May 1, 2023
Republicans Effectively Voted to Raise Taxes. They’re Fine With That. – Richard Rubin, Wall Street Journal ($):
Republicans finally found a tax increase they can support.
The party, united for decades around the view that net tax increases are unacceptable, on Wednesday advanced debt-ceiling legislation that would raise taxes by more than $300 billion over a decade, according to official congressional estimates.
The bill, which passed in the GOP-controlled House and won’t survive the Democratic-led Senate, would repeal clean-energy tax credits that Congress created last year. The changes would shrink breaks for wind energy, solar power, hydrogen and electric vehicles, effectively raising taxes on some manufacturers, car buyers and others.
The tax incentives they reversed were included in the Inflation Reduction Act, which Democrats passed last year. Republicans have made it a habit to try and undo Democratic bills simply because Democrats passed them. Think Obamacare. The fact that before the vote on the debt-ceiling legislation several House Republicans stated their opposition to these tax increase - and then voted for them - was stunning.
The bill now goes to the Senate, where it is not expected to pass. Instead, Senate Committees will hold hearings on the legislation to highlight its imperfections.
Schumer says Senate committees will hold hearings on the Republican legislation. The bill didn’t go through regular order in the House. Instead, the legislation was drafted by McCarthy and other senior House Republicans following consultations with their rank-and-file.
It will be interesting to see if the Democratically controlled Senate will criticize the tax increases that are in the legislation. Democrats normally support tax increases, so it would be a bit out of character for them to lambast them.
EB takes the spotlight:
Spotlight on International Tax Services Partner Shannon Smith - Rebecca Baker, Bloomberg ($):
Our Spotlight series highlights the careers and lives of tax professionals around the world. This week’s Spotlight is on Shannon Smith, who is partner in charge of international tax services at Eide Bailly in Boulder, Colo.
Amazon Opens a Door for States to Tax Third-Party Merchants - Michael Bologna and Laura Mahoney, Bloomberg ($):
Amazon is often called the ‘everything store,’ but it’s also becoming the ‘everywhere store.’ It’s an exciting prospect for the 9.7 million independent sellers using the e-commerce giant’s sales platform and expansive network of warehouses, but Amazon’s ubiquity may also leave these retailers with income and franchise tax duties in a slew of new states, an attorney with the Multistate Tax Commission warned this week.
More SALT Workarounds Ahead as States Add Pass-Through Tax - Annie Goulart and Laura Holt, Bloomberg ($):
Differences in the application of extensions, retroactivity, estimated payments, and credits remain the key elements that practitioners must navigate when dealing with the varying approaches to pass-through entity taxes.
Indiana, Kentucky and West Virginia are the most recent states to enact legislation to reduce the effect of the 2017 $10,000 SALT cap deduction limitation for individuals who conduct business through a pass-through entity.
Kansas Rebate Doubtful as Governor’s Flat-Tax Veto Stands - Angélica Serrano-Román, Bloomberg ($):
Kansas Gov. Laura Kelly’s proposal to distribute one-time tax rebates appeared dead late Friday in the Republican-dominated Legislature, which failed in two efforts to override her veto of a flat-tax bill.
Kelly, a Democrat, proposed the $450 rebates early this week after she vetoed Senate Bill 169. The bill would, among other things, have switched the state’s graduated personal income tax structure to a flat 5.15% tax regime. Kelly called the measure regressive and said rebates would provide relief 'without breaking the bank or jeopardizing funds' for public schools.
Hochul’s $229 Billion New York Budget Deal Boosts Wages, Taxes - Laura Nahmias and Donna Borak, Bloomberg ($):
Under the new plan the governor reached with the legislative leaders, the minimum wage will be raised to $16 an hour in New York City in 2024, the payroll taxes on the city’s businesses will be increased to pay for the Metropolitan Transportation Authority’s budget deficits and the state’s controversial bail reform laws will be revised.
More on taxes:
New York residents will be able to claim children under four years old and allow non-citizen tax filers to claim the state earned income tax credit. They also agreed to extend the supplemental earned income tax credit to one year to help struggling families wrestling with the burden of inflation. And they planned to increase the excise tax on cigarettes by one dollar to $5.35 from $4.35.
The details are still being worked out and a vote on the budget could occur later this week, according to the article.
Governor signs $515 million tax relief legislation bill – Minot Daily News. “Gov. Doug Burgum signed a $515 million tax relief package Thursday that includes savings for state individual income-tax payers and local property-tax payers over the next two years.”
Minnesota DOR Issues Income Tax Tips Concerning Missing Returns, Commissioner Filed Returns – Bloomberg ($). “The Minnesota Department of Revenue (DOR) April 27 issued individual income, corporate income, and trust income tax tips for tax professionals regarding missing returns and Commissioner Filed Returns (CFR).”
Minn. Floats Adopting MTC's New P.L. 86-272 Guidance – Paul Williams, Law360 Tax Authority ($). "The Minnesota Department of Revenue is considering adopting Multistate Tax Commission guidance that outlines when an out-of-state business' internet activities exceed P.L. 86-272 protections against state income tax, according to a draft proposal obtained by Law360 on Friday."
Repatriation of Intangible Property Guidance ‘Imminent,’ IRS Official Says - Lauren Vella, Bloomberg ($). “Guidance regarding the treatment of intangible property that was moved overseas and subsequently on-shored back in the US is ‘imminent,’ an IRS official said Friday.”
‘I actually thought the 367 regs might be out in time for this panel,’ Laura Williams, branch chief at IRS Office of Associate Chief Counsel, International, said of the US tax code section at the International Fiscal Association’s annual conference in Chicago. ‘So they’re coming very soon,’ she added.
IRS Set to Roll Out Guidance on US Model Tax Treaty Provisions - Danish Mehboob, Bloomberg ($):
The IRS is drafting technical guidance for changes to the 2016 US model income tax convention, an administration official said Friday at an International Fiscal Association conference in Chicago.
The agency is working on adapting the US model treaty to changes in the 2017 Tax Cuts and Jobs Act, said Lara Banjanin, senior counsel at the office of associate chief counsel at IRS.
Global Tax Deal Negotiations See Progress, US Official Says - Isabel Gottlieb, Bloomberg ($):
Amount A of Pillar One of the 2021 global tax agreement would reallocate a slice of the largest multinationals’ profits to jurisdictions where they’re making sales. It’s been politically contentious, and the roughly 140 governments involved in negotiations still are working to find agreement on a number of key issues by a mid-year deadline…
The key question at this stage in the negotiations is ‘how to determine whether the jurisdiction is taxing residual profits’ and how to offset those against Amount A, Plowgian said. He was speaking at an International Fiscal Association event in Chicago.
No Need to Say ‘Royalty’ on Foreign Tax Credit Break, IRS Says - Michael Rapoport, Bloomberg ($). “License agreements aimed at helping companies’ royalty withholding taxes stay eligible for the US foreign tax credit don’t necessarily have to use the word ‘royalty,’ an IRS official said Friday.
IRS May Amend Stock Buyback Tax 'Per Se' Rule, Official Says – Kat Lucero, Law360 Tax Authority ($). “The Internal Revenue Service plans to modify the pending stock buyback tax rules' so-called per se rule, a criticized provision designed to prevent foreign companies from using U.S. affiliates to avoid paying the levy, an agency official said Friday.”
From the “They’re Back!” file:
IRS Reopens the Gates for In-Person Public Hearings – Jonathan Curry, Tax Notes ($):
Taxpayers will soon be able to express their views on the IRS’s proposed regulations face-to-face with agency officials, ending more than three years of the phone-only format instituted because of the pandemic.
The return to in-person hearings will take effect for proposed regs published in the Federal Register after May 11, the IRS announced April 28. The agency is looking to keep the best of both worlds by opening its doors to individuals while retaining a call-in option.
Some might associate the term “May Day” with troubled airplanes or ships. Others might associate it with Spring.
National Day Calendar:
May Day has been a traditional day of celebration for centuries, with some of the earliest appearing in pre-Christian times. One of the more popular rituals was harvesting flowers and giving them to neighbors and strangers in cone-shaped baskets. These May Baskets become more commonly known as May Day Baskets. The current tradition is observed by hanging a cone-shaped basket full of flowers or other gifts on the outside doorknob, then knocking or ringing the doorbell and running away.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.