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Tax News & Views Inflation Wave Roundup

December 5, 2023
Wave of Money

Key Takeaways

  • Inflation ups underpayments
  • Tax bill do or die
  • Manchin dislikes EV credit
  • IRS slow on handling ERCs
  • Moore hits Supreme Court
  • Santa makes his list

The Surprise Bill Coming to Those Who Underpay Their Taxes – Ashlea Ebeling, Wall Street Journal ($):

Failing to keep up with tax payments now could lead to an expensive surprise come next spring.

As of Oct. 1, the Internal Revenue Service is charging 8% interest on estimated tax underpayments, up from 3% two years ago. The increase is one of the many effects of rising interest rates.

IRS move could carry hefty cost for some taxpayers – Eric Revell, Fox Business. "Self-employed workers and independent contractors, including many gig workers, will be at risk of being hit with the underpayment penalty if they fail to pay the amount the IRS believes they owe. Taxpayers don’t face an interest penalty for underpayment if the balance due is under $1,000 after their credits and other tax account information is factored in."

Avoid the nasty bills:

Let us help you relieve your tax headache – Eide Bailly:

Federal, state, local, and international tax burdens and responsibilities consume time and cash flow. Whether you’re an individual, a business, a nonprofit, or handling a trust or estate, proper planning and guidance from a well-versed professional can make managing taxes less painful.

Eide Bailly has the depth of tax resources to help you gain peace of mind. Plus, our professionals are supported by the National Tax Office, allowing clients to dig into specialized tax situations.

 

Courts, tax bills and impeachment — oh, my – Bernie Becker, Politico Morning Tax:

It really is crunch time if Congress wants to complete a tax bill this year, with lawmakers likely to work for only a couple more weeks before calling it a day for 2023…

Still, advocates on both sides are doing what they can to gin up interest in getting the deal across the finish line.

Here’s the thing, if congressional leaders want to pass a tax bill, a tax bill will be passed:

Capitol Hill Recap: Lawmakers Call for Passing Year-End Tax Bill – Jay Heflin, Eide Bailly:

Arguably, the biggest hurdle is that congressional leaders (Speaker Johnson (R-La.), Senate Majority Leader Schumer (D-NY), House Minority Leader Jefferies (D-NY), and Senate Minority Leader McConnell (R-Ky)) must agree that tax legislation should pass by year-end. Bipartisan support will be needed to pass this tax bill so all leaders must be onboard.  

In conversations with tax-writing lawmakers and tax staff, they say that congressional leaders have yet to focus on moving tax legislation by year-end. Their focus is on the myriad of spending bills that many lawmakers insist must pass before they adjourn for the holidays.  

Here’s the other thing, their focus could be redirected on taxes in a heartbeat. Legislation is a living document and changes to them happen all the time – mostly during the wee-hours. The stories are countless of people waking up in Washington to find the bill their tracking has been materially altered.  

Speaking of possible tax changes:

Rich NYC Suburb’s Control Up for Grabs After Santos Expulsion - Simone Foxman, Laura Nahmias, Greg Giroux, Bloomberg ($):

The expulsion of George Santos from Congress Friday triggers a new election in New York City suburbs that threatens to further weaken Republicans’ already shaky control of the US House. The vacancy will give Democrats a chance to take back a congressional seat the party held for a decade before Santos’s election last year…

The Long Island district, which also includes parts of Queens, is one of the nation’s wealthiest congressional districts and includes tony [sic] areas like Oyster Bay and Kings Point. It’s one of the districts most affected by the limit on state and local tax deductions imposed as part of the Republican-backed 2017 tax law. Opposition to the limit has been a bipartisan rallying point for local politicians, including Santos.

 

Feds Unveil 'Foreign Entity' Guidance For EV Tax Credit – Kat Lucero, Law360 Tax Authority ($):

Federal regulators released guidance Friday that would allow automakers to satisfy new trade restrictions that the 2022 climate law incorporated into the consumer electric vehicle tax credit, including sought-after proposed rules defining the foreign-entity-of-concern provision.

Under the proposed rules from the U.S. Department of Energy, a foreign entity of concern, or FEOC, would be an EV battery components or critical minerals supplier that has more than 25% of its business controlled by entities closely tied to foreign governments that Washington has deemed hostile, such as China.

Manchin Slams Biden’s EV Tax Credit Rules as Soft on China - Ari Natter, Bloomberg ($). “New rules from the Biden administration to limit a lucrative consumer tax credit for electric vehicles that contain ingredients from China and other foreign adversaries drew the wrath of Senator Joe Manchin, who said the requirements were fraught with loopholes.”

Friday’s Roundup includes more information on this topic. Click here and scroll down to view it.

 

FinCEN Updates Outreach Materials on New Ownership-Info Rules - Michael Rapoport, Bloomberg ($):

The Financial Crimes Enforcement Network, or FinCEN, said Friday it has updated its materials on the new “beneficial ownership” reporting requirements, which take effect Jan. 1. The updates reflect an extension for newly formed companies to report owner information.

A list of frequently asked questions about the new rules, a small-business compliance guide, quick reference materials, and an informational video have all been updated to reflect FinCEN’s move to give companies created or registered in 2024 a 90-day period after they’re formed to file the required disclosures, up from the previous 30 days.

More coverage from Eide Bailly is here.

 

Taxpayer Advocate Prods IRS Over Sluggish ERC Claim Processing – Jonathan Curry, Tax Notes ($):

The IRS’s slowdown of employee retention credit claim processing brought on by the moratorium on new claims has prompted the national taxpayer advocate to implore the agency to pick up the pace.

When announcing in mid-September that it was going to hit pause on processing all new ERC claims amid a “tsunami” of potential fraud, the IRS indicated that active claims would be moved at a slower pace, thanks to the establishment of stricter compliance reviews.

That slower pace could more accurately be described as a near-standstill.

Further down the article:

[National Taxpayer Advocate Erin] Collins cited recent stats from the IRS identifying a backlog of about 983,000 unprocessed amended employment tax returns. Although those aren’t all necessarily ERC claims, she said that the Taxpayer Advocate Service thinks most of them are.

Those numbers also have yet to go down, despite the moratorium and increase in staff resources allocated to ERC processing.

Eide Bailly’s Elyse Katz weighs in on the subject:

The IRS’s apparent lack of processing progress matches the experience of tax professionals like Elyse Katz of Eide Bailly LLP, who told Tax Notes that revenue agents had told her directly to file a request with TAS [Taxpayer Advocate Service] for clients’ ERC claims because, they say, the IRS is only working TAS cases.

“At the very least, they’re getting to the top of the queue for when processing starts,” Katz said, adding that TAS also follows up monthly on those cases.

 

Work Still Needed On Key EU Tax Files, Ministers Warn – Todd Buell, Law360 Tax Authority ($):

Member countries must continue to negotiate to find agreement on key tax proposals in the European Union, with some states seeming to be far from accord more than two years after laws were proposed, a draft report penned by finance ministers indicates.

Tax initiatives, such as one to limit the use of shell companies and one to update the EU's energy taxation system, remain stalled, the report published Thursday showed. Another proposal, to stop tax fraud scandals such as cum-ex, which have ensnared major banks, has made progress but has not reached agreement by member states.

Need to know more about this issue:

International Tax – Eide Bailly:

Global expansion is full of complex decisions. Take the guesswork out of international tax planning with the help of Eide Bailly.

Doing business internationally can be complicated, and setting your business up for success includes being mindful of creating a tax efficient model at the outset. Whether you are just starting or have an established multinational business, an experienced advisor can help you make confident decisions in these areas. Specific expertise, including language fluency, in the countries where you operate and/or have sales can help ease the burden and the headaches of determining the right course of action.

 

From the “Holy Moly” file:

One Supreme Court Case Could Mess Up Chunks of the Tax Code – Richard Rubin, Wall Street Journal ($):

A case that could punch holes in the federal tax code heads to the Supreme Court on Tuesday. 

The court will hear arguments in Moore v. U.S., which challenges a piece of the 2017 tax law that imposed a one-time levy on profits that companies had accumulated outside the U.S. But its implications could reach much further, providing the justices an opportunity to define what Congress can tax under the Constitution—and what it can’t. 

The Court’s decision could basically uproot the tax code:

Tax lawyers and the government say a sweeping ruling could also upend many longstanding rules affecting partnerships, multinational companies and bond investors. Former House Speaker Paul Ryan, a Wisconsin Republican who helped write the 2017 tax law, warned in September that the case could damage a third of the tax code. 

If the Moores win, investors and companies could demand billions of dollars in refunds tied to the 2017 law. And a loss for the government could prompt a wave of lawsuits over other tax-code provisions, according to lawyers.

The tax world is watching:

Tax World Is Nervous as Court Arguments in Moore Case Approach - Michael Rapoport and Michael Bologna, Bloomberg ($):

The case, Moore v. United States, concerns whether a tax on companies’ past foreign earnings is constitutional, and whether income that hasn’t been “realized” by taxpayers can be taxed. If the court ultimately decides the answer is no, many observers fear that could trigger not only gigantic tax refunds to multinational companies, but could also preclude any future attempts to impose taxes on wealth, and call into question a host of other taxes that have been around for years or decades.

That could lead to a wave of new litigation, and a need for new legislation and regulation to address parts of the tax code that the court’s ruling may sweep away because they bear some resemblance to the tax at issue, these observers say. It could also limit policymakers’ future flexibility in raising revenue, and cause havoc in many states’ tax systems.

 

Uh-Oh! It’s Santa’s List Day! Today he separates the naughty from the nice. For those routinely listed with the naughties there is potentially good news. Coal prices have increased so Ol’ Saint Nick might not be able to afford much of it.

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About the Author(s)

Jay Heflin Photo

Jay Heflin

Director of Legislative Affairs
Jay brings more than two decades of experience to his job as Director of Tax Legislative Affairs in Eide Bailly’s Washington D.C. office. Jay provides political intelligence and guidance to the firm on the progress of tax legislation on Capitol Hill. Prior to joining the firm, he was a director at the tax lobbying shop Federal Policy Group, LLC, where he tracked tax legislation in Congress and participated in lobbying efforts to amend tax legislation. Before joining the Federal Policy Group, he was a Congressional reporter for several news organizations where his beat was tax policy.