Child Tax Credits Could Be Expanded This Year, Hill Aide Says – Asha Glover, Law360 Tax Authority ($):
Democrats may use a year-end spending bill to address priorities left out of the Inflation Reduction Act, including expanding the child tax credit and earned income tax credit, an aide to the House tax writing panel said Thursday.
Many Democrats were disappointed the Inflation Reduction Act didn't include changes to the child tax credit or earned income tax credit, said Andrew Grossman, majority chief tax counsel of the House Ways and Means Committee. His comments came during a panel of federal tax aides speaking at the American Bar Association's 2022 Fall Tax Exempt Organizations Symposium.
President Joe Biden’s Economic Blueprint, released this morning, calls for expanding the CTC.
This could be a whole thing. If CTC modifications get added to a spending bill, Katy bar the door. That would allow the legislation to include a whole host of other tax provisions, like fixing the R&D tax break or interest deduction.
Many lawmakers pushing to include a CTC provision in any legislation oppose modifying business-related tax measures. Meanwhile, other lawmakers supporting business tax breaks oppose modifying the CTC.
The solution usually involves making everyone happy by adding all tax provisions to the bill:
‘You can potentially see room for horse-trading between Republicans and Democrats over modifications or extensions of [Tax Cuts and Jobs Act] expiring provisions in exchange for some change to the child tax credit and the earned income tax credit,’ Grossman said. One provision on Republicans' wish list could be extending tax breaks for business interest expenses and research costs included in the 2017 tax overhaul law, he added.
‘The engine driving the thing is probably the treatment of research and development for large corporations,’ Grossman said.
Here’s the problem: Granting all tax wishes means the bill could get too big. In congressional parlance, a bill that is too big is called a “Christmas Tree” and normally fails to pass because it has become a political liability for lawmakers on both sides of the aisle.
For example, Lawmaker A backs the CTC and supports the bill. Suddenly, there are political ads running in her state saying that she supported legislation giving wealthy business owners tax breaks, which was included in the legislation she supported. The ad fails to mention that the CTC was also in the bill, and now the lawmaker who is running on a ‘tax the rich’ platform has a perception problem.
Also, adding tax provisions to a spending bill that would fund the federal government is risky. If the bill fails, the federal government suffers a partial shutdown. Not good.
Wyden, Crapo Introduce Bill to Bolster Retirement Savings – Senate Finance Committee. “Senate Finance Committee Chair and Ranking Member, Senator Ron Wyden, D-Ore., and Senator Mike Crapo, R-Idaho, today introduced the bipartisan Enhancing American Retirement Now (EARN) Act to bolster retirement savings.”
The bill’s text is here.
A summary of the bill is here.
The House has already passed its version of this bill.
Retirement Legislation Set to Head to Senate Floor – Benjamin Guggenheim, Tax Notes ($).
The timing for when the Senate could vote on this bill is unclear, but, whenever it happens, it is expected to pass the chamber.
If the 414-5 passage of its counterpart — Securing a Strong Retirement Act of 2022 (H.R. 2954) — in the House and the unanimous approval of the EARN Act in the Finance Committee are any indication, the retirement bill will not have much difficulty getting the 60 Senate votes for passage.
The law would also crack down on abusive conservation easement transactions, disallowing charitable deductions for conservation contributions if the deduction is more than two and a half times the sum of each partner’s basis.
It is equally unclear how high of a priority this bill is for Senate leadership. There is already a lot on their plate so a vote before the election seems unlikely.
It’s September, and it seems very likely that Congress will be done with its pre-election legislating by the end of the month.
Let’s take stockfor a moment on what’s on deck: circuit court judges, which take up to 30 hours per nomination; codifying same-sex marriage into law; and the short-term government funding bill needed to avoid a shutdown. That should be just enough to fill the legislative calendar. While it’s scheduled to do so, we tend to believe that the Senate won’t come back in October.
There is no mention of a retirement bill.
Buyback Tax May Alter Equity Compensation and Retirement Plans – Chandra Wallace, Tax Notes ($). “Guidance would help employers determine which stock transfers qualify for legislative provisions that are expected to blunt the impact of the new 1 percent stock buyback tax, observers say.”
Crapo: GOP Would Preserve IRS Funding for Tech, Customer Service – Benjamin Guggenheim, Tax Notes ($). “Republicans in the majority would try to roll back much of the $80 billion in new IRS funding but likely wouldn't touch the money directed to IT modernization and taxpayer services, according to Senate Finance Committee ranking member Mike Crapo, R-Idaho.”
New Tax-And-Climate Law Leaves Much for Treasury to Shape – Michael Rapoport and Erin Slowey, Bloomberg ($):
Treasury says it’s already at work and will have more to say about its plans in the coming months.
Months?
There isn’t much time—some of the law’s key provisions take effect Jan. 1, and Treasury likely won’t be able to write full regulations by then, tax attorneys and accountants said. But they think the department may issue notices by then that will provide at least some interim guidance for companies about how the law’s provisions will be applied.
Folks wanting to know the rules before buying an electric car or making their homes more efficient may have to put those plans on hold.
The energy and climate incentives will require guidance in two key areas: the prevailing wage and apprenticeship programs, practitioners said. Many of the tax credits, such as for electric vehicles and energy-efficient commercial buildings, include mandates for those requirements.
Defining the prevailing wage requirements will be the ‘largest item’ tax professionals hope to see…
Yellen Renews Call for Tax Hikes on Rich, Social-Spending Boost - Christopher Condon, Bloomberg ($). “Treasury Secretary Janet Yellen outlined some of the Biden administration’s unfinished economic business on Thursday in a speech calling for higher tax rates on the rich and on companies to help pay for social spending.”
Mind you, this event was billed as being about electric cars (which may or may not be available).
The Treasury secretary called for ‘closing loopholes and returning tax rates for high earners and corporations to historical norms.’
Further down the article:
Yellen listed a number of priorities in her speech, at a Ford Motor Co. electric vehicle plant in Dearborn, Michigan.
- 'Programs like free community college and expanded workforce training increase the productivity of our labor force.'
- 'High-quality, affordable child care and free preschool increase the likelihood that parents, particularly mothers, will participate in the workforce.'
- 'It is a national imperative to increase the affordability of housing,' she said. 'We must continue advancing our coordinated government approach' to that end, she said.
Welcome to election season.
Former Chief: IRS nearing ‘Catastrophic’ collapse – Jay Heflin, Eide Bailly:
Former IRS Commissioner John Koskinen told the Tax Policy Center (TPC) on September 8th that the agency he used to run was inching toward a ‘catastrophic’ collapse.
‘We’re getting closer, obviously,’ Koskinen told TPC’s The Prescription host Howard Gleckman, who asked if operational issues have pushed the IRS toward a “catastrophic” collapse.
Koskinen cited the filing backlog, the agency’s inability to answer phones, and a declining audit rate as evidence that the agency is suffering from an inefficiency that could render it useless.
‘Most people would look at that and say that’s a very sick person,’ he said.
There is expected to be a new IRS chief come November.
When asked what sort of person should replace Rettig, Koskinen picked a budget guru over a tax professional.
‘The last thing in the world the IRS needs is more tax expertise,’ Koskinen said. ‘What the IRS needs in the next commissioner is someone who can take advantage of this [$80 billion] funding’ Congress recently bestowed to the IRS.
The White House might be listening to Koskinen:
Biden Closing In on New IRS Chief to Succeed Trump Appointee – Nancy Cook and Laura Davison, Bloomberg ($):
The names of potential nominees to succeed Charles Rettig, a Donald Trump appointee whose term expires in November, are closely held secrets within the White House and Treasury Department. People familiar with the search say the administration wants someone with deep management and business experience as opposed to a tax attorney, someone who can help to lead and transform the sprawling agency that processes more than 150 million individual tax each year.
Rettig 2.0?
No IRS commissioner has served two terms since the IRS Restructuring and Reform Act of 1998 which set up the current term structure. The White House hasn’t yet officially told Rettig they are not re-nominating him for the job when his term expires Nov. 12, said one Biden ally briefed on the search. A spokesman for Rettig didn’t immediately respond to a request for comment.
This process could take awhile:
The IRS Commissioner job is subject to Senate approval. The chamber’s limited schedule in Washington for the remainder of the year means that Biden will likely have to select someone to lead the agency in an acting capacity while the nominee awaits for a Senate vote.
That wait could be even longer if Republicans win a Senate majority in the November election and Democrats aren’t able expedite the confirmation in the lame duck session after the election and before the new Congress is installed.
With Inflation Sky High, Taxpayers Reconsider Payment Options - Kelly Phillips Erb, Bloomberg ($):
Taxpayers often have questions about how to pay off their tax debts. But with inflation and interest rates creeping higher, those questions are becoming more frequent, and the standard answers don’t always apply.
To make a good decision, it’s important to understand how the IRS applies interest and penalties to tax bills.
New York Sending $475 Million in Relief to Low-Income Families – Donna Borak, Bloomberg ($). “Nearly 2 million eligible low-income New Yorkers and their families will receive $475 million in tax relief by the end of October.”
Expedia, Airbnb Must Collect Virginia Sales, Lodging Taxes – Michael Bologna, Bloomberg ($). “Services like Expedia Inc. and Airbnb Inc. that broker hotel rooms and short-term rentals will have to collect and remit sales and lodging taxes to the Virginia Department of Taxation under a law that takes effect Oct. 1.”
Mich. Justices Won't Hear Co.'s Plea To Deduct Delivery Costs – Paul Williams, Law360 Tax Authority ($). “The Michigan Supreme Court declined to hear a fuel company's claims that it is entitled to a gross receipts tax deduction for delivery charges that weren't specifically stated in contracts for the company's coal purchases.”
Tesla Evaluating Lithium Refinery in Texas, Seeks Tax Breaks – Sean O’Kane and Shelly Hagan, Bloomberg ($). “The electric-car maker has told the state it is considering constructing a ‘battery-grade lithium hydroxide refining facility,’ in Nueces County, which it has pitched as ‘the first of its kind in North America,’ according to a newly-public application for tax breaks filed with the Texas Comptroller’s Office."
State Sales Tax Revenue Rises 7.4% YoY in July – Bloomberg ($):
Sales tax revenue increased 7.4% to $24.3 billion in July from the same month in 2021, according to U.S. Census Bureau data for 26 states compiled by Bloomberg. Minnesota rose the most, up 142.7%, and Iowa fell the most, down 36.4%.
Arizona DOR Publishes Transaction Privilege Tax, Other Tax Rate Tables Effective Oct. 1 – Bloomberg ($). “The Arizona Department of Revenue Sept. 1 published transaction privilege tax (TPT) and other tax rate tables, effective Oct. 1, for excise and sales and use tax purposes.”
Iowa PAAB Finds Taxpayer Entitled to Reduced Property Tax Assessment Based on Facility’s Exempt Components – Bloomberg ($). “The Iowa Property Assessment Appeal Board (PAAB) Sept. 6 found that Taxpayer was entitled to a reduced property tax assessment based on the assessed value of items eligible for exemption.”
Oklahoma Tax Commission Issues Information on Income Tax Withholding Rules – Bloomberg ($). “The Oklahoma Tax Commission Sept. 1 issued information on individual income, corporate income, and trust income tax withholding rules, effective Sept. 11.”
South Carolina DOR Issues Information Letter Providing Various Tax Legislative Updates for 2022 – Bloomberg ($). “The South Carolina Department of Revenue Sept. 7 issued an information letter providing a summary of individual income, corporate income, trust income, sales and use, excise, and property tax and regulatory laws enacted during the 2022 legislative session with their effective dates.”
Bloomberg also reports that the Palmetto State has provided information on individual income tax rebate eligibility requirements, which is here.
EU Nations Commit to Global Minimum Tax Despite Hungary Veto – Jorge Valero, Kamil Kowalcze and William Horobin, Bloomberg ($):
A group of European Union countries is considering new ways of implementing a global deal for a 15% minimum tax on large multinationals in 2023 as Hungary continues to veto a joint solution for the bloc.
Finance ministers from five of the largest EU economies said at a meeting in Prague on Friday they will strengthen their commitment to the plan by working on alternatives that would exclude Budapest.
‘Should unanimity not be reached in the next weeks, our governments are fully determined to follow through on our commitment,’ Germany, France, Italy, Spain and the Netherlands said in a statement. ‘We stand ready to implement the global minimum effective taxation in 2023 and by any possible legal means.’
From the “Man bites Dog” file:
Jury Sides With Partnership Over $580K Tax Penalties – Theresa Schliep, Law360 Tax Authority ($):
A federal jury found a partnership had reasonable cause for its tax filing problems due to the mental health problems of an employee, siding with the company in its challenge to $580,000 in Internal Revenue Service penalties.
RSBCO had sufficient reason within the meaning of Internal Revenue Code Section 6724 for failing to file the information returns that led to the IRS' assessment of the penalties, a jury found Wednesday. The statute relieves a person or company of penalty liability if they prove they had a good reason for failing to comply with reporting requirements, and the Louisiana-based partnership has argued that it had reasonable cause because the employee charged with filing the forms experienced mental health problems that complicated compliance.
It’s National Teddy Bear Day. This day is dedicated to President Theodore Roosevelt, who refused to shoot a bear while hunting for bears.
Did you know that the Teddy Bear was invented in honor of President Theodore Roosevelt? It all began when Theodore Roosevelt was on a bear hunting trip near Onward, Mississippi on November 14, 1902. Mississippi's Governor Andrew H. Longino had invited him, but unlike other hunters in the group, Theodore had not located a single bear.
Roosevelt's assistants, led by Holt Collier…cornered and tied a black bear to a willow tree. They summoned Roosevelt and suggested that he shoot it. Viewing this as extremely unsportsmanlike, Roosevelt refused to shoot the bear. The news of this event spread quickly through newspaper articles across the country. The articles recounted the story of the president who refused to shoot a bear. However, it was not just any president, it was Theodore Roosevelt the big game hunter!
Clifford Berryman, a political cartoonist, read the article and decided to lightheartedly satirize the president's refusal to shoot the bear. Berryman's cartoon appeared in the Washington Post on November 16, 1902. Morris Michtom, a Brooklyn candy shop owner, saw the cartoon and had an idea. He and his wife Rose also made stuffed animals, and Michtom decided to create a stuffed toy bear and dedicate it to the president who refused to shoot a bear. He called it 'Teddy's Bear'.
I would like to say that capturing an animal to make it easier to shoot is uncommon. It’s not.
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