Will Artificial Intelligence Be Able to Prepare Our Tax Returns? – Robert Weinberger, Tax Policy Center:
Tax, accounting, and consulting firms are moving quickly to take advantage of the technology. Professionals in 250 firms have partnered with Blue J Tax, an AI tool for tax research, analysis, and planning that aids in analyzing legislation and litigation to predict tax scenario outcomes with speed and accuracy. Developers claim AI can analyze thousands of past decisions, expedite research, find supporting directives, weigh alternatives, anticipate court rulings, and quantify risk.
Further down the article: ChatGPT is still a work in progress, missing critical analytical and quantitative skills. It is flummoxed by translating our convoluted tax code, its regulations, and rulings into tailored decisions. It is prone to error and dependent on internet information only available before 2021.
Plus, even with AI, the burden of preparing a tax return will still involve collecting personal information, entering data that may be unavailable in public records, and weighing decisions based on precedent and values.
Also, how good would AI be at picking up the tab for a client lunch? Ya need thumbs.
Missing in this year’s debt-ceiling talks: Democratic demands for new taxes – Paul Kane, Washington Post:
In late May 2011, Vice President Biden exited a meeting on Capitol Hill to declare that he had delivered a ‘clear’ edict in those negotiations over raising the nation’s federal debt limit.
‘Revenues are going to have to be in the deal, and everybody knows that,’ Biden told reporters, using Democratic parlance for raising taxes on the rich.
Twelve years later, during another debt standoff with a new House GOP majority, President Biden and his allies have not made higher taxes on the rich and powerful a centerpiece of the talks.
Um…tax increases are on the table that would hit the “rich and powerful.” But Democrats didn't do it. They were put there by House Republicans.
The House-passed debt limit bill (the Limit, Save and Grow Act) includes roughly $515 billion in tax increases over ten years, according to the Joint Committee on Taxation. And as odd as this sounds, Republicans who favor tax cuts supported the bill's passage on April 26, 2023.
The Limit, Save and Grow Act essentially repeals or modifies several tax cuts from the Inflation Reduction Act. Removing a tax break is normally considered a tax increase because it requires an entity to pay more in taxes. The statement by House Ways and Means Committee Chairman Jason Smith (R-Mo.) upon passage of the Limit, Save and Grow Act talks about the tax increases in the bill:
So yes, tax increases are on the table in the debt limit debate that would affect the “rich and powerful.” Whether they get enacted is a whole other story.
…[B]y ending welfare for the wealthy and loopholes for big corporations in the Inflation Reduction Act. Ninety percent of these special interest green tax breaks go to companies with over $1 billion in sales; financial institutions alone pocket three times as much as any other industry; and these tax dollars are being funneled to China, enriching the Chinese Communist Party and allowing it to dominate critical mineral supply chains…
Debt-Ceiling Talks Devolve Into Finger Pointing and Frustration as Deal Remains Elusive – Natalie Andrews and Andrew Restuccia, Wall Street Journal ($):
BTW, debt ceiling talks between the White House and Congress are back on.
The White House, in a memo released Saturday evening, called Republicans’ spending proposals extreme and argued that if they were serious about fiscal responsibility, they would consider raising taxes on wealthy people and corporations.
Speaking of the Inflation Reduction Act:
Biden Delays Bid to Grant EV Makers Renewable Fuel Credits - Jennifer Dlouhy, Bloomberg ($):
Under the proposal, carmakers would be folded into the 18-year-old Renewable Fuel Standard that requires refiners to blend biofuels into gasoline and diesel. Electric vehicle manufacturers would be able to claim new, tradeable credits in exchange for using electricity generated from natural gas harvested from landfills or farms.
EPA spokeswoman Maria Michalos declined to comment, citing the proposed rule’s ongoing interagency review. The draft regulation could still change before its formal, final release.
CPA Group Asks IRS to Prioritize Inflation Reduction Act Guidance - Lauren Vella, Bloomberg ($). "The American Institute of CPAs named guidance under the corporate alternative minimum tax, and the stock buyback excise tax as the top two priorities for corporation taxation, according to its letter."
FIRPTA Stock Exception Applies at Partnership Level, IRS Says – Chandra Wallace, Tax Notes ($):
A partnership’s direct ownership of stock in a domestic real property holding corporation is tested at the entity level — not in the hands of each partner — when applying the regularly traded stock exception in section 897(c)(3), the IRS has advised.
In a May 12 general legal advice memorandum (AM 2023-003), the IRS clarified how to calculate the 5 percent stock ownership threshold below which foreign owners aren’t required to report gains on the sale of stock as effectively connected income subject to federal income tax under the 1980 Foreign Investment in Real Property Tax Act.
The Pandemic-Era Tax Break Keeping the IRS Up at Night – Richard Rubin and Ruth Simon, Wall Street Journal ($):
The Internal Revenue Service has paid out more than $150 billion amid a surge of claims for an expired pandemic-era tax break for small businesses. Agency officials are wading through another roughly 800,000 returns that need processing—and more are still arriving.
The continued flood of claims for the employee-retention tax credit is straining the IRS, which is caught between pressure to process refunds quickly and concerns about paying money that businesses don’t deserve. The agency has repeatedly warned about advisers who are encouraging employers to file returns that stretch or flout eligibility requirements. Small business owners, meanwhile, complain about monthslong waits for much-needed tax refunds.
IRS Plan To Flag Return Errors Could Impede Taxpayer Rights – David van den Berg, Law360 Tax Authority ($):
The Internal Revenue Service recently proposed to send notifications to taxpayers and tax professionals when returns are filed about errors and missed credits or deductions, a plan that could have the unintended consequence of hindering taxpayer rights.
Capitol Roundup: Tax bill goes to Walz; gas tax increase and delivery fee to fund roads – Dana Ferguson, MPR News:
The Minnesota House voted 69-63 along party lines Saturday night to pass a $3 billion tax plan that includes rebates, credits for families, property tax relief and new tax increases for those who profit from some investment earnings and for some corporations.
The Senate passed the bill Sunday afternoon by a 34-33 party-line vote and sent the bill to Gov. Tim Walz.
Democrats said the bill would make Minnesota a leader in its support for children and families. Meanwhile, Republicans said the state should send more money back to taxpayers and skip any new tax hikes.
The Minnesota Supreme Court May 17 affirmed the tax court’s adjustments to the property tax market valuations of a hotel. The county assessed the property’s value. Taxpayer, owner of the hotel, appealed to the tax court and sought production of Hennepin County’s tenancy, income, and expense information. The tax court denied the discovery of the requested materials and adjusted the undistributed expenses, management fees, replacement reserve, and valuation of furniture, fixtures and equipment, resulting in increased market valuations of the property.
Chicago’s New Mayor Examines Novel Taxes in a Hunt for Revenue - Michael Bologna, Bloomberg ($):
Fears of Chicago turning into a left-leaning regime like Portland, at least from a tax perspective, flowed through the 'windy city' this week like Budweiser at Wrigley Field during a doubleheader in August.
Brandon Johnson, a liberal politician with an aggressive agenda, was sworn in as mayor Monday after a surprise victory over a more conventional Democrat last month. During the campaign Johnson promised to raise as much as $800 million in new revenue from wealthy individuals, corporations, and suburbanites to close the city’s growing structural deficit and fund an array of new social programs.
Iowa Governor Signs Law Regarding Pass-Through Business Entity Tax, Credit – Bloomberg ($). “The Iowa Governor May 11 signed a law creating a new voluntary pass-through entity (PTE) individual income tax and a refundable credit for partnerships and S corporations.”
Tax law changes drop Michigan revenue plans by $1.8B for next year – Craig Mauger, The Detroit News. “Michigan leaders dropped their tax revenue expectations for next year by $1.8 billion Friday, but they touted the state's economy and emphasized changes in projections were the result of tax relief measures authorized earlier this year.”
In GILTI Reg Dispute, DOJ Argues Silver has CIC Services All Wrong – Andrew Velarde, Tax Notes ($):
The government is arguing that a taxpayer appealing a dismissal of his suit against the global intangible low-taxed income regs over an alleged Regulatory Flexibility Act (RFA) violation is misconstruing Supreme Court Anti-Injunction Act precedent.
The Justice Department filed its appellee brief with the D.C. Circuit in Silver v. IRS on May 19. The brief asserts that Monte Silver’s argument that his suit was like CIC Services LLC v. IRS, 141 S. Ct. 1582 (2021), in that it seeks to enjoin reporting requirements is contradicted by his own complaint, which asks for a deferral of enforcement of the GILTI regs until Treasury complies with the RFA.
From the "Fingers Crossed" file:
Housing Tax Bill Backers Eye Way Ahead Amid Headwinds - Samantha Handler, Bloomberg ($):
The bipartisan group leading the Affordable Housing Credit Improvement Act, reintroduced earlier this month, is plotting ways to move the bill forward. That includes working to quell concerns over the lack of data sharing and transparency in the program as well as what vehicle can carry tax legislation this year.
The AHCIA expands the Low-Income Housing Tax Credit, increasing the amount of credits state agencies can award, which can help get housing developments off the ground. After the expanded LIHTC program expired in 2021, some projects stalled, left waiting for Congress to act.
Advocates Optimistic About Expansion of Low-Income Housing Credit – Lauren Loricchio, Tax Notes:
Advocates and stakeholders are encouraged by bipartisan support for addressing the issue of affordable housing and the prospects of a legislative solution that includes expansion of the low-income housing tax credit.
The fact that this is a bipartisan bill is noteworthy. Modifications to the Low-Income Housing Tax Credit (LIHTC) could replace expanding the Child Tax Credit (CTC) in talks about R&D expensing, expanding the 163(j) interest deduction, and allowing for 100% Bonus Depreciation.
Modifying the LIHTC was considered a Republican priority. That is a harder argument to make since the bill is backed by members from both parties. If lawmakers can agree to swop the CTC for LIHTC the odds improve for passing the business tax breaks this year.
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