May 20, 2022
IRS Data Security - Patrick Ambrosio, Bloomberg ($). “The Government Accountability Office Thursday released a report providing an overview of cases of willful unauthorized access and disclosure of federal tax information by IRS employees. The report analyzes data about IRS employee misconduct cases from fiscal year 2012-21 and describes how unauthorized access and disclosure cases are investigated and how employees with violations are punished.”
The report comes after ProPublica last year began publishing articles based on the confidential tax data of wealthy individuals. The Treasury Inspector General for Tax Administration and other federal agencies have been investigating the disclosure of the tax records, and Republican lawmakers have been frustrated that there haven’t been more updates about the investigations.
For those unfamiliar with ProPublica, it is an investigative organization that has published a series of reports on tax information that focused largely on wealthier taxpayers. ProPublica does not say that the information came from the IRS, but gets really close to saying just that.
Jesse Eisinger, senior reporter and editor at ProPublica:
We received this vast trove of information. We’re unfortunately not talking about this in great detail. The reason we’re not talking about it is that one of the top principles of being journalists is to protect sources, especially if those sorts of sources seem to have taken some risk to get you information that you believe is in the public interest. So we received some information, and my first experience with it passed the initial smell test. It looked like a massive amount of information about taxes. It looked real, it had jargon, it had words that the IRS uses.
ProPublica’s position on protecting sources is pretty much universal with all news outlets. Still, IRS tax data is not for public consumption and the GAO found that the agency completed 1,694 investigations on employees potentially engaged in “willful unauthorized access” (referred to as “UNAX”) between 2012 and 2021. If spread-out evenly over the course of the ten-year period, that is potentially one UNAX happening every other day at the IRS.
From the GAO report:
Of the 1,694 UNAX cases, 12 percent (204) also included an unauthorized disclosure issue. IRS substantiated 27 percent of the 1,694 UNAX cases as violations and about 24 percent of the 204 unauthorized disclosure cases… The majority of UNAX and unauthorized disclosure violations during fiscal years 2012-2021 were committed by nonmanagerial employees… More than 82 percent of UNAX violations resulted in the offending employee's suspension, resignation, or removal. In all cases where IRS found employees committed both UNAX and unauthorized disclosure violations, the offending employee also was suspended, resigned, or removed.
IRS probed hundreds of cases of unauthorized access to taxpayer data – Michael Cohn, Accounting Today:
A report released Thursday by the Government Accountability Office found the IRS completed 1,694 investigations into the willful unauthorized access of tax data between fiscal years 2012 and 2021 by employees and 27% were found to be violations.
Such access is against the law and could even lead to criminal prosecution.
The IRS needs to get to the bottom for why its employees are stealing private tax information. Period.
Ukraine Donations Eligible for Tax-Advantaged Leave Programs - Erin Slowey, Bloomberg ($). “The IRS on Thursday detailed tax rules for leave-based donation programs set up to benefit charitable organizations focused on Ukraine. The guidance (Notice 2022-28) explains the federal income and employment tax implications for employers who offer workers the opportunity to donate vacation, sick, or personal leave time in exchange for cash payments to charitable organizations under Section 170(c).”
Notice 2022-28 is here.
Manufacturers Back R&D Tax Fix in Chips Bill - Patrick Ambrosio, Bloomberg ($). “A major trade organization representing manufacturers is pushing for lawmakers to add more favorable tax treatment of research and development costs to legislation designed to boost US economic competitiveness with China.”
A bicameral conference committee is working to reconcile differences between House and Senate versions of the competition bill. The National Association of Manufacturers, in a letter released Thursday, detailed a 10-point plan for the conference committee, including the restoration of full and immediate expensing for R&D spending.
It is unclear at this point if tax provisions will be included in the "competition bill." Lawmakers can't agree on which tax provisions should be included, which could mean none of them get included.
Revived Energy, Climate Deal Sought in Congress - Christina Banoub and Naoreen Chowdhury, Bloomberg ($). “President Joe Biden vowed to cut US carbon emissions in half by 2030 and climate efforts have been among the top legislative priorities for Democrats in Congress. Yet as Election Day draws near, lawmakers are at a stalemate on advancing legislation for Biden to sign.”
Revived? The second sentence states that “lawmakers are at a stalemate on advancing legislation.”
Then there is this head-scratcher:
Outlook Good For Passing Energy Incentives, Dem Aide Says – Joshua Rosenberg, Law360 ($). “There's a good chance the U.S. Senate will approve via reconciliation much of the energy incentives and other tax provisions the House passed last year as part of the Build Back Better Act, a Democratic aide said Thursday.”
Many of the Democrats' proposals should appeal to Sen. Joe Manchin, D-W.Va., who needs to be won over in order for the measures to pass, Robert Andres, senior policy adviser to the Senate Finance Committee, said during a conference hosted by the professional services organization Novogradac.
The U.S. Chamber explains how a deal could be had:
An Effective Climate and Energy Security “Grand Bargain” Is Within Reach - Martin DurbinSenior Vice President, Policy, U.S. Chamber of Commerce. “Pursuing climate progress and energy security are not mutually exclusive. We can both increase domestic production of oil and natural gas and accelerate the energy transition.”
Democrats are the only lawmakers who are expected to support the passage of this bill (i.e., Build Back Better). Many of them have railed against increasing oil production. It is not clear if the war in Ukraine has changed all of their minds – and it will take all of them to pass this bill.
SALT Limit Redux as Reconciliation Talks Quicken – Doug Sword, Tax Notes ($). “With budget reconciliation talks warming up this month, a handful of House Democrats are making a renewed push to raise the profile of efforts to roll back the $10,000 state and local tax deduction limit.”
House Ways and Means Chair Richard E. Neal, D-Mass., told reporters May 19 that he is ‘open to suggestions’ on taking the unusual step proposed by members of the SALT Caucus of using the appropriations process to lessen the limit’s impact.
Once more with feeling: Lawmakers are not in agreement on whether a SALT fix should be included in the bill.
Grants for restaurants, small businesses blocked in Senate – Lindsey McPherson, Roll Call. “Deficit-concerned senators blocked the Senate from considering a $48 billion aid package for restaurants and other small businesses Thursday, likely dealing a fatal blow to a monthslong effort to provide a final round of relief for industries that suffered major revenue losses during the pandemic.”
Lawmakers urge a fix for the ‘family glitch’ limiting premium tax credits – Michael Cohn, Accounting Today. “House Ways and Means Committee Chairman Richard Neal, D-Massachusetts, and Senate Finance Committee Chairman Ron Wyden, D-Oregon, sent a letter Thursday to Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig expressing support for a proposed regulation to reduce health care costs for Americans with unaffordable employer-sponsored coverage by fixing the so-called ‘family glitch,’ giving some family members access to the Affordable Care Act’s premium tax credits.”
The letter is here.
Crypto Accounting Guidance - Patrick Ambrosio, Bloomberg ($). “Mark Uyeda, nominated to fill one of the open seats on the Securities and Exchange Commission, told a Senate panel that he wants to know how cryptocurrency accounting guidance issued in March intersects with state and federal banking requirements.”
Harvard Will Pay More Taxes Than Ford, Chevron, Bacow Says - Janet Lorin, Bloomberg ($). “Harvard University’s tax bill this year will exceed that of several large US corporations, said Lawrence Bacow, the school’s president.”
The Ivy League college is among several that are subject to a 1.4% excise tax on investment earnings. The levy was passed during the Trump administration to help offset corporate tax cuts.
‘I think this is bad public policy. We’re a charitable institution,’ Bacow said Wednesday at the Economic Club of Washington. ‘To put it in context, Harvard this year will pay more in federal tax than General Motors, more in federal tax than Ford, more in federal tax than Chevron. I could go on.’
Adding more context:
From CollegeCalc: “Tuition for Harvard University is $49,653 for the 2020/2021 academic year. This is 67% more expensive than the national average private non-profit four year college tuition of $29,812. The cost is 44% more expensive than the average Massachusetts tuition of $34,405 for 4 year colleges.”
So after four years roughly $200,000 has been paid by one student - the school has more than one student. Meanwhile, the Harvard endowment hit $53.2 BILLION for fiscal year 2021, according to The Harvard Crimson.
More from the Op-Ed:
Despite this monumental financial gain of over $11 billion this past year, the University continues to lower its budget allocated for essential workers, citing 'continued financial pressure' due to the pandemic. Before the semester began, Harvard’s proposed new dining schedules threatened to cut the number of full-time dining employees by 20 percent, limiting their access to employee benefits and increasing their financial strain after an already trying year.
The cost for a 2022 Ford Escape starts at $26,670.
Donor-Advised Funds Bill Would Discourage Giving, State AGs Warn – Fred Stokeld, Tax Notes ($). “Some state attorneys general are arguing that federal legislation designed to accelerate charitable distributions from donor-advised funds could discourage donations to charity. The restrictions proposed by the Accelerating Charitable Efforts (ACE) Act (S. 1981 and H.R. 6595) ‘will chill donations and frustrate the ability of charities to receive funding,’ 14 state attorneys general predicted in a May 18 letter to House and Senate leaders."
Arizona’s Challenge to Covid Aid Restrictions Revived on Appeal – Perry Cooper, Bloomberg ($). “The first federal appeals court to consider whether the government may enforce federal restrictions on nearly $200 billion in Covid-19 aid to states revived a challenge led by Arizona.”
‘We hold that Arizona has standing to challenge the American Rescue Plan Act, both because there is a realistic danger of ARPA’s enforcement, and because there is a justiciable challenge to the sovereignty of the State, which alleges infringement on its authority to set tax policy and its interest in being free from coercion impacting its tax policy,’ the U.S. Court of Appeals for the Ninth Circuit ruled Thursday.
$2.5 Billion Income Tax Cut Clears Michigan Legislature - Alex Ebert, Bloomberg ($). “The Michigan House and Senate passed a sweeping tax cut Thursday that would amount to roughly $2.5 billion in relief for residents. The Republican-backed bill. (H.B. 4568) would drop the state’s flat income tax rate to 4% from 4.25% beginning in the 2023 tax year and raise the personal income tax exemption by $1,800. The 2021 exemption was $4,900.”
First round of tax rebates heading to New Mexicans – Curtis Segarra, KRQE News. “As early as Thursday, hundreds of thousands of New Mexicans will start seeing an extra $250 in their bank accounts. Just over a month after lawmakers approved cash payments for New Mexicans to help pay for higher costs of living and surging gas prices, the state now says the first round of money is hours away from going out.”
Massachusetts to Send Second Round of $500 Checks to Workers - Angélica Serrano-Román, Bloomberg ($). “Approximately 330,000 Massachusetts taxpayers will receive a $500 check beginning in June as part of a second round of payments to low-income workers. Gov. Charlie Baker (R) announced Thursday a plan to disburse the checks under the Covid-19 Essential Employee Premium Pay program, which was passed by the Legislature and signed by Baker last December. The program is funded by American Rescue Plan Act, or ARPA, funds.”
Treasury Mulls Package of Changes to Foreign Tax Credit Rules - Michael Rapoport, Bloomberg ($). “The changes could be a combination of new rules, clarifications to the existing regulations that Treasury issued in December, and other administrative guidance from the IRS, said Jose Murillo, deputy assistant Treasury secretary for tax affairs. They could include examples to illustrate how the regulations are intended to apply to certain taxes, Murillo told Bloomberg Tax.”
Global Tax Deal Timeline to Reflect Need for Input, Official Says - Isabel Gottlieb, Bloomberg ($). “Officials working to finalize the global tax deal want to take the time needed to get stakeholders’ input and make sure the work is done well, the chair of the OECD’s Committee on Fiscal Affairs said.”
Yippee! It’s funny tax quotes time! Below are side-splitting quotes that are unsourced:
'I put all my money into taxes. They're the only thing that's sure to go up!'
'The Government says we should be proud to be paying taxes. I think I could be just as proud for about a third of the money.'
'Trying to do your own taxes is like a do-it-yourself mugging.'
Happy National Rescue Dog Day! Dog adoptions skyrocketed during the pandemic, but more recently have reversed course. If you’re looking for a new best friend, head to your local dog rescue facility!
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.