March 2, 2022
Punchbowl News on President Biden's State of the Union Address:
Gone were the bold proclamations that Washington, under Democratic control, would seek to remake America. Instead, Biden offered a catalog of what he sees as his successes, and a plea to get the rest done – somehow.
If we could name the speech, here’s what we’d call it: “Build Back Sorta. And save Ukraine too.”
4 takeaways from Biden’s State of the Union address - Aaron Blake, Washington Post ($):
There were a few words notably missing from Biden’s speech: “Build Back Better.”
It has been pretty clear for a while now that the signature package is going nowhere in Congress — particularly as we turn to an election year in which passing legislation is much more difficult. But the White House and Democrats have been slow to concede that. Tuesday marked a significant shift away from it.
Biden pushes clean energy tax credits amid stalled spending agenda - Rachel Frazin, The Hill:
President Biden on Tuesday continued to push for tax credits for clean energy and electric vehicles, key climate components of his stalled Build Back Better bill.
“Let’s provide investments and tax credits to weatherize your homes and businesses to be energy efficient and get a tax credit for it; double America’s clean energy production in solar, wind and so much more; lower the price of electric vehicles, saving another $80 a month that you’re not going to have to pay at the pump,” Biden said while delivering his first State of the Union address.
Manchin pours water on Biden's attempt to revive Build Back Better - Alexander Bolton, The Hill:
“Nothing’s changed,” he said.
“There might be parts they want to talk about. I don’t know. That was a little bit far,” he added, referring to the list of expensive Build Back Better items that Biden tried to put back on the table Thursday evening.
Manchin's opposition in the evenly-divided Senate stalled Build Back Better, including its tax increase provisions, at the end of last year.
Talks Hit Snag on Omnibus, Tax Provisions - Doug Sword, Tax Notes ($):
The Democrat-controlled House could bring an omnibus spending bill to the floor as early as March 8, but the package, for now, has no tax provisions.
That doesn’t mean there’s no chance that the omnibus, which is often the vehicle for renewing expired tax extenders, will include revenue measures. There could still be a bipartisan push for a rollback to full expensing of research and development expenses, or a Democrat-fueled effort to get electric vehicle tax credits into an omnibus, members say.
The article adds that the 41 "temporary" tax provisions that expired at the end of 2021 are unlikely to make it into the "must pass" omnibus bill.
Ukraine Invasion Prompts Wyden Call to Strengthen IRS CI - Benjamin Guggenheim and Doug Sword, Tax Notes ($). "Strengthening the IRS Criminal Investigation division to crack down on tax loopholes exploited by Russian oligarchs should be a key part of the congressional response to Russia’s invasion of Ukraine, according to Senate Finance Committee Chair Ron Wyden, D-Ore."
IRS reminds taxpayers to report gig economy income, virtual currency transactions, foreign source income and assets - IRS. "Generally, income earned from the gig economy is taxable and must be reported to the IRS."
Mitch McConnell Rebukes Rick Scott for Tax Proposal - Lindsay Wise and Alex Leary, Wall Street Journal ($):
Mr. Scott’s 11-point “Rescue America” plan was released last week and he has paid for television and online advertising. It covers a range of topics, and includes proposals to name the border wall after former Republican President Donald Trump, balance the federal budget, prohibit the government from asking people to disclose their race on any federal form and sunset all federal legislation after five years. But a line about taxes gained the most attention. “All Americans should pay some income tax to have skin in the game, even if a small amount. Currently over half of Americans pay no income tax,” it reads.
“We will not have as part of our agenda a bill that raises taxes on half the American people and sunsets Social Security and Medicare within five years,” Mr. McConnell told reporters Tuesday. “That will not be part of the Republican Senate majority agenda.”
Tax History: Do Taxpayers Make Better Citizens? Rick Scott Thinks So - Joseph Thorndike, Tax Notes. "In 2020, 61 percent of American households paid no income tax, according to the Urban-Brookings Tax Policy Center. That number is expected to fall for 2021, but only to 57 percent."
In a blow to progressives, Douglas County court strikes down WA’s new capital-gains tax - Joseph O'Sullivan, Seattle Times:
In a written order, Douglas County Superior Court Judge Brian Huber wrote that the tax, among other things, violated the state constitution’s uniformity requirement for taxes.
“It violates the uniformity requirement by imposing a 7% tax on an individual’s long-term capital gains exceeding $250,000,” Huber wrote, but imposes “zero tax on capital gains below that $250,000 threshold.”
Huber — who was appointed by Democratic Gov. Jay Inslee in 2019 — also rejected the argument by Democratic lawmakers and others that the new law is an excise tax, rather than an income tax.
Kim Reynolds signs 3.9% flat tax into law in conservative realignment of Iowa's tax system - Stephen Gruber-Miller, Des Moines Register. "Over the next few years, the law will lower Iowa's top income tax rate until all Iowans pay a 3.9% flat tax starting in 2026. Along the way, the measure will eliminate the state's progressive income tax system, in which wealthier Iowans pay higher rates than lower-income Iowans, and place Iowa among 10 other states with some form of flat income tax."
Mich. House OKs Income Tax Cut, Broader Retirement Break - Paul Williams, Law360 Tax Authority. "The Republican-controlled House amended and passed S.B. 768 with some support from Democrats, sending the bill back to the Senate, which will consider the chamber's revisions. Under the legislation, the income tax rate would be lowered to 3.9% beginning this tax year, and an exemption on retirement income for taxpayers 62 and older would be raised. Both provisions would take effect retroactively as of this past Jan. 1."
Colorado to Accept Cryptocurrency for Tax Payments - Carolina Vargas, Tax Notes ($). "In a February 23 tweet, Polis said that Coloradans will be able to pay their state taxes with cryptocurrencies starting in the summer. 'In Colorado, we’ve been laying the groundwork to be a center of crypto and blockchain innovation for a number of years. We see it as a critical part of Colorado’s overall innovation ecosystem,' he said in an Instagram post. The state currently accepts tax payments via electronic funds transfers, credit and debit cards, checks, e-checks, money orders, and cash payments, according to the revenue department's website."
An Overloaded IRS Stops Certain Automated Notices, But Taxpayers Still Need to File Federal Tax Returns and Pay Outstanding Taxes - Erin Collins, NTA Blog. "Although the IRS has suspended automated notices for unpaid taxes assigned to ACS and ALPs, it will continue with case-specific enforcement work. Therefore, depending upon the circumstances, an individual IRS employee may issue a letter equivalent to Letter 11, notifying the taxpayer of its intent to levy and of the taxpayer’s right to a CDP hearing, issue a levy, or file a Notice of Federal Tax Lien."
5 March tax moves you can make to cut your 2021 IRS bill - Kay Bell, Don't Mess With Taxes. "Where couples' incomes and workplace plan situations negate traditional IRA tax deductions, they still might be able to achieve some savings through a spousal IRA."
Taking the Credit You Deserve - What You Need to Know About the Earned Income Tax Credit - Spencer Wilson, TaxBuzz. "Many Americans opt-out of filing a tax return based on their low income precluding a tax liability, but the IRS is encouraging those people to file a return anyway, as the expansion of the EITC and other credits may mean that they have money coming to them in the form of a credit."
2022 tax season going just as preparers predicted, according to survey results - NATP. "The 2022 tax filing season has proven to be more frustrating, for taxpayers and tax professionals alike, than any previous season."
Spouse Liable On Unsigned Joint Return - Peter Reilly, Forbes. "In an appeal to the Ninth Circuit an "innocent spouse" drew support from the Center For Taxpayer Rights and The Federal Tax Clinic At the Legal Services Center Of Harvard Law School in the form of an Amicus Brief. That didn't do trick. In its opinion, the Ninth Circuit confirmed the Tax Court decision that they were liable for the deficiency from joint returns that they were deemed to have joined in filing with their ex-spouse. I think they got a raw deal, but I dug into the case because I think there are some really important lessons."
The Global Minimum Tax Changes the Game for Build Back Better Revenue - Daniel Bunn, Tax Policy Blog. "Up to this point, one goal for the Build Back Better Act has been to increase the amount of revenue the U.S. raises from U.S. companies at home or abroad. With the global minimum tax rules in play, it is likely that the expected gains to the U.S. Treasury from foreign profits of U.S. companies will diminish."
Sales Tax Carveouts: They’re All About That Base - Renu Zaretsky, TaxVox. "The last thing a state should be doing is reducing its tax base by exempting more products. Yet for many politicians, the temptation to serve their political base could be too hard to resist."
Part-Time Bookkeeper on the Hook for Employer’s Payroll Tax - Chandra Wallace, Tax Notes ($):
A part-time, non-management employee missed his narrow window of opportunity to challenge an IRS decision designating him a “responsible person” for his employer’s unpaid payroll tax liability and can’t dispute it in court, the Tax Court held.
Petitioner Mohammad Kazmi had no ownership interest, financial authority, or decision-making role in the company that employed him, the court noted in a memorandum opinion issued March 1 in Kazmi v. Commissioner. But because Kazmi hadn’t responded to the initial Letter 1153 from the IRS that proposed assessing trust fund recovery penalties against him under section 6672, he missed his only opportunity to challenge the IRS determination making him liable and couldn’t challenge the underlying tax liability, the court held.
A harsh and unfair result. Also a lesson on the importance of responding to IRS correspondence - and documenting the response, as it may sit for months unopened.
UK Tax Fugitive Arrested Nine Years After Trial - Natalie Olivo, Law360 Tax Authority ($).
Sarah Panitzke, originally from York, was arrested Sunday while walking her two dogs near Spain's Catalan coast, according to HM Revenue & Customs, which said the 47-year-old had disappeared in 2013 while on trial for money laundering offenses. In Panitzke's absence, she was convicted and sentenced to eight years in prison for her role in value-added tax fraud that involved moving millions of pounds through offshore accounts, HMRC said.
The article is silent on whether the dogs face charges.
Ukrainian authorities say citizens don't need to declare captured Russian tanks and military equipment for tax purposes - Cheryl Teh, Business Insider:
Ukrainian authorities have reassured citizens that they don't need to declare captured Russian tanks or any equipment they pick up as personal income.
"Have you captured a Russian tank or armored personnel carrier and are worried about how to declare it? Keep calm and continue to defend the Motherland!" read a statement from the Ukrainian National Agency on Corruption Prevention (NACP) seen by Interfax Ukraine.
This of course does not control the treatment of captured ordnance for US tax purposes. Treasury Reg. 1.61-14 provides, for example, that "Treasure trove, to the extent of its value in United States currency, constitutes gross income for the taxable year in which it is reduced to undisputed possession."
But if you plan to use, say, a captured thermobaric rocket launcher in your trade or business, you will be able to take an offsetting bonus depreciation deduction in the year it is placed in service.
Meow. Today is International Rescue Cat 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.