March 3, 2022
Biden Drops Build Back Better Moniker, Keeps Agenda Intact - Jonathan Curry, Tax Notes ($):
In his speech to Congress, Biden reiterated his plan for clean energy-related tax incentives and vaguely called for making the tax system fairer by closing “loopholes” to ensure the wealthy pay their fair share of taxes.
Biden also restated his call for corporate tax reforms like a 15 percent minimum tax on the corporate book earnings of the largest corporations and a 15 percent global minimum tax in accordance with the OECD’s pillar 2 plan.
With tax increases, Biden proposes, Sinema disposes. Her disposition remains enigmatic.
Manchin proposes dramatically scaled down version of Build Back Better - Alexander Bolton, The Hill:
Manchin said he could support a reconciliation package that reforms the tax code and lowers the cost of prescription drugs if the money raised is split between spending on new climate change proposals and deficit reduction and fighting inflation.
“I’m just saying reconciliation is for getting your financial house in order,” he said, adding that whatever tax reform comes to the floor may be different than what White House officials and senators negotiated last year.
“I’m talking about a fair tax system,” he said, declining to take a position on the wealth surtax that the White House unveiled as part of its framework in the fall.
It might be a challenge to draft bill language on that basis.
Dems agonize over Manchin's wish list: Taxes, prescription drugs, climate cash - Burgess Everett and Nicholas Wu, Politico:
Manchin said that if Democrats want to cut a deal on a party-line bill using the budget process to circumvent a Republican filibuster, they need to start with prescription drug savings and tax reform. He envisions whatever revenue they can wring out of that as split evenly between reducing the federal deficit and inflation, on the one hand, and enacting new climate and social programs, on the other — “to the point where it’s sustainable.”
“If you do that, the revenue producing [measures] would be taxes and drugs. The spending is going to be climate,” Manchin said.
Major corporations make last-ditch push for R&D tax break - Laura Weiss, Roll Call.
The omnibus appropriations package would be the quickest avenue with Congress facing a March 11 government funding deadline. In a letter, CEOs of Intel Corp., AT&T Inc., 3M Co. and 33 other big corporations said Tuesday that it “could be the last chance to avert the consequences of failing to act before the end of the first quarter.
Before Jan. 1, companies could deduct what they spent on research and development immediately from their taxable income. As of this year, they must gradually write off the expenses over five years, a change that was part of Republicans’ 2017 tax overhaul."
Wash. Judge Strikes Down State Capital Gains Tax - Maria Koklanaris, Law360 Tax Authority ($):
An appeal is expected.
In a ruling released Tuesday, Superior Court Judge Brian Huber agreed with the group of taxpayers who sued to strike the tax even before Washington Gov. Jay Inslee, a Democrat, signed it into law. Judge Huber said the court did not need to reach all the arguments advanced by the plaintiffs to strike the tax. He said the court could strike it because it violates the uniformity and limitation requirements of the Washington state constitution.
Washington Capital Gains Tax Is Unconstitutional, Superior Court Rules - Paul Jones, Tax Notes. "Huber rejected the state’s argument that the tax is an excise tax on the sale of long-term capital assets. His ruling noted that 'the new tax is not levied upon ‘the sale or transfer’ of capital assets. Instead, the new tax statute levies a tax on receipt, and thus ownership, of capital gains.'"
Iowa To Cut Income Tax Rate Annually - Jaqueline McCool, Law360 Tax Authority ($):
Republican Gov. Kim Reynolds signed H.F. 231 on Tuesday, which will reduce the state income tax rate annually from 2023 until 2026, when a flat rate of 4.4% will begin. The rate will be 6% for 2023, then drop to 5.7% and 5.2% for the following two years, according to the measure.
The law also exempts retirement income and income from farm leases from income tax. It also changes the time period for the retired farmer capital gains income tax exemption and modifies the research activities tax credit calculation method.
That's *some* income from farm leases. These are leases by farmers who have met 10-year holding and material participation tests and opt out of a potentially more-lucrative exemption from capital gains taxes on farmland sales.
Iowa Governor Approves Individual and Corporate Tax Reform Bill - Carolina Vargas, Tax Notes ($): "The legislation will also reduce the state’s top corporate income tax rate each year in which receipts exceed $700 million until the rate reaches a uniform 5.5 percent, at which point the rate would be capped. Iowa has three corporate income tax brackets as of January 1, 2021: 5.5 percent on income up to $100,000; 9 percent on income between $100,000 and $250,000; and 9.8 percent on all income over $250,000."
Green Tax Credits Spotlighted in State of the Union - Benjamin Guggenheim, Tax Notes ($):
According to the preliminary Joint Committee on Taxation score of the Senate’s Build Back Better Act, Biden’s green energy initiatives would cost a total of $325 billion over 10 years if none of the current provisions are pared down in a new bill.
A Tax Notes analysis showed that the Finance Committee bumped the section up by $25 billion over the House-passed bill, with individual green energy provisions receiving some of the largest increases in funding — notably, a $4.43 billion (33 percent) increase from extending, increasing, and modifying nonbusiness energy tax credits and a $3.03 billion (33 percent) increase for a tax credit that would encourage the production of clean hydrogen.
Other sizable increases include a $1.62 billion (3 percent) increase for the extension and modification of the credit for electricity produced from renewables; a $1.53 billion (3 percent) increase for the extension and modification of the section 48 energy credit; and a $1.04 billion (42 percent) increase for the advanced manufacturing production credit.
DOJ Launches Crackdown To Enforce Russia Sanctions - Jack Queen, Law360 Tax Authority ($):
Sweeping sanctions against Russia over its invasion of Ukraine will be immediately and aggressively enforced, the U.S. Department of Justice said Wednesday, unveiling a task force of more than a dozen attorneys to hunt for violators and seize the assets of Russian oligarchs.
The move indicates there will be no grace period for compliance with the new global sanctions regime, which is unprecedented in scope and scale and continues to grow as world governments heap on measures.
6th Circ. Denies Whirlpool's Bid To Rehear $45M Tax Battle - Dylan Moroses, Law360 Tax Authority:
The court majority said the income plainly met a two-part test laid out in the statute to be considered FBCSI. First, Whirlpool's Luxembourg subsidiary conducted activities through a branch or similar establishment outside the country where it was incorporated, the court found. Second, the purpose of the arrangement was to defer U.S. tax, the court said, upholding a May 2020 decision by the U.S. Tax Court.
Alternate headline: Whirlpool tax appeal circles the drain.
What to Know About Filing Taxes Before You File a Lawsuit - Kelly Phillips Erb, Bloomberg:
I know it seems odd to think that tax strategy would play a part in civil cases, but here’s a secret: Most court cases don’t end in a dramatic fashion like you see on television or in the movies. Most civil cases—meaning non-criminal cases—settle.
And while a settlement is typically taxed the same as a judgment, a settlement may allow the parties some wiggle room to suggest a more tax advantageous allocation of damages.
Don't make any of these 12 common tax filing mistakes - Kay Bell, Don't Mess With Taxes. "10. Entering incorrect bank account numbers: The IRS has for years encouraged us to file electronically and have our refunds directly deposited into a financial account. That process is easy for taxpayers and the IRS, unless you enter the wrong account number and accompanying routing number."
Relief for Taxpayers Affected by Colorado Wildfires - Eide Bailly. "Recently, the IRS announced relief for taxpayers in Colorado affected by wildfires and straight-line winds that began on December 30, 2021. These taxpayers now have until May 16, 2022, to file individual and business tax returns and to make tax payments." 2022/2
IRS Issues Proposed Regs on Required Minimum Distributions from Retirement Plans - Parker Tax Publishing. "Under Code Sec. 401(a)(9)(C), as amended by Section 114 of the SECURE Act, the required beginning date for an employee is generally April 1 of the year following the later of the calendar year in which the employee attains age 72 or the year in which the employee retires. Before amendment, the relevant age for determining the required beginning date was age 70 1/2. The increase to age 72 applies to distributions required to be made after December 31, 2019, with respect to individuals who attain age 70 1/2 after that date."
Tax Court is on the Road Again - Keith Fogg, Procedurally Taxing. "I do not know why some of the cases on its calendar continue to be remote. While the split this week was between regular and small tax cases, that is not always the split if you look at the remainder of the Winter calendar. So, continuing remote calendars does not appear to signal a difference in the way the Court is approaching the two types of cases, but rather other factor(s) such as local courthouse restrictions."
A Regulatory Tax Hike on U.S. Multinationals - Daniel Bunn, MNETax.com. "Final foreign tax credit (FTC) regulations released just at the beginning of the year represent a tax hike for many U.S. companies that earn profits from customers abroad. While the initial motivation for revising FTC rules was the adoption of digital services taxes (DSTs) in foreign jurisdictions, the final rules have impacts well beyond the DSTs."
Higher Oil Prices Can Help Fuel Green Transition - Thronton Matheson, TaxVox. "Instead, policymakers could embrace higher oil prices as the necessary cost of both containing Russia’s aggression and protecting the environment. Focusing on the longer term, they could design a plan to gradually increase taxes on motor fuels to reflect their full environmental cost and help speed electrification of the vehicle fleet."
The Pros and Cons of Tax Secrecy - Tax Notes Opinions. "As you know, and as I indicated in the article, for over 100 years there's been a provision in the code that allows any 'bona fide shareholder of record' owning at least 1 percent of the outstanding stock of any corporation to inspect the tax return. The reason you don't hear much about this is that there's another section that makes revealing what you learned a felony punishable by a fine up to $5,000 and a five-year imprisonment, or both, which is pretty serious."
Former Payroll Manager of Home Healthcare Company Pleads Guilty to Federal Tax Offense - U.S. Department of Justice (names omitted):
Between approximately 2012 and 2016, Taxpayer assisted Owner by processing payroll that caused checks to be issued to “ghost employees,” who did not actually work for ECH. The money paid to the ghost employees was actually paid to Owner, who did not report the hundreds of thousands of dollars of income on her tax returns. By submitting false payroll data, Taxpayer also caused false Forms W-2 and W-3 to be submitted to the Internal Revenue Service.
So the defendant wasn't even cheating on his own behalf. Whatever bonuses or raises he got for this extra duty probably weren't enough.
I want a sandwich. Today is National Cold Cuts Day! "Romans regularly feasted on ham and prosciutto. These cold cuts often were a part of their main courses and even became street food."
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.