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Tax News & Views Better Luck Next Year Roundup

Jay Heflin
December 18, 2023
Calendar page with deadline

Key Takeaways

  • Sights for passing tax bill now set on 2024
  • Big ‘ifs’ on it happening
  • Incoming: Blue Book
  • EV conundrum
  • Safe harbor rules re: info reporting
  • Taxes in retirement
  • Making FSA magic
  • ERC pleas
  • Elf!

Lawmakers Eye January as Tax Bill Crunch Time - Kim Dixon, Bloomberg ($):

The Senate is in session, but with the House gone for the year, lawmakers are looking to January as the next best hope for a bipartisan tax package to gain steam.

They’ll have no time to waste, with Congress returning the week of Jan. 8 and the next legislative vehicle tied to a Jan. 19 deadline for the first tranche of appropriations bills.

The outstanding issues that postponed action this year on the bill will likely still be outstanding issues next year that will be hard to tackle. And the spending bills mentioned in the article are not expected to pass Congress easily. Adding tax legislation to spending bills that are already fraught with problems may not be a winning strategy.

Capitol Hill Recap: Tax Bill Put on Ice – Jay Heflin, Eide Bailly:

Lawmakers will now apparently continue tax negotiations on provisions where there has been no agreement for nearly two years. The goal is to reach an agreement and pass tax legislation early next year, which is a head-scratcher.

Congressional tax lawmakers and staff have repeatedly said in closed-door meetings (i.e., no press allowed) that the focus in 2024 will be on examining the expiring TCJA (Tax Cuts and Jobs Act) tax reform provisions and decide what stays and what goes... Then, in 2025, Congress would vote on the tax legislation. 

Also, Congress’s legislative plate is expected to be quite full in January absent moving a tax bill:

Lots of talk, but no border deal - Andrew Desiderio and Mica Soellner, Punchbowl News ($). "A marathon weekend of talks on a border-security plus immigration package that could unlock billions of dollars in Ukraine aid yielded significant progress but no deal… That means Congress may have a complicated and politically thorny legislative proposal on its plate when lawmakers return to Washington in 2024 – all while they’ll be just days away from a government shutdown."

 

JCT Still Hopeful for Blue Book Release in 2023 – Andrew Velarde, Tax Notes ($):

It may be the waning days of 2023, but the Joint Committee on Taxation still hopes to release its long-awaited blue book this year, even if it is not officially published.

“We've worked really hard to put finishing touches on this,” Jared Hermann, legislation counsel for the JCT, said. “We are hopeful for 2023 something getting out.”

Don’t be surprised when the JCT Blue Book lands in your inbox on Christmas Eve.

 

Fewer Electric Vehicles Will Qualify for Federal Tax Credits in 2024 – Jack Ewing, New York Times:

Efforts to fight global warming could suffer a setback next year when new rules reduce the number of electric cars that qualify for a federal tax credit.

The credits, up to $7,500 a vehicle, have helped make electric cars more affordable, bringing the cost of some models below $30,000. Next year, for the first time, dealers will be able to give buyers the credit when they purchase a car, rather than telling them to claim it on their tax returns.

But qualifying for the subsidy will become more difficult on Jan. 1 because of Biden administration rules intended to encourage automakers to manufacture vehicles and parts in North America, while bypassing China. Most automakers are still years away from breaking their dependence on China for batteries and essential materials like refined lithium.

Reduced inventory for cars that aren’t selling could make for inventory issues at year-end.

Car dealers say they can’t sell EVs, tell Biden to slow their rollout – Jonathan Gitlin, ARS Technica:

Pity the poor car dealers. After making record profits in the wake of the pandemic and the collapse of just-in-time inventory chains, they're now complaining that selling electric vehicles is too hard. Almost 4,000 dealers from around the United States have sent an open letter to President Joe Biden calling for the government to slow down its plan to increase EV adoption between now and 2032.

Despite our robust economy, the US trails both Europe and China in terms of EV adoption. More and more car buyers are opting to go fully electric each year, although even a record 2023 will fail to see EV uptake reach double-digit percentages.

 

A Shock for Many Retirees: Social Security Benefits Can Be Taxed - Brian O’Connor, New York Times:

Social Security benefits weren’t taxed at all until 1984. Then in 1993, Bill Clinton signed legislation that expanded tax thresholds, making up to 85 percent of benefits taxable for recipients with combined incomes of more than $34,000 ($44,000 for joint filers). Those who earn less could be subject to taxes on up to 50 percent of their benefits. Combined income consists of a filer’s adjusted gross income, untaxed interest (such as from municipal bonds) and half of one’s annual Social Security payments.

Over the past 39 years, both Social Security payments and federal income tax brackets have continually shifted upward to compensate for inflation — but the income thresholds that result in a retiree’s benefits being taxed have not. When the tax took effect in 1984, during the Reagan administration, it was estimated to affect about 10 percent of Social Security recipients. By 2022, 48 percent of recipients were paying tax on some of their benefits, and paid $48.6 billion that year, according to the Social Security Administration. Most states do not apply state income taxes to Social Security benefits.

 

How to Make the Most of Your FSA Money Before It Disappears – Joseph Walker and Melanie Evans, Wall Street Journal:

The main benefit of setting up an FSA is that it can save you several hundred dollars or more in tax payments each year, depending on your tax bracket and how much money you decide to deduct from your paycheck. 

Under the typical FSA, however, you forfeit to your employer any money you haven’t spent by the end of the year, with some important exceptions.

Even if you didn’t manage to spend down all of your FSA funds as the new year approaches, you may still come out ahead because of the tax savings you accrue from making pretax payroll deductions, said Jake Spiegel, who studies health benefits at the nonprofit Employee Benefit Research Institute. 

 

Final Regs Issued on Safe Harbors for Payee Statements, Info Returns – Tax Notes ($). “The IRS has issued final regulations (T.D. 9984) providing safe harbor rules that, for penalty purposes, generally treat as correct payee statements or corresponding information returns that contain errors regarding de minimis incorrect dollar amounts.”

The document is here.

 

Trying to flip the script on the employee retention credit – Bernie Becker, Politico Morning Tax:

A lot of the recent talk about the Employee Retention Tax Credit has centered on the IRS’s effort to stop people who weren’t eligible from claiming it.

But now, a new business coalition is popping up to try bring more exposure to a different set of taxpayers — the legitimate companies that have been frustrated in their efforts to claim the credit because of the IRS’s current moratorium on new claims and more intense scrutiny of existing ones.

The Coalition to Preserve American Jobs isn’t full of the biggest names in the D.C. business lobby. But it does include some industries that have had a more fitful recovery from the pandemic, like theaters and gyms.

Cut to the chase: The group wants the IRS to end the ERC moratorium. Good luck with that.

 

IRS Hopes to Release Foreign Trust Reporting Regs in 2024 – Andrew Velarde, Tax Notes ($):

The IRS is targeting 2024 for a release of rules related to foreign trust information reporting, a frequent area of controversy between the agency and taxpayers.

“We’ve received a ton of comments and feedback from the practitioner community to the instructions to forms 3520 and 3520-A and some of this guidance,” Lara Banjanin of the IRS Office of Associate Chief Counsel (International) said. “We have. . .a foreign trust regulation package that we have been working on for some time and this is something we are actively working on that would address section 6048 and 6677, as relevant here. It is something that we hope to issue in the form of proposed regulations in 2024.”

 

Tax Court Closure Extends the Time to File a Petition - Keith Fogg, Tax Notes (opinion)($). “In this post, Fogg examines a recent Tax Court case interpreting a statute that extends the deadline to file a petition in Tax Court if the court is closed on the last day for filing.”

 

Corp. Min. Tax Guidance Addresses CFC Income Calculation – Dylan Moroses, Law360 Tax Authority ($):

The Internal Revenue Service published interim guidance Friday to address concerns about the potential for double counting under the U.S. corporate alternative minimum tax in certain situations when controlled foreign corporations issue dividends.

Notice-2024-10 covers how to calculate adjusted financial statement income, or AFSI, when a U.S. shareholder or controlled foreign corporation receives dividends from another CFC for purposes of the corporate alternative minimum tax, or CAMT.

 

Plowgian Hints at Extension of Pillar 1 Negotiation Deadline – Michael Smith, Tax Notes ($):

The United States expects an extension of the pillar 1 negotiation deadline into 2024 and is working to extend the digital services tax moratorium as well, Treasury’s outgoing OECD negotiator said.

During his December 15 keynote address at a tax conference cosponsored by the George Washington University School of Law and the IRS, Michael Plowgian said that Treasury has “already been in the process with our negotiating partners to formally extend the deadline for pillar 1 negotiations into next year.” Plowgian also announced that he will be stepping down as Treasury deputy assistant secretary for international tax affairs at the start of 2024.

 

International tax reform: OECD/G20 Inclusive Framework releases new information on key aspects of the Two-Pillar Solution – OECD:

Today, the OECD/G20 Inclusive Framework on BEPS (Inclusive Framework) released further technical guidance to assist governments with implementation of the global minimum tax under Pillar Two and a statement on the timeline of the Multilateral Convention (MLC) under Pillar One.

The Agreed Administrative Guidance for the Pillar Two GloBE Rules (December 2023) released today supplements the Commentary to the Global Anti-Base Erosion Model Rules in order to clarify their application, including guidance on the application of the Transitional Country-by-Country Reporting Safe Harbour and a mechanism for allocating taxes arising in a Blended Controlled Foreign Corporation (CFC) Tax Regime when some of the jurisdictions the MNE operates in are eligible for the safe harbour.

 

From “The Man Wants His Cut” file:

FTX's $24B Tax Bill Could Wipe Out Any Creditor Recovery – Alex Wittenberg, Law360 Tax Authority ($):

A process intended to resolve a $24 billion dispute in FTX Trading Ltd.'s bankruptcy case threatens to render moot the fallen crypto company's plan to repay millions of customers who lost money after the exchange collapsed in late 2022, experts told Law360.

FTX has been feuding with the Internal Revenue Service over an alleged tax bill that the agency first estimated at $44 billion before revising to $24 billion, an amount FTX says bears "no relation to reality." On Wednesday, a Delaware bankruptcy judge ordered an estimation hearing in the case that will determine whether the IRS claim can be counted against FTX.

 

Happy Answer the Telephone Like Buddy the Elf Day! Don’t know how he answered the phone in the movie Elf?

Answer (from National Day Calendar):

Simply answer the phone and say "(Insert your Name) the Elf, what's your favorite color." As you answer, smile and spread some joy. It's nearly impossible not to. Encourage others to do the same. If you call someone, don't be surprised by the elf-like voice. 

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About the Author(s)

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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.