Tax Update Blog

Tax News & Views State Tax Cut and Waffles Roundup

August 24, 2022 | Blog
By Joe Kristan, CPA

Idaho Gov. Calls For Special Session Focused On Tax Cuts - Michael Nunes, Law360 Tax Authority ($):

Idaho lawmakers will convene for a special legislative session Sept. 1 to focus on lowering the state's flat tax rate as the state projects a record budget surplus, the governor announced Tuesday.

Republican Gov. Brad Little's office said in a statement that a bill will be introduced in the Legislature that will offer a new flat tax rate of 5.8%, down from 6%, for individual and corporate taxpayers, along with a one-time tax rebate and a deduction of the first $2,500 of income from tax for single filers and $5,000 for joint filers.

 

Mo. Gov. Calls For Special Session On Tax Package - Michael Nunes, Law360 Tax Authority ($):

It will include eliminating the lowest tax bracket of 1.5% that is imposed on income of up to $1,088, reducing the state's top income tax rate to 4.8%, from 5.4%, and increasing the standard exemption by $2,000 for individual filers and $4,000 for joint filers.

The bill will also extend some tax credits for the state's agricultural industry for at least six years, and create tax credit programs for high ethanol blend fuel dealers, biodiesel producers and for urban farming operations.

 

IRS launches safety review after right-wing threats - Jacob Bogage, Washington Post:

The Internal Revenue Service will launch a full security review of its facilities nationwide, Commissioner Charles Rettig announced Tuesday, as congressional Republicans and far-right extremists are lashing out at the agency and the new funding it is slated to receive in a massive spending law.

...

In a letter to employees sent Tuesday, he wrote that the agency would conduct risk assessments for each of the IRS’s 600 facilities and evaluate whether to increase security patrols along building exteriors, boost designations for restricted areas, examine security around entrances and assess exterior lighting. It will be the agency’s first such review since the 1995 bombing of the Alfred P. Murrah Federal Building in Oklahoma City in 1995, which killed 168 people.

None of this is likely to improve taxpayer service. 

IRS to conduct security review following GOP attacks, online threats - Tobias Burns, The Hill:

In an appearance on “Fox & Friends” earlier in August, Sen. Chuck Grassley (R-Iowa) talked about whether the IRS was ready to send in armed units of agents into small Iowa businesses.

“Are they going to have a strike force that goes in with AK-15s already loaded, ready to shoot some small business person in Iowa with these, because I think they’re going after middle-class and small-business people,” he said.

There is no such thing as an "AK-15," if that helps.

 

How popular is that new law? - Bernie Becker, Politico. "In all, 42 percent said they supported the measure while 31 percent said they didn’t."

Companies Face Challenges Determining Impact of New Minimum Tax - Jennifer Williams-Alvarez, Wall Street Journal. "For companies, figuring out whether they are among the 150 and how significant the implications could be will come with uncertainties. Among them is whether the companies hit the $1 billion threshold and if adjustments provided for in the law will impact their tax liability, tax advisers said. Businesses will also grapple with how to disclose the potential impacts of the minimum tax in financial statements before they receive guidance on the law from regulators, including the Financial Accounting Standards Board."

 

Climate Advocates Hold Out Hope for Carbon Tax - Lauren Loricchio, Tax Notes ($):

“Policy that pushes us toward greener energy is good, but I think that green energy credits are a second- or third-best solution to the problem,” Kyle Pomerleau of the American Enterprise Institute told Tax Notes.

Pomerleau said he thinks a carbon tax would have been the best solution to confronting climate change, but he acknowledged that it would be a heavy political lift.

 

IRS offers tips for people who haven’t filed their 2021 tax return; encourages taxpayers to file soon - IRS. "Some people may choose not to file a tax return because they didn't earn enough money to be required to file. But they may miss out on receiving a refund. This could apply if someone had federal income tax withheld from their pay, made estimated tax payments, or qualifies to claim tax credits such as the Earned Income Tax Credit. The only way to get a refund is to file a tax return. Generally, there's no penalty for filing after the April 18 deadline if a refund is due."

UK Probing Libel Lawyers' Tactics After Threat To Tax Pro - Matt Thompson, Law360 Tax Authority

The British legal profession's regulator said it is examining aggressive and misleading language by libel lawyers discouraging criticism of public figures after a tax practitioner said British Chancellor Nadhim Zahawi used such tactics against him, according to correspondence published Tuesday.

An email from the Solicitors Regulation Authority to Dan Neidle, the former head of Clifford Chance's tax practice, sent Friday said the use of misleading privacy or nonprejudice labels that carry no legal weight is an issue it is examining in the context of anti-SLAPP guidance. Measures against SLAPP, or "strategic lawsuits against public participation," take aim at the use of legal action by powerful and wealthy individuals seeking to prevent legitimate criticism or exclude the targeted person from participating in public debate.

 

Nexus Compliance: How Do You Know When You Should Collect Sales Tax? - Aaron Giles. "States have varying nexus compliance thresholds for how much economic activity triggers economic nexus. While the thresholds vary by state, many states have hovered around a common threshold of either 200 invoiced transactions or $100k in sales, whichever is hit first."

Related: A Sales Tax Reform Game Changer: How Wayfair Changed the Sales Tax Reform Landscape.

 

Funding the tax police is very good - Matthew Yglesias, Slow Boring. "If you believe that taxes should be low, the goal is to be like Ireland or New Zealand, where taxes are low but compliance is very high. Or you could be like Denmark, where tax compliance is very high and the taxes are high. But you don’t want to be like Italy where everyone is cheating on their taxes."

Japanese tax officials holding contest to encourage drinking…and alcohol tax collection - Kay Bell, Don't Mess Wth Taxes. "Contestants have until Sept. 9 to submit what the NTA is calling business plans that can help revive drinking in the East Asian nation. Entrants are encouraged to use artificial intelligence and metaverse technologies, such as virtual reality and augmented reality, to come up with new ways to appeal to modern changing lifestyles."

On Exchanging Cryptocurrency for Casino Chips (or Cash) - Russ Fox, Taxable Talk. "The anti-money laundering laws are complex, and I’m not an attorney.  But the basic idea is that exchanging one kind of cash-valued item for something considered to be cash requires knowing your customer and following the rules and regulations set by FINCEN (the Financial Crimes Enforcement Network) under the Bank Secrecy Act and the Patriot Act (and there are others, including state laws).  If you regularly take in cash (or a cash equivalent) and are exchanging it for something else (or vice versa), you may fall under the definition of non-bank financial institution.  And a single transaction (like the one above) may make someone guilty of money laundering."

Form 990-N filers must use a new sign-in process to file their annual reports - Wolters Kluwer Tax & Accounting. "Beginning August 1, 2022, smaller charities that are eligible and choose to file Form 990-N, Electronic Notice for Tax-Exempt Organizations (e-Postcard), must sign into the IRS modernized authentication platform using either their active IRS username or create an account with ID.me, the current IRS credential service provider."

 

The Tax Compliance Costs of IRS Regulations - Scott Hodge, Tax Policy Blog. "The accompanying table lists the 25 most burdensome tax regulations. It shows that more than half of the 6.5 billion hours Americans spend on tax compliance is on complying with income tax returns. Taxpayers spend 2 billion hours complying with individual income returns (including small business returns) and over 1.1 billion hours complying with corporate income tax returns, plus 1.4 billion hours complying with business deductions and quarterly tax returns. The remaining 2 billion burden hours are attributable to complying with hundreds of other tax forms and schedules, everything from wage and tax statements for employees to estate tax returns."

Pursuit of After-Tax Profit Through Use of Tax Credits Is a Legitimate Business Activity - Parker Tax Pro Library. "The court concluded that a partnership's pursuit of after-tax profit can be legitimate business activity for partners to carry on together and this is especially true in the context of tax incentives, which exist precisely to encourage activity that would not otherwise be profitable."

Safe Harbor Could Shelter OECD Global Tax Hopes - Alex Parker, Things of Caeser ($). "Pillar Two works by identifying a slice of income–defined through the project’s own measurements, including a carveout for tangible property and payroll–that is taxed at less than 15% in whatever jurisdiction it’s in. The corporate taxpayer’s home jurisdiction is invited to tax that income through an “income inclusion rule.” If they decline, countries where that corporation operates through subsidiaries or branches can tax it (or deny deductions at the same amount), through the UTPR rule. This applies even if the income is earned in the home jurisdiction originally."

TIGTA’s Annual Review of CDP Processing - Keth Fogg, Procedrually Taxing. "The one area where TIGTA dinged Appeals, an area where it has dinged Appeals before and we have discussed before, herehere and here, concerned the statute of limitations on collection (CSED).  TIGTA found that in 20% of the reviewed cases the IRS got the CSED wrong.  In 10 of the cases it got the CSED wrong in a way that incorrectly extended the statute of limitations."

Related: Owing back taxes isn’t the end of your story.

  

Italian Police Break Up Antarctic Tax Haven Citizenship Scam - William Hoke, Tax Notes:

In an August 18 statement, the national police agency said the group duped over 700 people into paying between €200 and €1,000 each to become citizens of the Antarctic Theocratic State of St. George. “To validate the existence of the state, the members of the criminal group created a whole series of various institutions, an official gazette, a website, as well as identity documents that were also valid for expatriation,” it said.

In addition to the low tax rate, buyers were told they had “the possibility of receiving funding for one’s own research projects, of benefiting from a leaner bureaucracy for one’s own businesses, and of receiving government documents to circulate freely in Italy and abroad,” the police agency said. “In at least two cases, the sale of land in Antarctica was accompanied by a title of nobility.”

Tax havens are always suspect, but if you have to choose one, Grand Cayman has much better weather. 

 

Crank it up, with syrup. Today we celebrate both National Waffle Day and International Strange Music Day


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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.