clean Vehicle Credits - Marky Katherine Browne, Tax Notes ($)
To receive credits under section 30D and 25E, the guidance says a seller must send reports to the taxpayer and IRS information about the sold clean vehicle.
The report must include the name and taxpayer information of the seller and the buyer, the vehicle identification number, battery capacity of the vehicle, and verification that the original use of the vehicle starts with the taxpayer. The date of the sale and vehicle price must also be listed.
Link: Rev. Proc. 2022-42
IRS Releases Procedures For EV Tax Credit Documentation - Theresa Schliep, Law360 Tax Authority. "Taxpayers looking to claim the credits can use certifications from manufacturers to prove their eligibility, according to the IRS. Sellers are required to furnish reports to the IRS as well as to purchasers of clean vehicles, with reports due to buyers the day they're purchased, the IRS said."
IRS Finalizes Employee Health Coverage Statement Rules - Asha Glover, Law360 Tax Authority ($). "Applicable large employers, usually those with 50 or more full-time employees, will receive automatic extensions for providing statements regarding health insurance offered to those employees, according to the final regulations. The rules also said Medicaid coverage that encompasses only coronavirus testing and diagnostic services doesn't fall within the meaning of minimum essential coverage under Internal Revenue Code Section 5000A for purposes of tax laws pertaining to health insurance."
The IRS has extended the January 31 due date for these statements every year by 30 days. The March 2 due date for providing forms to employeesis now permanent and automatic, with no need to file an extension request. The E-filing due date for the IRS copies is March 31st.
Related: Affordable Care Act Penalties.
Europe Strikes Deal to Tax Imports Based on Greenhouse-Gas Emissions - Matthew Dalton and Kim Mackrael, Wall Street Journal:
The plan, known as the carbon border adjustment mechanism, would be the world’s first tax on the carbon content of imported goods. It has rattled supply chains around the globe and angered the EU’s trading partners, particularly in the developing world where manufacturers tend to emit relatively large amounts of carbon dioxide. It has also unsettled manufacturers in the U.S. who are concerned the measure would create a new web of red tape to export to Europe.
Europe’s border tax has also spurred officials in other countries to consider a similar approach. The U.K. is discussing it, as is Canada. Democrats in Congress have introduced legislation to impose a carbon tax at U.S. borders.
EU Countries Reach Unanimous Deal On Minimum Tax - Todd Buell, Law360 Tax Authority ($)
The agreement, which still needs to be formally approved in writing, should wrap up a long-standing dispute among EU member countries over the 15% minimum tax, which more than 130 countries had agreed to in principle last year at the Organization for Economic Cooperation and Development in Paris.
The tax aims to ensure that that companies with annual revenues above €750 million ($790 million) pay at least a 15% minimum corporate tax in every country in which they do business. The EU's implementation timeline means it will be a "front-runner" in applying the international tax deal, the release said.
EU reaches deal on Ukraine aid, tax on big corporations - Ref Casert, Associated Press via Washington Post. "The European Union reached a deal in principle to send an 18 billion euro ($18.93 billion) financial aid package to Ukraine and approve a minimum tax on major corporations in a big move that narrowed a rift between the bloc and recalcitrant member Hungary."
Early filers’ should wait to submit their tax return in 2023, the IRS warns. Here’s why - Kate Dore, CNBC. "Here’s why: Before 2022, the federal Form 1099-K reporting threshold was more than 200 transactions worth an aggregate above $20,000. But the American Rescue Plan Act of 2021 slashed the threshold to just $600, and even a single transaction can trigger the form."
How the Dems' new Senate majority will affect tax policy - Benjamin Guggenheim, Politico. "Observers are anticipating that most of the tax action next year will be on the oversight side of things, with the tax policy side largely involving the laying of the groundwork for what is promising to be a hectic year in 2025 — when nearly two dozen provisions of the Tax Cuts and Jobs Act, from the increased standard deduction to the bigger child tax credit, are set to expire."
Don't fall for frivolous tax arguments - Kay Bell, Don't Mess With Taxes. "And the IRS is serious about going after folks who promote or use frivolous tax arguments. It has a list, updated most recently back in April, of these unfounded tax arguments. When taxpayers are found to have used them, they can face significant penalties."
Does Using Old Tractors Mean You Aren’t a Farmer? And the Wind Energy Production Tax Credit – Is it Subject to State Property Tax? - Roger McEowen, Agricultural Law and Taxation Blog. "The IRS disallowed significant amounts of depreciation and other farm expense deductions largely on its claim that the petitioners were not engaged in a farming business, but rather were engaged in a 'nostalgic' activity with an excessive and unnecessary amount of old tractors."
IRS: Don’t Call Us, Don’t Write Us - Russ Fox, Taxable Talk. "When we write the IRS, it goes into the black hole of correspondence. First, the average response time when we write the IRS is measured in months (three to six currently), so taxpayers have to wait longer for resolution. Second, some of the time when we respond by mail the IRS repeats what was said in the original notice, ignoring the response; in those cases, we now have to send another letter to the IRS. Third, the National Taxpayer Advocate correctly noted the IRS’s Achilles heal is correspondence."
Should You Invest In A Syndicated Conservation Easement? - Peter Reilly, Forbes. "The risk that you run is that sometime in the future you will get a bill from the IRS for as much as $140,000 plus interest. Then you get to compare that to whatever your $50,000 net saving turned into."
The Efficiency of State Administration of Local Taxes - Janelle Fritts and Jared Walczak, Tax Policy Blog. "While the authority of tax collection might be attractive to many local governments, unified collection gives localities significant advantages. It reduces administrative costs, increases compliance, and potentially expands the market of tourism services, particularly in small jurisdictions."
Congress Could Save the Day for More Savers (Not Just The Wealthy Ones) - Renu Zaretsky, TaxVox. "But the real winners from Roth conversions are the Wall Street firms that manage the money as well as those who need little government incentive to save."
Tax Substance Abuse - Alex Parker, Things of Caesar. "This is something I think about as the international tax world trends towards more blunt, hard-and-fast rules that work by formulaic proxies, in lieu of more subjective principles. Formulas can be unfair–they can’t possibly account for every possible situation a taxpayer may fall into–but at least they won’t always favor the taxpayer who can summon the most brilliant lawyers to argue a principle to death in the courtroom. Rougher, but also juster, in theory."
Trucking Magnates Lose Income Tax Case at Nebraska High Court - Perry Cooper, Bloomberg:
The two, owners of Crete Carrier Corp., one of the biggest US trucking companies, had challenged the Nebraska Department of Revenue’s determination that they were Nebraska residents for income tax purposes from 2010 to 2014.
The high court upheld the trial court’s finding that the couple spent more days in Nebraska than in Florida each of those years. “But more importantly, the location summaries for each year tend to show that Lincoln was a ‘home base’ for both Duane and Phyllis—it was the place from where they departed and to where they returned most frequently in connection with their travels,” Justice William B. Cassel wrote for the court in an opinion issued Friday.
Somewhat related: Telecommuting Workers in Refuge States Complicate State Taxes.
Jury convicts Las Vegas man of tax fraud - IRS (Defendant name omitted; my emphasis)
Yesterday, a federal jury convicted a Las Vegas man for executing a fraudulent tax withholding scheme in an attempt to obtain nearly $1 million in tax refunds through the filing of fraudulent tax returns for himself and his companies.
On his 2011 individual income tax return, Defendant claimed nearly $600,000 in tax withholdings from purported winnings on horse racing wagers from off-track betting organizations, but according to evidence presented at trial, the IRS had no record of these winnings or withholdings. Furthermore, according to testimony of four witnesses at trial, two of the off-track betting organizations were not even in business at the time of the claimed wagers and withholdings, and two others had no records of the bets claimed by the defendant during the relevant time period.
All in all, claiming the false withholdings looks like a losing bet.
I choose both. Today is National Ice Cream Day and National Cocoa Day!
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.