Democrats confident about budget vote as GOP plans amendments - Lindsey McPherson and Laura Weiss, Roll Call:
Sinema previously opposed taxing investment fund managers' share of their clients' capital gains — known as carried interest — the same as ordinary income. Manchin fought to include that provision, which would lengthen the holding period required to benefit from more generous tax treatment. It would raise an estimated $13 billion over 10 years.
Manchin said last week he would not drop the carried interest tax increase to get Sinema’s support. But after speaking with Sinema, Manchin declined to take that hard of a line against changing the carried interest provision if needed to get her vote.
They might have more confidence if they had checked with Sinema before cutting their deal. Or maybe they aren't all that confident:
Democrats scramble for Sinema’s support on climate, health and tax bill - Tony Romm and Jeff Stein, Washington Post ($):
Senate Democrats are discussing whether to dial back some of their proposed taxes targeting wealthy investors and billion-dollar corporations, part of a new scramble to win the support of Sen. Kyrsten Sinema (D-Ariz.) and advance their broader economic agenda swiftly.
Publicly, Sinema has said nothing about the measure, and her aides maintain she is still reviewing it. Behind the scenes, though, the senator has spoken with Democrats about at least two of the proposal’s tax provisions, according to two people familiar with the matter who spoke on the condition of anonymity to describe the sensitive negotiations.
The two provisions - the only substantive tax provisions in the bill - are the carried interest provision and the financial statement minimum tax provision.
Manchin, Sinema ‘exchanging text’ on climate, tax deal - Alexander Bolton, The Hill:
Manchin was tight-lipped about the details of the conversation but made clear that he’s willing to consider changes she might want to make to the deal, which would raise $739 billion in new revenue over the next decade and reduce the deficit by more than $300 billion.
“We had a nice time. We had a nice time. Next?” Manchin said Tuesday when reporters pressed him for details of his chat with Sinema while she sat at the Senate dais.
Key Senate Democrat Remains Silent On Inflation Act - Kat Lucero, Law360 Tax Authority. "Schumer needs the support from all 50 members because Republicans are planning to unanimously oppose the bill. Sen. Joe Manchin, D-W.V., a centrist who had sided with Sinema in a previous iteration of the bill under the Build Back Better Act, has endorsed the new measure that he had negotiated with Schumer."
Inscrutable Sinema. From Punchbowl News: "The entire Democratic agenda is now at the mercy of the 46-year-old senior senator from Arizona, and she’s not sharing her position yet. The view by many – wrong, of course – is that Sinema and Manchin act as essentially one unit. Sinema isn’t one to chat with the Hill press corps either – unless she has something to say. So here we sit, waiting for Sinema to make up her mind on the package. Needless to say, she has a lot of leverage. If Sinema wants something removed from the package, she has the power to do so. Yet this bill is a bit like a Jenga tower. If you remove too many pieces – or the wrong one – the entire thing may fall apart."
Bernie Sanders knocked the Joe Manchin and Chuck Schumer deal. He wants the ability to make changes to it. - Politico. "He asked for the chance to make changes to it, but notably did not threaten to vote against it."
The oft-maligned tax increase on the verge of becoming law - Brian Faler, Politico:
Companies would have to pay 15 percent not on the income they report to the IRS, but on the earnings they report to the Securities and Exchange Commission. Those two things are based on entirely different and separate accounting systems, and bringing them together introduces lots of difficulties.
Even accountants said the complexity would be too much. “The proposed minimum corporate tax violates numerous elements of our twelve guiding principles of good tax policy,” the American Institute of Certified Public Accountants said in a letter last month to lawmakers.
Most everyone says it's a bad idea, but since it only affects a few companies with an outsized effect on the economy, let's give it a whirl and see what happens.
Big Pharma and Tech Targeted by Corporate Minimum Tax, JCT Says - Benjamin Guggenheim, Tax Notes ($). "According to the JCT analysis, 24 percent of the new tax on book income would hit the apparel and textiles, pharmaceutical and medicine, and computer and electronic product manufacturing industries. That accounts for around half of the 49.7 percent of the tax that would be borne by a broad range of businesses in the manufacturing sector."
Putting JCT’s Score of the Inflation Reduction Act Into Context - William Gale and John Buhl, TaxVox. "Recent analysis by the nonpartisan Joint Committee on Taxation (JCT) shows the impact of several tax pieces included in the Inflation Reduction Act (IRA). The report suggests taxes would increase at nearly every income level. However, pundits and lawmakers should consider other important factors before drawing conclusions about how the IRA would affect taxpayers."
Details & Analysis of the Senate Inflation Reduction Act Tax Provisions - Alex Durante, Cody Kallen, Huaqun Li, William McBride, and Garrett Watson, Tax Policy Blog. "Last-week’s Democrat-sponsored Inflation Reduction Act (IRA), successor to the House-passed Build Back Better Act of late 2021, has been touted by President Biden to, among other things, help reduce the country’s crippling inflation. Using the Tax Foundation’s General Equilibrium Model, we estimate that the Inflation Reduction Act would reduce long-run economic output by about 0.1 percent and eliminate about 30,000 full-time equivalent jobs in the United States. It would also reduce average after-tax incomes for taxpayers across every income quintile over the long run."
Kentucky storm, flooding victims now eligible for tax relief; October 17 deadline, other dates extended to November 15 - IRS "The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual or public assistance. Currently, individuals and households that reside or have a business in Breathitt, Clay, Floyd, Johnson, Knott, Leslie, Letcher, Magoffin, Martin, Owsley, Perry, Pike and Wolfe counties in Kentucky qualify for tax relief. The same relief will be available to any other locality added later by FEMA. The current list of eligible localities is always available on the disaster relief page on IRS.gov."
California OTA Gives LLC Partial Win in Annual Tax Dispute - Andrea Muse, Tax Notes ($). "The OTA held in Matter of MJK Real Estate Fund II LLC that an LLC's profit interest percentage, and not its capital interest percentage, should be used in determining its distributive share of property for purposes of calculating whether it exceeded the threshold for doing business in the state under California Revenue and Taxation Code (R&TC) section 23101(b)(3) and is thus subject to the annual $800 LLC tax."
Context, Heartbeats, and Investments - Renu Zaretsky, Daily Deduction:
Lawmakers passed and an appeals court affirmed the Living Infants and Fairness Equality (LIFE) Act, which defines a “natural person” as “any human being including an unborn child.” The Georgia Department of Revenue announced this week that it will “recognize any unborn child with a detectable human heartbeat ... as eligible for the Georgia individual income tax dependent exemption” worth $3,000 for an unborn child on or after July 20, 2022 through December 31, 2022. Should the Department request it, a filer will have to provide relevant medical records or other supporting documentation for that exemption.
We might expect the number of pregnancies in Georgia to greatly exceed the number of births, at least until they start issuing Social Security numbers at conception.
IRS again issues potentially wrong tax-due notices - Kay Bell, Don't Mess With Taxes. "The CP14 balance due notices going out now appear to mostly involve married couples who filed a 2021 joint return. The IRS hasn't been able to match up those returns with the tax due shown on them."
Retirement plan options for small employers - National Association of Tax Professionals. "Yes, a solo 401(k) plan can be established with a one-year-of-service eligibility condition."
Lesson From The Tax Court: Excise Tax On Messed Up IRA Rollover Different From Income Tax - Bryan Camp, TaxProf Blog. "Particularly tricky are managing rollovers from one type of retirement plan to another. Mistakes there can have both income tax consequences and excise tax consequences. Thus, we must always keep straight the difference between different types of taxes, just like we saw in last week’s lesson."
Wapello Man Sentenced to Six Months in Federal Prison For Failing to File Income Tax Returns - U.S. Department of Justice (defendant name omitted):
Defendant pleaded guilty on March 24, 2022, to two counts of failure to file income tax returns, one for each of the calendar years 2016 and 2018. The Court imposed a three-month prison sentence on each count, to be served consecutively. Following completion of his prison term, Defendant will be on supervised release for one year. The Court imposed a $20,000 fine.
Since approximately 2004, Defendant has owned and operated Louisa County Millwright, LLC, a business that specializes in grain elevator work, material handling, steel building installation, and fabrication. Defendant failed to file federal income tax returns for the years 2004 to 2014. As part of his plea, Defendant admitted that he knowingly and willfully failed to file tax returns for the years 2015, 2016, 2017, and 2018. Defendant remains responsible for paying his tax liability in full.
It seems that a lot of tax prosecutions start because someone didn't even bother to file a return. It can work out badly.
AMC, Sony Accused Of Smearing Tax Biz In 'Better Call Saul' - Theresa Schliep, Law360 Tax Authority:
Liberty Tax Service accused AMC Networks and Sony of trademark infringement and defamation in New York federal court, saying they disparaged the chain by depicting a similar business that stole customers' cash in the hit show "Better Call Saul."
The episode of the show, which is a spin-off of "Breaking Bad," portrayed Liberty Tax in a bad light by depicting a "Sweet Liberty Tax Services" business that used nearly identical branding but that skimmed tax return money from paying customers, the tax chain said in a complaint Monday. AMC and Sony Pictures Television should be barred from distributing the episode, which was the second of the show's sixth season and aired in April, Liberty Tax said.
Perhaps related: Compliance called out in Liberty Tax DOJ settlement.
It should also be National I Need to Change Shirts Now day. It's National Watermelon Day!