Stimulus mistakes hit 2021 returns, and more reasons for late refunds – Susan Tompor, Detroit Free Press:
Many people, plain and simple, shouldn't bet on getting refund money quickly, as the Internal Revenue Service is once again cautioning taxpayers not to rely on ‘receiving a refund by a certain date, especially when making major purchases or paying bills.’
The IRS has a list of reasons that refund money could take months to get, even if you file electronically, including cases of identity theft.
Filing season so far: Frustrating but predictable – Roger Russell, Accounting Today. “The current filing season has proved to be frustrating for tax preparers and taxpayers alike, but it has been predictable, which has made it more palatable, according to most preparers.”
‘After 36 tax seasons, this is on the better side,’ remarked Rob Cordasco, founder of Cordasco & Co. PC. ‘This is the first time in a very long time that we did not have last-minute tax changes to learn and delay the start of filing season. This has led to a more stable processing environment.’
Not everyone agrees.
‘Through conversations with preparers and members, anecdotally, it seems as though tax season is just as frustrating as they predicted,’ said Jennifer Van Elzen, director of member relations and analytics at NATP [National Association of Tax Professionals]. ‘Unfortunately, it looks like tax season is going about as well as our members thought it would. Serving their tax clients has been further complicated by an increase in delays and lack of IRS resources, a persistent effect from the pandemic.’
Enrolled Agents Have Mixed Reactions to Fee Increases – Caitlin Mullaney, Tax Notes ($). “Many enrolled agents (EAs) have met a proposed IRS increase of renewal and enrollment user fees with a mixture of personal acceptance and professional disapproval.”
‘It's a petty amount of money to lose any sleep over in the grand scheme of things, and on a scale of 1-10 of things that are bothersome, this probably ranks around a 2 out of 10,’ Adam Markowitz of Howard L Markowitz PA, CPA, told Tax Notes.
Pence on Tax Law Cuts – Butch Maier, Bloomberg ($):
Advancing American Freedom, the advocacy group of former Vice President Mike Pence, released a policy agenda Thursday for Republicans to run on in the midterm elections.
The plan is here.
Chart topper:
Permanently extend the Trump/Pence tax cuts that helped create 5 million jobs and are set to expire in 2025.
This is worth noting. Republicans have a better than average chance of being the majority party in the House and Senate after the elections. And President Biden plays ball with just about everyone.
Pelosi rejects gas tax holiday – Cristina Marcos, The Hill. "Speaker Nancy Pelosi (D-Calif.) on Thursday poured cold water on the idea of suspending the federal gas taxes as a way to reduce the costs of higher gas prices for consumers."
Pelosi acknowledged that the proposal, which has been floated by some Democrats in recent weeks, sounds appealing in theory. But she argued it doesn’t help consumers much in the long term since oil companies are not required to pass on the savings.
Furthermore, suspending the gas tax would take away the primary source of money for the Highway Trust Fund, which finances roads and mass transit.
Dems Urge Ending Gas Co. Tax Breaks For Consumer Rebate - Theresa Schliep, Law360 ($). “Congress should eliminate various tax breaks for energy companies and provide direct payments to consumers to help fight high gas prices, several Democratic members of Congress told House leadership in a letter Wednesday.”
The federal government should cease subsidizing oil and gas companies through tax breaks and benefits while commuters struggle with high prices at the pump, according to the letter, which was signed by Reps. Sean Casten, D-Ill., Earl Blumenauer, D-Ore., A. Donald McEachin, D-Va., and Katie Porter, D-Calif.
Rebates. It's an election year.
White House, Democrats Try to Salvage Global Vaccine Funding – Erik Wasson, Alexander Ruoff and Laura Litvan, Bloomberg ($). “Democrats and Republicans are near agreement on a $10 billion Covid-19 funding package as the White House mounts a last-ditch effort to salvage money for global vaccine efforts that had been championed by President Joe Biden.”
Utah Senator Mitt Romney, the top GOP negotiator on the bill, said Thursday afternoon that there is an agreement in principle but that Republicans are awaiting a cost estimate from the Congressional Budget Office.
Romney said $1 billion in global vaccine funding could be added but only if other funding is cut to keep the total at $10 billion. The bill, he said, would be fully paid for, including by using unspent money previously allocated to aid businesses.
There is some disagreement between lawmakers about using unspent COVID funds to offset the bill's cost. Some would prefer tax increases. However, passing this bill from Congress will require Republican support so it is highly unlikely that tax increases will be included in this legislation.
How Biden’s Billionaire Minimum Income Tax Would Hit the Wealthy - Laura Davison, Bloomberg ($):
The plan, which would tax the appreciation of financial and business assets owned by people worth more than $100 million, has strong support among many Democratic voters. It could generate hundreds of billions of dollars in new revenue from a group that has traditionally used tax laws to lower their Internal Revenue Service payments.
Biden’s proposal would only affect a sliver of Americans. Still, it’s unlikely to be passed anytime soon in Congress, where Democrats have razor-thin margins, because many moderate lawmakers are skittish about such a big tax overhaul.
Why Biden’s billionaire minimum income tax may be a tough sell – Kate Dore, CNBC. “President Joe Biden has proposed a new tax on the ultra-wealthy as part of his 2023 federal budget, aiming to reduce the deficit by about $360 billion. Some experts say it’s unlikely to gain traction in Congress."
‘The billionaire tax and how they’ve put that forward doesn’t make much sense,’ Rep. Josh Gottheimer, D-N.J., co-chair of the Problem Solvers Caucus, told CNBC’s “Squawk Box’ on Wednesday, stressing to the challenges of taxing unrealized gains.
‘I really don’t think that proposal is going anywhere,’ he added.
Tax Pros Eye Biden’s Estate Tax Plans, Shrug Off Billionaire’s Tax – Jonathan Curry, Tax Notes ($). “The Biden administration was eager to tout a new billionaire minimum income tax proposal in its latest budget, but estate planners are far more interested in what’s buried deeper in Treasury’s green book.”
The billionaire’s tax, like much of what President Biden has proposed, is 'politically aspirational,' Austin Bramwell of Milbank LLP assured Tax Notes. “It’s not going anywhere.”
However, the long list of tax provisions outlined in Treasury’s green book features a handful of provisions aimed directly at trusts and estates that offer fresh signals of the administration’s intentions on that front and that estate planners say are worth closer scrutiny.
'There’s a lot in this bill to try to squeeze more taxes out of the wealthy,' Beth Shapiro Kaufman of Caplin & Drysdale Chtd. said. 'It seems like one of those things where the idea was: Here are all the arrows in our quiver — we'd be happy to use any or all of them,' she said.
Congress is struggling to pass tax increases it birthed roughly a year ago. Adding to the list seems far-fetched.
Russia Tax Penalties – Butch Maier, Bloomberg ($). “Senate Finance Chairman Ron Wyden (D-Ore.) said he is in talks with Republicans about legislation that would take away tax credits for U.S. companies that do business in Russia, part of his proposed financial response to Russia’s invasion of Ukraine.”
‘I have had Republicans come up to me and say they think it is outrageous when an American business does business in Russia and pays taxes to the Russian government, and gets basically foreign tax credits from us,’ Wyden said.
House Passes Bill to Limit Cost of Insulin to $35 a Month – Margot Sanger-Katz, New York Times. “A bill to limit the cost of insulin to $35 a month for most Americans who depend on it passed the House on Thursday, raising Democrats’ hopes that the party could take at least one step toward fulfilling its promise of lowering drug costs.”
The bill attracted unanimous support from Democrats who voted, as well as from 12 Republicans, making it a rare piece of bipartisan policy legislation.
To become law, the bill will need to attract at least 10 Republican votes in the Senate to overcome a filibuster. Some lawmakers involved in the effort have expressed optimism that such a coalition might be possible, but few Republican senators have publicly endorsed the bill yet.
It’s unclear if the House-passed bill will go anywhere in the Senate. Punchbowl News ($):
There was some eye-rolling in the Senate on Thursday when the House passed a bill to cap insulin costs at $35 per month. This came despite Schumer’s announcement last week that the Senate was negotiating a bipartisan bill to do the same and more. The Senate is expected to vote on that bill – led by Sens. Susan Collins (R-Maine) and Jeanne Shaheen (D-N.H.) – following the Easter recess.
SEC Leans on Crypto Firms to Report Assets Held for Customers – Allyson Versprille and Amanda Iacone, Bloomberg ($). “The U.S. Securities and Exchange Commission is pressing firms to account for crypto assets they’re holding on behalf of customers on their balance sheets.”
A growing number of crypto trading platforms are safeguarding digital assets for their users and maintaining the cryptographic keys necessary to access the tokens, the regulator said in staff guidance Thursday. But platforms aren’t disclosing those activities -- which can increase the chances of financial loss in the event that assets are stolen or misused -- to investors in the same way, leaving some without a full understanding of the risks, an SEC official said on a call with reporters.
EU Lawmakers Back Plan to End Crypto Transfer Anonymity – Stephen Gardener, Bloomberg ($). “Crypto transactions would be covered by EU rules requiring that financial transfers carry information about the identities of payers and payees, according to a plan backed Thursday by a panel of the European Parliament.”
Under the current EU Transfer of Funds Regulation ((EU) 2015/847), payment service providers must include identity information only for transfers of ‘banknotes and coins, scriptural money and electronic money,’ leaving crypto transfers beyond the reach of the rule.
This loophole exposed ‘both users and providers of services of crypto-assets to significant money laundering and terrorist financing risks,’ according to a position on the plan drawn up by Belgian center-right European Parliament lawmaker Assita Kanko and Spanish Green Ernest Urtasun.
Crypto’s popularity is growing. Expect regulations on them to do the same.
OECD Crypto Guidance Signals ‘Tsunami’ of Regulations (Podcast) - Shaun Courtney, Bloomberg ($). “The OECD released a draft framework March 22 that would standardize how global tax authorities regulate and share tax information related to cryptocurrency assets.”
The draft—called the Crypto-Asset Reporting Framework, or “CARF”—includes model technical rules and a commentary written for wide adoption and data-sharing among tax administrations.
1 in 5 adults has invested in, traded or used cryptocurrency: poll – Natalie Prieb, The Hill. “One in 5 adults has invested in, traded or used cryptocurrency, according to a new NBC News poll.”
The poll, which surveyed 1,000 Americans, found that half of men between the ages of 18 and 49 said they have dealt with cryptocurrency, the highest amount of any demographic group.
Black Americans also reported using crypto at a significant level at 40 percent, compared to 42 percent of all people between the ages of 18 and 34 who said the same.
The poll goes to show how much cryptocurrency, a relatively young phenomenon, has grown in popularity in recent years. Still, the survey showed there is still some division in opinions about crypto, with 19 percent of respondents saying they view the online currency positively and 25 percent saying they view it negatively.
Federal Government Free From Missouri Nonjudicial Tax Sale Case – Perry Cooper, Bloomberg ($). “A federal trial court in Missouri dismissed the U.S. Housing and Urban Development Department from a suit seeking to extinguish title claims by the agency and other defendants after a tax sale.”
Federal law says any suit to foreclose a lien in favor of the U.S. ‘must seek judicial sale.’ This case was the first time a court in the Eighth Circuit has considered whether federal law preempts the purported cancellation of a federal lien through a nonjudicial local tax sale.
Court Says Online Software Fees Don’t Qualify for Deduction – Mary Katherine Browne, Tax Notes ($). “A Delaware national securities exchanges operator wasn’t entitled to treat fees from its exchanges as domestic production gross receipts because they weren’t from providing customers with direct use of its software.”
In a March 31 opinion in Bats Global Markets Holdings Inc. v. Commissioner, Tax Court Judge Kathleen Kerrigan sided with the government in holding that Bats Global wasn’t entitled to make domestic gross production receipts deductions for various fees it charged its customers for using its service.
IRS Blocked by Judge From Seizing Billionaire-Linked Fund Cash - Jeremy Hill, Bloomberg ($). “A federal judge temporarily halted an Internal Revenue Service effort to seize money the U.S. government says is owed by a Bermuda fund linked to billionaire Robert Brockman."
U.S. Bankruptcy Judge J. Kate Stickles on Thursday said she’d stop, for now, the IRS plan to round up cash that Vista Equity Partners owes to Point Investments Ltd., an offshore fund tied to Brockman and his family. The 80-year-old billionaire is facing criminal tax-evasion charges and civil claims for $1.4 billion the IRS says he owes.
IRS Must Look for FOIA Docs Before Claiming That None Exist – Kristen Parillo, Tax Notes ($). “A California district court refused to dismiss a Freedom of Information Act claim by a tax attorney who says the IRS reported him to a Treasury watchdog as part of a harassment campaign against his tax-exempt church client.”
‘To comply with FOIA, the IRS must actually search for documents to know whether they exist in their possession,’ the U.S. District Court for the Southern District of California said in a March 30 order denying the Justice Department’s November 2021 partial motion to dismiss in Free Sacred Trinity Church v. IRS.
IRS' Pot Co. Summonses Should Be Tossed, 10th Circ. Told - Theresa Schliep, Law360 ($). “The Tenth Circuit should undo a lower court decision permitting the IRS to proceed with summonses seeking records from a cannabis dispensary because the agency is impermissibly trying to enforce the Controlled Substances Act, the dispensary told the appeals court.”
The Internal Revenue Service should be barred from proceeding with its summonses seeking financial records from Standing Akimbo LLC that it issued in the course of a civil audit of the business and its owners' tax liabilities, the company said in a brief Wednesday. The agency is not permitted ‘to use civil authority to enforce criminal law,’ according to the brief, which urged the appeals court to reverse a lower court decision permitting the summonses.
‘This court has only allowed the IRS drug crime investigations for 'civil tax purposes' only,’ the brief said. ‘The court has not legitimized such investigations for purposes of enforcing the Controlled Substances Act.’
Minn. Bill Floats Employer Tax Credit For Family Leave - Sanjay Talwani, Law360 ($). “Minnesota would offer a tax credit to small employers for the costs of paid family leave for workers under a bill introduced Thursday in the state Senate.”
S.F. 4394, sponsored by Sen. Julia Coleman, R-Waconia, would allow employers to claim a credit against individual or corporate income taxes for the costs of paid family leave for qualifying employees. The credit would be worth the costs of the paid leave benefits, up to $3,000 per employee.
Minn. Bill Would Extend Small-Biz Investment Credit- Sanjay Talwani, Law360 ($). “Minnesota would extend its small-business investment tax credit to 2030 and temporarily increase the maximum credit allowed statewide under a bill introduced Thursday in the state Senate.”
S.F. 4393, sponsored by Sen. David Senjem, R-Rochester, would extend through 2030 the small-business investment credit, now set to expire after 2022. The bill would boost the allowable statewide maximum value of the credits for 2022 from $5 million to $12 million before restoring it to $5 million for the remaining years.
Secret State and Local Tax Deals Targeted by New Campaign – Laura Mahoney, Bloomberg ($). “A coalition of advocacy groups dubbing itself Ban Secret Deals is turning up the heat on states to ban secret deals that give tax incentives to corporations.”
The groups are targeting non-disclosure agreements between state or local governments like a $1.2 billion deal Kansas lawmakers awarded to an unknown company and $16 million in tax breaks approved by the Fort Wayne, Ind., city council before all members knew it was for Amazon.
Ky. Lawmakers Pass Framework For Income Tax Cuts – Michael Nunes, Law360 ($). “Kentucky lawmakers agreed to incorporate a review process that hinges on state finances into their plan to reduce the state's individual income tax and expand its sales and use tax under an amended bill passed by the Legislature.”
An amended version of H.B. 8, sponsored by Rep. Jason Petrie, R-Elkton, and others, passed the state Senate by a 27-8 vote Tuesday. The bill would reduce the state's individual income tax if revenue and spending targets are met and expand the state's sales and use tax to new services.
Tax the rich? A new bill in City Council would place a levy on stocks and bonds – Jordan Levy, BillyPenn. “Just in time for budget season, Philadelphia Councilmember Kendra Brooks is reintroducing her push for a tax that would disproportionately affect the city’s richest residents.”
The bill is essentially a revival of Pennsylvania’s Personal Property Tax, a statewide levy on ‘intangible personal property’ — defined as direct holdings in stocks and bonds, as well as mutual funds and ETFs — at a rate of 0.4%. (For example, you’d owe $4 for every $1000 in holdings, or 4¢ out of every $10.) Tax qualified retirement accounts, a 401(k) or IRA, for instance, would be excluded.
As written, the tax would apply to all residents, but backers say it would mostly affect the wealthiest, who are much more likely to directly own stocks or bonds.
N.Y. Lawmakers Keep Popular Housing Tax Break Out of Budget Deal – Donna Borak, Keshia Clukey and Laura Nahmias, Bloomberg ($). “A controversial $1.7 billion property tax break program for developers won’t be part of New York state’s final $200 billion-plus budget deal, according to sources familiar with the matter.”
The tax abatement program, known as 421-a, is slated to expire in June. An overhaul of the tax credit was part of Gov. Kathy Hochul’s five-year, $25 billion plan to address the state’s affordable housing supply. Renewal of the program was dropped from the budget negotiations ahead of the April 1 deadline because of pushback from lawmakers, the sources said.
‘I can’t speak for what other bodies or other parties want to remove it or not. But what I can tell you is our conference was pretty adamant that this is a complicated issue that doesn’t expire until June and gives us time to work on it after the budget,’ state Senate Deputy Majority Leader Michael Gianaris told reporters on Thursday.
Mo. Senate OKs SALT Cap Workaround, Pot Tax Break - Sanjay Talwani, Law360 ($). “Missouri would enact a workaround for pass-through entities to avoid the $10,000 federal cap on the deduction for state and local taxes along with a tax break for medical marijuana under legislation passed Thursday by the state Senate.”
The Senate passed S.B. 807, sponsored by Sen. Denny Hoskins, R-Warrensburg, by a 24-7 vote. If enacted, the bill would create a tax on pass-through entities to enable them to bypass the federal $10,000 SALT deduction cap. It would also allow medical marijuana companies to deduct operating expenses and would lower taxes on new businesses for their first three years.
Nebraska advances sweeping income, property tax package – Grant Schulte, Associated Press. “Nebraska lawmakers gave initial approval Wednesday to multi-pronged tax package despite concerns that it would send the biggest benefits to high income-earners.”
The bill would cut the top personal and corporate income tax rates, create a new tax credit for property owners and accelerate the phase-out of a Social Security income tax that lawmakers approved last year. It advanced, 44-0, through the first of three required votes Wednesday night, although some lawmakers said they would push for more changes.
South Carolina Plans June 30 End to Covid-19 Nexus Modification - Jamie Rathjen, Bloomberg ($). “South Carolina’s Covid-19 nexus modification is planned to end June 30, a March 29 draft revenue ruling from the state revenue department said.”
Under the guidance, nonresident employees who normally work in South Carolina, but are working from home in another state, are still subject to South Carolina withholding. South Carolina residents who normally work in another state, but are working from home in South Carolina, are not subject to South Carolina withholding while tax is withheld for the normal work state.
IRS Mulling Foreign Withholding Tax Credits, Official Says - Natalie Olivo, Law360 ($). “The Internal Revenue Service is looking into issues that may arise under final regulations that determine the creditability of foreign withholding taxes based on whether the country's tax system matches up with U.S. rules, an agency official said Thursday.”
Thefinal regulations, which were issued in late December, generally deny credits for foreign withholding taxes on royalties unless the taxing country determines the source of that royalty income in ways that align with U.S. sourcing laws. This requirement has raised some issues, according to Peter Blessing, the associate chief counsel, international, in the IRS Office of Chief Counsel. He spoke during a webinar hosted by the American Bar Association's tax section.
In the preamble to the final regulations, the U.S. Treasury Department noted that U.S. laws source royalty income based on the place of use or the right to use the intangible property. The IRS recognizes that a lot of countries have sourcing rules that look to the place of use or place of residence of the payer, according to Blessing.
Contracts May Improve US Approach To Pillar 1, Officials Say - Dylan Moroses, Law360 ($). “A U.S. approach to determining so-called Amount B — the routine portion of profits subject to reallocation under the global tax plan's so-called first pillar — could include contractual standards for intercompany transactions, Treasury and IRS officials said Thursday.”
Internal Revenue Service senior advisers for the agency's treaty and transfer pricing operations practice area and an economist with the Treasury Department's Office of Tax Analysis presented a framework for how rule makers might consider defining, calculating and collecting Amount B, one component of the first pillar under the Organization for Economic Cooperation and Development's global tax deal.
Tumultuous Tax Planning Future Forecast for Multinationals – Michael Smith, Tax Notes ($). “Uncertainty and change are the themes of tax planning today, as ongoing negotiations on international tax agreements are leaving multinationals unsure which way the wind is blowing, practitioners said.”
Many countries have different views about how to tax multinational enterprises, sometimes enacting unilateral tax measures in the background of global tax reform efforts. The United States has proposed changes to its global intangible low-taxed income regime that raise the minimum corporate tax rate for foreign subsidiaries, and on March 28, Treasury released new green book proposals, one of which would replace the base erosion and antiabuse tax with an undertaxed profits rule (UTPR) that includes a qualified domestic minimum top-up tax to shield U.S. tax revenue from other countries' UTPRs.
Clock Ticks on Giving Input on PFIC Regs – Tax Notes ($):
Final proposed regulations on the treatment of domestic partnerships when determining gross income from foreign corporations are among guidance the IRS wants comments on soon.
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