Tax Update Blog

Tax News & Views Once More Unto the Breach (Again) Roundup

June 17, 2022 | Blog
By Jay Heflin

Advocates Seek to Revive Spending Bill With Eye on West Virginia – Zach Cohen, Alex Ruoff, Erik Wasson and Kellie Lunney, Bloomberg ($):

Groups and lawmakers advocating for Democrats’ domestic agenda, from clean energy to health care, are renewing campaigns tailored to their target audience: Joe Manchin…. The recent campaigns aren’t the first time groups have targeted Manchin specifically since Democrats took a slim, 50-vote majority in the Senate. But many activists see the next few months as a make or break moment for their priorities, adding to pressure to sway the key vote.

House Democrats prod Senate, Biden on climate legislation – Benjamin Hulac, Roll Call. “Congressional Democrats are redoubling their push for a sweeping climate bill this Congress, urging President Joe Biden to ‘do everything’ in his power to make a deal as the country braces for a hot and arid summer and the world’s atmosphere breaks greenhouse gas records.”

Further down the article:

‘We have presented a consensus of diverse voices, diverse communities, diverse perspectives in the political sphere, and we have suggested that we have come together,’ Rep. Paul Tonko, D-N.Y., said at a news conference Thursday about the House Democrats' message to the Senate. ‘Now tell us what you can send us back, because it is so important that we get this done.’

AP Interview: Biden says a recession is ‘not inevitable’ – Josh Boak, Associated Press. The article touches on a lot of issues, including how to pass the reconciliation bill that has stalled in the Senate. On that topic, the article states the following:

The president is still trying to steer his domestic agenda through Congress, after an earlier iteration last year failed to clear a 50-50 Senate. Biden said ‘I believe I have the votes’ to lower prescription drug prices, reduce families’ utility bills with tax incentives and place a 15% minimum tax on corporations. He said his plans would lower expenses for many Americans, though the measure would be scaled back from earlier intentions for an expanded child tax credit, universal pre-kindergarten and other programs.

Big hurdle: Senator Manchin does not support expanding the Child Tax Credit. He has said that it will worsen inflation. He even went so far to say that the payments would buy nefarious things. How do you backtrack from that and support any expansion? Meanwhile, roughly 100 House Democrats support that expansion. House Democratic leaders have said that whatever bill the Senate can pass will be passed in the House. If the Senate passes a bill that does not include a CTC expansion it is not clear if the House has the votes to pass the same bill, according to lawmakers. 

Why does this bill matter to tax folks? This legislation is the only way tax increases can pass Congress because it has protections that other bills do not have. 

This is also the billionth time that Democratic groups and lawmakers have pushed for passage of the bill, but who's counting. 

 

Pelosi: Social spending and climate package is ‘alive’ – Mike Lillis, The Hill. “Speaker Nancy Pelosi(D-Calif.) said Thursday that negotiations on a massive social spending and climate package remain active despite the opposition from Senate centrists that stopped the legislation in its tracks last year. The Speaker emphasized that House Democrats, who passed a roughly $2 trillion reconciliation package in November, are essentially sidelined as Senate leaders seek to continue the delicate talks with the centrist holdouts.”

Status on the bill:

‘It’s alive,’ [Pelosi] added. ‘I would say that.’

Pelosi is referring to the Senate bill being alive – which, according to several sources, has yet to be written.

Further down the article:

Pelosi and House Democrats have long been resigned to the reality that their version of the reconciliation package is dead in the Senate. Still, the Speaker is holding out hope that some smaller version will move while Democrats control the two chambers. 

‘Everything that was in the [House] reconciliation bill is great. So if we just have some of it, that’ll be very good, and we look forward to that,’ Pelosi said.  

The new plan is expected to include enough tax increases to partially pay for spending provisions and lower the debt. 

 

Speaking of tax increases and the reconciliation bill:

Treasury reaps windfall even without Democrats' tax increases – Brian Faler, Politico. “Individual income tax receipts are set to reach an all-time high. A special tax targeting companies that hide money in overseas tax havens is bringing in more cash than anticipated. Even companies’ supply chain problems are helping the Treasury.”

Important to note:

Though Democrats’ bid to hike taxes by $1 trillion has gone nowhere, the government is suddenly expected to reap that and much more in a windfall of tax payments that is surprising forecasters… [I]t could prove awkward for Democrats hoping to revive their ‘reconciliation’ spending package, with Republicans now asking why tax increases are necessary when receipts are booming.

Historical context of revenue boom:

Total tax receipts are set to increase this year by 19.5 percent, or $800 billion, according to the nonpartisan Congressional Budget Office, after rising last year by 18 percent.

That would be the biggest back-to-back increases since Harry Truman was president.

‘You have to go way, way, way back to the early 1950s to see that kind of growth,’ said Mark Booth, a former head of revenue forecasting at CBO.

 

In other reconciliation news:

Housing Groups Pursue 2 Tracks Toward Fed. Tax Credit Update – Stephen Cooper, Law360 Tax Authority ($). “Affordable housing advocates are pursuing a two-pronged strategy with the IRS and Congress to update the low-income housing tax credit program and make it easier to build new units for a wider range of tenants.”

The article continues:

“Rather than waiting for Senate lawmakers to move on the BBB Act, which includes major portions of the bipartisan Affordable Housing Credit Improvement Act, or H.R. 2573, housing groups are trying to work around Congress by asking the Internal Revenue Service to take administrative action.”

 

Possible Senate action on reconciliation:

Back burner no more: Dems set Manchin talks on party-line bill to simmer – Burgess Everett, Politico. “Senate Democrats are preparing for possible summer action on their still-elusive climate, tax reform and prescription drugs bill… Schumer and his staff are working with the Senate parliamentarian to help tee up a possible July or August vote.”

Disclaimer alert!

The talks could all fall apart, of course, just as they did in December when Manchin rejected a $1.75 trillion, White House-blessed plan. Any bill advanced this summer would be much slimmer than that one, focusing on lowering drug costs, reducing the deficit, raising taxes on the wealthy and boosting energy sources both clean and domestic.

 

Superfund Tax Poised to Catch Small Chemicals Companies Unaware – David Hood and Erin Slowey, Bloomberg ($). “Small chemicals companies and importers are not ready for the return of an excise tax on chemicals they produce or import that was most recently in place almost 30 years ago… Congress included a provision in the infrastructure law enacted in November that reinstates the tax for the first time in nearly 30 years. Small chemicals companies and importers are likely to be caught unprepared by the tax that affects most, if not all, portions of their business.”

 

Study: Pre-Filled Tax Returns Would Come With Tricky Trade-Offs – Jonathan Curry, Tax Notes ($):

Lim’s study sought to estimate how accurately the IRS could prepare a tax return, with one method using only information returns received for the 2019 tax year, pulling filing status and dependent information from the prior-year return for a sample size of about 344,000 tax units, and then matching that to what the taxpayer filed. If the hypothetical return prepared by the IRS came reasonably close to matching what that taxpayer submitted, it was deemed a success.

Under that approach, the IRS would have successfully calculated the tax liability for only about 41 percent of tax units, with lower income levels being generally more successful, according to Lim.

 

House Democrats Propose $1 Billion IRS Funding Increase – Naomi Jagoda, Bloomberg ($). “House Appropriations Committee Democrats on Wednesday released a fiscal 2023 spending bill that includes $13.6 billion for the IRS, a $1 billion increase from its current funding level.”

 

SALT Fix Not Right for Appropriations Bill, Neal Says – Doug Sword, Tax Notes ($). “Adding a provision to an appropriations bill barring the IRS from ruling against state workarounds on the $10,000 state and local tax deduction cap isn’t the SALT fix that the House’s top taxwriter is seeking.”

Further down the article:

‘I’m still looking for a solution,’ House Ways and Means Committee Chair Richard E. Neal, D-Mass., said after the markup of the [appropriation] bill, agreeing that the provision barring the IRS from spending any appropriated funds to rule on state SALT workarounds wasn’t a solution he favored.

 

Blumenauer Asks Biden to Keep Gas Tax - Alex Clearfield, Bloomberg ($).Rep. Earl Blumenauer (D-Ore.), who serves on the House Ways and Means Committee, sent a letter Thursday to President Joe Biden asking that the administration not suspend the federal gas tax.”

‘There is no guarantee a gas tax suspension would reduce prices at the pump or stem the broader inflation affecting the global economy, and it may only increase oil companies’ bottom lines,’ Blumenauer said, continuing that it would impact Highway Trust Fund infrastructure spending.

Meanwhile, at the state level:

Virginia Governor Pushes Gas Tax Holiday in Budget Amendments - Angélica Serrano-Román, Bloomberg ($). “Virginia Gov. Glenn Youngkin (R) again urged the General Assembly to temporarily suspend the state’s gas tax in a series of budget amendments he sent lawmakers late Wednesday.”

Some New Mexicans still waiting on gas tax rebates - Giuli Frendak, KOB 4.State leaders made a promise in April that every eligible New Mexican would be getting rebate checks to help offset some of the current rising prices. Almost 800,000 New Mexicans have already gotten checks or direct depots, but many are still waiting.”

‘My husband’s a firefighter for Bernalillo County and he’s been busting his butt and I do work with foster kids here,’ said Sarah Owensby, who lives in Los Lunas. ‘And we could really use the money right now.’

 

NY High Court Rules Car Dealer Can Appeal Leased Land's Tax – Jaqueline McCool, Law360 Tax Authority ($). “A New York car dealership required to pay property taxes on land it leased can appeal tax assessments of the property, the New York State Court of Appeals ruled Thursday.”

 

Texas Shoreline Structures Can Be Taxed By Mainland City – Michelle Casidy, Law360 Tax Authority ($). “A three-justice panel of the Thirteenth Court of Appeals rejected arguments from the city of Corpus Christi that Ingleside had improperly annexed an area of water that was within its jurisdiction, and agreed with Ingleside that the structures should be treated as part of the land. The panel said it's undisputed that the boundary between the cities is at the shoreline, and that the at-issue structures are on Ingleside's land, but extend into water that's within Corpus Christi's jurisdiction.”

 

New Jersey Rolls Out Transfer Pricing Tax Resolution Program – Paul Williams, Law360 Tax Authority ($). “New Jersey will offer taxpayers a voluntary transfer pricing agreement program to resolve potential tax controversies resulting from pricing disputes stemming from intercompany transactions for open tax years, the state Division of Taxation announced Thursday.”

 

EU Clashes With Hungary Over Implementing Global Minimum Tax - Marton Kasnyik, Bloomberg ($):

French Finance Minister Bruno Le Maire said he is determined to get a European Union agreement on a global corporate minimum tax, setting up a clash with Hungary at a meeting of officials in Luxembourg on Friday.

Disagreements over how to implement the levy have dogged France’s six month presidency of the EU that concludes at the end of June. Until Hungary reinstated its opposition in recent days, agreement had appeared close after Poland, the sole remaining holdout, indicated it could give its green light after winning some concessions on the wording of the directive.

Time is also running out in the U.S. for adopting a global corporate minimum tax. Republicans are expected to win the House majority after the elections and they have sworn to not pass legislation the creates this levy. If Democrats do not pass legislation that includes a minimum tax this year, the odds are slim that the tax gets enacted in 2023 and 2024.

 

It's time for the way-back machine:

Top Appropriator Recalls IRS Scandals, Opposes Big Budget Hike – Doug Sword, Tax Notes ($). “A proposed $1 billion bump in IRS funding might be too big of a reach against a Republican push to tamp down on spending and still-fresh GOP memories of the agency’s missteps in the last decade.”

‘While I believe the IRS could use some additional resources, the bill provides them with a billion dollars, or an 8 percent increase,’ Rep. Steve Womack, R-Ark., ranking Republican on the House Appropriations Financial Services and General Government Subcommittee said at a June 16 markup where Democrats advanced a $30 billion financial services spending bill to a full committee vote scheduled for June 24.

‘It wasn’t long ago that the IRS was targeting groups based on political beliefs and wasting taxpayer dollars on lavish conferences, inappropriate videos, and employee bonuses,’ Womack continued, complaining that the spending bill ‘further contributes to our growing debt and the inflationary spirals that are hindering our economy.’

Womack is conjuring up Lois Lerner and the picture of that IRS guy at an agency event in a macked-out suite, sitting in a hot tub, and sipping fun stuff. ProPublica will likely soon join this list of memories.

 

It’s National Eat Your Vegetables Day! A day that lives in infamy for my daughter.   


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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.