Tax News & Views Busted Roundup

IRS Says $122M Recovered From Wealthy In New Crackdown – Asha Glover, Law360 Tax Authority ($):

The Internal Revenue Service has collected $122 million in back taxes from high-income, high-wealth individuals in a new enforcement initiative, the agency said Friday.

The back taxes were collected from 100 high-income individuals the agency targeted in its effort to ramp up enforcement against people with more than $1 million in income who haven't filed taxes and those who have failed to pay more than $250,000 in tax debt, the IRS said in a statement. The 100 people are among a group of 1,600 taxpayers the agency is pursuing in the initiative, which it announced in September.

The agency had previously collected $38 million from a group of 175 high-income taxpayers, it said.

IRS’s New Corporate Crackdown Won’t Be Resolved Overnight – Jonathan Curry, Tax Notes ($):

A new effort by the IRS to address noncompliance and aggressive tax positions taken by large corporations is just the start of what could be a long, drawn-out fight between the agency and its targets.

The IRS announced October 20 that it is launching a trio of corporate tax compliance initiatives as part of its second quarterly update on how it is spending its Inflation Reduction Act funding and implementing new priorities. That includes teeing up dozens of new audits of some of the biggest corporations and contacting around 150 more to give them a chance to revise their aggressive tax positions.

The IRS will soon set new tax brackets for 2024. Here's what that means for your money – Aimee Picchi, CNBC:

Some taxpayers may get a break next year on their taxes thanks to the annual inflation adjustment of tax brackets set by the IRS. 

The tax agency hasn't yet announced the new brackets for 2024, but that is likely to come within the next days or weeks, according to Steve Grodnitzky of Bloomberg Tax, which has issued its own forecast for the new tax brackets as well as other policies that are adjusted for higher prices.

IRS Decides to Extend E-Signature Perk — Permanently – Jonathan Curry, Tax Notes ($):

Tax professionals don’t have to wonder if their clients will have to go back to signing a litany of IRS forms in person, after the IRS quietly made a temporary COVID-19 perk permanent.

The temporary relief was set to expire at the end of this month, but on October 17 the IRS updated its Internal Revenue Manual entry on electronic signatures, reflecting that the temporary guidance has now been “fully incorporated” into the manual.

Treasury to Open Green Energy Credit Property Portal This Year - Caleb Harshberger, Bloomberg ($):

The US Department of Treasury plans to open a portal by the end of that year that will allow companies to register their properties to generate green energy tax credits as part of last year’s Inflation Reduction Act, an official said Friday.

“We are on track to open the portal later this year,” Sarah Haradon, Department of Treasury attorney-adviser, said during a virtual conference hosted by the American Bar Association’s tax section. “We’ve been working hard to incorporate feedback from user testing.”

Grouping Rule Could Be Added to Clean Energy Prefiling Process – Kristen Parillo, Tax Notes ($):

Treasury and the IRS might allow taxpayers to register groups of credit properties — instead of registering each one — when completing the prefiling registration process for electing direct-pay or transfers of clean energy tax credits.

“We are giving it a lot of thought,” Sarah Haradon of the Treasury Office of Tax Legislative Counsel said October 20 at the American Bar Association Virtual Fall Tax Meeting.

SECURE 2.0 Notice to Address Only High Priorities – Caitlin Mullaney, Tax Notes ($):

The SECURE 2.0 “grab-bag notice” will address some of the most pressing guidance topics but may leave some practitioners unsatisfied, according to a Treasury official.

“A little bit of a warning that folks are going to be in a lot of ways sort of disappointed. Even though there’s a lot of pages, it’s not going to cover everything that one would have hoped,” William Evans of the Treasury Office of Benefits Tax Counsel said October 19.

Republicans Unveil Nine Candidates to End House Speaker Deadlock - Alicia Diaz, Bloomberg ($):

House Republicans set up a nine-man contest for the speaker’s post on Sunday, signaling what may be a drawn-out vote to fill the vacancy this week.

Candidates announced by a noon deadline in Washington include Representative Tom Emmer, an ally of ousted former Speaker Kevin McCarthy, former Rules Committee chairman Pete Sessions and Representative Mike Johnson, vice chairman of the GOP party conference in the chamber. House Budget Chairman Jodey Arrington said Sunday he had decided against running.

Why is this article included in a tax blog? Because the longer this situation takes to correct the less time there will be to pass tax legislation by year end.

Assuming a House Speaker is named this week, the House and Senate must then agree on spending levels before funding runs out on November 17th. The chambers must also reach an agreement on a “supplemental” spending package aimed at Ukraine, Israel, and possibly the U.S. border.

Assuming all spending issues have been addressed, lawmakers could – could – focus on tax legislation. But passing a tax bill by year-end has its own set of hurdles:

• Hurdle 1: The SALT Cap. A handful of House Republicans have refused to support tax legislation that does not include a fix for the SALT cap. House Democrats are not expected to support such legislation so these few GOPers are wielding a lot of power in getting a tax bill through the lower chamber.
• Hurdle 2: The Child Tax Credit. Assuming the SALT Cap is fixed to GOPers’ satisfaction and the tax bill passes the House, the legislation goes to the Senate where Democrats will not support the passage of tax legislation unless it includes an expansion of the Child Tax Credit. This has been an issue for nearly two years and, so far, the political parties have not been able to reach an agreement on it.

But before any piece of legislation can pass Congress - be it a spending bill, a supplemental spending bill, or a tax bill - the House has to have a Speaker. And the longer it takes to knight a Speaker the less time Congress will have to tackle the aforementioned work load.

Weed wins galvanize Capitol Hill’s anti-cannabis club – Natalie Fertig, Politico:

Fighting weed legalization on Capitol Hill can feel like a lonely struggle these days.

Marijuana is just as popular as ever. More than half of Americans now live in states where adults can legally possess the drug, and just over two-thirds support federal legalization. In Congress, more and more lawmakers — on both sides of the aisle — express some form of support for legal cannabis in the states.

BUT:

Yet a small but vocal, ad-hoc coalition of lawmakers — almost all Republicans — is keeping the anti-weed fight alive in Washington. And they’re not exactly losing.

The lawmakers, while still disorganized, scored several notable victories in recent months, thwarting progress on key cannabis bills and leaving die-hard supporters of federal legalization conceding they had been briefly outmaneuvered.

There's a lot of tax revenue riding on the legalization of weed. Here is one report, although dated, from the Tax Foundation:

Marijuana Legalization and Taxes: Federal Revenue Impact – Gavin Ekins, Joseph Bishop-Henchman, Tax Foundation:

A federal tax of $23 per pound of product, similar to the federal tax on tobacco, could generate $500 million per year. Alternatively, a 10 percent sales surtax could generate $5.3 billion per year, with higher tax rates collecting proportionately more.

Companies Clash Over Billions of Dollars in Hydrogen Tax Breaks – Amrith Ramkumar and Richard Rubin, Wall Street Journal:

Big energy producers are sparring over billions of dollars in subsidies from last year’s climate law, a fight that pits the Biden administration’s goals for economic growth against its efforts to reduce greenhouse-gas emissions.

The battle is over subsidies to produce clean hydrogen, a potential alternative to oil and natural gas in industries such as steelmaking and trucking where renewable energy and batteries alone aren’t adequate. The administration is weighing how strictly to define what energy sources can be used to make clean hydrogen and still be eligible for some of the most valuable tax credits in the Inflation Reduction Act. 

Deal to force multinational companies to pay a 15% minimum tax is marred by loopholes, watchdog says – Paul Wiseman, Washington Post:

An ambitious 2021 agreement by more than 140 countries and territories to weed out tax havens and force multinational corporations to pay a minimum tax has been weakened by loopholes and will raise only a fraction of the revenue that was envisioned, a tax watchdog backed by the European Union has warned.

The landmark agreement, brokered by the Organization for Economic Cooperation and Development, set a minimum global corporate tax of 15%. The idea was to stop multinational corporations, among them Apple and Nike, from using accounting and legal maneuvers to shift earnings to low- or no-tax havens.

Further down the article:

According to the report, being released Monday by the EU Tax Observatory, the agreement was expected to raise an amount equal to nearly 10% of global corporate tax revenue. Instead, because the plan has been weakened, it says the minimum tax will generate only half that — less than 5% of corporate tax revenue.

Much of the hoped-for revenue has been drained away by loopholes, some of them introduced as the OECD has been refining details of the agreement, which has yet to take effect. The watchdog group estimates that a 15% minimum tax could have raised roughly $270 billion in 2023. With the loopholes, it says, that figure drops to about $136 billion.

US, Chile Working To Finalize Tax Treaty, Official Says – Dylan Moroses, Law360 Tax Authority:

The U.S. and Chile are in talks to determine the next steps to take for a recently approved bilateral tax treaty between the countries to enter into force, a U.S. Treasury Department official said Friday.

Elena Virgadamo, Treasury's deputy international tax counsel for treaty affairs, said Treasury officials are working with the Chilean government to determine how to address some language in the treaty before it can enter into force. Virgadamo spoke during the American Bar Association Section of Taxation's fall meeting, held online.

From the “That’s Not A Thing” file:

Bad Wording in Penalty Approval Rule Is Frustrating Tax Industry - Caleb Harshberger, Bloomberg ($):

Language in a rule requiring IRS staff to get supervisor approval for penalty amounts is confusing tax professionals and could be stymying enforcement of penalties, panelists at an Institute on Federal Taxation conference said.

The rule—Section 6751b—requires supervisor approval for the “determination of such assessment” of penalties by the individual that determined them.

“There is no such thing as a ‘determination of an assessment.’ That is not a thing,” Lowenstein Sandler LLP partner Melissa Wiley said Sunday during the conference in New York. “There are ‘assessments,’ there are ‘determinations'; that phrase doesn’t mean anything.”

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