Tax News & Views Now Hiring, Not Roundup

September 26, 2022

GOP’s First Bill Would ‘Repeal 87,000 IRS Agents,’ McCarthy Says – Doug Sword and Jonathan Curry, Tax Notes ($):

If Republicans take control of the House in 2023, they will support the addition of 200,000 police officers nationwide, a 50 percent cut in permitting times for energy development, and full funding of border enforcement.

But first, they’ll go after the IRS.

‘We’ll put it out to the entire country: This is what we’ll do,’ House Minority Leader Kevin McCarthy, R-Calif., said at a September 23 event on his caucus’s newly unveiled ‘Commitment to America’ platform.

‘But on that very first day that we’re sworn in you’ll see that it all changes — because on our very first bill we’re going to repeal 87,000 IRS agents,’ McCarthy said.

The Republican plan is here. Details are few.

To be clear: This piece of legislation would also have to pass the Senate, and if Democrats control that chamber it won't pass. President Biden would also resist signing this measure into law.  Currently, odds for enactment are low. 

There is also this:

Just wait 'til next year (maybe) – Bernie Becker, Politico. “The IRS has projected that it would hire 87,000 new employees over a decade with its new funding influx, but far from all of those would be revenue agents. Plus, a good chunk of those new hires are expected to replace retiring IRS staffers.”


Skills To Quickly Bulk Up IRS Key For Next Commissioner – David van den Berg, Law360 Tax Authority ($):

With the IRS poised to receive a nearly $80 billion funding boost and facing an aging workforce and outdated technology, significant management experience will be an essential qualification for President Joe Biden's nominee for IRS commissioner, former agency officials said.

Biden's choice to head the agency should be comfortable leading a large organization that needs to hire the right people quickly, the officials said. More than 60% of the Internal Revenue Service's workforce will be eligible for retirement in the next six years, and its attrition rate is higher than average, the agency said in a strategic plan released in July. The agency's information technology systems and infrastructure are also severely outdated.

Further down the article:

The five-year term of the agency's current commissioner, Chuck Rettig, is set to expire Nov. 12. Biden has not nominated anyone for the position yet, and time could be running out for him to put forth a nominee while his party controls the Senate, given that the chamber is up for grabs in November's midterm elections.

Congress currently has bigger fish to fry than appointing a new IRS chief. It has four days to extend federal government funding before a shutdown occurs. However, a shutdown is unlikely. But once lawmakers approve funding they are expected to immediately head out of town to campaign for November's election. This leaves no time to vet the next IRS chief in public hearings, let alone vote on that person. The mid-term elections are on November 8th and the current commissioner's term ends on November 12th. An interim commissioner might be the answer. 


IRS Can Seek Crypto Platform Users' Bank Docs – Theresa Schliep, Law360 Tax Authority ($). “The IRS can proceed with a summons on a New York bank seeking the account records of clients who've received services from cryptocurrency platform sFOX as the agency probes whether they've complied with their tax obligations, a federal judge ruled.”


IRS Doubles Down on Limited Partner Exception – Kristen Parillo, Tax Notes ($). “The IRS appears to be standing by its position in a Tax Court case brought by a hedge fund that its owners can’t claim the limited partner exception to self-employment tax even if they are limited partners under state law.”


Powering Up Advanced Manufacturing – Marie Sapirie, Tax Notes ($):

The Inflation Reduction Act (IRA, P.L. 117-169) introduces a shift of the tax incentives for renewable energy from a more technology-specific model of picking winners and losers to a largely technology-neutral one, but the bill also includes the new, and highly detailed, advanced manufacturing production credit in section 45X. This novel credit is an effort at rapid deployment of existing renewable energy technology.

Moving the United States to a carbon-pollution-free power sector by 2035, as the Biden administration plans, means that 40 percent of the nation’s energy needs would have to come from solar power, according to an estimate from the Energy Department. Section 45X is meant to supercharge U.S. production of solar panels, wind turbines, inverters, and batteries to achieve those decarbonization ambitions.


Clock Is Ticking on Research Amortization Help – Nathan Richman, Tax Notes ($):

Treasury has promised two pieces of guidance on the new section 174 from the TCJA that took effect for tax years beginning in 2022. To pay for more tax cuts, the TCJA drafters converted the immediate deduction for research and development expenses into five- or 15-year amortization.

James R. Gadwood of Miller & Chevalier Chtd. told Tax Notes that by the end of 2022, he hopes to see the IRS and Treasury release substantive proposed regulations and a procedural revenue procedure.

There is broad, bipartisan support for allowing R&D outlays to be expensed. The problem is that there are huge disagreements on how other tax measures should be handled. Until those disagreements are settled, it is not clear when or if Congress will approve a bill that includes an R&D fix. 


Before Heading Into Retirement, Beware of Two Common Tax Traps (Perspective) - Leslie Geller, Bloomberg ($). “If you’re a tax professional or financial adviser, you know many of your clients are focused on saving for their golden years but generally treat what to do once they’re in retirement as an afterthought. This is problematic because of the many tax traps that can arise once a person has retired, and it’s why I’ve long counseled investors, tax professionals, and financial advisers to plan for them before retirement.”


Texas Well Suited to Weather Economic Storm, Comptroller Says – Danielle Moran and Shelly Hagan, Bloomberg ($). “Texas Comptroller Glenn Hegar is confident the state is better positioned to weather an economic downturn than many other places, he said Friday in an interview at the Texas Tribune Festival in Austin.”

The state is better positioned because tax receipts have been quite big.

Texas saw a historic 26% surge in tax revenue in the fiscal year through August, bolstered by strong sales tax collections.

 But it won’t last forever.

The pace of that growth is almost certainly expected to slow as the state grapples with economic headwinds caused by a global or national slowdown, Hegar said.


Florida Governor Keeps the Sun Shining on Sales Tax Holidays – Michael Bologna, Bloomberg ($). “Florida’s reputation as both a travel and tax vacation capital shines a bit brighter with Gov. Ron DeSantis’s (R) latest pitch to waive the state’s 6% sales tax on a long list of consumer goods ranging from toilet paper to dog food, baby buggies, and circular saws.”

Further down the article:

What’s on the latest list?

  • A new two-week spring tax holiday for school supplies to go along with Florida’s existing two-week back-to-school holiday in the fall;
  • A permanent exemption on baby items such as diapers, onesies, cribs, and strollers;
  • A permanent exemption on medical equipment and “items that contain medicinal ingredients";
  • A one-year exemption on household items such as soap and bathroom tissue, children’s books and toys, sports equipment, and pet food.


Kentucky DOR Announces Updates to Individual Income Tax for 2023 Tax Year – Bloomberg ($). “The Kentucky Department of Revenue Sept. 21 announced that after adjusting for inflation, the standard deduction for 2023 is $2,980, which is an increase of $210 from the current standard deduction.”


California Governor Signs Law on Excise and Sales and Use Tax, Fee, Surcharge Administration – Bloomberg ($). “The California Governor Sept. 22 signed a law on the administration of sales and use and excise tax, fees, and surcharges.”

Calif. Justices' Pass On Agency Deference Concerns Tax Pros – Maria Koklanaris, Law360 Tax Authority ($). “The California Supreme Court's pass on a decision holding out-of-state trusts' income from a California S corporation's sale of a subsidiary was California-sourced income leaves in place a lower court's deference to an agency regulation that practitioners say changes law.”


Iowa Court of Appeals Affirms Judgment Denying Church’s Petition to Abate Property Taxes – Bloomberg ($). “The Iowa Court of Appeals Sept. 21 affirmed the district court’s denial of Taxpayer’s petitions to abate property taxes. Taxpayer, a registered religious and charitable organization, purchased its property in 2015.”


Michigan Treasury Issues Reminder to File Individual Income Tax Returns by Oct. 17 – Bloomberg ($):

The Michigan Department of Treasury Sept. 22 issued a reminder to file individual income tax returns. The information includes that: 1) taxpayers who requested an extension to file their returns must do so by Oct. 17 through the U.S. Postal Service or by e-filing; 2) for the convenience of taxpayers, the extension deadline is the same as for the Internal Revenue Service; 3) taxpayers risk losing their state income tax refund if they don’t file a return within four years from the due date of the original return; 4) taxpayers may file returns and pay now to limit interest charges and late payment penalties; and 5) if taxpayers owe outstanding taxes and can’t pay in full, they should pay as much as they can when they file their tax returns.

Michigan Order Endangers Billions in Tax Foreclosure Profits - Alex Ebert, Bloomberg ($). “Michigan counties can be forced to repay the profits they made in tax foreclosure sales, a state appellate court ruled in a decision that risks billions of dollars counties have collected over decades.”


France Says EU Should Respond in Kind to Biden’s EV Subsidies – William Horobin and Albertina Torsoli, Bloomberg ($). “French Finance Minister Bruno Le Maire said Monday the European Union should consider applying electric-vehicle subsidies to cars built in the bloc, after the US limited its support to North American-made vehicles.”

It may be ‘time to reserve electric vehicle bonuses either for cars produced on European territory or for vehicles that strictly and rigorously meet new environmental standards,’ Le Maire told reporters during a briefing on the 2023 budget. ‘We need to play with the same rules if we want to defend our industries, our jobs and our technology.’


From the “Priceless Quote” file:

Amazon, Berkshire Hathaway Could Be Among Top Payers of New Minimum Tax – Richard Rubin and Theo Francis, Wall Street Journal ($):

A handful of large companies, such as Berkshire Hatchaway Inc...and Inc...could bear most of the burden from a 15% corporate minimum tax President Biden signed into law last month.

Researchers at the University of North Carolina Tax Center analyzed securities filings to determine what companies would have paid if the tax had been in place last year. They found fewer than 80 publicly traded U.S. companies would have paid any corporate minimum tax in 2021, and just six—including Amazon and Warren Buffett’s conglomerate—would have paid half of the estimated $32 billion in revenue the levy would have generated.

The article reports that AT&T would also pay the tax. The company's spokesperson offered a priceless response to this development:

An AT&T spokesman said the company doesn’t expect the minimum tax to affect its 2023 tax bill. ‘Academics don’t prepare our taxes; trained and expert tax professionals do that work,’ the spokesman said.


Breakfast and lunch are covered! Happy National Pancake Day and National Dumpling Day!

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