Tax News & Views Read All About It Roundup

August 15, 2022

Eide Bailly and Conservis partner to connect farm data and business operations – Juliette Gaudemer, Accounting Today:

Eide Bailly, a Top 25 accounting firm, and Conservis, a Minneapolis-based company that provides farm management software, are joining forces to combine the benefits of farm data optimization and effective economic decisions.  

Scott Schmidt, vice president of business development and partnership for Conservis, and Steve Troyer, partner-in-charge of ag producers for Eide Bailly, have informally been talking about a partnership for over a year and a half. The two groups had several clients in common, and they chose each other for their expertise in assisting farmers. 


House Sends Biden Landmark Tax, Climate, Health Bill to Sign – Erik Wasson, Bloomberg ($):

House Democrats delivered the final votes needed to send President Joe Biden a slimmed-down version of his tax, climate and drug price agenda, overcoming a year of infighting and giving themselves a cornerstone achievement to campaign on for the November congressional election.

The legislation passed the House Friday on a party line 220-207 vote. Biden tweeted that he would sign it next week.

The president’s tweet came out last Friday, so “next week” means this week.

Legislation upping taxes heads to the White House – Jay Heflin, Eide Bailly:

What’s in the Bill:

The following provisions are in the legislation (not inclusive):

  • Corporate Minimum Tax: Corporations with a three-year average adjusted financial statement income in excess of $1 billion would be subject to a 15% minimum tax, effective for taxable years beginning after 2022. The bill replaces depreciation that is normally claimed on the financial statement with the year’s tax depreciation. Broad discretion would be given to Treasury in implementing the corporate minimum tax.
  • Excise Tax on Stock Buybacks: One percent excise tax on corporate stock buybacks. The levy applies to net buybacks; therefore, it only applies if there is an excess of redemptions over new issues for the year.
  • Limitation on the Excess Business Losses of Noncorporate Taxpayers: Extended for two years, to apply to tax years ending before January 1, 2029.
  • Increased IRS Funding: The agency will receive $80 billion over the next ten years. Of that amount $45.6 billion will go to tax enforcement. Administration officials have said that the extra funding is not supposed to increase audit rates on taxpayers and small businesses earning less than $400,000 a year.
  • Black Lung fund: Permanent extension of tax rate to fund Black Lung Disability Trust Fund.
  • Superfund: Reinstate the Superfund tax for oil and petroleum products (16.4-cents-per-barrel).
  • Rx: Allow Medicare to Negotiate the Price of Prescription Drugs.

The bill’s book tax drew focus during the Senate debate because it would affect private equity firms. An amendment was added to the legislation to fix that situation - supposedly. Tax Notes thinks differently:

Private Equity’s Book Income Tax Problem – Lee Sheppard, Tax Notes ($):

Here’s your speed read: Even though the Thune/Sinema change was made, private equity funds still have a problem. There may be other grounds for inclusion of private-equity-controlled groups in the book income tax. Funds maintain that the fund itself has to be engaged in a trade or business to be aggregated with their portfolio companies for this purpose, and they maintain that funds are not engaged in a trade or business. But the single employer rule, which was used for book income tax aggregation, doesn’t require a group parent in a trade or business. Even if it did, the funds themselves may be engaged in a trade or business under recent ERISA precedent, again making them eligible for aggregation.

Sinema took Wall Street money while killing tax on investors – Brian Slodysko, Associated Press. “Sen. Kyrsten Sinema, the Arizona Democrat who single-handedly thwarted her party’s longtime goal of raising taxes on wealthy investors, received nearly $1 million over the past year from private equity professionals, hedge fund managers and venture capitalists whose taxes would have increased under the plan.”

Surely, the article is not suggesting that the money influenced the vote. That would be illegal. Or would it? 

3 Things State Tax Pros Should Know About The Inflation Act – Maria Koklanaris, Law360 Tax Authority ($):

Corporate and Pass-Through Tax Changes

 One of the changes would be a 1% excise tax paid by corporations when they buy back their own stock from shareholders. Tax pros told Law360 this change would not likely have strong effects at the state level. However, the other two changes could.

One is the creation of a corporate alternative minimum tax of 15%, applicable to adjusted financial statement income for corporations with profits in excess of $1 billion, effective after December 2022. The other is a two-year extension of caps on pass-through business losses that can offset nonbusiness income.

The other two are about IRS funding (more on that later) and tax initiatives to combat climate change (more on this, too). 


Brief Reminder:

The House passed its Build Back Better legislation last November. Its tax details are here.

The tax provisions in the House bill were many, and pretty much all of them were cut from what the Senate approved. Moving forward, any attempt to pass these measures in a new bill will require Republican support, which is highly unlikely to happen between now and the calendar year-end. Still, Democrats say they are going to try to pass them. 

House Sends Landmark Tax And Climate Bill To Biden – Asha Glover, Law360 Tax Authority. ($):

The Senate had rejected amendments to the bill that would expand the child tax credit, with Democrats voting against them to preserve the overall legislative agreement with Sens. Joe Manchin, D-W.Va., and Kyrsten Sinema, D-Ariz., in the underlying bill. The Build Back Better Act passed by the House late last year included a one-year extension of the expanded child tax credit for families earning up to $150,000 per year. The BBB Act also would have extended the earned income tax credit for childless workers for an additional year.

Pelosi said Democrats intend to address the provisions that were left out of the bill with future legislation.

‘After we pass it and the president signs it into law, we will continue to fight for more of the family features of the bill that were not included in this legislation,’ she said.


Tax increases are also on the docket:

Neal Suggests Democrats Could Revisit Increasing Tax Rates – Naomi Jagoda, Bloomberg ($). “House Ways and Means Committee Chair Richard Neal (D-Mass.) said Friday that Democrats would be interested in raising tax rates on high-income taxpayers and corporations if they retain control of the House in the midterm elections.”

‘I do think that there’s a chance here to address some fundamental tax-reform issues,’ Neal told reporters.

House Democrats are currently projected to lose control of their chamber after the mid-term elections. If Republicans gain control of the House, then the odds of legislation passing the chamber that would increase taxes on high-income taxpayers and corporations is basically nil.


The next piece of legislation most likely to include tax provisions: A year-end bill.

Revisiting SALT – Butch Maier, Bloomberg ($).

Five Democratic members of Congress wrote a letter to Neal urging inclusion of their proposal restoring the full state and local tax deduction, or SALT, in any tax-extender package considered by the committee this year.

Reps. Josh Gottheimer (D-N.J.), Mikie Sherrill (D-N.J.), Katie Porter (D-Calif.), Tom Suozzi (D-N.Y.), and Tom Malinowski (D-N.J.) signed the letter, dated Friday.

From the letter($):

As you begin work on a year-end tax extenders package, we respectfully request that you include our fully-paid-for proposal restoring the State and Local Tax Deduction (SALT) in any tax extender package that is considered by the House Ways and Means Committee this year.

Members of this group publicly vowed to oppose the Inflation Reduction Act if it didn't include a SALT fix. The bill did not include a fix. Yet every member of the group voted in favor of the bill. Hopefully they won't resurrect the "No Salt, No Deal" mantra when it comes to passing a year-end tax bill. Who would believe them?

Important to note: The passage of a year-end tax bill will require support from both political parties. Republicans are highly unlikely to support easing the SALT cap - unless they get something major in return. 


Ways and Means Wants Access to Trump Tax Records ‘Immediately’ - Aysha Bagchi, Bloomberg ($):

The House Ways and Means Committee has asked a federal appeals court to issue a mandate that would let the committee get President Donald Trump’s tax returns from the Treasury Department.

Trump and his business entities are planning to ask for a rehearing after the US Court of Appeals for the DC Circuit ruled against them this week, according to the committee’s Thursday motion. Nonetheless, the committee asked the court to “immediately issue” a mandate to enable the documents transfer.

‘Realistically, a months-long delay in issuance of the mandate could entirely inhibit this Congress’s ability to act on the requested information,’ the committee said in its motion.

The clock is ticking on this issue. If Republicans win control of the House after the mid-term elections they will lead the House Ways and Means Committee and will likely do nothing with Trump's tax returns. 


New 25% Chip Tax Credit Sparks Interest Amid Uncertainty – Kat Lucero, Law360 Tax Authority ($). “Semiconductor companies can receive a 25% tax credit thanks to a new law designed to help boost domestic chip production, but the incentive has practitioners uncertain as to what kind of investments can qualify.”


Comments About Armed IRS Agents Could Stoke Violence – Lauren Loricchio, Tax Notes ($). “Incendiary comments about armed IRS agents are causing concern that the rhetoric could incite violence against the agency.”

Further down the article:

The rhetoric from opponents has become more inflammatory, with some Republicans suggesting that the IRS will use the funding to send armed agents to track down taxpayers or that the Biden administration may use IRS agents to go after political opponents.

In an August 11 interview on Fox News’s Fox and Friends, Senate Finance Committee member Chuck Grassley, R-Iowa, asked if the IRS plans to use the funding to arm agents with assault weapons to shoot small business owners. ‘Basically, they think anybody that has passthrough income is a crook and they aren’t paying their fair share and we’re going to go after them,’ he said. 

The IRS has a criminal division, and they can carry guns. But a sloppy return is unlikely to bring them to your door.

If the IRS Gets $80 Billion, Will Its Agents Come Gunning for You? – Janet Holtzblatt, Tax Policy Center. “It would help if opponents of the new funding stop their irresponsible claims that armed IRS agents are about to go after middle-income households. And it also would help if the IRS clearly explains how it would use the new money.”

Further down the article:

About $46 billion—or 57 percent—would be allocated to tax enforcement. That’s spurred the claims that the IRS will deploy as many as 87,000 new agents—'an army of auditors'— who will flyspeck the returns of an additional 700,000 Walmart shoppers. Some conservative commenters have gone even further, warning that those agents will be carrying guns.

Neither the Biden Administration nor congressional Democrats seem especially interested in cracking down on the vast majority of taxpayers who take the standard deduction and whose income is reported on W-2s and 1099s. In a letter this week to IRS Commissioner Charles Rettig, Treasury Secretary Janet Yellen affirmed that the enforcement money would be used to target the very rich, large corporations, and partnerships. Walmart, maybe, but not its customers.


Tax Shelter Promoters Liable for Lying on Benefits, IRS Says – Michael Rapoport, Bloomberg ($):

People who can be held liable for promoting abusive tax shelters include those making false statements about the application of any tax deductions, credits, or other tax benefits related to the shelter, an IRS attorney said.

Penalties under Section 6700 for tax shelters can be imposed on any promoter who makes statements with respect to the allowability of any deduction or credit, the excludability of any income, or the securing of any other tax benefit, if they know the shelter is false or fraudulent, said Aurora Wheeland, an attorney in the IRS Office of Chief Counsel.


Special Legislative Sessions Bring More State Tax Cuts – Michael Bologna, Bloomberg ($):

This week in state tax news: The state tax cuts just keep coming. This week Arkansas lawmakers cut rates and offered a new tax credit. The National Association of State Budget Officers said roughly two dozen states have slashed taxes. Meanwhile, New Yorkthrew generous subsidies at both Amazon and tech firms engaged in semiconductor manufacturing.


Minnesota DOR Issues Reminder to File for 2020 Property Tax Refunds by Aug. 15 – Bloomberg ($). “The Minnesota Department of Revenue (DOR) Aug. 11 issued a reminder to homeowners and renters to file for their 2020 property tax refund before the deadline of Aug. 15.”

Minnesota DOR Announces July Distributor Cigarette, Tobacco Tax Returns, Payments Due August 18 – Bloomberg ($). “The Minnesota Department of Revenue (DOR) Aug. 11 announced the Aug. 18 deadline for July distributor cigarette and tobacco excise tax returns and payments.”


Massachusetts Court Tosses Challenge to ‘Harsh’ Tax Foreclosure – Michael Bologna, Bloomberg ($). “A Massachusetts town’s tax foreclosure on the family home of a man suffering from ‘incapacitating’ illness may have been harsh, but it was reasonable under the state’s foreclosure rules, a state appeals court judge ruled."


Arkansas Governor Signs Law Reducing Income Tax Rate, Adopting Federal Depreciation, Expensing Rules – Bloomberg ($). “The Arkansas Governor signed a law amending individual income, corporate income, and trust income tax provisions (the specific date of signing isn’t available at this time).”


California CDTFA Issues Information on Revised Cannabis Tax Return Beginning With July, Third Quarter Filings – Bloomberg ($). “The California Department of Tax and Fee Administration (CDTFA) Aug. 1 issued information on the revised cannabis tax return beginning with the July and third quarter filing periods for excise tax purposes. The return is revised to report and pay any excess cultivation tax collected when filing the return.”


Indiana DOR Issues Updated Information on Application of Sales and Use Tax to Meals, Banquets – Bloomberg ($). “The Indiana Department of Revenue Aug. 1 issued an updated information bulletin on the application of sales and use tax to meals, banquets, smorgasbords, and all other food and beverage services.”


New York Governor Signs Law Making Green CHIPS Projects Eligible for Excelsior Tax Credit – Bloomberg ($). “The New York Governor Aug. 11 signed a law making Green CHIPS projects eligible for an Excelsior Jobs Program tax credit, for corporate income, individual income, and excise tax purposes.”


Multinationals Face Most Of Inflation Act's Biz Taxes, Prof. Says – Kevin Pinner, Law360 Tax Authority ($). “Multinational corporations would bear most of a 15% minimum tax and a 1% tax on net share repurchases in the Inflation Reduction Act passed by Congress, a Wharton business economics professor told Law360 on Friday.”


From the “Ahead-of-the-Curve” file (bold added):

Jump-Starting Clean Vehicles – Marie Sapirie, Tax Notes ($):

With the passage of the Inflation Reduction Act of 2022 (H.R. 5376), Congress created a credit for clean vehicle technology for which few, if any, vehicles on the market qualify. That has troubled the industry, but if a credit is intended to encourage the development and adoption of a new technology so that it can eventually supplant older, established technology, changing the requirements as the technology advances and gains acceptance is necessary. The bill does that in novel ways, and not solely to raise the bar on environmental impact mitigation.

Imagine: A family eager to save the planet walks into a car dealership to buy an electric car using their tax credit from the Inflation Reduction Act. But the cars on the lot don’t qualify for the tax credit.  Does the family still buy the car? Can they afford the car without the credit? This situation should be the subject for future articles so people don’t feel hoodwinked at the dealership.


Happy National Relaxation Day! The best kind of Monday is the one requiring naps!

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