Tax News & Views Enter: Tax Bill Roundup

June 9, 2023

Ways and Means GOP preps tax package for vote next week – Laura Weiss, Roll Call:

The House Ways and Means Committee is preparing to consider a package of tax breaks for individuals and businesses next week, laying out GOP priorities ahead of potential bipartisan tax talks later this year.

Everyone – and I mean everyone – in Washington says this bill will not pass the Senate and it will not become law. Many of these same people also said that the $80 billion funding for the IRS was safe – until it wasn’t. (Quick catch up: The recently enacted debt ceiling bill cuts IRS funding.)

Bottom line for the tax bill: Watch this space.

No matter what the bill's ultimate fate is, it is expected to pass the House Ways and Means Committee next week:

GOP Tax Bill Edges Toward Release - Kim Dixon, Bloomberg ($):

Chairman Jason Smith (R-Mo.) briefed Republican members Thursday morning, ahead of the release of the package. The committee will likely consider the legislation next week, Rep. Ron Estes (R-Kan.) told reporters after the briefing.

‘I think we’ll pass the economic package next week, out of committee,’ Estes said.

The Committee is expected to pass the bill on Wednesday. At that point it heads to the House floor, where passage is expected (possibly in early July). From there, it goes to the Senate where it’s fate is unknown. A final Senate vote on the bill could take some time. Some expect the vote to happen at year end.

House Tax Bill to Focus on TCJA Extensions – Cady Stanton and Doug Sword, Tax Notes ($):

House Ways and Means Committee Republicans expect that the year’s biggest tax package will be marked up the week of June 12 and include three major expired business provisions from the 2017 Tax Cuts and Jobs Act.

The “three major expired business provisions” are: 1. Allowing for R&D costs to be expensed; 2. Expanding the Section 163(j) interest deduction (from EBIT to EBITDA); 3. Returning Bonus Depreciation to 100%.

[Rep.] Malliotakis and others are also pushing to get a new standard deduction included in the economic package. The bill will likely see a markup by June 16 — the birthday of committee Chair Jason Smith, R-Mo. — according to Malliotakis.

Upping the income level for 1099-K reporting requirements, extending 199A, and keeping estate tax rates low might also be in the bill.

Senior taxwriter Rep. Ron Estes, R-Kan., said the bill could also include Republican members’ legislation retaliating against the undertaxed profits rule section of OECD pillar 2 negotiations.

Repealing or modifying tax incentives in the Inflation Reduction Act could also be included. The odds are slim that a SALT cap fix is included. 


Normally, I ignore bill introductions, but this one caught my eye:

Mine Methane Capture Would Qualify for Tax Credit in New Bill - Samantha Handler, Bloomberg ($):

Reps. Carol Miller (R-W.Va.) and Terri Sewell (D-Ala.) will introduce a new bill Friday that would allow methane capture to qualify for the 45Q tax credit, which currently applies to carbon capture. Expanding the tax incentive to methane would help reduce methane emissions released from abandoned mines…

The bill is here (requires a Bloomberg sub).


IRS Funding Clawback Likely to Come Out of Enforcement Bucket – Jonathan Curry, Tax Notes ($). “The IRS’s enforcement budget is likely to take the biggest hit under the debt limit deal’s agreement to snatch $20 billion back from the agency, according to a top official. Those cuts are set to kick in over the next two years, but fortunately, their impact won’t be felt for a while, said Douglas O’Donnell, IRS deputy commissioner for services and enforcement.”

‘We are working now to figure out what this $20 billion cut means. We don’t know exactly what it’s going to look like,’ O’Donnell said June 8 at a conference sponsored by the New York University School of Professional Studies. ‘But we do think our original plan for the first five years is going to hold, and it’s going to be in the further-out years that we have more of a challenge to deal with the reduction.’

The reason O’Donnell doesn’t know what to make of the $20 billion cut in funding is because it wasn’t really cut. The Debt Ceiling bill cut roughly $1.4 billion in IRS funding. A side agreement was also stuck on cutting the funding by another $20 billion in 2024 and 2025. But that side agreement is not in the bill. Appropriators are supposed to make good on that agreement. However, the current Congress cannot dictate to a future Congress what spending cuts to make. The year 2025 will be in a future Congress, which means this side agreement has no say on funding levels for that year.


IRS Can Still Modernize After Debt-Limit Deal, Official Says - Naomi Jagoda, Bloomberg ($):

The IRS expects its plans for the first five years of spending its tax-and-climate law funds will stay the same, even after some of the funds were clawed back in the recent debt-limit deal, a top agency official said Thursday.

‘We still have the opportunity to truly transform the agency,’ Deputy Commissioner for Services and Enforcement Doug O’Donnell said at a conference hosted by New York University.


Employee Retention Credit Claimants May See Help From IRS – Nathan Richman, Tax Notes ($). “Multiple IRS functions are exploring options for helping taxpayers that may have made faulty employee retention credit claims, according to Lia Colbert, commissioner of the IRS Small Business/Self-Employed Division.”

‘There’s not going to be a simple audit strategy here. . . . It’s going to be a veritable array, a suite of options and paths for taxpayers,’ Colbert said June 8 at a conference sponsored by the New York University School of Professional Studies.


State Tax Reform and Relief Trend Continues in 2023 – Katherine Loughead, Tax Foundation:

As legislative sessions wind down in many states, it is evident that 2023 marks a third consecutive year of substantial state tax reform and relief. Since 2021, 24 states have cut individual income tax rates (including 22 reductions to top marginal rates), 13 states have cut corporate income tax rates, two have cut sales tax rates, and many more have made structural improvements like repealing capital stock taxes, adopting permanent full expensing, raising nonresident filing and withholding thresholds, improving treatment of business tangible property, eliminating throwback and throwout rules, and more.

2023 state tax reform and relief trend continues


California Tax Lawyers Look for Guidance on Handful of Issues – Tax Notes ($):

Members of the California Lawyers Association Taxation Section have asked the IRS to provide guidance on a range of topics, including estate and gift taxes, international tax, and tax-exempt organizations, while also recommending the establishment of a crypto voluntary disclosure program for digital assets.

IRS Says Californians Have Disaster Extension for Filing – Tax Notes($):

Taxpayers in California have an automatic extension on filing and paying taxes until later in the year because of state-declared disasters and the IRS apologizes for confusion caused by notices sent to taxpayers that they have only 21 days, the agency said in a June 7 release.

California Offers Tax Deal for Micro-Captive, Easement Cases - Laura Mahoney, Bloomberg ($):

California taxpayers participating in syndicated conservation easements or micro-captive insurance companies have a four-month window to settle with the Franchise Tax Board and avoid some or all state penalties. The Internal Revenue Service considers both transactions possible illegal tax shelters.


Louisiana Set to Phase Out Franchise Tax, Restore Gun Tax Holiday - Michael Bologna, Bloomberg ($):

A flurry of tax bills are headed to the Louisiana Gov. John Bel Edwards (D) for signature, including measures that phase out the corporate franchise tax, trim tax benefits available to expanding businesses, and renew a unique sales tax holiday on guns and ammunition.


Leaving New York for Miami Can Save Nearly $200,000 a Year – Natasha Solo-Lyons, Bloomberg ($):

For people who make $650,000, moving to Miami from New York can save nearly $200,000 a year thanks to lower taxes and a cheaper cost of living.

That’s according to a new study from financial information provider SmartAsset, which looked at how much people with six-figure salaries in New York, San Francisco and Chicago can save on taxes and other costs if they decamp to the South Florida city.


Ohio Bill Would Credit Pass-Through Tax Paid To Other States – Paul Williams, Law360 Tax Authority ($):

Ohio owners of pass-through entities could be credited for taxes those entities pay in other states as a workaround to the federal cap on state and local tax deductions under a bill introduced in the state House of Representatives.

H.B. 200, introduced Tuesday, would specify that owners or partners in pass-through entities with a multistate presence could receive a credit against their Ohio personal income tax liabilities for other entity-level taxes paid in other states. The legislation is a follow-up to a law Ohio enacted last year when the state joined a host of others in allowing pass-through entities to elect to be taxed at the entity level.


Ways and Means Republicans Express Concern About German Tax – Tax Notes ($):

An extraterritorial tax imposed on American companies by Germany is “a clear example of a unilateral tax policy that burdens U.S. companies” and hinders competitiveness, eight Republican members of the House Ways and Means Committee said in a June 8 letter to Treasury Secretary Janet Yellen.

Republicans on the House Ways and Means Committee were supposed to travel to Europe during the Memorial Day recess period to discuss their tax concerns with their foreign counterparts. That didn’t happen because of the debt ceiling debate.

These members are expected to make this trip later this year. The focus of the trip is to express their frustrations about the undertaxed profits rule in the OECD’s global tax deal. Republicans have introduced legislation to counter it. 

From the May 24th Capitol Hill Recap:

Republicans on the House Ways and Means Committee explain their bill:

The bill creates a reciprocal tax applicable to any foreign country that imposes unfair taxes on U.S. businesses and workers under the Organization for Economic Co-operation and Development (OECD)’s global tax deal.

The bill is here


US Seeks to Extend Digital-Tax Freeze as Global Deal Stalls - Christopher Condon and Brian Platt, Bloomberg ($):

The Biden administration is proposing to allies that they extend a coordinated freeze on new digital services taxes beyond its planned expiration at the end of this year, in a bid to avert a trade war among friends and keep alive a foundering global tax deal.


From the “Olly Olly Oxen Free” file:

$1.5 Billion in Tax Refunds Waiting to Be Claimed, IRS Says – Tax Notes ($):

The IRS has advised (IR-2023-112) taxpayers who failed to file a 2019 income tax return that they could get money back from the government if they file by the July 17 deadline, saying nearly $1.5 billion in refunds remain unclaimed.

Taxpayers usually have three years to file a return and claim a tax refund, but the deadline that applies to unfiled 2019 returns was postponed to July 17, 2023, because of the COVID-19 pandemic. The IRS estimates that 1.5 million people didn’t file and that the average median refund was $893. That includes many low- and moderate-income workers who may be eligible for the earned income tax credit, which was worth as much as $6,557.


Happy National Movie Night! It’s Friday! Covid is in the rearview mirror! Date night at the movies!

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