Tax News & Views Situation Normal... Roundup

February 15, 2023

‘Refund’ States Still Face IRS Complexity on Relief Check Taxes – Michael Bologna and Angélica Serrano-Román, Bloomberg ($):

Despite an IRS clarification that most of the ‘special payments’ provided in 21 states last year won’t be treated as income for federal tax purposes, complexity continues for people in four states that technically structured their payments as tax refunds rather than one-time rebates.

Taxpayers receiving refunds in Georgia, Massachusetts, South Carolina, and Virginia could be on the hook for federal taxes on those payments if they gained a federal tax benefit, the IRS said in a Feb. 10 guidance statement. Residents of the four states falling into this category include people who itemized their deductions and didn’t reach the $10,000 cap on deductions for state and local taxes.

Eide Bailly's coverage on this topic is here


High Interest in Tax Among Senators, but Will There Be a Bill? – Doug Sword, Tax Notes ($). “There is a lot of tax policy talk going on among senators in the new Congress, but it’s too early to tell whether that high level of interest will turn into action, according to the top Republican on the Senate Finance Committee.”

‘I believe that there is a significant amount of interest in tax legislation in the context of extenders,’ Senate Finance Committee ranking member Mike Crapo, R-Idaho, said February 14. ‘What I can’t tell you is whether that’s got any fuel behind it yet.’

The scuttlebutt on Capitol Hill is that a tax bill is most likely to happen in the second half of the year, like in the fourth quarter. If inflation rears its ugly head before then (or a legislative fix occurs, see below), taxes could become a front-burner issue sooner rather than later.

Eide Bailly's weekly take on things from February 9th: Capitol Hill Recap: Lots of Tax Talk, but will there be Action?

Plan Administrators Call on Treasury to Fix SECURE 2.0 Glitch – Tax Notes ($):

The National Association of Government Defined Contribution Administrators has requested immediate guidance pending an expected legislative correction to the SECURE 2.0 Act of 2022 that inadvertently disallows all catch-up contributions beginning in 2024, advising Treasury to make clear it will follow congressional intent rather than the erroneous final text.

If lawmakers introduce legislation that fixes this glitch it will be considered "technical correction" legislation, which can't include bigger fixes for issues like Section 174 or 163(j), to name a few. However, technical corrections can be a part of legislation that addresses larger tax issues, like 174 and 163(j).

What we have here is a 'which came first, the chicken or the egg' situation. If legislation is introduced that addresses the Secure 2.0 problem, will it be a technical correction bill? Or will it be legislation that includes larger provisions (like 174 and 163(j)) as well as a technical correction for Secure 2.0?


Biden’s Pick for IRS Chief to Face Questions About Agency’s $80 Billion Expansion – Richard Rubin, Wall Street Journal ($):

Danny Werfel, President Biden’s choice to run the Internal Revenue Service, will tell senators Wednesday that he is committed to focusing tax enforcement on high-income Americans, as lawmakers press him for details on how the agency plans to use the $80 billion Congress gave it last year. 

Mr. Werfel’s confirmation hearing is expected to focus less on his qualifications for the role—which include a stint as the acting IRS leader in 2013 and years as a consultant—and more on the new IRS funds from the Inflation Reduction Act.

Eide Bailly will post a blog about this hearing later today. 


Hedge Fund Calls on Tax Court to Clarify Limited Partner Exception – Kristen Parillo, Tax Notes ($). “A New York hedge fund is asking the Tax Court to issue an explicit ruling that limited partners in a state-law limited partnership are exempt from self-employment tax on their distributive shares of partnership income.”

‘Section 1402(a)(13) unambiguously excludes distributive shares of partnership income from the calculation of net earnings from self-employment for limited partners in state law limited partnerships. Nothing in the Code permits any contrary interpretation,’ the fund asserts in a February 7 motion for summary judgment in Soroban Capital Partners LP v. Commissioner.


Partnership Asks Tax Court to Settle Self-Employment Tax Question – Tax Notes ($):

A partnership moved for summary judgment in its Tax Court case challenging IRS adjustments, arguing that a limited partner’s distributive share of income is excluded from self-employment tax or, alternatively, that any functional inquiry into the role of any of the partners is an impermissible partner-level determination.


Company Gets Chance to Challenge Tax Court Deadline, IRS Notice – Erin McManus, Tax Notes ($):

A Canadian corporation will get an opportunity to argue for equitable tolling regarding a tardy Tax Court petition to challenge penalties for what the IRS says were late-filed information returns.


Minn. House Panel OKs Restoring Historic Rehab Tax Credit – Sanjay Talwani, Law360 Tax Authority ($):

Minnesota's tax credit for the rehabilitation of historic structures, which expired last year, would be restored under legislation advanced Tuesday by a state House panel, with the credits awarded in lump sums instead of over five years.


IRS Targeting Second Half of 2023 for PTEP Regs – Andrew Velarde, Tax Notes ($). “The IRS is hoping to release its long-anticipated proposed regs on previously taxed earnings and profits (PTEP) in the back half of 2023 — a timeline that once again pushes back a previous release date goal.”

‘PTEP is the elephant in the room. . . . Obviously, that project has been a long time coming,’ Robert Williams Jr. of the IRS Office of Associate Chief Counsel (International) said. ‘We’re looking at the second half of this calendar year for that big package.’


Singapore To Implement Min. Tax In 2025, Deputy PM Says – Matthew Guerry, Law360 Tax Authority ($):

Singapore will implement the globally agreed-upon 15% minimum tax on corporate income in 2025, its deputy prime minister said Tuesday.

The announcement came during a speech that Deputy Prime Minister Lawrence Wong, who also serves as Singapore's finance minister, gave to lawmakers regarding the country's budget for the year, according to a transcript of the remarks.

The U.S. will never enact this tax, if Republicans have a say in the matter: 

Smith: OECD Must Stop Colluding with Biden Administration to Surrender American Sovereignty – House Ways and Means Committee:

The Organization for Economic Co-operation and Development (OECD) must stop colluding with the Biden Administration to enact a global tax deal that will surrender American sovereignty, destroy American jobs, and hand China a global economic competitive advantage, House Ways and Means Committee Chairman Jason Smith (MO-08) demanded in a letter today to OECD Secretary-General Mathias Cormann.

The letter is here.


From the “Waste of Paper” file:

Rosen, Tester introduce resolution condemning GOP sales tax plan - Max Cohen, Punchbowl News ($):

Sens. Jacky Rosen(D-Nev.) and Jon Tester(D-Mont.) are introducing a resolution formally opposing a much-maligned Republican proposal to establish a national sales tax. The move shows vulnerable Senate Democrats want to hammer home this economic message, even while top Republican leaders have distanced themselves from the sales tax effort.

Translation: These lawmakers introduced a “bill” that opposes another bill that will never be enacted into law.

Background: Legislation was introduced in January that replaces the income tax system with a national sales tax. Speaker Kevin McCarthy (R-Calif) and several other high ranking Republicans don’t support the bill, and it would never pass a Democratically-controlled Senate. Also, President Biden would veto the legislation if (big ‘if’) it got to his desk. Despite these facts, the aforementioned lawmakers put to paper words opposing enactment of this bill - That. Will. Not. Become. Law. 

Why can't lawmakers focus on real issues?   


Happy National Gumdrop Day! Sick of all that Valentines candy? Go with gumdrops! They’re good AND good for you (caveat: they are not good for you).

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