IRS Floats Rule To Expand Access To Administrative Appeals – Stephen Cooper, Law360 Tax Authority ($):
Taxpayers seeking to settle disputes with the Internal Revenue Service over their unpaid tax liabilities would get greater access to the service's office of administrative appeals under proposed regulatory guidance released Friday.
The proposed rule, required by enactment of the Taxpayer First Act in July 2019, would establish how the IRS will operate its Independent Office of Appeals to resolve federal tax controversies that do not require litigation. In most cases, the taxpayer will have received a preliminary letter from the service determining their liability, prompting an appeal request.
The proposed rule is here.
IRS Corrects Rules For Disclosing Nonprofit Info To States – Emlyn Cameron, Law360 Tax Authority ($). “The Internal Revenue Service on Friday released corrections to final rules for states seeking return information about tax-exempt organizations from the agency to manage state-level laws about those groups.”
The document is here.
CPA Group Asks IRS to Add More Years, Forms to Penalty Relief - Alex Clearfield, Bloomberg ($):
The American Institute of CPAs asked the IRS and Treasury to expand the recently announced penalty relief for the 2019 and 2020 tax years to include the 2021 tax year and additional forms, as well as amended returns, in a letter released Monday.
The letter is here, but a Bloomberg subscription is required.
Biden Touts Tax Successes as Election Season Heats Up – Alexander Rifaat, Tax Notes ($). “As campaigning for the fall midterm elections intensifies, President Biden is pointing to the series of tax measures he recently signed into law as just the start of a broader economic plan he wants to put in place.”
Biden’s economic blueprint was included in Friday’s Roundup. It calls for enacting tax increases that the Administration has yet to get through Congress despite the fact of having the majority in both chambers.
The blueprint includes a call for another attempt to pass several of the tax policy changes that Congress stripped out during negotiations on what became the Inflation Reduction Act (P.L. 117-169).
Those proposals include changes to how capital gains are treated on carried interest income, as well as a plan to end the step-up in basis at death for the wealthiest individuals. The plan also calls for a minimum tax on billionaires and other ‘structural changes to our tax code to remove incentives to offshore jobs and profits.’
It seems highly unlikely that Congress will pass these provisions before the end of the calendar year. If Republicans take the majority in either the House or Senate after November's elections, Biden’s tax-increase agenda will basically be dead for 2023 and 2024.
72 Democrats sign letter opposing Manchin permitting bill – Benjamin Hulac, Roll Call:
Seventy-two House Democrats said Friday they oppose including legislation to change federal permitting laws in a funding bill to keep the government running at the end of September, teeing up a clash with party leadership.
Democrats’ Effort to Speed Up Energy-Project Permitting Faces More Opposition – Siobhan Hughes, Wall Street Journal ($):
Congress is flashing warning signs about the prospects for passing legislation to speed up permitting of both renewable-energy and traditional fossil-fuel projects, with a growing number of lawmakers objecting to the proposal being tied to a must-pass spending bill.
Last week, Senate Majority Leader Chuck Schumer (D., N.Y.) said he would attach the permitting bill to a short-term budget measure known as a continuing resolution needed to keep the government funded beyond the end of September. Lawmakers on both sides of the aisle have balked at supporting the permitting bill, leaving its fate up in the air with just a few weeks until the funding deadline.
How is this tax related? If lawmakers get into a rumble over this permitting provision, they will not likely have the bandwidth to identify what tax provisions should be included in the bill. Lawmakers say they ‘can walk and chew gum at the same time,’ but they really can’t.
In Age of Unpaid-For Tax Cuts, Deficit Reduction Is an Anomaly – Doug Sword, Tax Notes ($):
The Congressional Budget Office’s estimate that the Inflation Reduction Act (P.L. 117-169) will cut future deficits by $58 billion marks the first time in 12 years that a reconciliation bill signed into law isn’t expected to explode the deficit.
This marks a departure from the last two reconciliation bills — the American Rescue Plan Act of 2021 and the Tax Cuts and Jobs Act — each of which was projected to add $1.9 trillion to the national debt over 10 years. But it doesn’t mark a return to the pre-2000 world when reconciliation bills had names like the Balanced Budget Act and were used solely as deficit-taming vehicles.
Brief history lesson: Reconciliation rules were created in 1974 when inflation was rampant and interest expense on government debt consumed a growing amount of the revenue raised. The rules made it easier to pass legislation that would increase revenue and pay down the debt, hence less interest expense. Reconciliation is now used to increase the debt - the exact opposite reason for why it was created.
Not income tax related, but still taxing:
Affordable Care Act Health-Plan Premiums Set to Rise – Stephanie Armour and Anna Wilde Mathews, Wall Street Journal:
Premiums for many Affordable Care Act health-insurance plans are set to rise sharply next year, a sign of how rising labor costs and other expenses are starting to ripple through the healthcare economy.
Consumers, who generally can begin signing up for plans on Nov. 1, probably won’t feel much impact because of enhanced federal subsidies, but small employers are likely to face the brunt of higher rates because they don’t get similar government help, according to health-insurance specialists.
Digging Into Direct Pay and Credit Transfers Under the IRA – Marie Sapirie, Tax Notes ($):
The Inflation Reduction Act (IRA, P.L. 117-169) added options for taxpayers and investors with the hope that the new avenues for financing clean energy projects would encourage investment and help achieve the legislation’s ambitious greenhouse gas reduction goals. The two new choices are direct pay and transferring credits for cash, and they could make big changes in parts of the clean energy sector.
Climate Law Provisions Seen as Lift to Direct Air Carbon Capture – Dean Scott, Bloomberg ($). “Carbon capture developers working on directly pulling carbon emissions from the air are touting the climate law for not just tripling the previous tax credit but including features they predict should turn the technology to a relatively common climate solution.”
How Inflation Reduction Act Will Lift Offshore Wind Projects – Eric Runge, Margaret Czepiel and Paul Belval, Law360 Tax Authority ($). “The Inflation Reduction Act was signed into law on Aug. 16. Among its hundreds of pages, the IRA contains some significant provisions geared toward the development of clean energy — including from offshore wind.”
Energy Co. Asks Fed. Circ. To Rethink $550M In Tax Credits – Anna Scott Farrell, Law360 Tax Authority ($). “A Philadelphia energy company asked the Federal Circuit on Friday to overturn a lower-court decision denying it $550 million in tax refunds for alternative fuel mixtures tax credits, saying the court wrongly excluded butane from classification as an alternative fuel.”
Crypto Investors Wary of Tax ‘Regulation by Enforcement’ – Michael Bologna, Bloomberg ($):
Minnesota and Michigan provided investors with some guidelines on the tax treatment of cryptocurrencies and NFTs, but one practitioner is warning investors about 'regulation by enforcement.' Meanwhile, Pennsylvania lost a tax fight with 11,000 sellers with inventory parked in Amazon warehouses, and Indiana acknowledged student loan forgiveness would be taxable in the Hoosier state.
Opponents Attack Washington Capital Gains Tax at High Court – Perry Cooper, Bloomberg ($):
Washington state’s tax on capital gains was properly struck down as an unconstitutional tax on income, opponents of the law told the state high court.
A trial court struck down the tax law in May, siding with farmer and business groups that argued past court rulings categorized income taxes as property taxes, which can’t exceed 1% annually.
New York Tax and Finance Department Issues Child, Earned Income Tax Credit Additional Payment Information – Bloomberg ($). “The New York Department of Taxation and Finance Sept. 8 issued information on additional Empire State child credit and earned income tax credit payments.”
Pa. Court Blocks State's Tax Pursuit Of 3rd-Party Sellers – Paul Williams, Law360 Tax Authority ($):
The Pennsylvania Department of Revenue cannot pursue back taxes from certain third-party sellers that had inventory housed in the Keystone State through participation in an Amazon sellers program, a state court held Friday.
A seven-judge panel for the Pennsylvania Commonwealth Court unanimously blocked the department from seeking sales and income taxes from sellers that had goods stored in the state as part of the fulfillment by Amazon, or FBA, program, in which Amazon would control the flow of inventory the retailers sold. The court held in a precedential opinion that because the third-party sellers didn't control the placement of their goods after Amazon received them, they didn't have nexus with Pennsylvania.
Victims of Mississippi water crisis get filing relief – Jeff Stimpson, Accounting Today. “Victims of the water crisis that began in Mississippi on Aug. 30 now have until February to file various individual and business returns and make tax payments.”
Accounting firms react to passing of Queen Elizabeth – Michael Cohn, Accounting Today. "Queen Elizabeth II's death Thursday after 70 years on the throne prompted an outpouring of grief around the world. Her son, Charles, a longtime proponent of the accounting profession's role in sustainability reporting through the group he founded in 2004, Accounting for Sustainability (A4S), is succeeding her on the throne as King Charles III."
A4S posted a statement on its homepage and on Twitter: ‘We are greatly saddened to learn of the death of Her Majesty The Queen. We send our deepest condolences to our Founder, His Majesty The King Charles, and members of the Royal Family at this time.’
It’s good to be king:
King Charles doesn't have to pay inheritance tax on the Queen's private estate worth more than $750 million – Jyoti Mann, Insider. “King Charles will not have to pay inheritance tax on the Duchy of Lancaster estate he inherited from the Queen due to a rule allowing assets to be passed from one sovereign to another.”
EU Is Assessing If US Inflation Act in Breach of WTO Rules – Jorge Valero and Jillian Deutsch, Bloomberg ($). “The European Union is checking whether protectionist elements of a $437 billion health, climate and tax law recently passed by the US are in violation of World Trade Organization rules, according to Trade Commissioner Valdis Dombrovskis.”
‘We have concerns about a number of discriminatory elements in this Inflation Reduction Act which puts requirement for local content, for local production,’ Dombrovskis, who also is a European Commission vice president, told Bloomberg in Prague. ‘So we are assessing if it’s in line with WTO requirements and with government procurement agreement.’
US proposed import levy looks like a not-so disguised carbon tax - Andrew Silverman, Bloomberg ($).
A proposed levy on a broad range of imports is in effect a domestic carbon tax on companies such as Ford and Archer-Daniels because they would have to pass it on to their foreign suppliers. The proposal comes from progressive congressional Democrats, which appears to be a handicap. It also has significant flaws, including a loophole that may subsume the tax entirely.
Treasury Plans FATCA Guidance to Help Foreign Residents, Banks - Michael Rapoport, Bloomberg ($):
The Treasury Department is planning guidance that would offer some relief to foreign residents and foreign banks that have run into problems over compliance with the US Foreign Account Tax Compliance Act, according to a Treasury official.
FATCA requires non-US banks to report information to the US on accounts held by US citizens, even if those citizens are foreign residents with no financial links or limited financial links to the US. Some of these ‘accidental Americans’ lack the documentation that’s supposed to be reported, like US taxpayer identification numbers.
Banks can face steep penalties if they don’t provide the information, and so some banks have moved to close such residents’ accounts.
From the “inciting-mass-confusion” file:
Discharged Student Debts Won’t be Reported to IRS, States – Michael Bologna, Bloomberg ($):
Taxpayers participating in the Biden administration’s student loan debt forgiveness program won’t have to account for the benefit on their federal tax returns, but they could face problems when filing state returns because lenders likely won’t issue cancellation of debt forms.
Last year the IRS issued guidance, Notice 2022-1, under the American Rescue Plan Act. The agency directed lenders and student loan servicing agencies to stop issuing Form 1099-C, cancellation of debt, for the forgiveness of student loan debt between 2021 and 2025. The form, required for discharges of debt greater than $600, is generally sent to both the IRS and taxpayers to streamline tax compliance.
The lack of Form 1099-C reporting could prove problematic for revenue departments and taxpayers in roughly seven states that plan to tax cancellation of student debt next year, said Jared Walczak, vice president of state projects at the Tax Foundation.
‘It seems to be the expectation that there will not be 1099-Cs issued by the loan servicing companies,’ he said. ‘It creates a double problem in states that potentially tax student loan debt cancellation. So now the borrowers don’t have the information they need to prepare their taxes and the state doesn’t have the normal documentation it needs to know what amount is owed.’
Add in the hodgepodge of states that will allow or disallow the cancelation, and you’ve got yourself a real situation.
Post up! It’s National Chocolate Milkshake Day and National Video Games Day! A very good combo! And if you’re not feeling up for it, it’s also National Day of Encouragement!
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