Tax News & Views Toe Stub Roundup

As US Housing Crisis Grows, So Does Hope for Bipartisan Tax Bill – Bloomberg ($):

The headline might have exaggerated the odds for passing a tax bill this year.

This takes some explanation.

Amid a chaotic session of Congress consumed with a near-shutdown, impeachment and the historic ousting of House Speaker Kevin McCarthy, the idea that any legislation aimed at addressing a real-world national problem could garner enough bipartisan support to land on President Joe Biden’s desk seems increasingly improbable. But the US housing crisis might just be dire enough, distributed enough and desperate enough to have a shot.

According to the article, the “Affordable Housing Credit Improvement Act” (AHCIA), which has bicameral, bipartisan support and improves the Low-Income Housing Tax Credit, could get through Congress this year.

HOWEVER, legislation like AHCIA rarely passes Congress as a stand-alone bill. Normally, such measures are included in larger bills. In this case, a larger bill could include fixes for R&D, 163(j) and Bonus. But passage of such legislation is currently unlikely to occur.

Tax bills often become part of larger packages because there’s a need for revenue offsets, and many members of Congress want to see these measures become part of a larger bill that will take shape by the end of the year. It’s been a long time since such a bill has been passed, and numerous tax credits need passage or adjustment, including bonus depreciation and another swing at the Child Tax Credit. Last year’s omnibus bill didn’t include any tax changes.

“Congress has — how to put this delicately — missed the opportunities to do anything on tax the last two cycles,” [David] Gasson [executive director of the Housing Advisory Group] said. “I have a hard time believing they would once again stub their toe and not try to do something on tax this year or early next year.”

Let’s pretend that the fight for House Speaker and the spending brawls have been addressed. To pass a tax bill by year-end, lawmakers would need a bipartisan, bicameral accord on modifications to the Child Tax Credit and the SALT cap – and those arguments have been happening for nearly two years with nary an agreement. It currently seems more likely that lawmakers will ‘stub their toe’ again this year when it comes to passing tax legislation.

To wit:

Child Tax Credit Debate Threatens Year-End Tax Package – Asha Glover, Law360 Tax Authority ($):

Federal lawmakers on both sides of the aisle are interested in making changes to the child tax credit, but negotiations over what that expansion should look like and how it should be advanced threaten to scuttle a year-end tax package.

Democrats have long sought to beef up the child tax credit, with a preference for extending the American Rescue Plan Act's expansion of thecredit for families earning up to $150,000 per year. In the past, they have hinged their support for extending the Tax Cuts and Jobs Act's research and development tax break — a Republican priority — on that provision being included in a package that also makes changesto the child credit.

Cut to the chase:

• Democrats support renewing the Child Tax Credit enacted in the American Rescue Plan that would cost more than $1 trillion over ten years.
• Republicans support a Child Tax Credit that includes work requirements and narrows who receives the credit to cut down on costs.

Arguments regarding the SALT cap are also not going well:

SALT Cap Haunts GOP House Candidates as Democrats Turn Tables - Samantha Handler, Bloomberg ($):

Democrats running to unseat endangered blue-state Republicans get to campaign on an unusual message: The GOP is hiking your taxes.

The path to sustaining the House majority largely depends on whether Republicans can maintain their footholds in New York, New Jersey, and California, but those races may be tough if Republicans can’t raise the cap on the state-and-local tax deduction the GOP enacted in 2017.

There is another side to this argument: Many Democrats in low-tax states think the SALT cap is good because it forces wealthy landowners to pay more tax. If there is a vote to increase the SALT cap (or repeal it), Democrats from these states will likely vote against the measure. Their opposition, combined with GOP opposition, will make it very hard to pass such legislation. It will also be hard to point a finger at Republicans for not providing SALT tax relief when both political parties would be responsible for blocking this relief to land owners. 

Senators Seek Rollinson’s Views on Leaks, Backdating, Auditing – Doug Sword, Tax Notes ($):

Senate Finance Committee members gave IRS chief counsel nominee Marjorie Rollinson a preview of how they would judge her performance in 39 recently released pages of follow-up questions.

Senators quizzed the nominee about her views on some of the toughest issues confronting the agency, from data leaks and impending Form 1099-K reporting requirements to backdating concerns and the direct-file pilot program.

Rollinson was also reminded that all politics are local by the worries of Sen. Michael F. Bennet, D-Colo., who asked for her views on Notice 2023-56, 2023-39 IRB 824, as it pertains to whether his state’s Taxpayer Bill of Rights refunds are federally taxable. Rollinson answered that, if confirmed, she would make it a priority to understand the issue in more detail, including the thinking behind the timing of the new guidance.

How to Take Advantage of a Health Savings Account – Ann Carrns, New York Times:

Health savings accounts offer valuable tax benefits and have become increasingly popular since they were introduced two decades ago. At the end of last year, about 36 million health savings accounts held $104 billion, up from about eight million accounts with almost $16 billion a decade earlier, according to Devenir, an H.S.A. investment and research company. More than a quarter of workers with employer health coverage were enrolled in high-deductible plans with health savings accounts in 2022, said KFF, a nonprofit health research group.

Yet many people still confuse them with flexible health spending accounts, a workplace perk that offers more limited tax benefits. Because it’s open enrollment season at many employers, it’s important to know the difference. F.S.A.s have lower contribution limits, and typically you must spend the money before a deadline or forfeit it. Also, if you change jobs, you can’t take F.S.A. money with you.

More data incoming on Direct File – Bernie Becker, Politico:

Now, for the latest volley: The Economic Security Project and Groundwork Action, a pair of progressive groups, is releasing new polling today that found that around 9 in 10 favored allowing the IRS to “create a simplified free tax filing tool directly on its website,” while still allowing for taxpayers to use outside tax prep companies. (Hart Research, a leading Democratic firm, conducted the poll back in September.)

The prior volley occurred on October 4th when it was reported that the IRS might have overstated taxpayer interest in a direct file program:

IRS may have overstated taxpayer interest in agency-run e-filing system, watchdog says – Benjamin Guggenheim, Politico:

The IRS used a survey that may have overstated taxpayer interest in a potential agency-run direct e-filing system in a report it issued earlier this year, which also included cost estimates that the agency couldn’t back up, according to a watchdog study released Wednesday.

Taxpayers impacted by the terrorist attacks in Israel qualify for tax relief; Oct. 16 filing deadline, other dates postponed to Oct. 7, 2024 – IRS:

The Internal Revenue Service [Friday] announced tax relief for individuals and businesses affected by the terrorist attacks in the State of Israel. These taxpayers now have until Oct. 7, 2024, to file various federal returns, make tax payments and perform other time-sensitive tax-related actions.

In Notice 2023-71, posted today on IRS.gov, the IRS provided relief to certain taxpayers who, due to the terrorist attacks, may be unable to meet a tax-filing or tax-payment obligation, or may be unable to perform other time-sensitive tax-related actions. The IRS will continue to monitor events and may provide additional relief.

The Notice is here.

Watchdog Plans for Policing IRS Inflation Reduction Act Spending - Caleb Harshberger and Naomi Jagoda, Bloomberg ($):

The Treasury Inspector General for Tax Administration on Friday released its Strategic Plan to police IRS spending of Inflation Reduction act funds on agency transformation initiatives laid out in its Strategic Operating Plan.

The strategic plan divvies up which TIGTA offices will tackle what: The Office of Audit will handle the agency’s spending of IRA dollars. TIGTA’s Office of Inspections and Evaluations will tackle the IRS’s execution of its Strategic Operating Plan. The Office of Investigations will look into potential cases of fraud or misconduct in IRS programs.

The Office of Investigations expects an uptick in criminal investigations into external attempts to bribe, threaten, or otherwise influence or harm IRS officials and staff as activities ramp up.

The Plan is here.

IRS Seeks Contractors for Help With Procurement – Lauren Loricchio, Tax Notes ($):

The IRS is searching for contractors that can help the IRS Office of the Chief Procurement Officer (OCPO) manage and implement procurement projects and programs.

In a request for information (RFI), the OCPO said it is seeking information on “the current market capabilities of administrative and professional support services providers with the ability to provide qualified personnel to assist the IRS in managing and implementing projects and programs as defined in individual call orders.”

Treasury Asks for Public Comments on OECD Global Tax Treaty - Chris Cioffi, Bloomberg ($):

The Treasury Department put out an open call for public input on the newly released treaty aimed at implementing a key part of the OECD’s global tax agreement.

Request for comment appeared on Treasury’s website as the Organization for Economic Cooperation and Development issued a multilateral convention this week implementing part of the global tax deal known as Amount A. That’s the process under Pillar One of the agreement by which a slice of the taxes on large multinational companies’ profits would be reallocated to countries where they do business but don’t have a major physical presence.

The request is here.

Examining the Tax Rules at Risk in SCOTUS Moore v. US Case – Eric Toder, Tax Policy Center:

TPC’s paper examines six provisions in current law that tax unrealized or undistributed income:

• The Section 965 transition tax
• Taxation of Global Intangible Low Tax Income (GILTI)
• Taxation of certain forms of passive and other easily moveable income of CFCs (Subpart F income)
• The minimum tax on book income of US corporations
• The taxation of undistributed income of partnerships and S corporations
• Rules for taxing accrued interest on original issue discount bonds 

We conservatively estimate that federal receipts would have been permanently lower by $87 billion per year in 2024 and $125 billion per year in 2028 if these provisions were not part of the federal income tax code (the higher 2028 figure mostly reflects the expiration of the TCJA individual income tax rate cuts and the 20 percent deduction for qualified business income, as well as the scheduled phase in of a higher tax rate on GILTI). 

From the “Money Down the Drain” file:

Did Tax Cuts And Jobs Act of 2017 Increase Revenue on U.S. Corporations’ Foreign Income? – Alex Arnon, Penn Wharton Budget Model:

Despite a complete overhaul of the US system of international corporate taxation in the Tax Cuts and Jobs Act of 2017, taxes on US corporations’ foreign income are about the same after the law’s enactment as before.

Corporate America in 2017 shoveled a lot of money to D.C. lobbyists to ensure they paid less tax on all sorts of income:

U.S. business group lobbying surged as tax reform took shape – Reuters:

Lobbying by U.S. business groups including the U.S. Chamber of Commerce and the Business Roundtable surged in the last three months of 2017 as lawmakers negotiated and finalized legislation that deeply cut the taxes companies pay…

The amount spent on lobbying by the Business Roundtable, a group of chief executive officers at the largest U.S. companies, nearly quadrupled to $17.35 million in the fourth quarter from $4.53 million in the third quarter, according to lobbyist disclosures published on Monday…

Lobbying expenditures by the U.S. Chamber of Commerce, the most powerful business group in Washington, jumped to $16.83 million in the last three months of 2017 from $13.12 million from July through September.

The money succeeded in permanently lowering the top corporate tax rate from 35 percent to 21 percent. Apparently it was not enough to have a similar effect for foreign income.  

Happy National Boss's Day!

Of all the reasons to celebrate today, this is by far the best! (Does my boss read my blog posts? You betcha!)