Tax News & Views Shares Bread Not Data Roundup

IRS Discussing Response to Data Sharing by Tax Prep Companies - Lauren Loricchio, Tax Notes ($):

The problem was brought to light when the news website The Markup reported last year that H&R Block, TaxAct, and TaxSlayer were sending sensitive financial information to Facebook through a piece of code called the Meta Pixel. That prompted congressional Democrats to call for the Treasury Inspector General for Tax Administration to investigate the data-sharing practices of those companies.

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In a February 2 letter to TIGTA, Reps. Adam B. Schiff, D-Calif., and Raja Krishnamoorthi, D-Ill., and House Ways and Means Committee member Judy Chu, D-Calif., expressed concern that the disclosure may have violated section 7216, which bars tax return preparers from knowingly or recklessly disclosing tax return information. The lawmakers also pointed out that section 7216(a) establishes a criminal penalty for tax return preparers who knowingly or recklessly disclose or use taxpayer information without consent.

IRS Dodges Multiple Budget Bullets, CR Clears Way for Tax Talks - Doug Sword and Cady Stanton, Tax Notes ($):

The Senate voted 87 to 11 late November 15 to send the House’s clean continuing resolution (CR) that maintains funding at fiscal 2023 levels to President Biden, who is expected to sign it before funding runs out November 17 at midnight.

That provides more than two months of breathing room for a growing priority among taxwriters: successfully negotiating a year-end or early 2024 tax package.

The nine-week grace period should allow lawmakers the space to end their focus on appropriations and turn to a much-needed tax package, according to House Ways and Means Committee member Ron Estes, R-Kan.

Capitol Hill Recap: Shutdown Avoided, Tax Bill Needs a Ride - Jay Heflin, Eide Bailly:

Still, there has been a concerted effort from lobbyists and corporate leaders to make changes to the business tax breaks (R&D expensing, an expanded 163(j)-interest deduction, and 100% Bonus Depreciation) retroactive to 2022.

Tax staffers have said that it is highly unlikely that the modifications will be retroactive to 2022. At best, retroactivity might be for 2023, but even that is iffy since the bill’s cost could soar above lawmakers’ comfort level and require offsets.

Legislative Outlook: We’re in wait-and-see mode on whether Congress will pass a year-end tax bill or wait until next year to pass such legislation.

Senate Passes Stop-Gap Spending Bill, Keeps The Lights On Through January - Kelly Phillips Erb, Forbes. "An amendment proposed from Sen. Rand Paul (R-Kentucky) that would reduce funding by 15%, except for the Department of Defense, military construction, and the Department of Veterans Affairs—and to rescind $30 billion from enforcement funds provided to the IRS—failed by a vote of 65 to 32."

Some IRS Criminal Investigators Will Soon Wear Body Cameras - Nathan Richman and Jonathan Curry, Tax Notes ($):

IRS Criminal Investigation division special agents will be equipped with body cameras during planned operations, according to CI Deputy Chief Guy Ficco.

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Ficco noted that CI will continue to make unannounced visits to taxpayers, as has been previously noted. He added that CI’s planned Advanced Collaboration Data Center, a resource meant to nationalize technological tools used in some high-profile investigations like that of Silk Road, is on schedule to open in the spring of 2024.

I look forward to exciting body camera footage of bank records being reviewed.

IRS Attacks on Art Donations: Old Techniques, New Hurdles - Hale Sheppard, Tax Notes. "Claiming a tax deduction for an art donation can be complicated. Among other things, taxpayers must obtain a qualified appraisal from a qualified appraiser; demonstrate that the charity is a qualified organization; obtain a contemporaneous written acknowledgement of the donation; complete Form 8283, 'Noncash Charitable Contributions'; and file a timely tax return with all necessary enclosures and disclosures."

Circling back on foreign tax credits - Bernie Becker, Politico:

A bipartisan crew of House members is urging the Treasury Department to give businesses a further break on new Foreign Tax Credit regulations.

Treasury announced back in July that they were giving taxpayers a two-year reprieve from those rules, which were finalized at the beginning of last year, until the end of December.

But the eight House members, all of them either current or former Ways and Means members, noted that the IRS has suggested that it’s looking at extending that relief — and is prodding the Biden administration to announce that it’s offering at least another year of the reprieve with no further hesitation, and to make other timing tweaks for businesses as well.

US Aims to Push Back Signature Deadline for Global Tax Treaty - Lauren Vella, Bloomberg ($):

Deputy Assistant Secretary for International Tax Affairs Michael Plowgian said the US is working with the Inclusive Framework—countries involved in the global tax deal negotiations—on a “new timeline” for Pillar One negotiations. He also reiterated that it was important to the US that other countries don’t impose any new digital services taxes.

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The multilateral treaty is part of the global tax deal agreed to by over 140 countries in 2021. The deal is comprised of two main components: a reallocation of large multinational companies’ residual profits, known as Pillar One, and a 15% global minimum tax, known as Pillar Two.

Related: Eide Bailly International Business Structure Services.

AMT, household help, & payroll tax inflation changes in 2024 - Kay Bell, Don't Mess With Taxes. "The parallel tax requires taxpayers who itemize to add back some Schedule A claims before they figure their alternative tax amount. But since the TCJA greatly increased standard deduction amounts, fewer taxpayers than ever are itemizing, and therefore no longer have to worry about the AMT add-backs."

2023 Year-End Tax Planning for Individuals - Parker Tax Pro Library. "Clients can save a lot on taxes by making the maximum contributions to a qualified retirement plan. Individuals under 50 years old who work for an employer that has a 401(k) plan can defer up to $22,500 of income into that plan for 2023. Catch-up contributions of $7,500 are allowed for individuals who are 50 or over. For a SIMPLE 401(k), the maximum pre-tax contribution for 2023 is $15,500. That amount increases to $19,000 for individuals 50 or older. The maximum IRA deductible contribution for 2023 is $6,500 and that amount increases to $7,500 for individuals 50 or over."

Lesson From The Tax Court: Merely Winning Does Not Entitle Taxpayer To Attorneys Fees - Bryan Camp, TaxProf Blog. "Just because the taxpayer here won, both in its appeal to the 11th Circuit and then again on remand, does not mean it was a prevailing party entitled to attorneys fees and costs under §7430.  Rather, the determination of whether a taxpayer is a prevailing party will turn on whether the government position was reasonable under the facts and circumstances before it at the time it asserted the position."

Indebted to Yourself - Alex Parker, Things of Caesar. "It might be tempting to say that intercompany debt is an accounting fiction used for tax planning, not something “found in nature.” But that’s harder to claim after the 385 saga. Treasury had to refine the rules after learning that they could ensnare “cash pooling,” a routine corporate practice in which surpluses are collected and distributed to different departments to meet daily cash needs. Turns out, companies do loan to themselves, both for the short-term and the long-term, not necessarily motivated by taxes."

Coca-Cola Tanks Again in the Last Round of Transfer Pricing Litigation in the Tax Court - Jack Townsend, Federal Tax Procedure. "Transfer pricing adjustments turn on valuations, with many larger taxpayers preferring to use some type of IRS-recognized safe harbor methodology to take the risk out of the potential for adverse results given the uncertainties involved in valuations.. There can be some tricky rules to qualify for certain real or imagined safe harbors, but at the end of the transfer pricing cases are principally valuation cases."

Do we need Pillar 2, if we have GILTI? - Leonard Wagenaar, Leonard's Tax Posts. "So with a grand tax reform in the US seeming unlikely in the near term: does the world need P2 as another global minimum tax?"

Assessing the EU Tax Observatory’s View on Profit Shifting and the Global Minimum Tax - Daniel Bunn, Tax Policy Blog. "Profits that have been shifted to low-tax jurisdictions are often associated with valuable intellectual property (IP) that has been developed elsewhere. If, due to the minimum tax, companies become less likely to shift new IP and associated profits to low-tax jurisdictions, then, over time, the bathtub full of shifted profits will be less important. Fewer and fewer profits will be moved out of high-tax jurisdictions for the sake of a lower tax bill."

The ‘Georgists’ Are Out There, and They Want to Tax Your Land - Conor Dougherty, New York Times:

Seemingly without knowing it, Mr. Duggan, a Democrat in his third term, was espousing what generations of policy minds consider one of the best ideas nobody will listen to: the land-value tax.

The notion that land is an undertaxed resource — and that this distorts markets in destructive ways — unites libertarians and socialists, has brought business owners together with labor groups and is lauded by economists as a “perfect tax.” And yet despite all that agreement, there are just a handful of examples of this policy in action, and none in America that match the Detroit proposal in scale.

The Concise Encyclopedia of Economics explains the Henry George's Land Tax:

The value of a vacant lot in its natural state comes not from any sacrifice or opportunity cost borne by the owners of the land, but rather from demand for a fixed amount of land. Therefore, argued George, because the value of the unimproved land was unearned, neither the land's value nor a tax on the land's value could affect productive behavior. If land were taxed more heavily, the quantity available would not decline, as with other goods; nor would demand decline because of land's productive uses. By taxing the whole of the value of unimproved land, the government would drive the price of land to zero.

The article notes some of the drawbacks of the pure version of the land tax, such as the difficulty of determining "the whole of the value of unimproved land." But it concludes:

Objections aside, Henry George may have been arguing for what is really the least offensive tax. As Milton Friedman said almost a century after George's death: "In my opinion, the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago."

11 of the most scathing allegations in the House ethics report about Santos - Mariana Alfaro and Maegan Vazquez, Washington Post. The tax angle of the charges against New York Congressman George Santos:

According to the report, in 2021, Santos filed a late tax return reporting a negative $70,481 in total income — claiming he had suffered more than $90,000 in business losses and received $20,304 in unemployment compensation. While he claimed the losses were primarily because of payments made to a company owned by one of his campaign consultants, in reality, those payments were made in 2022, not 2021. Investigators say Santos also failed to disclose his unemployment income and income from Harbor City Capital, a now-defunct Florida-based investment firm that the SEC has described as a “fraud.” Santos also is accused of failing to report in his taxes unearned income from other assets, including more than $20,000 in stock transactions. Despite claiming in his taxes that he had a negative salary in 2021, in credit card applications, Santos claimed to have an income of $9,000 per month.

Under the circumstances, it seems likely that knowing how to report unemployment income may come in useful for the congressman shortly.

CI issues red flags, tips to avoid falling victim to pig butchering schemes during International Fraud Awareness Week - IRS:

It's human nature. People want company, and online romances have blossomed as more people use dating applications and social media to build relationships. While the hope is to live happily ever after, IRS Criminal Investigation (CI) special agents are seeing pig butchering schemes pop up across the globe. Flirtatious strangers use social media to lure unsuspecting romantic partners, who serve as the "pigs," to invest in cryptocurrency trading platforms. When victims attempt to cash out, criminals seize their funds. This year, as part of International Fraud Awareness Week, which takes place Nov. 12 – 18, IRS Criminal Investigation (CI) warns U.S. taxpayers – Don't. Get. Butchered.

Do you mean maybe all those social media invitations I get from beautiful strangers aren't responding to my irresistible online persona?

Bye-bye. It's National Unfriend Day: "Please join us on this day of self-care to celebrate by simplifying our connections online and unfriending any and everyone who does not add joy to your online, social networking experience." On a more appetizing note, it's also National Homemade Bread Day.