Publication note: Eide Bailly offices are closed September 4th in honor of Labor Day. We will be back on schedule on Tuesday, September 5th. Enjoy the holiday!
GOP Taxwriters to Air Grievances to OECD Leaders in Europe – Cady Stanton, Tax Notes ($):
Republicans on the House Ways and Means Committee are bringing their complaints to the doorstep of the European leaders behind the OECD’s global tax deal, hoping to make clear to them that the United States can’t sign on to the agreement without Congress’s approval.
The delegation will make stops in France and Germany over the Labor Day weekend to meet with government finance officials and OECD representatives, according to committee staff who briefed reporters August 30. The lawmakers intend to ensure through face-to-face discussions that the officials understand congressional Republicans’ opposition to the tax deal.
GOP tax-writers are hitting the road to inform the OECD that they oppose enacting Pillar Two. Seems like a phone call or letter could have done the trick, and would have been cheaper.
Risks to the U.S. Tax Base from Pillar Two – Alan Cole and Cody Kallen, Tax Foundation:
Key Findings
- Pillar Two, an international tax agreement, is intended to incentivize countries to set corporate income tax rates at 15 percent or higher. This agreement threatens the U.S. tax base in two ways: potential lost revenue and limitations on Congress’s ability to set its own tax policy.
- We analyze the revenue effects of other countries adopting Pillar Two-compliant minimum taxes, though these estimates are subject to considerable uncertainty. U.S. corporations will be able to take larger foreign tax credits, reducing U.S. corporate tax revenues by $64.3 billion over 10 years, but they will also likely report more of their income in the U.S., raising U.S. revenues by $99.3 billion. On net, we estimate that foreign Pillar Two adoption increases U.S. corporate tax revenues by $34.9 billion over 10 years.
Taiwan Tax Agreement Still Subject of Senate Committee Turf War – Cady Stanton, Tax Notes ($):
Two Senate committees remain at odds over which will take the lead on a treatylike tax agreement with Taiwan, in a dispute with roots in committee jurisdictions and disagreement over the best method for addressing the issue.
Because the United States doesn’t have official diplomatic relations with Taiwan, it cannot execute a formal tax treaty, leading to a need for a workaround to eliminate double taxation and limit tax evasion and avoidance. But the Senate Foreign Relations and Finance committees have each drafted different versions of legislation on the topic, and while the bills have the same goals, the panels are at an impasse over which will move forward.
When lawmakers return to Congress later this month their focus will be on extending federal government funding beyond September 30th. Deciding the fate of taxes is further down the to-do list.
The funding fight could get ugly and be time consuming:
SCHUMER DRIVES WEDGE BETWEEN HOUSE, SENATE GOP – Rachael Bade, Eugen Daniels and Ryan Lizza, Politico Playbook:
In a ‘Dear Colleague’ letter that will hit Senate inboxes this morning, Majority Leader CHUCK SCHUMER signaled that he will lay blame for any government shutdown at the feet of House Republicans if they fail to pass spending legislation by the end of the month.
In the letter, which was obtained by Playbook, Schumer seeks to drive a wedge between House and Senate Republicans — offering praise for both Senate Appropriations Chairwoman PATTY MURRAY (D-Wash.) and ranking Republican SUSAN COLLINS (R-Maine), a lawmaker with whom Schumer is often at loggerheads.
U.S. health officials want to loosen marijuana restrictions. Here’s what it means – Stefan Sykes, CNBC:
This week, the Department of Health and Human Services asked the Drug Enforcement Agency to consider easing restrictions on marijuana upon a review of its classification under the Controlled Substances Act.
Important to note:
If marijuana moves down to a Schedule III substance, this will effectively ease a number of restrictions holding the sector back.
The biggest boon will come in the form of new tax opportunities. Currently, enterprises dealing in Schedule I substances aren’t allowed to write expenses off their federal tax returns under an Internal Revenue Service code known as 280E.
Account Upgrades Could Save Tax Pros From IRS Headaches – David van den Berg, Law360 Tax Authority ($):
Planned IRS enhancements to tax professionals' online accounts, including letting practitioners make payments for clients and access client information such as payment histories in real time, could ease tax pros' lives in ways like reducing how much time they spend on the phone with the agency.
The Internal Revenue Service said in itsstrategic plan to implement the funding increase provided by last year's Inflation Reduction Act that it will beef up its online tax pro accounts to allow tax representatives to use them to access client information and act on clients' behalf. The IRS said in mid-August that it had already put in place one of the projects in the plan to allow tax pros to manage their client authorizations using their tax pro accounts. Planned account improvements still to come include allowing practitioners to view client balances and notices and to make payments and set up payment plans for clients, according to the strategic plan.
IRS Is at Risk Without Vulnerability Fixes, Watchdog Says – Erin Slowey, Bloomberg ($):
The IRS should remediate all known exploited vulnerabilities in a timely manner, the Treasury Inspector General for Tax Administration said in a new report.
Known exploited vulnerabilities, or KEVs, are active cybersecurity threats set out by the Department of Homeland Security that should be the IRS’s top priority, the report said.
The report is here.
IRS Looks to Fight Information Return Penalty Approval Case – Andrew Velarde, Tax Notes ($):
Although practitioners may have expected the IRS to settle a dispute over what constitutes written supervisory approval for a foreign trust reporting penalty, the agency appears to be gearing up for a Tax Court fight.
The IRS filed its answer in the Tax Court on August 29 in Lu v. Commissioner. In it, the IRS is pushing back against Ching Tzu Lu’s July 5 petition that asserts that it failed to meet the requirements of section 6751(b) by providing only a notation of penalty approval from the IRS reporting system, the Accounts Management System (AMS), as proof of supervisory approval.
IRS Struggles to Balance Cybersecurity With Taxpayer Experience – Jonathan Curry, Tax Notes ($). “A new Treasury Inspector General for Tax Administration report offers a critical take on the IRS’s handling of active cybersecurity threats, but the agency countered that the required responses would be disruptive for taxpayers.”
‘The IRS is not following established guidance to isolate or remove all vulnerable assets from its network,’ putting it at risk of malicious attacks, TIGTA charged in its report, released August 31. The Department of Homeland Security issued a directive in 2021 for federal agencies to promptly address known exploited vulnerabilities (KEVs) by isolating the threats from the rest of their network until the issue is patched.
The report is here.
State Farm Can’t ‘Pick Off’ Class Suit Over Car Taxes, Fees - Bernie Pazanowski, Bloomberg ($):
State Farm Mutual Automobile Insurance Co. can’t avoid a class action over its failure to pay sales taxes and title transfer fees by paying off the named plaintiff’s claim, the Eleventh Circuit said.
State Farm said that the payment to Anthony Sos before the class was certified mooted the suit, but the opinion by Judge Andrew L. Brasher said that the class action was saved by the relation-back doctrine. The doctrine recognizes that a plaintiff whose claims are satisfied before class certification can continue pursuing the class action in certain circumstances because the claims relate back to the filing of the complaint, he said.
Va. Gov. Calls For Special Session To Provide Tax Relief – Zak Kostro, Law360 Tax Authority ($). “Virginia lawmakers are to convene for a special session Sept. 6 after Republican Gov. Glenn Youngkin asked them to return to Richmond to pass amendments to the state budget and called for ‘much-needed tax relief’ for residents and businesses.”
Further down the article:
‘To make Virginia more affordable for families and local businesses, we must deliver on our shared goals for more jobs, safer and healthier communities, greater workforce and educational opportunities and much-needed tax relief for Virginians,’ Youngkin said in a statement.
Oregon Set for Largest-Ever ‘Kicker’ Refunds of Over $5 Billion - Angélica Serrano-Román, Bloomberg ($):
Oregon is poised to provide $5.6 billion in tax refunds next year—marking the biggest amount in the state’s history—after experiencing record revenue growth.
The state’s Office of Economic Analysis said in a report that an examination of the underlying revenue collections from 2021 to 2023 revealed that the ‘kicker’ amount surged to an all-time high of $5.6 billion. The figure is nearly three times the $1.89 billion reached in the 2019-21 period.
From the “When Moore is Less” file:
Moore Outcome Could Mean a Whole Lot Less Revenue – Jonathan Curry, Tax Notes ($):
Observers have long warned that an expansive Supreme Court decision in Moore v. United States could have catastrophic repercussions for the tax code. Now, the Tax Foundation has put a price tag on it.
Nearly $5.7 trillion in federal revenue over the next decade is at stake under the most extreme scenario envisioned by the Tax Foundation in a report released August 30. That would entail the Supreme Court striking down all business income taxes on undistributed earnings for both corporate and passthrough entities like partnerships.
For context, that would wipe out nearly a tenth of all federal tax revenue — estimated to be about $60 trillion — over that time frame, the Tax Foundation’s Alan Cole told Tax Notes.
The report is here.
Happy National College Colors Day! I graduated from Butler University. Its colors are blue and white, which I happen to wear often. Coincidence?
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