Tax News & Views Orgs Send Signal Roundup

July 21, 2023

It Takes a Village: Orgs Signal Readiness to Support Direct File – Jonathan Curry, Tax Notes ($):

A newly launched coalition of more than 200 organizations says it is ready to help the IRS get its controversial direct-file program off the ground.

Dubbed the Coalition for Free and Fair Filing, the group published a letter to IRS Commissioner Daniel Werfel on July 20 expressing its support for the agency’s program. The letter was signed by a diverse list of 203 organizations. ‘We stand ready to do what we can to help make this project a success,’ the group wrote.

IRS moves forward with a new free-file tax return system, supporters and critics mobilize – Fatima Hussein, Associated Press via PBS:

An IRS plan to test drive a new electronic free-file tax return system next year has got supporters and critics of the idea mobilizing to sway the public and Congress over whether the government should set up a permanent program to help people file their taxes without needing to pay somebody else to figure out what they owe.

On one side, civil society groups this week launched a coalition to promote the move toward a government-run free-file program. On the other, tax preparation firms like Intuit — the parent company of TurboTax — and H&R Block have been pouring millions into trying to stop the idea cold.

There is a lot of opposition in Congress to the IRS completing tax returns. But the recent news about tax prep firms selling taxpayer info to big tech isn’t helping in stopping this from becoming law.


US Lawmakers Seek Watchdog Review of Puerto Rico Tax Breaks - Jim Wyss and David Voreacos, Bloomberg ($):

US House Democrats have asked the congressional watchdog to assess Puerto Rico tax breaks that have made the Caribbean island a haven for wealthy Americans and are now the subject of Internal Revenue Service criminal investigations.

At issue is Puerto Rico’s Act 60, which allows people who move to the US territory, and meet other conditions, to avoid federal income tax and pay no taxes at all on dividend, interest and capital gains income.


Biden Creates Debt-Limit Team to Find Ways of Ending Standoffs - Jordan Fabian, Bloomberg ($):

President Joe Biden has ordered the creation of a working group to study ways to circumvent future brinkmanship over the US debt limit, months after the nation was taken to the edge of default.

White House Counsel Stuart Delery and National Economic Council Director Lael Brainard will lead the group, composed of administration officials and without any Republican members. The effort will consider actions Congress can take as well as what the administration is calling ‘Constitution-based’ solutions to avert future debt-ceiling standoffs, according to a statement obtained by Bloomberg News.

‘[W]ithout any Republican members’?? I’m guessing tax increases will be their first choice to rein in the debt so why include Republicans who will likely oppose such moves and muck-up the works.  


CBO Offers Long-Term Budget Outlook Under Alternative Scenarios – Congressional Budget Office.

Tax Notes summary:

If taxes and spending remain the same, the deficit would nearly double to 181 percent of GDP by 2053, but that amount would differ under eight alternate scenarios, including six that vary economic outcomes and one that limits Social Security benefits, the Congressional Budget Office said in a July 20 report.

I have the utmost respect for the Congressional Budget Office, but this annual report makes me laugh every single year. What it basically says every year is that if the federal government took in more revenue or spent less, it would have more money. If the federal government takes in less revenue or spends more, it would have less money.


Energy Credit 'Chaining' Carveout May Be Needed For Gov'ts – Kat Lucero, Law360 Tax Authority ($):

Treasury has proposed a prohibition on the so-called chaining of clean energy tax credits — in which entities use the same energy project to capitalize on two new ways to monetize the incentives — but an exception may be needed to allow government entities to finance projects.

In June proposed rules,the U.S. Department of the Treasury and the Internal Revenue Service said they generally would not permit chaining. The process involves an entity buying credits from a clean energy developer for a discount and then electing a direct cash payment from the government equal to the full value of the credits.


Supply-Chain Snags Don’t Trigger Employee Retention Credit: IRS - Michael Rapoport, Bloomberg ($):

Employers who were hampered by supply-chain disruptions during Covid-19 but weren’t actually ordered to shut down aren’t eligible for a pandemic-era tax credit aimed at encouraging companies to keep employees on their payroll, the IRS said.

The statutory language that enacted the employee retention credit doesn’t cover supply-chain disruptions, the IRS Office of Chief Counsel said in a legal advice memorandum, dated June 30 and released Thursday. Such a disruption by itself 'does not rise to the level' of a full or partial suspension of a company’s operations that’s required to be eligible for the credit, the IRS said, unless a government order mandated the shutdown.

The memo is here.


Time Has Not Run Out On Collecting $931K Tax Bill, Feds Say – Jared Serre, Law360 Tax Authority ($):

The U.S. government asked a federal court Thursday to enter judgment against a California couple who owe almost $931,000 in unpaid income taxes and penalties, saying the statute of limitations has not expired.

James K. and Carol J. Ward owe unpaid income taxes from tax years 2007 through 2013 and 2015 through 2017, the government said in a complaint filed in the Eastern District of California.


Judgment for Unpaid Taxes, Erroneous Refunds, Penalties Affirmed – Tax Notes ($). “The Third Circuit, in an unpublished per curiam opinion, affirmed a district court decision that granted the government summary judgment in its suit to reduce an individual's unpaid taxes to judgment, to recover erroneous refunds she received, and to collect penalties assessed against her for filing frivolous returns.”


Court Warns DOJ of Sanctions for Foot-Dragging in FBAR Settlement – Andrew Velarde, Tax Notes ($):

A U.S. district court is fed up with the government over its pace in finalizing a settlement with a taxpayer in a foreign bank account reporting dispute, threatening sanctions for further delay.

The U.S. District Court for the Southern District of New York issued an order July 19 in United States v. Schik noting its understanding that the settlement in a willful FBAR case that originally sought $8.8 million in penalties required approval from a senior Justice Department official. However, that does not excuse the government for failing to submit the settlement — which was agreed on in August 2022 — for approval until the day the order was issued, the court said.


US House Members Want Biden to Negotiate Taiwan Tax Deal - Patricia Zengerle, US News and World Report:

Republican and Democratic members of the U.S. House of Representatives introduced legislation on Wednesday that would authorize President Joe Biden's administration to negotiate a tax agreement with Taiwan, seeking to foster investment as Washington works to shore up the island against a rising China.

The lawmakers, including House Foreign Affairs Committee Chairman Michael McCaul and top Democrat Gregory Meeks, said the agreement, similar to a treaty, would facilitate investment, protect against tax evasion and allow businesses in both the United States and Taiwan to avoid double taxation.


OECD cannot decide US international tax policy: Columbia law professor – Congressional Testimony, Transfer Pricing News:

International tax policy of the United States should be set by the United States, not by other countries, David Schizer, Dean Emeritus, Columbia Law School, has said.

Schizer made the statement as part of his testimony before the House Ways & Means Committee Subcommittee on Tax at a July 19 hearing on the OECD’s Pillar Two proposal to impose a global minimum tax on large multinationals.


From the “Houston, We Have a Spending Problem” file:

OECD Funding Intact As Senate Committee’s Spending Bill Advances - Chris Cioffi, Bloomberg ($):

Senate appropriators pushed back on their House counterparts, opting to fund international programs like the Organization for Economic Cooperation and Development in a spending bill advanced on Thursday.

The Senate bill proposes a $174 million increase over fiscal 2023, to $3.6 billion, to fund multiple international organizations including the OECD, the United Nations, and the World Trade Organization, according to a bill summary. A House version of the bill, passed in a party-line vote last week, made good on a GOP priority to zero out funding for international programs like the OECD. House lawmakers this week slammed the global body as a shadowy global organization seeking to take away US sovereignty.

House and Senate appropriators are expected to disagree on nearly every spending bill, which means these spending bills can’t pass Congress, which means federal agencies and other priorities don’t get funded, which means they shut down.

How does this affect tax policy? Glad you asked:

Capitol Hill Recap: Possible Shutdown Adds More Uncertainty To Passing Tax Legislation – Jay Heflin, Eide Bailly:

Whether there is a partial shutdown of the federal government or lawmakers pass a CR, the problem is the same. Lawmakers will be hyper-focused on getting spending bills through Congress that align with their priorities. And sadly, while lawmakers say they can chew gum and walk at the same time, they can’t.

Between moving a tax bill or funding the federal government, they will choose funding because its politically more important than moving a tax bill.


Good lordy! It’s National Junk Food Day! Bring on the junk!

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