Tax News & Views Too Many 1099s Roundup

IRS will receive 30M more 1099-Ks – Michael Cohn, Accounting Today:

The Internal Revenue Service expects to receive 30 million more Form 1099-K information returns in 2024 under a new lower threshold that was delayed last year, according to a new report.

The report, released Wednesday by the Government Accountability Office, said the IRS expects to receive about 44 million Form 1099-Ks in 2024, up from about 14 million. However, the report acknowledged that estimate may change as the IRS receives more information from large filers and states. The "IRS does not have a plan to analyze these data to inform enforcement and outreach priorities," the report added. "This limits its understanding of changes in taxpayer burden."

The document is here.

IRS Releases Proposed Regs on Energy Investment Tax Credit – Alexander Rifaat, Tax Notes ($):

Treasury and the IRS have unveiled proposed regulations clarifying the eligibility of specific equipment for the section 48 energy investment tax credit.

The guidance (REG-132569-17), announced November 17, applies to equipment used in offshore wind projects and standalone battery storage units.

IRS Floats Rules To Broaden Green Energy Investment Credit – Kat Lucero, Law360 Tax Authority ($):

The proposal would implement several updates to the Section 48 incentive that was expanded under the Inflation Reduction Act and removed what policymakers viewed to be outdated technology-specific rules.

The climate law updated existing incentives so that energy projects could adopt more innovative solutions to reduce greenhouse gas emissions. The proposal released Friday laid the groundwork for eventually making credit technology-neutral for development projects placed in service in 2025.

The proposed regs are here.

IRS reminds eligible 2020 and 2021 non-filers to claim Recovery Rebate Credit before time runs out – IRS:

The Internal Revenue Service is reminding those who may be entitled to the Recovery Rebate Credit to file a tax return and claim their money before it’s too late.

The vast majority of those eligible for Economic Impact Payments related to Coronavirus tax relief have already received them or claimed them through the Recovery Rebate Credit. The deadlines to file a return and claim the 2020 and 2021 credits are May 17, 2024, and April 15, 2025, respectively.

IRS Regs Void Partnership Conservation Donations’ Deductions - Michael Rapoport, Bloomberg ($):

The IRS proposed regulations on disallowing tax deductions for qualified conservation contributions made by partnerships or S corporations.

The regulations (RIN 1545-BQ90) were issued Friday.

The rules provide guidance on a statutory disallowance rule enacted by the SECURE 2.0 Act, under which qualified conservation contributions after Dec. 29, 2022, would be disallowed if they exceed 2.5 times the sum of each partner’s or S corporation shareholder’s relevant basis.

Proposed Regs on New Easement Limits Are Heavy on Calculations – Kristen Parillo, Tax Notes ($):

Partnerships and S corporations would have to wrestle with a complex set of computational rules under proposed regulations addressing how to determine if they are subject to a new law disallowing big-dollar conservation easement deductions…

In addition to providing definitional guidance, the proposed regs detail how the deduction disallowance rule applies to partnerships and S corporations, how those entities and their owners should compute their relevant basis and modified basis — including in tiered structures — to determine if their contribution is disallowed, and how the three statutory exceptions to the disallowance rule should be interpreted.

The document is here.

IRS announces underpayment, overpayment rates for 2024 First Quarter - Bailey Finney, Eide Bailly:

The IRS has announced (Rev. Rul. 2023-22) the interest rates for taxpayer underpayments and overpayments for the first quarter of 2024:

• 8% for overpayments [7% in the case of a corporation];
• 5.5% for the portion of a corporate overpayment exceeding $10,000;
• 8% for underpayments; and
• 10% for large corporate underpayments. 

The document is here.

IRS urged to crack down on wealthy tax cheats in Puerto Rico – Jim Wyss and Angelica Serrano-Roman, Accounting Today:

A group of U.S. lawmakers is asking tax authorities to accelerate an investigation into rich Americans seeking lucrative tax breaks in Puerto Rico. 

Twelve Democratic members of the House of Representatives asked the Internal Revenue Service on Friday to expedite a congressional request for information about efforts to root out people allegedly abusing Puerto Rico's tax benefits. In July, the IRS said it was investigating about 100 wealthy individuals[…]and might pursue criminal charges after announcing an audit of the benefits in 2021. 

"Unfortunately, beyond these announcements, the IRS has not released any information to the public regarding its auditing efforts," the lawmakers, led by New York Democrat Nydia Velazquez, wrote to IRS Commissioner Daniel Werfel. 

The letter is here

Stopgap Spending Bill Dims Hopes For Year-End Tax Package – Stephen Cooper, Law360 Tax Authority ($):

Hopes for an end-of-the-year federal government funding bill that could serve as the legislative vehicle for tax extenders and other long-awaited business and family tax code changes dimmed this [last] when Congress passed legislation punting budget negotiations into early next year…

While lawmakers from both parties wanted to prevent the federal government from closing its doors when a short-term fiscal 2024 funding bill expired Friday, House Republicans said they were intent on stopping the budget from becoming a so-called annual Christmas tree, which is political shorthand for a must-pass omnibus bill that is loaded with specialty tax and spending provisions. 

When it comes to prognosticating future legislative action never say never.

Here are some potential legislative vehicles (albeit not great legislative vehicles) in which tax provisions could hitch a ride.

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

Lawmakers tend to add provisions to bills that already include similar provisions. For example, if a bill includes a tax provision, then other tax provisions can be added to the legislation without having to clear procedural or parliamentarian hurdles. Currently, there are two pieces of legislation that fit this profile, but neither one is great.

They are:

• Legislation that funds and reauthorizes programs for the Federal Aviation Administration. The bill includes provisions related to fuel taxes, which means that other tax provisions could be added to the bill. The FAA bill needs to be addressed before December 31st. 
• Legislation creating a tax agreement with Taiwan. Since it's a tax bill, other tax provisions could be added to it. 

More from the article:

The measure would allow for R&D expensing, expand the 163(j)-interest deduction as well as the Child Tax Credit, and up Bonus Depreciation to 100%. 

Lawmakers will have a lot on their plate when they return from the Thanksgiving recess so moving tax legislation will not be at the top of their ‘to do’ list.

In Halifax, lawmakers warn about Ukraine and border - Andrew Desiderio, Punchbowl News ($):

Senators from both parties warned their foreign counterparts this weekend that the United States can’t keep its commitment to Ukraine unless Congress addresses the crisis at the southern border…

When senators return to the Capitol next week, they’ll have just a few weeks to clear must-pass legislation including the defense authorization bill, as well as the massive supplemental package. This means the bipartisan border group will need to begin socializing an agreed-upon framework as soon as they return.

Nearly everyone we spoke with here agreed that, realistically, the end of the year is the deadline to get it done. 

The (Hopefully) Upcoming 2025 Tax Reform Debate - Monte Jackel, Tax Notes ($) (Commentary):

Tax reform is a topic often talked about in tax journals, but Congress infrequently acts to reform the law. A recent Tax Notes Federal article discussed topics that are anticipated to be in the upcoming 2025 tax reform debate. This article continues the discussion on reforming the Internal Revenue Code so that the federal tax base has a stronger foundation and is fairer for all. The discussion that follows does not take into account which political party controls tax policy, although that is an interesting discussion.

The year 2025 is expected to be a huge tax year. The individual provisions from the 2017 tax reform act will expire and lawmakers will debate their extensions. Tax staffers predict that tax modifications to the Inflation Reduction Act might also occur in 2025. This will be a huge undertaking and will likely be a dominant legislative issue in Congress.

The Estate Taxes Catching Americans by Surprise – Ashlea Ebeling, Wall Street Journal ($). “While the federal estate tax hits only the wealthiest Americans, the thresholds for state estate and inheritance taxes are generally much lower. These taxes can cost heirs tens of thousands of dollars they aren’t expecting to pay, along with the grief of figuring out how to pay the bill when the bulk of an estate’s value is tied up in a house or business. The problem is especially acute now because of the recent meteoric rise in real-estate values.”

Tax Pros Face Year-End Flurry of Work from US Policy Updates - Caleb Harshberger, Bloomberg ($):

Tax professionals rounding out a year of big changes to the US tax code can’t relax yet as Treasury Department and IRS staff make a final push to publish policy guidance packages while international frameworks continue to evolve.

Some upcoming tax law developments could be among the biggest of the year, such as a an extensive suite of book income tax rules, according to industry pros and agency officials.

EU Biz Tax Plan Raises Eyebrows For Potential Complexity – Todd Buell, Law360 Tax Authority ($). “The European Union's plan to further harmonize tax rules for large corporations adds complexity to an already-burdensome international tax system, specialists say, noting that the proposal comes just ahead of when the global minimum tax is due to take effect.”

From the “Too Good To Be True?” file:

You could owe 0% capital gains tax for cryptocurrency in 2023. Here’s what crypto investors need to know – Kate Dore, CNBC:

• If you own cryptocurrency for more than one year, you qualify for long-term capital gains tax rates of 0%, 15% or 20%.
• In 2023, single filers can earn up to $44,625 in taxable income — $89,250 for married couples filing jointly — and still pay 0% for long-term capital gains.
• This could be a chance to harvest crypto gains or sell and immediately repurchase for a “step up in basis,” experts say.

Another thing to keep in mind:

Senators Urge IRS to Speed Up Plan to Snag Crypto Tax Cheats - Allyson Versprille, Bloomberg ($). This article was published last month, but it’s still current.

A group of senators led by Democrat Elizabeth Warren and Independent Angus King is pushing US tax officials to move up the start date for crypto brokerages and exchanges to report information on their clients’ transactions to the government.

Proposed regulations released by the Internal Revenue Service and Treasury Department in August would require those firms to begin reporting data on sales and exchanges of digital assets in 2026 — two years later than Congress had intended when it enacted legislation in 2021.

“We are alarmed by the self-inflicted two-year delay for the rule’s implementation” that will cause the US to miss out on billions of dollars in tax revenue, the senators wrote in a letter sent late Tuesday to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel. “We urge your agencies to limit this troubling delay and implement the final rule as swiftly as possible, while maintaining the rule’s substance in the face of industry attacks.

The letter is here. 

Happy National Absurdity Day! Be all you can be!