Tax News & Views Telework Roundup

June 3, 2022

IRS Dangles Telework to Lure New Recruits to Beleaguered Agency – Naomi Jagoda, Bloomberg ($). “The IRS is in the midst of a return-to-office effort that will offer many employees the option to telework some or most of the time, something agency officials and union leaders view as an asset in recruiting.”

Further down the article:

Prior to the pandemic, about half of the IRS’s 78,000 employees were eligible for telework, according to a recent Treasury Inspector General for Tax Administration report. An average of about one third of agency employees teleworked at least once per week between October 2019 and early March 2020.

The number of remote IRS workers grew dramatically in the second half of March 2020 and grew steadily thereafter, according to TIGTA. In the week ending March 12—roughly two years into the pandemic—nearly 65,000 IRS employees reported telework time, the watchdog said.


IRS LB&I Staffing Down Due To Funding Delay, Official Says – Dylan Moroses, Law360 Tax Authority ($):

The Internal Revenue Service's Large Business & International division will likely hire fewer employees and suffer from a declining workforce this year as a result of delayed funding and attrition, an official said Thursday.'

The IRS division won't be able to hire as many new agents as a result of agency funding being delayed in a fiscal 2022 omnibus spending package that was enacted in March, said John Hinding, director of the cross-border activities practice area for LB&I. Hinding spoke in Washington, D.C., during a conference hosted by the U.S. branch of the International Fiscal Association. 


IRS Making Progress on Insurer-Focused Audit Campaigns - Erin Slowey, Bloomberg ($). “The IRS is making headway on insurer-focused audit campaigns led by its Large Business and International division, an agency official said Thursday at a Federal Bar Association tax insurance conference. The Tax Cuts and Jobs Act changed how life insurance reserves—the amount an insurance company sets aside to pay the estimated cost of an individual claim—are computed. The Computation of Life Insurance Reserves and Election to Recompute Life Insurance Reserves campaigns address noncompliance issues ‘related to unreported income, undisclosed assets, or any other tax avoidance scheme.’"


Court Walks Back Requiring IRS To Return Microcaptive Docs – Theresa Schliep, Law360 Tax Authority ($). “A Tennessee federal court walked back an order requiring the IRS to return documents it received under a now-invalidated notice requiring the disclosure of microcaptive insurance arrangements, saying Thursday that it can't force the agency to give back the records.”


White House weighing oil profits tax to fund consumer rebate, official says – Trevor Hunnicutt, Reuters. “The White House is considering proposals that would tax oil and gas windfall profits in order to provide a benefit to consumers struggling with higher energy prices, a U.S. official said on Thursday.”

D.C. scuttlebutt: Just because the Biden Administration is thinking about doing something doesn’t mean that they will do it. But if it does materialize, passage would likely require ten Senate Republicans to support it. That is highly unlikely to happen. 


Crypto Industry Eclipses Defense, Big Pharma in Political Giving – Allyson Versprille and Bill Allison, Bloomberg ($):

Crypto executives are now pouring more money into US politics than many of America’s industrial stalwarts.

Political donations from the sector surged to more than $26 million during 2021 and the first three months of this year. That influx of cash is outpacing spending by internet giants, drug makers and the defense industry -- providing a fresh pool of financing for candidates heading into November’s congressional elections.


Proposed menthol ban highlights debate over ‘sin tax’ revenue – Laura Clason, Roll Call. “A proposed federal ban on menthol cigarettes has underscored the tension lawmakers face in using so-called ‘sin tax’ revenue to fund critical social programs at the state and federal levels. For decades, states have used sin taxes — excise taxes placed on things like tobacco, alcohol and gambling — for health, education and other public programs. Revenue has fallen over the years along with smoking rates, and the Food and Drug Administration’s recent proposal to ban menthol cigarettes and flavored cigars could trigger an even sharper decline."


Defense CEOs urge congressional leaders to pass Bipartisan Innovation Act – Max Cohen, Punchbowl News ($). “The CEOs of Lockheed Martin, Leidos, Northrop Grumman, BAE Systems, Raytheon and General Dynamics recently wrote a letter to top congressional leaders urging the passage of the Bipartisan Innovation Act.”

My two cents: Democratic leaders hope that both chambers of Congress pass this bill before July 4th. That’s a big ask and will likely require the support from both political parties.

The bill is not expected to include tax provisions. The reason is because a cluster of lawmakers refuse to support business tax relief (like an R&D fix) until Congress expands the Child Tax Credit to what it was last year. Another group of lawmakers oppose expanding the Child Tax Credit.

Barring some sort of give-and-take (I mean, these lawmakers are supposed to be supreme negotiators, right? Isn’t that why they’re elected?) a bill including tax provisions is not expected to occur until later this year, possibly after November’s elections.


Crowdfunding complexities may produce tax surprises – Roger Russell, Accounting Today. “Social media has fostered both the desire and the ability to raise funds for a number of worthy purposes. On their face, the tax consequences should be simple to analyze, but in practice many taxpayers are caught unaware.”

‘In general, revenue from crowdfunding is includible in gross income, unless it meets certain exceptions,’ [said tax attorney Barbara Weltman]. ‘Money received from crowdfunding without an offsetting liability — such as a repayment liability — is includible in gross income. The Internal Revenue Service made clear in a 2016 notice that the facts and circumstances of a particular situation must be considered to determine whether the money received in that situation is income. What that means is that crowdfunding revenues generally are includible in income if they are not loans that must be repaid, capital contributed to an entity in exchange for an equity interest in the entity, or gifts made out of detached generosity and without any quid pro quo. However, a voluntary transfer without a quid pro quo is not necessarily a gift for federal income tax purposes. In addition, crowdfunding revenues must generally be included in income to the extent they are received for services rendered or are gains from the sale of property.’


Miss. Car Dealer's $5M Assessment Complaint Tossed – Jaqueline McCool, Law360 Tax Authority ($). “A Mississippi car dealer's complaint over tax assessments of nearly $5 million was dismissed as a federal district court ruled that he failed to prove the court had subject-matter jurisdiction.”


California Lawmakers Float Tax Break Ideas to Spend Billions – Laura Mahoney, Bloomberg ($):

California lawmakers flush with cash are advancing billions of dollars in tax breaks aimed at businesses and low-income residents as they bargain with Gov. Gavin Newsom over what to include in the annual budget.”

Newsom and fellow Democrats in the Legislature have made it clear they want to give some of the state’s $97.5 billion surplus to Californians directly, but they haven’t agreed on the details yet. Newsom’s proposal to send $400 to every car owner would cost $11.5 billion on its own, although Democrats on Wednesday countered with an $8 billion plan to send $200 to every taxpayer and dependent earning less than $125,000 a year, not car owners.


Kentucky’s Beshear Halts 2-Cent Gas Tax Hike Amid Rising Costs – Donna Borak, Bloomberg ($). “Kentucky Gov. Andy Beshear’s (D) administration on Thursday used an emergency measure to prevent the state’s gas tax from increasing 2 cents per gallon on July 1.”


Colo. For-Profit Child Care Facilities Owners Allowed Tax Break – Sanjay Talwani, Law360 Tax Authority ($). “Charitable child care facilities in Colorado will be eligible for property tax breaks even if owned by for-profit entities under legislation signed into law by Gov. Jared Polis. Under H.B. 1006,which the Democratic governor signed into law Wednesday, a child care facility will qualify for a property tax exemption if the operator is a charitable organization, regardless of the status of the owner."


DeSantis Signs $109.9 Billion Budget with Tax Cuts, State Guard - Danielle Moran, Bloomberg ($). “Florida Governor Ron DeSantis signed into law a $109.9 billion budget that includes a pay boost for teachers and a second round of checks to law enforcement officers, drawing on better-than-expected tax revenue collections and allocating a portion of the state’s federal stimulus dollars.”


Ohio Lawmakers Unanimously Approve Pass-Through Entity Tax Break – Alex Ebert, Bloomberg ($):

Ohio business owners selling stakes in pass-through entities stand to score big state income tax breaks under a measure the Ohio House and Senate passed unanimously Wednesday.

The bill (H.B. 515) ensures sales of pass-through entities qualify as ‘business income’ instead of personal income for state income tax purposes so long as the taxpayer hasn’t ‘materially participated’ in the running of the business in recent years. The change would qualify for Ohio’s generous treatment of pass-through business income—deducts first $250,000 in earnings, taxes above that at flat 3%—and eliminate a disparity between in-state and out-of-state investors.


Treasury Expects to Align US Foreign Income Tax With Global Pact - Michael Rapoport, Bloomberg ($). “A Treasury Department official said Thursday she was 'confident' the US would enact changes in its minimum tax on foreign income to bring it into line with the global minimum tax. Treasury expects any budget reconciliation package that comes out of Congress will include planned changes in the US tax, known as GILTI, for global intangible low-taxed income, said Rebecca Kysar, counselor to the assistant Treasury secretary of tax policy.”

This is a ‘don’t count your chickens before they hatch’ situation. The reconciliation reference is the Build Back Better plan that has been stalled in the Senate since last Thanksgiving. Since then, several hurdles remain uncleared in passing the bill. The question now is if those hurdles will ever be cleared.  And yes, some lawmakers refer to the reconciliation bill as "Build, Back, Never."


Tax Executives Look for Changes in Foreign Tax Credit Rules – Michael Rapoport, Bloomberg ($):

Corporate tax executives said they hope the Treasury Department’s planned revisions to fiercely-debated foreign tax credit regulations will address companies’ concerns about their rigid requirements.”

One problem with the foreign tax credit rules, executives at the IFA conference said, is that the rules depend in part on whether or not the US has a tax treaty with a particular country that covers a particular tax. That means that the same kind of tax can be eligible for the foreign tax credit in one country but not eligible in another.

But tax treaties take a long time to enact, and require ratification by a two-thirds vote of the Senate.


Treasury: U.S. Supports Pillar 1 Exclusion for Reinsurers – Chandra Wallace, Tax Notes ($). “The United States supports a carveout under pillar 1 of the OECD global tax reform plan for regulated financial institutions that includes entities engaged in reinsurance and asset management, according to a Treasury official.”


Debt Could Reach 125% of GDP With Irresponsible Actions – Committee for a Responsible Federal Budget. “The Congressional Budget Office's (CBO) new budget projections find that debt will reach a record 110 percent of Gross Domestic Product (GDP) ($40.2 trillion) by the end of Fiscal Year (FY) 2032, while the deficit will reach 6.1 percent of GDP ($2.3 trillion) and interest costs will total a record 3.3 percent of GDP ($1.2 trillion). These current law projections may prove optimistic, however, since they assume policymakers will allow a number of temporary policies to expire, only grow discretionary spending with inflation, and won't pass any new deficit-financed legislation.”

Current law means that the CBO’s prediction assumes that the individual tax cuts enacted as part of the 2017 tax reform bill will not be extended and will expire in 2026. This means that individual tax rates will revert to pre-2018 level, i.e., tax increases. Congress will likely extend the tax cuts in the 2017 tax reform to the middle class, at the very least. This means that less revenue will actually come to the federal government than what the CBO projected, and the debt situation gets uglier.  

Fact: The total public outstanding national debt was $30.5 trillion as of May 31, 2022, according to the Treasury Department. It’s gotten bigger since.

Billion- and trillion-dollar figures get thrown around a lot on Capitol Hill with no real recognition for the amount of money they are talking about.  Below illustrates the difference between billion and trillion, according to Tax Facts.

How much more is a Trillion?

  • A Billion seconds ago, it was 1980. A Trillion seconds ago, was 29,380 BC – Cro-Magnon man inhabited Europe.
  • A Billion minutes ago, Jesus walked the earth. A Trillion minutes ago, was the first appearance of Homo Erectus on the earth.
  • A Billion hours ago, our ancestors were living in the Stone Age. A Trillion hours ago, was 200 million BC – the Jurassic Age.
  • A Billion days ago, no one walked the earth on two feet. A Trillion days ago, the earth was without form.
  • So maybe measuring in time isn’t much help. Once I get beyond the minutes, I have trouble understanding how much more a Trillion is than a Billion.  Let me try it in dollars…
  • In 2005, the US government spent a Billion dollars every 8 hours and 20 minutes. In 2012, the government is spending a billion dollars every 2 hours and 18 minutes.

These examples are about one billion, i.e., single billion. Multiply every example by roughly 30 to get a true sense for the size of the national debt.


It’s National Repeat Day!

Come again? 


Another way to celebrate is by repeating some of the simple tasks of the day.  Wash the dishes twice.  Make the same meal for lunch as you do for supper. Watch the same movie twice. The 1993 film Groundhog Day comes to mind. Send duplicate text messages.

Speaking of sin taxes (above), does Repeat Day apply to bourbon and cigars? If so, I’m in, and Ibid!

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