Tax News & Views Waiting to Launch Roundup

March 31, 2023

Reviving Bonus Depreciation - Kim Dixon, Bloomberg ($):

Sen. James Lankford (R-Okla.) reintroduced a bill, known as the ALIGN Act, to make 100% bonus depreciation permanent. The measure seeks to reinstate the full expensing of business costs for things such as equipment in the first year. The break was part of the 2017 tax law and began phasing out at the end of 2022. It expires at the end of 2026.

The National Association of Manufacturers and other business lobbyists have pushed hard to bring it back.

Bonus Depreciation, R&D expensing, and expanding the 163(j) interest deduction are all in one basket and await enactment. There is bipartisan, bicameral support for making these provisions law. The hurdle: Expanding the Child Tax Credit. Some lawmakers who support the business provisions refuse to advance them unless expanding the Child Tax Credit is also included. Other lawmakers oppose increasing the family tax provision because they say it contributed to inflation.

The latest development on this front:

Indiana GOP senator carves out dealmaking niche on taxes – Laura Weiss, Roll Call:

Sen. Todd Young has a pitch to clear a path forward on tax legislation after a partisan standoff last year gave way to a monthslong chill. He’d pair a more generous research and development benefit for businesses with affordable housing measures to aid low-income families.

Both are bipartisan projects Young leads on the GOP side. Tying them together, he hopes, could satisfy Democrats’ demand to pair tax breaks for companies with provisions to boost the social safety net while avoiding an expansion of the child tax credit that currently lacks Republican backing.


McCarthy Says GOP Finalizing Debt Limit-Energy-Spending Bill - Erik Wasson, Bloomberg ($):

House Republicans are finalizing a bill combining an increase in the US debt ceiling with spending cuts, energy deregulation and other GOP priorities, Speaker Kevin McCarthy told reporters Thursday.

Why is this tax related? If House Republican approve this budget, then Senate Democrats will likely include tax increases in their budget to counter the GOP spending cuts. All of this activity is waste of time because budgets do not become law. I've often wondered how lawmakers would survive if they had real jobs. 


Nonprofit Reps Weigh In on Ways and Means IRS Oversight Plan – Fred Stokeld, Tax Notes ($). “Enhanced congressional oversight of the IRS’s regulation of tax-exempt organizations could make it more likely that only qualified entities attain exempt status, according to groups representing the nonprofit sector.”


Treasury Releases Proposed Guidance on New Clean Vehicle Credit to Lower Costs for Consumers, Build U.S. Industrial Base, Strengthen Supply Chains – Treasury Department:

Today the U.S. Treasury Department and the IRS released proposed guidance on the new clean vehicle provisions of the Inflation Reduction Act that will lower costs for consumers, build a resilient industrial base and spur manufacturing in the U.S., and strengthen supply chains with like-minded partners that are vital for energy security. Since the Inflation Reduction Act was enacted, at least $45 billion in private-sector investment has been announced across the U.S. clean vehicle and battery supply chain, and today’s guidance will help ensure that American workers, companies, and consumers continue to benefit. 

The proposed guidance is here

IRS Issues Guidance on Battery Content for EV Tax Credits – Alexander Rifaat, Tax Notes ($):

Automakers have a little more than two weeks to determine whether their vehicles will still qualify for up to $7,500 in clean vehicle tax credits.

The Treasury and IRS laid out the details in newly proposed rules (REG-120080-22) that include steps to determine that a significant percentage of critical minerals — such as lithium, copper, and manganese — used in a car’s battery were extracted or processed in the United States, or in ‘any country with which the United States has a free trade agreement in effect.’

EU Seeks EV Rules Clarity Before Signing Key US Mineral Deal - Alberto Nardelli, Bloomberg ($).   “The European Union is seeking to clarify several issues with the US before signing an agreement on critical minerals designed to give EU companies access to some of the massive green subsidies offered in President Joe Biden’s Inflation Reduction Act.”


IRS Puts Offer in Compromise Mills on Dirty Dozen List of Scams – Bloomberg ($):

The IRS has included Offer in Compromise ‘mills’ that mislead taxpayers who don’t qualify into believing they can settle tax debt at steep discounts as the ninth entry on its annual Dirty Dozen list, the agency said Thursday.

The Offer in Compromise program is aimed at helping people who can’t pay their federal tax debts in full settle with the IRS; ‘mills’ exploit this by offering aggressive promotions that mislead taxpayers who wouldn’t qualify, the IRS said.

The announcement is here.


IRS Enforcement Funds Should Be Used Broadly, CPA Group Says -  Naomi Jagoda, Bloomberg ($). “The IRS should use the enforcement funds provided for the agency in the tax-and-climate law for a broad number of purposes, including enforcement-related items pertaining to technology and customer service, the American Institute of CPAs said.”

‘We believe there is an imbalance in the allocation of funds between enforcement and service,’ AICPA said in a comment letter sent this week to the Treasury Department and the IRS. ‘The good news is that the IRS can mitigate some of this imbalance by paying for enforcement-related service out of IRA enforcement funding.’


Research Credit Decision Illustrates Limits of Testimonial Evidence – Kristen Parillo, Tax Notes ($):

A recent Tax Court opinion holding that a high-level executive’s wages can’t be included in a research credit computation shows how oral testimony alone won’t fill the void left by inadequate documentation, according to tax professionals.

Practitioners who spoke with Tax Notes said the outcome in a February 23 memorandum opinion (T.C. Memo. 2023-20) in Moore v. Commissioner was disappointing but not surprising, given the taxpayers’ failure to provide contemporaneous documentation as support for their wage allocation claims.


Walmart’s ‘Dark Store’ Property Tax Argument Rejected in Iowa - Perry Cooper, Bloomberg ($):

Walmart Inc. failed to convince the Iowa Court of Appeals that its West Des Moines store was overvalued for tax purposes.

A trial court upheld the Dallas County Board of Review’s valuation of the store at $19.9 million for the 2019 tax year. Walmart sought to reduce the value to $17.9 million based on the “dark store” theory, under which big box stores should be valued as if they are vacant because they are built to suit an individual company’s specific needs and would be worth less to a different occupant.


New Jersey Taxpayer Off the Hook for Tax on Partnership Gain – Perry Cooper, Bloomberg ($):

The New Jersey Division of Taxation improperly taxed $2.3 million that a bankrupt limited liability company allocated to an individual member of the partnership, the state tax court ruled.

Because the sum—used to zero out a negative capital account—doesn’t represent economic gain or recovery of a past benefit, it isn’t taxable, New Jersey Tax Court Judge Mark Cimino held in an unpublished opinion posted Thursday.


Estate of Block Ruling Shows Need for Care With Trust Planning - Daniel Hauffe and Kathleen Adcock, Bloomberg ($). “In Estate of Block v. Commissioner, the Tax Court scrutinized the purported charitable remainder annuity trust (CRAT) and denied the estate’s claimed charitable deduction for the remainder interest because the CRAT’s income interest provision did not comply with the law and the trustees failed to correct the error quickly enough.”


Washington State Supreme Court Upholds Capital Gains Tax as an “Excise Tax” – Adam Sweet, Eide Bailly:

The Washington State Supreme Court ruled that a new state capital gains tax is constitutional as an ‘excise tax’ under Washington law. The opinion, released March 24, 2023, surprisingly concludes that a tax on capital gains is not a tax on income (unconstitutional in Washington state) but is instead a ‘valid excise tax under Washington law.’ This is due, in part, because:

‘…taxpayers do not owe the capital gains tax merely by virtue of owning capital, like a property tax. Instead, the tax relates to the exercise of rights ‘in and to property’—namely, the power to sell or transfer capital assets—like an excise.’


New York Couple’s Empire Zone Tax Credit Was Properly Reduced - Aysha Bagchi, Bloomberg ($):

New York’s tax division correctly decreased a couple’s qualified empire zone enterprise tax reduction credit, a state tribunal ruled.

The decision affirmed an administrative law judge’s determination against Frank and Kristine Giotto. The couple claimed the tax credits based on Frank Giotto’s ownership of three qualified empire zone enterprises—a designation that comes with a tax reduction credit either to the enterprises themselves or to their owners.


Arizona governor Hobbs vetoes the ban on sales tax for food – Associated Press. “Arizona Gov. Katie Hobbs vetoed a food tax bill Tuesday that would have prevented cities and municipalities from taxing groceries. In a letter sent to the Legislature, Hobbs said she believed the bill wouldn’t eliminate costs onto consumers and instead shift the responsibility to the state.”


Florida Governor Signs Corporate Income, Sales, Property, Excise Tax Law Regarding Affordable Housing Exemptions, Credits – Bloomberg ($). “The Florida Governor March 29 signed a law regarding affordable housing exemptions and credits for corporate income, sales and use, property, and excise tax purposes.”


From “The Naughty Step” file:

Swiss Banker Admits Helping Hedge Fund Manager Evade US Taxes - Chris Dolmetsch, Bloomberg ($):

A Swiss banker pleaded guilty to fraud for helping an unnamed hedge fund manager and other US taxpayers hide $60 million in assets.

Daniel Walchli, who worked at Zurich’s Privatbank IHAG , entered his plea Thursday to a single count of conspiracy to defraud the US. The charge carries a maximum sentence of five years in prison, but Manhattan federal prosecutors agreed not to seek a punishment outside of 24-to-30 months.

That's a lot of step time. 


Happy National Prom Day! Aww. Everyone looks sooo cute!

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