Forgiven But Ineligible Paycheck Protection Loan Is Income: IRS - Naomi Jagoda, Bloomberg ($):
Taxpayers who inaccurately represent that they are eligible for Paycheck Protection Program loan forgiveness, and subsequently have their loan forgiven even though they don’t meet the requirements, can’t exclude their loan forgiveness from income, the IRS Chief Counsel’s office said in a memo released Friday.
The memo is here (subscription required).
IRS Faces Tight Job Market and Competition for Talent as It Recruits Thousands – Richard Rubin, Wall Street Journal ($):
The tax agency received $80 billion from Congress this summer to overhaul aging computer systems and strengthen enforcement so the U.S. collects more unpaid taxes. The Biden administration wants the IRS to provide better, more-modern service and take a tougher approach to high-income households and large corporations.
Meeting the objectives will require a top-to-bottom transformation and expansion of the agency, a shift to be accomplished with a yearslong hiring binge for tens of thousands of workers after a long period of agency attrition.
The bulk of the hiring will be specialized accountants and technical professionals, though the agency is adding lower-paid customer-service workers in the short term. The IRS will need to sustain hiring over several years while offsetting expected retirements of its aging workforce.
Private Equity Is A Business Subject To The New Book Minimum Tax. Treasury Should Say So. - Steven M. Rosenthal, Tax Policy Center:
When the Senate added a new corporate minimum tax to the Inflation Reduction Act (IRA), it almost added a clarification that private equity is a business that would be subject to the new tax. But two key Senators blocked the clarification.
Now, as Treasury writes regulations to accompany the new law, it must decide whether private equity is a business. The legal answer is easy: Yes, private equity is a business. But the policy answer is harder: Does Treasury want to potentially apply the minimum tax to thousands of smaller companies that are owned by private equity?
Treasury recommends preparing for U.S. digital currency – Chris Gaetano, Accounting Today. “he Treasury Department recommended that the government begin the work of developing a digital currency of its own, just in case it ever wants to use one. The department drafted the report — one of three — as required in the March executive order "Ensuring Responsible Development of Digital Assets," which instructed the Treasury to look into and make recommendations on the future of money and payment systems, consumer and investor protection, and illicit finance risks.”
Warren Calls on Treasury to Rein in Crypto Market - Alicia Diaz, Bloomberg ($). “Senator Elizabeth Warren, a Massachusetts Democrat, is urging the Treasury Department to build a strong regulatory framework for the crypto market, according to a release.”
The letter is here.
Ways and Means Set to Take Up Republican Tax Resolutions – Benjamin Guggenheim, Tax Notes ($). “The House Ways and Means Committee has scheduled for markup several resolutions that will allow Republicans to spotlight their grievances against Democrats’ tax policy.”
The charitable point-of-view – Bernie Becker, Politico:
Advocates for charities and other tax-exempt groups are hoping to at least restore a charitable deduction that lawmakers gave to taxpayers who don’t itemize their returns.
Congress first offered that $300 deduction for 2020 as part of a bipartisan coronavirus relief measure passed in March of that year, before extending it through 2021 as part of a lame-duck tax deal that December and allowing joint filers up to a $600 deduction.
And now, nonprofit advocates are brandishing new polling to argue that voters want lawmakers to bring it back.
Which States Tax Student Loan Forgiveness, and Why Is It So Complicated? – Nikhita Airi and Lillian Hunter, Tax Policy Center:
The Biden administration’s plan for broad-based student loan forgiveness of up to $20,000 per individual won’t affect borrowers’ federal tax bills, but it could have state tax implications for some.
While many states will follow the federal lead and not treat forgiven student loans as earned income, some could take a different path. At this time, four states plan to treat forgiven student loans as income, while three states are reviewing their tax rules.
Stanford wants 'educational' tax exemption for faculty homes – Sue Dremann, Palo Alto Weekly:
Stanford University is seeking to reduce its tax burden on two faculty houses by claiming they are used for educational purposes.
If successful, additional exemptions the university might seek could result in millions of dollars of lost revenue for local schools and governments, particularly the Palo Alto Unified School District, according to Santa Clara County administrators.
Cash Cushions Make States Slow to Grab Corporate Tax Opportunity – Michael Bologna, Bloomberg ($). “Just a few states have corporate alternative minimum taxes, but the arrival of a new federal program has created a fresh opportunity for local officials to seriously consider following Washington’s lead.”
Further down the article:
State-level corporate minimum tax initiatives, however, seem unlikely in the current political and economic climate. Most states would have a hard time justifying a new business tax while sitting on huge post-pandemic cash cushions and cutting taxes to attract investment. If states gravitate towards corporate minimum tax structures, it may only emerge in response to a future revenue crisis or a populist campaign for corporate tax reform, said Jamie Yesnowitz, the state and local tax leader at Grant Thornton LLP’s Washington National Tax Office.
'I don’t expect many states to do that given the fact that very few currently have a corporate AMT concept, the corporate AMT being adopted for federal income tax purposes is pretty complex, and most states are currently in a strong fiscal position,' Yesnowitz said.
States are in a 'strong fiscal position' until they're not:
California Sees Warning Sign From Weak Tax Revenue Collections - Amanda Albright, Bloomberg ($). “California drew in 11% less in personal income tax revenue than it expected so far this year, the latest warning sign for the finances of a state whose fortunes are closely tied to the performance of markets.”
Massachusetts to Start Sending Individual Tax Rebates in November - Angélica Serrano-Román, Bloomberg ($). “Massachusetts taxpayers will receive one-time tax rebates starting in November through checks and direct deposit, the revenue agency said Friday."
Personal and Business Taxes on the Chopping Block in Louisiana – Michael Bologna, Bloomberg ($):
A new tax overhaul initiative kicked off in Louisianaas lawmakers explored options for jettisoning the personal income, corporate income and corporate franchise taxes.
Special session on Missouri tax cuts drags on – Associated Press. “In his special session call, [Republican Gov. Mike] Parson directed lawmakers to cut the top income tax rate from 5.3% to 4.8%, as well as increase the standard deduction by $2,000 for single filers and $4,000 for couples. He limited tax cuts to a maximum $700 million price tag per year.”
IRS Issues Foreign Tax Credit Guidance Over Puerto Rico Issue - Michael Rapoport, Bloomberg ($). “The IRS issued guidance Friday aimed at reassuring taxpayers that they’ll still be eligible to use US foreign tax credits in certain situations in Puerto Rico when some had feared they might not be able to.”
OECD to Design Peer Review Process for Minimum Tax in 2023 - Stephen Gardner, Bloomberg ($):
The Organization for Economic Cooperation and Development will start next year to design a peer review process for implementation of the global minimum tax, an OECD official said Friday.
The process would allow countries that approved the two-pillar global tax reform in October last year ‘to be comfortable each country has implemented the rules,’ said John Peterson, OECD head of unit for the minimum tax, speaking to a Swiss-American Chamber of Commerce seminar.
The U.S. has so far approved neither pillar and it is unclear when it might.
Global Deal, FATCA Updates - Alex Clearfield, Bloomberg ($). “Efforts by France, Germany, Italy, the Netherlands, and Spain to move ahead with adoption of the global minimum tax, despite failure to agree on it at the European Union level, could prove an encouragement to the US to bring its regime into compliance, Rep. Don Beyer (D-Va.) told a Swiss-American Chamber of Commerce seminar Friday.”
The administration is committed to implement the 15% minimum corporate tax—part of the global tax pact known as Pillar Two—but ‘the path to implementation is unclear,’ Beyer said.
‘The path to implementation is unclear’ is code for this provision will unlikely become law in the current Congress.
The path is also unclear for Beyer’s bill that would ease tax filing rules for Americans living abroad.
‘I continue to work on the unfairness of taxing overseas Americans as if they lived in the US,’ Beyer said. His bill would ‘vastly simplify the tax return for an overseas American if they make less than $400,000 and don’t owe any US taxes. It simply would be a one-page form with a signature,’ he said.
The bill’s text is here.
From the “Inside Baseball” file:
Emmer to donors – Buchanan will be next Ways and Means chair - Jake Sherman, Punchbowl News ($):
NRCC Chair Tom Emmer said at a Florida fundraiser last week that Rep. Vern Buchanan (R-Fla.) will be the next top Republican on the House Ways and Means Committee.
‘Vern will be the next Ways and Means chairman,’ Emmer said at the fundraiser, according to a source present. ‘Vern has been a mentor to me and many others in our conference.’
Why tax folks should care about this: The House Ways and Means Committee is where tax legislation is born. If there is a tax increase or tax cut that Congress approves, it likely got it’s start in this committee (leadership bills nothwithstanding).
Rumors have been circulating around Washington D.C. for a while about who will chair the tax-writing committee in the next Congress. Buchanan was mentioned early on, but now Rep, Jason Smith (R-Mo.) has become a dark horse in this race. Smith is supposedly tight with Rep. Kevin McCarthy (R-Cal.), who could become the next House Speaker – so Smith would have an “in” with leadership, which would be instrumental in getting tax bills passed in the House.
The election is still weeks away, and so far Republicans are expected to take the majority in the House. If true, the tax-writing committee will be ruled by pro-tax-cut individuals, be it Buchanan, Smith, or any other Republican. In other words, don’t count on tax increases being an issue under this leadership.
Ahoy! It’s International Tax Like a Pirate Day!
“When the boss gives you a new project, 'Aye, aye, Capt’n,' is the correct response,” according to National Day Calendar.
Other nifty pirate phases and their meaning, according to pirateglossary.com:
- ARR!: An exclamation.
- BECALMED: The state of a sailing vessel which cannot move due to a lack of wind.
- BILGED ON HER ANCHOR: A ship holed or pierced by its own anchor.
- BLIMEY!: An exclamation of surprise, short for ‘God blind me!’, which is very common to this day in Britain and sometimes shortened less to ‘Gor blimey’ or ‘Cor blimey.’
- DEADLIGHTS: Strong shutters or plates fastened over a ship's porthole or cabin window in stormy weather.
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