Tax News & Views Glee For R&D Roundup

July 31, 2023

Infrastructure and green energy spending are powering the economy – Abha Bhattarai, Washington Post:

A surge in government funding and related private investment is beginning to make its way to businesses and communities across the country, building electric vehicles, new bridges, airport upgrades and a host of other infrastructure and green energy projects that are juicing the economy — just when it needs it most.

The federal government has announced some $299 billion and has spurred another $503 billion in business investment that is providing a surprisingly quick and robust boost to the U.S. economy.

White House Executive Order on this issue:

Executive Order on Federal Research and Development in Support of Domestic Manufacturing and United States Jobs

     My Administration has prioritized support for our unique innovation ecosystem by reinvesting across sectors in research and development (R&D), demonstrations, education, and the necessary infrastructure to accelerate the transition of discoveries quickly from the lab to the marketplace.  

     This investment is designed to produce cutting-edge technologies that support the competitiveness, domestic manufacturing capacity, and well-being of the United States economy; United States workers; our communities; and our national security.  Ensuring the commercialization of federally funded inventions by United States manufacturers — while maintaining intellectual property rights — will build on the successful legacy of the United States in spurring economic growth and enhancing United States competitiveness through R&D.  It will also further our joint R&D work with partners and allies to strengthen the resilience of global critical supply chains and secure America’s leadership in delivering a net-zero emissions economy by no later than 2050.  

President Joe Biden:

[H]ere’s how it works: Federal agencies research and fund development to encourage innovation.  This executive order dictates that those agencies have to prioritize domestic manufacturing when it comes time to bring those inventions to market.  They can’t go abroad.  They have to look here -- who can do it here.  That’s the law, and we’re just beginning to enforce it.

Allowing companies to expense R&D costs would also help the economy by allowing certain workers to keep their jobs.

The National Association of Manufacturers:

Requiring the amortization of research expenses will reduce R&D spending and lead to a loss of more than 20,000 R&D jobs in the first five years with the number of lost jobs rising to nearly 60,000 over the following five years. Moreover, when accounting for the spillover effect from R&D spending, nearly three times as many jobs will be affected.

Currently, a majority of Democrats, including President Biden, support R&D expensing if the Child Tax Credit is also expanded. Right now, there isn’t enough support in Congress to expand the credit, which means R&D expensing hasn't happened. Fingers are crossed that R&D expensing will be enacted before year-end.


SECURE 2.0’s Disclosure Tug-of-War Strains Employers, Regulators - Austin Ramsey, Bloomberg ($). “Workplace retirement plans are trying to implement a hodgepodge of 401(k) disclosure provisions Congress enacted late last year that’s left regulators juggling simplifying jargon and not overburdening employers.”


Investment Funds Ask Washington High Court to Restore Tax Break - Perry Cooper, Bloomberg ($):

A Washington appeals court improperly found 16 investment funds can’t take a business and occupation tax deduction for “amounts derived from investments” based on out-of-date case law, the funds told the state high court.

The appeals court based its April ruling on cases decided before a 2002 change to the applicability of the deduction that was meant to create bright line rules for businesses, they told the Washington Supreme Court in their petition for review filed Thursday.


IRS Didn’t Follow Procedures When It Seized Funds, Couple Alleges – Tax Notes ($). "A couple filed a complaint in the Court of Federal Claims against the government, asserting that they are entitled to a refund of nearly $96,000 in penalties from alleged foreign trust reporting failures because the IRS didn't follow the procedural prerequisites to issue a notice and demand for the penalty before attempting to collect it."


Help Me Help You: IRS Seeks Feedback on Dispute Resolution – Jonathan Curry, Tax Notes ($):

The IRS wants to hear how it can attract taxpayers to its alternative dispute resolution (ADR) programs, but tax professionals who interact with those programs say that what’s needed is an infusion of money and a change in the organizational culture.

The IRS has additional funding through the Inflation Reduction Act (P.L. 117-169), and the strategic plan for implementing initiatives with those funds describes an effort by the IRS to find better, more efficient ways to reach settlements with taxpayers. Those extra resources could help remove some of the barriers within the ADR programs — like unacceptably long delays — that keep taxpayers away…

Eide Bailly coverage is here (scroll down). 


End of Surprise Visits Doesn’t Mean No In-Person IRS Collection – Nathan Richman, Tax Notes ($):

IRS revenue officers will conduct initial tax collection visits by appointment now that unannounced visits have been halted, according to Darren Guillot, deputy commissioner of collections in the Small Business/Self-Employed Division.

In the wake of a July 24 announcement that the agency will no longer make surprise visits to taxpayers’ homes or businesses, revenue officers will still conduct field visits, but they will be arranged in advance, Guillot said July 28 at a conference sponsored by the University of San Diego School of Law and RJS Law.

Eide Bailly coverage of this issue is here and here (scroll down). 


Hollywood Strikes Halt California Film Tax Credit Milestones - Laura Mahoney, Bloomberg ($):

More than one-third of the 133 projects participating in California’s film and television tax credit program have permission to miss production deadlines due to striking actors and writers without putting their tax credits at risk.

The productions have invoked 'force majeure' provisions of the tax credit program’s rules, allowing timelines to freeze until production can resume, California Film Commission Deputy Director Nancy Rae Stone said during a commission meeting Friday. The ongoing strikes by members of the Writers Guild of America and the Screen Actors Guild—American Federation of Television and Radio Artists qualify as a force majeure, she said.


Where Tax Policies Go Wrong: SALT In Review – David Brunori, Law360 Tax Authority ($). “The single worst state and local tax is the gross receipts tax. It is a job-killing, hidden, cravenly way to raise money. Politicians like it because it is not salient. They act as if the tax will be made by big companies when they know it will actually be paid by ordinary people.”


Disney and NBC Watch New York’s AI Tax Break Ban Proposal - Zach Williams, Bloomberg ($):

Walt Disney Co. and NBCUniversal are paying lobbyists to watch over legislation that would bar them from using a lucrative state tax break if artificial intelligence is used to displace workers in their film and TV productions.

Albany-based lobbyists for both companies began monitoring the bill (S.B. 7422) soon after it was introduced in each chamber in June when the 2023 legislative session wound down, according to disclosures filed with the state Commission on Ethics and Lobbying in Government.


Global Tax Rules to Unleash Billions in Clean Energy Investment - Erin Slowey, Bloomberg ($):

Recent global minimum tax guidance from the OECD will help usher in billions of dollars of financing for clean energy projects in the US.

The guidance makes it less likely companies will be hit by other countries’ minimum taxes when they purchase the clean energy credits to lower their US tax rate.

This article is about Pillar Two not affecting the transferability of energy tax credits.

The guidance should strengthen investment in renewable energy, said Rebecca Kysar, a professor at Fordham Law School and former counselor to the assistant secretary for tax policy at the Treasury Department. Companies interested in buying credits ‘in most cases, no longer fear those credits are going to be clawed back’ by Pillar Two, she said.


From the “Hitching a Ride, Not” file:

BGOV Bill Summary: House-Passed H.R. 3935, FAA Reauthorization - Karl Evers-Hillstrom, Dan Lee, Cooper Lohr, Lauren Turenchalk, and Brittney Washington, Bloomberg ($):

The Federal Aviation Administration would be authorized to receive more than $100 billion in appropriations over the next five years, through fiscal 2028, under the House-passed version of H.R. 3935.

The ticket and fuel taxes that support the Airport and Airway Trust Fund, and the authority to spend money from the trust fund, would also be extended through fiscal 2028.

The mere fact that taxes were included in this bill means that lawmakers could have added more taxes to the legislation, like R&D expensing, expanding the 163(j) interest deduction and 100% Bonus Depreciation. Why didn’t they? Because without expanding the Child Tax Credit the legislation would likely not have passed the Senate, and not become law. 

Lawmakers are currently out of session until September. When they return, passing tax legislation will take a back seat to funding the federal government beyond September 30th.

Congress Faces Crunchtime in Fight Over Spending Cuts – Siobhan Hughes, Lindsay Wise and David Harrison, Wall Street Journal ($):

A partial government shutdown would begin Oct. 1 if Congress fails to pass the funding bills.

‘September is going to be very busy,’ House Majority Leader Steve Scalise (R., La.) told reporters recently. ‘We will be working through August to get as many agreements as we can, so that when we come back, everybody is going to be buckling up and working hard.’


Salute! It’s World Ranger Day! If you’re in a national park, give a park ranger a ‘thank you.’

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