Tax Update Blog

Tax News & Views Racing to Hire Roundup

April 4, 2022 | Blog
By Jay Heflin

IRS Races to Hire Thousands in Hot Job Market to Get Rid of Paper Jam – Richard Rubin, Wall Street Journal ($). “Rolling carts packed with unprocessed tax returns line the hallways and fill the storerooms of the IRS campus here off Interstate 15. Any checks have long since been removed and deposited, and the returns have been sorted by arrival date and form type, December’s 1120s separated from November’s 1040s. And then they sit, waiting for a scarce government employee to process them.”

These returns made it here, inside an Internal Revenue Service building, but the numbers written on them may not reach IRS computer systems for months, leaving taxpayers without refunds or any way to know if their paperwork has even been received. If there is a fire, everything is gone.

 

IRS has $1.5 billion in unclaimed refunds. But April 18 is last day to claim the money – Aimee Picchi, CBS News. “The IRS said it has unclaimed tax refunds of almost $1.5 billion — and the tax agency is urging people to act before April 18 to claim any money that's due to them.”

The unclaimed refunds stem from about 1.5 million taxpayers who didn't file a tax return in 2018, the agency said. Because there's a three-year period to claim the refunds, the window for getting the money will close for most taxpayers on April 18, which is this year's tax deadline for federal taxes. People in Maine and Massachusetts have until April 19, 2022, to claim the refunds, due to the two states' Patriots' Day holidays.

 

The House is expected to vote on the following bill this week:

BGOV Bill Summary: Expanded H.R. 3807, Restaurant, Small Biz Aid - Michael Smallberg, Bloomberg ($). "The Small Business Administration would be given additional funds under an expanded version of H.R. 3807 to assist restaurants and small businesses that didn’t receive relief from previous Covid-19 aid packages."

The measure would allocate $42 billion to replenish the Restaurant Revitalization Fund and $13 billion to establish a new program for small businesses that lost revenue during the Covid-19 pandemic... The measure is separate from a supplemental appropriations package that senators are negotiating to provide additional Covid-19 emergency aid for vaccines and treatments.

Eligible payroll costs wouldn’t include certain wages and premiums covered by tax credits.

The SBA would have to use tax records or other reliable sources, such as certified accounting statements, to determine eligibility and award amounts. The Treasury Department would have to share data with the SBA through an automated exchange.

Awards wouldn’t be included in gross revenue for income tax purposes.

House readies relief package for restaurants, other industries – Lindsey McPherson, Roll Call. “The House might vote [this] week on a small-business pandemic aid package that would provide $42 billion for additional restaurant relief and $13 billion for other ‘hard hit’ industries.”

Businesses would qualify for tax-exempt awards, capped at $1 million per business, if they employ 200 or fewer employees and have suffered a pandemic-related revenue loss of at least 40 percent. The bill says first priority should go to businesses whose loss was greater than 80 percent and second priority to those with losses greater than 60 percent, with businesses that have 50 or fewer employees being considered first in both categories.

 

House Votes to Decriminalize Marijuana, Expunge Convictions - Jarrell Dillard, Bloomberg ($). “The House voted Friday to decriminalize marijuana, expunge federal convictions on pot-related charges and impose taxes on cannabis producers and importers. The legislation passed 220-204 with support from most House Democrats and three Republicans. Two Democrats voted against the bill."

The House had passed a version of the bill in 2020, but it was never considered in the Senate, where Majority Leader Chuck Schumer plans to introduce a separate marijuana legalization bill this month.

House Committee Approves Chamber Vote to Decriminalize, Tax Cannabis – Jay Heflin, Eide Bailly:

The bill creates a 5% sales tax on marijuana and marijuana products, which would eventually increase to 8%.

Revenue from the sales tax would go to an 'Opportunity Trust Fund' that the legislation would also create.

House votes to legalize cannabis, but Senate has its own ideas – Chris Cioffi, Roll Call:

The House bill and Senate proposal differ on how to impose excise taxes for marijuana importers and distributors. Senators sought to set the rate at 10 percent, and it would rise to 25 percent over five years. Advocacy and industry groups argue the rate would be too high, even though proposed tax credits would halve that rate for small businesses.

 

Lawmakers Seek Trucker Tax Credit - Patrick Ambrosio, Bloomberg ($). “New truckers would be eligible for a refundable tax credit of up to $10,000 under a bipartisan bill introduced Friday.”

The bill, cosponsored by Reps. Abigail Spanberger (D-Va.) and Mike Gallagher (R-Wis.), would also create a two-year refundable tax credit of up to $7,500 for truckers who drive at least 1,900 hours in the year.

It is not clear where this bill will go, but it could be included in a large piece of legislation that deals with supply-chain issues. 

 

House GOP Plans More Tax Cuts Despite Inflation Woes – Stephen Cooper, Law360 ($). “House Republican lawmakers, despite their own dire warnings about inflation caused by unnecessary fiscal stimulus, plan to push for more business tax incentives if they wrest control of the House of Representatives from Democrats in the fall midterm elections.”

GOP lawmakers want to make it easier for businesses to write off the costs of their research and development and business interest expenses as part of a "Day 1" agenda now being developed by a House Republican task force on jobs and the economy. Those incentives, which expired at the end of 2021, are among the first steps in the House GOP's effort to win power and ensure a complete renewal of the 2017 tax overhaul law in 2025.

 

Biden’s Bid to Salvage New-Deal Dream Hinges on Manchin – Again – Erik Wasson, Nancy Cook and Laura Davison, Bloomberg ($). “Every time President Joe Biden sits at his ornately carved 19th-century oak desk in the Oval Office, he’s confronted with a massive portrait of Franklin D. Roosevelt reminding him of an unfulfilled promise to bring sweeping social change. His Build Back Better plan rivaled the ambition of FDR’s Depression-era New Deal, with a price tag of $3.5 trillion.”

Its demise boils down to a miscalculation in the White House’s handling of Joe Manchin , the Democratic senator from a Trump-loving, coal-dependent state who can be vague and unpredictable in what he will support. Whether any of it can be salvaged will depend on the extent to which Biden is willing to get personally involved in mending the relationship with the most powerful politician in Washington, a man who has been tagged with the moniker ‘President Manchin.’

Manchin’s latest offer: $1.8 trillion in tax increases and drug cost savings that pay for climate change initiatives and cuts to the deficit.

 

BTAX OnPoint: Administration Proposes Rate Hikes on Wealthiest - Tammara Madison, Bloomberg ($). “Increased corporate and individual rates are the crux of the tax changes proposed in the fiscal 2023 “Greenbook” released by the Treasury Department March 28.”

The Biden administration’s second Greenbook seeks additional revenue increases, tax administration process changes, and closing of loopholes.

The wealthiest taxpayers would pay income taxes at higher rates and would be subject to a minimum tax of 20% on their income, including unrealized gains. Businesses would be subject to additional compliance and reporting requirements, and the corporate income tax rate would increase to 28%.

Explainer: The Greenbook details tax proposals in the president's budget. Budgets do not become law. For any budget proposal to become law it must be included in legislation that gets enacted. 

 

Taxing NFTs Is Tricky, but Puerto Rico, Washington Are Trying – Michael Bologna, Bloomberg ($). “At least 31 states apply sales taxes to digital products and services, but few if any tax dollars are flowing to them from the hottest commodity in the digital economy: nonfungible tokens, or NFTs.”

The revenue gap, however, could be closed soon in two jurisdictions. Both Washington state and Puerto Rico are drafting regulations that would stretch their sales tax on digital products to include NFTs, unique digital assets that act as certificates of authenticity for digital products—including works of art, music, tickets, and collectibles. No other U.S. state revenue agency has yet introduced an NFT sales tax strategy.

Despite their hands-off postures, other states will be watching Washington and Puerto Rico closely. Washington, home to tech giants like Microsoft Corp. and Amazon Inc., has been a leader on tax policy regarding digital goods at the Multistate Tax Commission, and Puerto Rico has actively structured its tax code to accommodate cryptocurrency investments.

 

States Sort Out Income Tax on Remote Workers as Covid-19 Fades – Laura Mahoney, Bloomberg ($):

South Carolina’s adjustments to income tax for remote workers are shifting again as the pandemic eases. California is flush with money but an arcane 1970s law complicates tax policy and spending choices. Washington is the first state to say it will issue guidance on taxation of non-fungible tokens.

 

Illinois Senate Democrats Propose $1B Tax Relief Plan - Amanda Vinicky, WTTW. “A tax-free back-to-school shopping spree, tax rebates in the mail, and respite – albeit, pennies’ worth – from what would otherwise be a bump in the state’s tax on gasoline are on the table in Springfield as legislators look to wrap up the session with plenty of time to hit the campaign trail leading up to a June primary.”

With a week to go before the Illinois legislature’s planned April 8 adjournment, Democrats in the state Senate on Friday introduced an election-year ‘inflation-busting’ plan (Senate Bill 1150) offering tax breaks to low-income workers, homeowners, parents, teachers, drivers and even volunteer first responders.

 

$90 million in tax cuts approved by Kansas Legislature — but no axe the food sales tax – Jason Tidd, The Topeka Capital-Journal. “Kansas lawmakers approved a ‘massive’ tax policy bill late on the last day of the regular session, cutting $90 million in tax revenue for the next fiscal year while leaving the food sales tax for after the spring break.”

A food sales tax cut may still be in the works for the veto session later this month, but the plan advanced by Republican leadership would wait to start a gradual reduction until after the November election.

 

Tribal Pass-Through Entities Free From Maryland Income Tax – Perry Cooper, Bloomberg ($). “Maryland can’t impose pass-through entity income tax on government contracting companies owned by a federally chartered tribal corporation, a state appeals court ruled.”

None of Chickasaw Nation Industries Inc.'s income is taxable under federal law, so CNI has no nonresident taxable income in Maryland, the Maryland Court of Special Appeals ruled Thursday.

CNI, a federally chartered tribal corporation, owns CNI Government LLC, which is made up of six LLCs. The subsidiaries are all disregarded entities for income tax purposes, meaning their gains and losses are included in the parent company’s tax return.

 

GOP Senators Not Consulted on Global Tax Deal Talks, Crapo Says - Kaustuv Basu, Bloomberg ($). “The Treasury Department has failed to engage meaningfully with Senate Finance Committee Republicans on the OECD global minimum tax tax agreement, the panel’s ranking member has said.”

Sen. Mike Crapo (R-Idaho) said in a letter Thursday to Treasury Secretary Janet Yellen that briefings provided by Treasury staff about negotiations had come after they occurred. The March 31 letter was signed by all 14 Republicans on the committee, and comes after letters sent on Dec. 22 and Feb. 16.

‘After-the-fact briefings with committee and leadership staff do not constitute meaningful consultation,’ Crapo wrote. Treasury had not provided a through analysis and data to evaluate the effects of the agreement, he said.

The Senator's letter is here.

 

Tax challenges of digitalisation: OECD invites public input on the draft rules for scope under Amount A of Pillar One – OECD:

As part of the ongoing work of the OECD/G20 Inclusive Framework on BEPS to implement the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, the OECD is seeking public comments on the Draft Model Rules for Domestic Legislation on Scope under Amount A of Pillar One.

The Inclusive Framework on BEPS has agreed to release this public consultation document (également disponible en français) in order to obtain public comments, but the draft rules do not reflect consensus regarding the substance of the document. The stakeholder input received on the Draft Model Rules for Domestic Legislation on Scope will assist members of the Inclusive Framework on BEPS in further refining and finalising the relevant rules.

Interested parties are invited to send their written comments* no later than18 April 2022...

 The document is here.

 

Summers Says Billionaire Tax Bad Idea, Urges Corporate-Tax Focus - Christopher Anstey, Bloomberg ($). “Former Treasury Secretary Lawrence Summers urged the Biden administration to focus on passing legislation to implement a historic global corporate-tax deal, while criticizing the White House’s call for a so-called billionaire tax."

‘It is absolutely essential -- the single most important priority for tax policy going forward is that we do what is necessary to move forward the global corporate-tax agreement,’ Summers told Bloomberg Television’s “Wall Street Week” with David Westin on Friday.

 

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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.