Tax News & Views Approximately a Deduction Roundup

July 22, 2022

The Fine Print Cost a Widow a $464,000 Tax Deduction - Laura Saunders, Wall Street Journal ($):

Among other things, the deed said the gift was irrevocable and unconditional. However, Ms. Albrecht didn’t have what the law calls a “contemporaneous written acknowledgment” from the museum explicitly saying whether or not she received goods or services in return for her donation.


Not having this statement cost Ms. Albrecht her entire deduction, even though the museum later clarified that it provided no goods or services in return for her donation. 

This excellent article includes reminders of the need to get proper documentation from your charity for gifts of $250 or more meeting "the magic language requirement." If you are donating appreciated property (other than publicly-traded securities), you have additional appraisal requirements if the donation exceeds $5,000.


Senators seek to clear procedural hurdles on unfinished business - Lindsey McPherson, Roll Call:

The “chips-plus” package includes $54 billion in grants over five years for semiconductor manufacturing and research, along with 5G wireless deployment; a tax credit covering 25 percent of spending on new semiconductor manufacturing plants through 2026; and numerous science-focused provisions, among them funding authorization for the National Science Foundation.

While there are enough Republicans supporting the bill to ensure the Senate can clear a filibuster, some of the measure’s opponents have said they may not consent to speeding up votes. 

A provision to reverse the rule requiring capitalization and amortization of research costs - instead of the prior-law immediate expensing - failed to make it into the bill. 


IRS Cybersecurity Not Quite Up to Snuff, TIGTA Says - Jonathan Curry, Tax Notes ($):

The IRS fell short on 17 of 20 metrics measuring the maturity of its information security practices and programs, according to an annual review by the Treasury Inspector General for Tax Administration.

Although the 17 metrics fell short of the desired “effective” maturity level, the IRS was still overall “generally aligned” with applicable security guidelines, TIGTA said in a report released July 21.

From the TIGTA report:


As examples of specific metrics that were not considered effective, TIGTA found that the IRS could improve on maintaining a comprehensive and accurate inventory of its information systems; tracking and reporting on an up-to-date inventory of hardware and software assets; maintaining secure configuration settings for its information systems; implementing flaw remediation and patching on a consistent and timely basis; and ensuring that security controls for protecting Personally Identifiable Information are fully implemented. 

The IRS needs to take further steps to improve its security program deficiencies and fully implement all security program components in compliance with FISMA requirements; otherwise, taxpayer data could be vulnerable to inappropriate and undetected use, modification, or disclosure.


Senate Dems Unveil Bill To Legalize, Tax Cannabis - Asha Glover, Law360 Tax Authority ($):

Under the Cannabis Administration and Opportunity Act, an initial 5% excise tax would be applied to small and mid-size cannabis producers that would gradually increase to a maximum of 12.5% after five years, according to the bill's summary. For larger cannabis businesses, the initial applicable excise tax would be 10%, and it would gradually increase to a maximum rate of 25% after five years. The federal tax revenue would be used to reinvest in communities and individuals most harmed by the war on drugs, according to the bill's summary.


The measure would eliminate the restriction on cannabis businesses claiming deductions for business expenses under Internal Revenue Code Section 280E.  It would also transfer federal jurisdiction over cannabis from the Drug Enforcement Agency to the Food and Drug Administration and the Alcohol and Tobacco Tax and Trade Bureau and implement a regulatory regime similar to alcohol and tobacco.

Don't expect this to advance in this Congress.


New Michigan Laws Modify Partnership Audit Reporting, Property Tax - Emily Hollingsworth, Tax Notes ($). "S.B. 248 establishes a state process for reporting final federal adjustments resulting from partnership-level audits, to address the centralized partnership audit regime created by the federal Bipartisan Budget Act of 2015. Bill sponsor Sen. Jim Runestad (R), chair of the Finance Committee, told Tax Notes that the changes in federal audits for partnerships made it necessary for those changes to also be made in the state."


Tax consequences of employer-provided abortion travel benefits - Jim Chapman, Thomson Reuters Tax & Accounting. "Post-Dobbs, providing abortion services is illegal in many cases in some states and soon will be illegal in others.  In still other states, providing abortion services will be generally legal.  Helping someone obtain an abortion may also be subject to criminal or civil penalties.  Whether ending one’s own pregnancy will be subject to criminal or civil penalties is not clear yet in most states.  The definition of medical care in the Treasury Regs under Code Sec. 213 states 'amounts expended for illegal operations or treatments are not deductible,' so expenses for abortions provided contrary to state law may need to be included in employee income. Furthermore, to the extent that the payments are for illegal abortion services, the deduction could be denied to the employer.  IRS has, as of press time, released no guidance on application of the rule in Rev Rul 73-201 post-Dobbs."


Identity Protection PINs provide an important defense against tax-related identity theft - IRS:

The Electronic Tax Administration Advisory Committee, or ETAAC, last month highlighted the importance of the IP PIN to taxpayers and tax professionals.

"The IP PIN is the number one security tool currently available to taxpayers from the IRS," the independent advisory group said in its annual report to Congress. "This tool is the key to making it more difficult for criminals to file false tax returns in the name of the taxpayer. In our view, the benefits of increased IP PIN use are many."


For security reasons, tax professionals cannot obtain an IP PIN on behalf of clients. Taxpayers must obtain their own IP PIN.

Taxpayers wanting an IP PIN can get started at Get an IP PIN, an IRS online tool.


Did West Virginia Just Kill Global Tax Reform? - Robert Goulder, Tax Notes Opinions. "Manchin said he’ll oppose any Senate reconciliation bill that includes the Biden administration’s plan for a 15 percent global minimum tax on corporate profits — which corresponds to pillar 2 of the OECD master plan. Manchin added that he’d vote against further federal spending on environmental protections, saying the additional spending would worsen inflation."

Some states looking to end sales tax on baby diapers - Kay Bell, Don't Mess With Taxes. "Currently, 31 states collect sales tax on children's diapers, according to the National Diaper Bank Network (NDBN)"

New Retirement Plan Distribution Rules Likely on the Way - Chuck Rubin, Rubin on Tax. "We cannot tell what all the provisions will be, but here is a list of items that are in one or both of the House and Senate bills and thus have a reasonably good chance of being in the final version..."

Chips Are Down in Semiconductor Tax World - Scott Hodge, Tax Policy Blog. "The Senate has begun debate on the so-called Chips bill, which would provide $52 billion in grants and $24 billion in tax credits to supposedly strengthen the production of semiconductors in the U.S. If this measure passes, U.S. semiconductors will join wool, mohair, helium, soybeans, ethanol, steel, credit unions, and Amtrak as industries thought to be so important as to warrant taxpayer subsidies—forever."

The latest wisdom on corporate income tax cuts - Tyler Cowen, Marginal Revolution. "You will hear many economists, including Paul Krugman, tell you that the Trump corporate tax cuts were a failure.  It would be more accurate to say that we still do not know how effective they will be, noting that the pandemic may have extended the 'five and eight years' benchmark a bit.  And it would be more accurate to report that the best available science indicates the tax cuts stand a good chance of succeeding."


IRS wants tax money from Iowa couple caught in California unemployment scam - James Stratton, KCCI:

July of 2021, while Steven and Gloria Clark were about to close on their home and after they notified their apartment complex they were moving they received a letter from the IRS. The letter stated Steven collected $30,900 in unemployment benefits from the state of California.


On top of never visiting the state, he never applied for unemployment there or in Iowa and, of course, never received it.

Steven's identity was stolen and used to fraudulently claim California unemployment benefits. "California's Employment Development Department, EDD, has admitted to paying out more than $20 billion in fraudulent unemployment claims throughout the pandemic. To put that into perspective, that is more than double the state budget of Iowa."

California issued him a Form 1099-G for the benefits, and the IRS computers noticed. The couple now has to deal with an IRS that is hard pressed to answer even a small fraction of taxpayer calls. 


Approximately. Today is Casual PI Day: "The world celebrates Pi Approximation Day every year on 22 July. The fraction 22/7 is an approximate value of Pi, and it is for this reason that this day is commemorated on July 22." But if that's too much work, it's also National Hammock Day

Expand Full Article

We're Here to Help

We are here to help
From business growth to compliance and digital optimization, Eide Bailly is here to help you thrive and embrace opportunity.
Speak to our specialists