Tax News & Views Boo! Roundup

November 1, 2023

Key Takeaways

  • E-sigs still a thing
  • FTCs in the hopper
  • DST should stay halted
  • Global tax promise
  • Will R&D credit escape Pillar Two add-back?
  • IRS hand-slap
  • IRS funding cut included in foreign aid
  • Tax amendments in spending bills
  • Happy Halloween!

IRS to Allow E-Signatures on Certain Tax Forms Indefinitely - Erin Slowey, Bloomberg ($):

The IRS will continue to accept electronic signatures on certain tax forms “indefinitely,” the agency announced Monday.

As a way to help the agency and taxpayers complete forms remotely during the pandemic, the IRS eased the electronic signature policy to allow accept scanned or photographed images of signatures and digital signatures on certain documents.

Electronic signatures will be accepted until “more robust technical solutions are deployed,” the agency said in its release. The temporary policy allowing for encrypted emails was also extended until Oct. 31, 2025.

IRS Signs Off on E-Sig Extension, Adds Secure Email to Relief – Jonathan Curry, Tax Notes ($):

Along with e-signatures, the IRS also said it has extended the temporary use of encrypted email to send and receive documents and communicate directly with enforcement personnel until October 31, 2025. That method of contact is most common in the context of field exams and communication with personnel in the Taxpayer Advocate Service, the Office of Chief Counsel, and the Independent Office of Appeals, the IRS noted.

The announcement should come as no surprise: The IRS quietly previewed the change earlier this month when it updated its Internal Revenue Manual entry on electronic signatures to reflect that the temporary relief had been “fully adopted” into the manual.

The decision to make the pandemic relief effectively permanent is a welcome relief to tax professionals — and a no-brainer.

The IRS announcement is here.


Foreign Tax Credit Notice Expected Soon, IRS Official Says – Dylan Moroses, Law360 Tax Authority ($):

A broad notice addressing a bevy of foreign tax credit issues, including how they may apply to components of the OECD's global minimum tax known as Pillar Two, is likely to be published by the IRS before the end of the year, the agency's international tax counsel said Monday.

Peter Blessing, the Internal Revenue Service's associate chief counsel for international, said the notice will include guidance on foreign tax credit treatment of certain Pillar Two taxes including the income inclusion rule and the qualified domestic minimum top-up tax. Blessing spoke during a conference on international tax issues hosted by the U.S. Council for International Business and the Organization for Economic Cooperation and Development in Washington, D.C.

IRS Says Foreign Tax Credit Guidance Will Address Partnerships – Michael Rapoport, Bloomberg ($):

Forthcoming guidance on foreign tax credit issues also will address how the temporary suspension of new foreign tax credit rules applies to partners and partnerships, an IRS official said Monday.

The partnership issue will be addressed in the same package of guidance that is expected to extend the temporary suspension of strict foreign tax credit rules issued in late 2021 and to address how the foreign tax credit will interact with the pending 15% global minimum tax, said Peter Blessing, associate chief counsel (international) at the IRS. He was speaking at a conference of the US Council for International Business in Washington.


US Treasury Official Says DST Pause Should Continue – Dylan Moroses, Law360 Tax Authority ($):

As negotiations continue on the OECD's profit reallocation and routine pricing plan known as Pillar One, a U.S. Treasury Department official said Monday that countries should continue to pause digital services taxes.

Lily Batchelder, Treasury's assistant secretary for tax policy, said the U.S. government will prioritize extending the standstill on existing and prospective digital services taxes and other similar unilateral measures as the Organization for Economic Cooperation and Development formalizes the next steps on its profit reallocation plan known as Pillar One. Batchelder spoke during a conference on international tax issues hosted by the U.S. Council for International Business and the OECD in Washington, D.C.


Biden Administration Reaffirms Commitment to Global Tax Pact - Lauren Vella, Bloomberg ($):

A top US negotiator in the OECD-led global tax deal reaffirmed the Biden administration’s commitment to the pact despite opposition in Congress to the project.

The deal, agreed to by over 140 countries in 2021, includes two main parts: a reallocation of large multinational companies’ residual profits to market jurisdictions, known as Pillar One, and a 15% global minimum tax, known as Pillar Two.

“So with respect to the two pillars, the administration remains committed to implementing pillars one and two,” said Michael Plowgian, deputy assistant secretary for international tax affairs at the US Treasury Department.


Treasury Wants Different Pillar 2 Treatment for Research Credit – Sarah Paez, Tax Notes ($):

The United States considers the treatment of the nonrefundable research credit by the pillar 2 global minimum tax regime an important priority as countries begin to implement the legislation, a Treasury official said.

“We continue to raise that in multilateral discussions as a significant issue and hope to chart the path forward,” said Lily Batchelder, Treasury assistant secretary for tax policy.

Further down the article:

Under the pillar 2 rules, a U.S. nonrefundable research credit would effectively reduce an in-scope company’s pillar 2 tax base, which could lead to a lower ETR.

Batchelder, who spoke at an October 30 panel of an OECD conference in Washington hosted by the U.S. Council for International Business, said that the Biden administration continues to “strongly support implementation” of pillar 2 in the United States “as the best way to level the playing field and protect U.S. interests.” However, she added that full pillar 2 implementation is in the hands of Congress, which must approve the legislation.

It will be difficult to pass a tax increase through the Republican-controlled House. 


IRS Abused Discretion in Hastily Closing Case, Tax Court Says – Jeffery Leon, Bloomberg ($):

The IRS Independent Office of Appeals abused its discretion when it suddenly closed a collection due process case over a tax lien because it didn’t give the taxpayer reasonable time to propose a payment plan for his tax liability, the Tax Court said Monday.

The US Tax Court held that the Appeals Office acted improperly when it hastily ended Kevin Long’s challenge to a lien on 2018 tax bill of almost $133,400, just two days after it invited him to propose an installment agreement. The court said the office failed to give Long enough time to propose an IA under tax code Section 6330(c)(2)(A).

“IRS Appeals’ decision to close Mr. Long’s CDP hearing and issue a notice of determination after receiving no response in two days was an arbitrary action with no sound basis in law or fact,” said Tax Court Judge Donald Gustafson.


Tax Court Slams Brakes on Business Expense Deduction – Caitlin Mullaney, Tax Notes ($):

The Tax Court upheld the IRS’s rejection of a transportation manager’s insufficiently substantiated deduction for reimbursed employee business expenses.

In an October 30 summary opinion in Harrell v. Commissioner, Chief Special Trial Judge Lewis R. Carluzzo found that Andrew and Katherine Harrell weren’t entitled to a deduction on their 2017 tax return for a combination of unreimbursed expenses related to Andrew’s employment.


House GOP Proposes $14B In IRS Cuts To Offset Israel Aid – Asha Glover, Law360 Tax Authority ($):

House Republicans on Monday proposed rescinding $14.3 billion in Inflation Reduction Act funding for the Internal Revenue Service, including funding for the agency's free filing pilot program, to pay for an aid package for Israel.

The Israel Security Supplemental Appropriations Act would rescind unobligated funding the Inflation Reduction Act  provided the IRS for enforcement and operations support. It would also claw back funding for the agency's task force to design an IRS-run free electronic tax return filing system.

The Republican proposal would also rescind Inflation Reduction Act funding for the Treasury Inspector General for Tax Administration, the U.S. Department of the Treasury's Office of Tax Policy, the U.S. Tax Court, and Treasury departmental offices.

The House GOP has presented Dems with a ‘Sophie's Choice’ situation, which is giving them a no-win option. If Dems support this proposal, they cut funding they deem to be important.  If they oppose this proposal, they refuse funding they deem to be important.


Spending Bill Changes Feature OECD Pillars, IRS Budget, SALT – Doug Sword, Tax Notes ($):

Amendments filed by a senior House Ways and Means Committee Democrat would roll back more than half of the $67 billion in IRS funding rescissions that House Republicans spread across their spending bills…

Besides the IRS funding proposals, a trio of other tax-related amendments are attached to the two spending bills. Amendments to the FSGG bill include provisions to bar the IRS from moving to restrict state workarounds of the $10,000 state and local tax deduction limitation and to deny Treasury any funds to implement either pillar 1 or pillar 2 of the OECD global tax plan. A T-HUD amendment would bar federal funds from being used to even study a vehicle-miles-traveled tax, or VMT.

Here's the thing: These amendments are being added to spending bills. A tax provision is not “germane” to a spending bill – unless the chamber agrees that tax provisions can be added to spending bills. And if the chamber agrees to this, Katy bar the door because tax amendments will come out of the woodwork to be included on these spending bills.


From the “How to Lose an Election” file:

White House's Brainard calls for tax hikes on wealthy to cut deficit – Katy O’Donnell, Politico:

White House National Economic Council Director Lael Brainard said the 2017 Trump tax cuts were a major cause of the spiraling federal deficit, adding that policymakers should raise taxes on corporations and the wealthy in response.

“If you look at the increase in the deficit over the last year, 60 percent of that is associated with a decline in revenues, and revenues as a share of GDP are now below the historic long-run average,” Brainard said Friday at a Peterson Institute event. That, she said is "in line with what critics were concerned about before this set of tax cuts was passed in 2017."

First off, the corporate rate cut is permanent. Good luck with increasing taxes on a group that pays big bucks to lobbyists to keep their tax rate low.

Second off, nobody cares about the deficit. Raising taxes to lower deficits doesn’t move the “excitement” meter. Voters will remember the deficit-reducing maneuver at the ballot box only because their taxes were raised to do it, and they will likely vote against the person who did it.   


Happy Halloween! Ironically, it is also National Caramel Apple Day and National Doorbell Day! Trick-or-Treaters will be ringing doorbells tonight and some might be rewarded with a caramel apple!

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