Tax News & Views Moore-tal Kombat Day Roundup

By Joe Kristan
December 5, 2023

Key Takeaways

  • 2017 tax on foreign corporation income before Supreme Court
  • Will "realization" requirement be spelled out?
  • Case may affect wealth, appreciation tax proposals.
  • Broad decision could affect partnership tax, commodity value tax.
  • Iowa provides four-month deadline extension for 2022 SALT cap workaround election.
  • Borrowing against unpaid ERC claims.
  • EV battery content guidance.
  • IRS Crypto investigations.
  • Beneficial ownership.
  • Corporate life insurance and share valuation.
  • Why deficits are out of control.
  • Tax extenders are 'bad policy.
  • 21st Amendment day, Ninja day.

Supreme Court Hears Biggest Tax Case in Decades - Richard Rubin, Wall Street Journal:

The fundamental question before the court—whether income must be realized, or received, to be taxed under the 16th Amendment—could also apply to tax code sections affecting bond investors, partnerships and multinational corporations. If the court issued a broad ruling that income must be realized to be taxed, it could prompt a wave of lawsuits challenging other tax provisions, lawyers said.

The court doesn’t take many cases about the scope of federal taxing power, so it isn’t easy to predict what will happen, said Joseph Bishop-Henchman, executive vice president of the National Taxpayers Union Foundation, which filed a brief that didn’t take sides in the case. 

The Supreme Court Battle That Could Rewrite the Tax Code - New York Times:

Oral arguments are to begin on Tuesday at the Supreme Court in a tax case with a lot at stake.

Moore v. United States may appear to center on a request for a $14,729 tax refund, tied to a law that affected relatively few Americans. But it could redefine what is considered income in America, change how Congress taxes it, and preemptively block future efforts by Democrats to impose levies on billionaires’ wealth.

Justices to hear major tax case - Amy Howe, SCOTUSblog:

Until 2017, nothing in U.S. tax laws authorized the federal government to tax a controlled foreign corporation’s foreign income unless and until that income came to the United States – for example, through a distribution to U.S. shareholders. But in 2017, Congress enacted a one-time tax, known as the mandatory repatriation tax, on a controlled foreign corporation’s earnings after 1986, regardless of whether they were distributed to shareholders or whether the shareholders owned the shares when the corporation made the earnings on which they are being taxed. The tax was a provision of then-President Donald Trump’s plan to overhaul the tax code and was included, in part, to fund the plan. The mandatory repatriation tax was estimated to raise some $300 billion over 10 years, with billions already paid.


A federal district court in Washington State rejected the Moores’ challenge to the tax’s constitutionality. The U.S. Court of Appeals for the 9th Circuit upheld that decision. It explained that the constitutionality of a tax does not hinge on whether a taxpayer has realized – that is, received – income. And it noted that if it were to strike down the tax as unconstitutional, it would “also call into question the constitutionality of many other tax provisions that have long been on the books.” The Moores then came to the Supreme Court, which agreed in June to weigh in.

Why Moore v. U.S. Won’t Get Us a Consumption Tax Base - Alan Cole, Tax Policy Blog. "At first glance, a ruling for the plaintiffs in Moore might seem to solve some of the timing problems with the U.S. tax system. Unfortunately, upon greater inspection, such a ruling might create new timing problems. And the more rigid the ruling, the harder it would be to fix the timing problems it would create."

Related: Tax Reform: What Does It Mean for My International Business.


Iowa extends deadline for 2022 PTET elections (Iowa Department of Revenue E-mail)

The Department has extended the deadline to make a Pass-Through Entity Tax (PTET) election for tax year 2022 from January 2, 2024 to April 30, 2024. As a result, a tax year 2022 PTET election must be made by the later of the following dates: 

-April 30, 2024, or

-The due date for filing the 2022 IA 1065 or 2022 IA 1120S, including extensions. 

April 30 is the deadline for filing 2023 returns.

The Department of Revenue notes that owners of partnerships and S corporations will be unable to claim PTET credits until the entity pays them. Deductions at the entity level are probably unavailable until the year in which a PTET election is made, and in many cases, until the tax is paid.


The IRS Froze a Big Tax Credit. It Didn’t Stop All the Money From Flowing. - Ruth Simon, Wall Street Journal:

The IRS has put a freeze on ERC refunds but that hasn’t stopped financing firms looking to capitalize on the popular pandemic-era tax break.

Credit funds, small business lenders and ERC processing firms are all offering bridge loans and cash advances to small businesses waiting for their refunds. Such financing has gotten a boost after the IRS put a moratorium on the ERC program in September. 


Other firms buy the credit at a discount of up to 20% and then collect payment from the IRS when the refund is issued. “From our perspective, the ERC is a receivable,” said a spokesman for Raistone, a finance company in New York that purchases the credits and sells them to institutional investors. 

Related: IRS Puts Temporary Hold On New ERC Claims.


EV tax credit rules would clarify restrictions on foreign-made batterie - Valerie Yurk, Roll Call:

The proposed rules aim to resolve outstanding questions unanswered by the law itself. Automakers, who must adhere to escalating annual benchmarks for battery components sourced from the United States or friendly nations if they want their vehicles to qualify, have wondered how strict the requirements will be for tiny amounts of tough-to-track minerals that may originate with a foreign entity of concern.

Treasury is proposing a “temporary transition rule” for the commingling of these small amounts that would identify tax credit-eligible batteries by serial number or other identification system that will allow them to be tracked as they’re installed in certain vehicles.


Swiss Private Bank Banque Pictet Admits to Conspiring with U.S. Taxpayers to Hide Assets and Income in Offshore Accounts - U.S. Department of Justice. "Swiss private bank Banque Pictet et Cie SA admitted today to conspiring with U.S. taxpayers and others to hide more than $5.6 billion in 1,637 secret bank accounts in Switzerland and elsewhere and to conceal the income generated in those accounts from the IRS."

IRS Criminal Investigation Unit Taking on More Crypto Tax Cases - Allyson Versprille, Bloomberg ($). "Three years ago, the vast majority of the active crypto investigations — upwards of 90% — involved money laundering, Jim Lee, chief of the IRS’s criminal investigation division, told reporters on a call Monday. But in the past year, about half of the digital-asset probes have involved tax, he said."

CI Expects to Stay Focused on Pandemic Fraud - Lauren Loricchio, Tax Notes ($). "'We continue to be very challenged with COVID crime,' CI Chief Jim Lee said during a December 4 press call."

Link: IRS CI fiscal 2023 report.


7 tax moves to make this December - Kay Bell, Don't Mess With Taxes. " If you have a 401(k) plan at work, get to your human resources office as soon as possible and up your contribution amount for the rest of the year."

Tax Court Clerk's Office Being Closed on Date for Filing Tax Petition Extends Time for Filing Under §7451 Even Though Other Options to File Remained Available on That Date - Ed Zollars, Current Federal Tax Developments. "The Tax Court diverged from the IRS’s stance, ruling that Mr. Sall was eligible for the extended filing period for his Tax Court petition."


Small Entities Must File New Beneficial Ownership Information Reports in 2024 - Kristine Tidgren, Ag Docket. "Domestic reporting companies are corporations, limited liability companies (LLCs), or any entities created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe. This generally means that limited liability partnerships, limited liability limited partnerships, business trusts in certain states, and most limited partnerships are also required to file reports if they are not otherwise excepted from the reporting requirement. Single-member LLCs, disregarded for tax purposes, are subject to BOI reporting requirements."

Funding a Buy-Sell Agreement with Corporate Owned Life Insurance – Will Corporate Value Be Enhanced? - Roger McEowen, Agricultural Law and Taxation Blog. "One potential problem of a corporation being the beneficiary of a life insurance policy designed to fund the buy-out of a deceased shareholder is that the IRS could argue that the policy proceeds are included in the corporate value."


Odd Exclusion for Home Rental Is Overdue for Repeal - Annette Nellen, 21st Century Taxation. "There is no logic to this exclusion. Anything else rented for 14 days or less during the year doesn't produce tax-free income. Perhaps it was to address small amounts of income someone might generate such as when a movie studio uses all or part of a home for 14 days or less."

IRS Delays Implementation of 1099-K Filing Changes to Calendar Year 2024 - Tax School Blog. "The news release not only specified that the IRS was delaying this change by one year, but also stated that the dollar amount threshold would be $5,000 instead of $600 for calendar year 2024 to phase in the implementation of this change in reporting requirement.  Consequently, the filing requirements for calendar year 2023 remain at over 200 transactions totaling over $20,000."


Watch Congress Spend And Cut Taxes More, Despite Its Deficit Hang-Wringing - Howard Gleckman, TaxVox. "Want to know why the budget deficit is enormous and growing? One reason is that when one political party in Congress proposes new tax cuts or new spending, the other party offers its own deal in return: We’ll accept your tax cuts and new spending but only if you agree to ours. And neither side tries to offset the costs with new revenues or spending cuts."

Temporary Tax Extenders Are Still Bad Policy - Adam Michel, Liberty Taxed. "There are always political reasons used to rationalize temporary changes, but arbitrary political cliffs make for poor economic policy and distort budgeting."


Omaha attorney sentenced to prison for filing false tax returns - IRS (Defendant name omitted)

A Nebraska attorney was sentenced today to one year and one day in prison for filing false individual income tax returns.

According to court documents and statements made in court, between 2014 and 2018, Defendant, a licensed attorney since 2011, was the owner and manager of TLN Law, a solo-practice law firm in Omaha. Defendant controlled the law firm's finances and was aware of substantial amounts of cash payments his firm received for legal services. For 2014 through 2018, Defendant did not report over $2.8 million in cash his firm received, which flowed through to, and should have been reported on, his personal tax returns. In total, Defendant caused a tax loss to the IRS exceeding $400,000.

As tax plan results go, this isn't good.


21 and Done. Today is Repeal Day, the anniversary of the passage of the 21st Amendment to the Constitution and the repeal of Prohibition. It's also International Ninja Day, so be careful out there.

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About the Author(s)

Joe Kristan

Joe B. Kristan, CPA

After 38 years centered on tax consulting for closely held businesses and their owners, Joe is joining Eide Bailly's National Tax Office. Joe's responsibilities include communication, process improvement and training. He is a principal contributor to the Eide Bailly Tax News and Views blog, providing daily updates on tax reform and other tax news. Joe is a Certified Public Accountant and a member of the AICPA Tax Section and Iowa Society of Public Accountants.