Tax News & Views 'Outgunned' Roundup

March 18, 2022

IRS ‘Outgunned’ in Audits of Major Companies, Agency Chief Says – Laura Davison, Bloomberg ($). “The IRS is outmatched in resources and expertise when it audits some of the largest companies in the country, the agency’s top official said."

'We do not have the resources to go after the bigs or the superbigs, as we refer to them, and we get outgunned routinely in that space,' IRS Commissioner Chuck Rettig told House Ways and Means Committee members on Thursday.

Rettig: IRS Backlog Cleared by Year-End – Jay Heflin, Eide Bailly. “IRS Commissioner Charles Rettig told lawmakers on March 17th that the agency’s processing backlog will be cleared by the end of this year.”

‘My term ends in November. Absolutely before December,’ he told the House Ways and Means Oversight Subcommittee, adding that ‘barring any unforeseen circumstances...if the world stays as it is today, we will be what we call healthy by the end of calendar year '22 and enter the '23 filing season with normal inventories.’

Rettig Makes a Big Backlog Pledge, Defends Audit Priorities – Jonathan Curry, Tax Notes ($). “The enormous mail backlog that has consumed the IRS’s resources and been at the root of many taxpayers’ issues will be cleared by the end of the year, according to IRS Commissioner Charles Rettig.”

‘Absolutely before December,’ Rettig assured lawmakers during a March 17 House Ways and Means Oversight Subcommittee hearing. ‘If the world stays as it is today, we will be healthy by the end of calendar year 2022,’ he said, referring to the backlog’s status.

One big reason Rettig gave for his newfound optimism is the direct hire authority the IRS received earlier this month. He noted that the IRS had just spent three months trying to hire 5,000 people for its submissions processing unit, but only managed to hire 211.

Rettig Suggests Congress Simplify Family Tax Credit System - Naomi Jagoda, Bloomberg ($). “IRS Commissioner Chuck Rettig suggested Thursday that Congress make changes to family-related tax credits in order to reduce the error rate.”

‘We need to change the earned income tax credit to a family-law credit,’ Rettig said during a hearing of the House Ways and Means Committee’s Oversight Subcommittee. He indicated he wasn’t offering an official IRS proposal but was making the recommendation based on his experience at the agency.


Amid painful tax season, bipartisan duo eyes IRS budget fix – Laura Weiss, Roll Call. “After giving the IRS its biggest budget boost in years, some lawmakers are turning to new efforts to deliver resources to the beleaguered agency in the middle of a tax filing season plagued by lengthy delays and a hefty backlog of unprocessed returns.”

Sens. Benjamin L. Cardin, D-Md., and Rob Portman, R-Ohio, are assembling a proposal focused on modernizing the IRS — a rare area of bipartisan agreement when it comes to the nation’s tax collectors — that could involve dedicated funding for the perennially cash-strapped agency. But Democrats’ other goals for bolstering the agency likely hinge on agreeing to a larger budget reconciliation package they can pass without GOP support.

‘This is ... clearly moving in the right direction,’ Senate Finance Chair Ron Wyden, D-Ore., said after the IRS got a 5.6 percent budget increase in the fiscal 2022 omnibus spending package. ‘We’ve got a lot to do. And we need new tech; we need more investigators; we need hiring authority.’


IRS Touts Brockman Case, Crypto Wins in Bid for Funding Boost - Jeffery Leon, Bloomberg ($). “The IRS Criminal Investigation unit on Thursday highlighted its successes in combating massive tax fraud and evasion schemes—including the indictment of software CEO Robert Brockman and shutting down cryptocurrency company BitConnect—as part of a push for more funding.”

The CI unit, in a fact sheet published Thursday, noted more than a dozen high-profile cases that it said ‘show the breadth and skill’ of the agency’s criminal enforcement staff.

Warren Introduces Crypto Bill Aimed at Russia - Butch Maier, Bloomberg ($):

It would effectively punish foreign cryptocurrency companies for interacting with sanctioned individuals. It also would provide the Treasury Secretary Janet Yellen with authority to prohibit digital asset trading platforms and transaction facilitators under U.S. jurisdiction from transacting with cryptocurrency addresses that are known to be or might be in Russia.

Crypto Industry Opts for Old-Fashioned Cash in Political Giving - Bill Allison, Bloomberg ($). “Cryptocurrency leaders are spending money to wield influence in Washington as focus on their industry skyrockets, but they don’t seem to be using their own product to do it.”

Industry insiders gave $7.3 million to political campaigns and committees in 2021 through the end of January, but almost all of that money came in old-fashioned dollars.

The disparity highlights the challenges cryptocurrencies face as they move into more mainstream parts of the economy. Only $580,000 worth of cryptocurrency was donated to political committees in the current election cycle, according to a Bloomberg analysis of Federal Election Commission records, with a handful of super PAC donations making up most of the total. Not all of those contributions were from crypto industry donors.

If crypto becomes a huge money-pot for lawmakers, you can expect favorable tax changes for the industry. 


U.S. Watchdog Says $163 Billion in Covid Payouts Could Be Fraud - Katia Dmitrieva, Bloomberg ($). “At least $163 billion in U.S. pandemic unemployment benefit payouts could be linked to fraud, according to the U.S. Department of Labor’s watchdog.”

More than 18% of the $872.5 billion in pandemic unemployment payments may have been sent improperly, ‘with a significant proportion attributable to fraud,’ according to U.S. Senate testimony Thursday from Larry Turner, the inspector general of the U.S. Department of Labor.

‘The unprecedented infusion of federal funds into the UI program gave individuals and organized criminal groups a high-value target to exploit,’ Turner said in written testimony, calling the situation ‘a perfect storm.’


Charitable Contribution Deduction - Butch Maier, Bloomberg ($). “Senate Finance Committee Chairman Ron Wyden (D-Ore.) said Thursday there ought to be bipartisan interest in reviving a charitable contribution deduction that was expanded during the pandemic but lapsed at the end of 2021.”

The ‘above-the-line’ deduction was available to those taxpayers who do not itemize with up to $300 for single filers and $600 for those filing jointly. The provision 'helped promote giving' during the pandemic, Wyden said during a Finance Committee hearing.

The non-profit sector has been lobbying this deduction for decades, and for a long time its enactment was considered a long shot. Once it finally happened they want to make it permanent.  Their argument is a good one: it provides incentive for non-itemizers (i.e., normally poorer taxpayers) to make donations. This ain't a tax break for the rich. 


Democrat Asks Duke, Villanova, Auburn Coaches for Salary Info – Laura Davison, Bloomberg ($). “With the March Madness college basketball tournament getting underway, a top Democrat on the House Ways and Means Committee is asking three top schools with highly paid basketball coaches to hand over data about those compensation packages.”

Representative Bill Pascrell, a New Jersey Democrat, sent letters to Duke, Villanova and Auburn Universities -- each participants in the popular NCAA Division I tournament -- asking them to divulge information about their coaches’ pay structure and their basketball programs.

The letters asked for details about Duke’s Mike Krzyzewski’s reported $7 million package, Villanova’s Jay Wright’s reported $6.1 million contract and Auburn’s Bruce Pearl’s reported $3.98 million deal.


Progressives Urge Biden to Use Executive Power to Fulfill Agenda - Jarrell Dillard, Bloomberg ($). “The Congressional Progressive Caucus is urging President Joe Biden to issue executive orders to fulfill a number of Democratic priorities that remain stalled in Congress in the months before the midterm elections.”

The 98-member caucus of liberal Democrats is urging Biden to go it alone on policies addressing climate change and reducing reliance on fossil fuels, canceling student debt, lowering prescription drug costs, raising worker wages and criminal justice reform.

‘This isn’t about abandoning the legislative path. It’s about realizing the promise of Democratic governance, and quickly — using all tools available to make it happen,’ progressives wrote in their agenda released Thursday.

It must be opposite day because asking the President to sign an executive order instead of passing legislation through Congress IS about 'abandoning the legislative path.'


Federal Law Bars Part of Minnesota Tax on Airlines, Court Says – Perry Cooper, Bloomberg ($). “Alaska Airlines Inc. convinced the Minnesota Tax Court that federal law preempts the state tax commissioner from including Minnesota sales or receipts when calculating the company’s ‘minimum fee’ tax.”

But the court ruled that the federal Anti-Head Tax Act doesn’t preempt the commissioner’s inclusion of Minnesota payrolls when calculating the tax. The preempted portion of the state law is severable, so the rest of the law stands, Judge Jane N. Bowman wrote for the court.

The state assessed the airline $27,000 in tax and $4,700 in interest for tax years 2012 to 2016. The airline paid the commissioner $28,000 and filed an administrative appeal disputing the minimum fee assessed.


Colorado Entitled to Restitution for Evaded Pot Excise Taxes - Perry Cooper, Bloomberg ($). “The Colorado Department of Revenue can be considered a ‘victim’ entitled to restitution where a criminal defendant has evaded marijuana excise taxes, a state appeals court ruled in a case of first impression.”

‘No Colorado case has yet addressed whether the Department can be ‘aggrieved by’ the evasion of marijuana excise taxes so as to fall within the purview of the Restitution Act,’ the Colorado Court of Appeals said Thursday.


Louisiana Couple’s Donation to Alabama Group Counts as Tax Paid – Donna Borak, Bloomberg ($). “A Louisiana couple’s payment to an Alabama scholarship granting organization qualified as an income tax payment to Alabama and thus should have reduced the couple’s Louisiana income tax liability, the Louisiana Board of Tax Appeals ruled.”

In an opinion released Wednesday, board Chairman Francis J. “Jay” Lobrano vacated the Louisiana Revenue Department’s assessment of $22,559.33 for 2018 against Gillian Goodrich and Robert Bernard III, who are Louisiana residents with Alabama source income.

The couple had contributed $30,000 to a qualified scholarship granting organization in Alabama in fulfillment of part of their Alabama tax liability.


Indiana Lawmakers Cut Vaping Tax to 15% Before July Start Date – Donna Borak, Bloomberg ($). “A new vaping tax in Indiana is already being cut even before it takes effect in the state.”

On Wednesday, Gov. Eric Holcomb (R) signed S. 382, which included a measure that would cut a 25% wholesale tax on ‘closed-system’ vaping cartridges such as Juul devices to 15%. The House adopted the measure 66-32, while the Senate approved 38-12 earlier this month.


Georgia Lawmakers Approve Tax Refunds and Gas Tax Holiday – Michael Bologna, Bloomberg ($). “Georgia taxpayers will save a little on gasoline purchases over the next two months and claim $1.1 billion in tax refund checks later this year under a pair of bills headed to Gov. Brian Kemp’s desk."

The Georgia Senate Thursday unanimously approved H.B. 304, which suspends the state’s 29.1 cents per gallon excise tax on gasoline through May 31. The bill won unanimous support in the House on March 11.

The action followed the Senate’s Wednesday approval of H.B. 1302, which offers a one-time income tax credit to taxpayers. The measure passed 47-4 after winning 148-18 in the House on March 1.

Gas Tax Rebate Push in California Gains Bipartisan Support – Laura Mahoney, Bloomberg ($). “A group of 21 California Assembly Democrats has gained support from Republicans in a plan to offset rising gas prices by giving a $400 tax rebate to each individual California taxpayer regardless of income or car ownership.”

The lawmakers said Thursday they are asking Democratic Gov. Gavin Newsom and Senate leaders to act quickly to bring relief to California consumers, who are paying an average of $5.79 per gallon, the highest among the 50 states and far above the national average of $4.29, according to the American Automobile Association. A multibillion-dollar budget surplus has paved the way for broad tax rebates.

Maryland Set to Enact 30-Day Gasoline Tax Holiday – Michael Bologna, Bloomberg ($). “Maryland lawmakers approved a 30-day gasoline tax holiday on Thursday, joining a growing list of states offering motorists tax relief as global energy prices surge.”

The Maryland Senate and House unanimously approved measures suspending motor fuel taxes for 30 days following final approval of the legislation. During the holiday period, Maryland would waive the 36.1 cents per gallon excise tax on gasoline, the 36.85 cents per gallon tax on diesel, and the 7 cents per gallon tax on aviation fuel.


Tax Court Finds Public Notice Doesn’t Breach Supervisory Approval – Mary Katherine Browne, Tax Notes ($). “A Georgia landscaping company was thwarted in its attempt to argue that the IRS’s public notice on syndicated conservation easements constituted a formal communication to assert penalties that violated the government’s duty to obtain supervisory approval.”

In a March 17 memorandum opinion in Pickens Decorative Stone LLC v. Commissioner, Tax Court Judge Albert G. Lauber agreed with the IRS that it hadn’t violated the section 6751(b) requirement to obtain supervisory approval when it imposed penalties against the petitioner, and he granted partial summary judgment to the agency on that issue.


It’s National Awkward Moments Day! Such moments show that we're human. They also can be endearing. 

“This is an annual day that every person can relate to. We have all had our awkward moments from time to time. They are a part of life; they just happen,” according to National Day Calendar.

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