Tax News & Views The Debate Begins Roundup

June 12, 2023

GOP Tax Wish List Revives Business Breaks, Nixes Energy Taxes - Samantha Handler and Chris Cioffi, Bloomberg ($):

House Republicans released a suite of bills Friday including business tax breaks and repeal of some pieces of the Democrats’ tax-and-climate bill, an opening bid for potential bipartisan legislation later this year.

Tax incentives that expired last year—a research and development tax break, full bonus depreciation, and the interest expense deductions under tax code Section 163(j)—would be revived under the package of legislation. The bills would also expand opportunity zones and repeal the Superfund Tax and an electric vehicle tax credit from the Inflation Reduction Act, as well as boost the individual standard deduction.

GOP Introduces Tax Package to Kick Off Tax Bill Negotiations – Cady Stanton, Tax Notes ($):

House Ways and Means Committee Republicans fired the starting pistol on tax talks this year with the release of a package that includes the retroactive extension of expired business tax provisions, a bonus standard deduction, and cuts to clean energy provisions.

A combination of business and individual tax cuts, the three bills released June 9 — the Tax Cuts for Working Families Act, the Small Business Jobs Act, and the Build It in America Act — serve as a jumping-off point for tax bargaining in Congress.

'Kick off...negotiations' suggests that the provisions in the bill could change as it makes its way through Congress. If changes happen, odds on enactment improve. 

Legislative language and summaries of the current legislation are included in the post below:

Sources: House Tax Writers Seek Action on Tax Bill Next Week – Jay Heflin, Eide Bailly:

It has been widely reported that the House Ways and Means Committee is expected to debate and vote on tax legislation [this] week... The bill is currently not expected to become law.

A "markup" of the bill is scheduled for June 13th.

House Ways and Means Chairman Jason Smith (R-Mo.) spoke to a group last week and said that if this bill does not pass Congress this year, the next opportunity to pass it will be 2025, which is the year that all individual tax cuts in the 2017 tax reform bill expire.

When the House will vote on this bill is unknown:

Playbook: The House GOP rebellion enters a second week – Rachael Bade, Eugene Daniels and Ryan Lizza, Politico:

McCarthy cannot move any significant legislation across the House floor until the rebel faction is brought back into the fold.

And as of this morning, there’s no sign that has happened. The hard-liners are still grumbling and are considering tanking more bills teed up for floor action this week. Said one senior GOP aide to Playbook last night: ‘I’m not going into this week assuming that any of the rules will pass.’

Explainer: For a bill to get a vote on the House floor, it must first be approved by the House Rules Committee. That Rule must then be approved by the House before a vote on the legislation can occur. A group of Republicans have recently voted against Rules in protest for how the debt ceiling negotiations turned out. Without a vote on the Rule, no vote can happen on the bill. If this situation continues, it could affect whether the tax bill gets a floor vote in the House.

The bills’ price tag could be a problem for lawmakers who recently supported to increase the amount of debt that the federal government can carry:

The Tax Angle: Dems Prepare To Blast New GOP Tax Plan – Stephen Cooper, Law360 Tax Authority ($):

Just over a week after House Republicans held their collective noses and voted to raise the federal debt ceiling and prevent the federal government's first-ever default on its debt, GOP lawmakers on the House Ways and Means Committee on Friday unveiled tax legislation estimated to increase federal red ink by $21 billion over the next decade.

The price could get bigger:

W&M Tax Bill Would Cost Over $1 Trillion if Made Permanent – Committee for a Responsible Federal Budget:

The House Ways and Means Committee will soon consider the American Families and Jobs Act, legislation to temporarily extend various business tax provisions and expand the standard deduction while repealing certain energy tax credits from the Inflation Reduction Act and enacting other reforms…

We estimate that the plan would cost over $1.1 trillion($950 billion without interest) through 2033 if these temporary tax cuts and extensions were made permanent.


‘Roth’ SECURE 2.0 Provisions Threaten Retirement Plan Catch-Ups - Austin Ramsey, Bloomberg ($):

This ‘Rothification’ of SECURE 2.0 has introduced a host of unanswered compliance questions and left the IRS scrambling to clear things up before some new provisions take effect next year. Chief among those concerns is an employer mandate that catch-up contributions that high-income workers make to boost their account balances near retirement be made solely on a Roth basis.


Clean Energy Credit Transfer Guidance Coming Soon, Treasury Says – Chandra Wallace, Tax Notes ($). “Guidance on the transferability of clean energy credits is on track to be issued in the coming weeks, according to a Treasury attorney.”

‘It has already been announced that the guidance [under section 6418] is coming out this spring,’ Sarah Haradon of the Treasury Office of Tax Legislative Counsel said June 9 at a conference sponsored by the Texas Federal Tax Institute in San Antonio. ‘That leaves us — you’ll see on the calendar — a couple of weeks, so watch your inboxes for that.’

Biden, Sunak Plan Critical Minerals Dialogue For EV Credits – Matthew Guerry, Law360 Tax Authority ($):

President Joe Biden and British Prime Minister Rishi Sunak said their governments would negotiate a deal allowing critical minerals sourced from the U.K. to count toward new electric vehicle tax subsidies in the U.S.


IRS Looks to Extend Electronic Signature Policies Again – Erin Slowey, Bloomberg ($):

The IRS will extend email and electronic signature policies beyond the policy expiration date, an agency official said Friday.

In 2020, the IRS eased its email and electronic signature policies, temporarily allowing electronic signatures on some tax return forms. The agency also temporarily accepts e-signatures on documents sent via email during audits or collections.

‘We are working to extend both temporary policies beyond October 2023 while we develop long term solutions for these capabilities,’ said Robert Malone, the director of Exempt Organizations and Government Entities at the IRS.


IRS ‘Considering Options’ for Conservation Easement Settlements - Aysha Bagchi, Bloomberg ($):

  • The IRS has argued that many claimed deductions under tax code Section 170(h) for conservation easements donations—which involve giving away property development rights—are highly inflated
  • [IRS Deputy Chief Counsel Drita] Tonuzi criticized the easement settlement initiative her office created in 2020 for being ‘incredibly cumbersome,’ adding that some settlements took ‘well over a year.’ ‘So obviously, we always look at opportunities to fix things,’ she added.
  • A number of taxpayers are prepared to pay the tax liabilities asserted by the IRS, but not the asserted penalties, Tonuzi said.


Book Tax Not Meant for Nonprofit Investment Income, Official Says - Lauren Vella, Bloomberg ($):

The corporate alternative minimum tax was not intended to include tax-exempt organizations investment income, a Joint Committee on Taxation staffer said Friday.

JCT Legislation Counsel Gordon Clay, speaking at the TEGE Exempt Organizations Council conference in Washington, said though there are questions about the inclusion of investment income in a tax-exempt entity’s adjusted financial statement income, he doesn’t think that was the intent of the law.

‘That’ll be sorted out, I’m sure,’ Clay said. ‘But, you know, in general, I think it’s very unlikely that there are any exempt organizations with more than a billion dollars worth of UBIT,’ referring to unrelated business income tax.


IRS Warns Many College Athlete NIL Funders Won’t Be Tax-Exempt – Erin Slowey, Bloomberg ($):

The NCAA adopted an interim name, image, and likeness policy, or NIL, in 2021 allowing for student-athletes and recruits to benefit from use of their NIL without impacting their eligibility…

An organization developing paid NIL opportunities for college student-athletes will in many instances serve the private interest of the student-athlete in a way that is more than incidental to any exempt purpose furthered by the activity, IRS Deputy Associate Chief Counsel Lynne Camillo said.


Tax Court Case Numbers Normalizing After Pandemic Drop and Spike - Aysha Bagchi, Bloomberg ($):

Petitions filed at the US Tax Court are approaching ‘more normal numbers’ after declining and then skyrocketing during the pandemic, according to the court’s chief judge.

As of June 7, the court had about 25,000 active cases, Chief Judge Kathleen Kerrigan said Friday at the NYU Tax Controversy Forum in New York.


Remote Sellers Left Vexed On Meaning Of Undue Burden – Paul Williams, Law360 Tax Authority ($):

Businesses...have expressed frustration with the varying approaches that states have taken, including a patchwork of rules governing which sales count toward a state's economic nexus dollar threshold, and the need to understand thousands of local tax rates and bases. Part of the problem stems from the court's declining to provide one uniform standard that states are required to follow, said Richard Jones, the leader of Sullivan & Worcester LLP's tax group.

‘The Wayfair decision, as monumental as it was, only addressed one state-specific rule,’ Jones said. ‘We do not really get a sense of the real constitutional parameters beyond that one example in South Dakota. In that sense, even though we are five years on, the dust is far from settled.’


NYC Cannabis Businesses Set to Receive Local Tax Deductions - Angélica Serrano-Román, Bloomberg ($):

Marijuana businesses in New York City would be allowed to claim local tax deductions under a bill state lawmakers approved this week.

The legislation (S07508/A07692) would let the businesses deduct ordinary and necessary business expenses from their city taxes, although they can’t deduct them from federal taxes under Section 280E of the federal tax code. The state Senate passed the bill on June 5, and the House approved it Thursday.

The measure next heads to Gov. Kathy Hochul (D), who signed a budget bill last year that allowed state-level cannabis business tax deductions. New York City law remained unaffected by the change.


New Jersey Lawmakers Launch Action on Corporate Tax Changes - Michael Bologna, Bloomberg ($):

New Jersey is headed toward a significant overhaul of its corporate business tax under a revenue-neutral package negotiated between lawmakers, business interests, and the state Treasury Department.

The bill, SB 3737, is scheduled for votes Monday in the Senate Budget and Appropriations Committee. It includes language trimming the state’s authority to tax the earnings of foreign subsidiaries of multinational corporations, causing a revenue loss. But the measure also would raise revenue, by changing the method of apportioning taxable income to the state and establishing a new standard for determining when out-of-state businesses have economic presence, or nexus, with the state.


Mass. Senate unveils long-awaited $590 million tax relief proposal - Steve LeBlanc, The Associated Press:

The Massachusetts Senate unveiled a long-awaited $590 million tax relief proposal Thursday as the Democratic-led Senate and House, and Democratic Gov. Maura Healey, work to come up with a final tax-cutting plan.

The Senate proposal would increase the rental deduction cap from $3,000 to $4,000, increase the child and dependent tax credit from $180 to $310 per child or dependent, bump up the earned income tax credit from 30% to 40% of the federal credit and double the maximum senior circuit breaker credit from $1,200 to $2,400.


Eide Bailly's most recent coverage of state tax news is here


From the “Same as It Ever Was” file:

Volume of Tax Fraud Crimes on Pace With Last Year, IRS Says - Michael Rapoport, Bloomberg ($):

The amount of criminal tax fraud and other financial crimes identified by the IRS this year is on track to be similar to the $32 billion identified last year, an IRS official said Friday.

The types of crimes identified by the IRS so far in fiscal 2023 are also similar to those found in fiscal 2022, said James Lee, chief of the IRS’s criminal investigation division. They include employment tax fraud, international cases, and cyber and cryptocurrency-related cases, for example.


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