Tax News & Views Once More Unto The Breach Roundup

By Jay Heflin
September 18, 2023

SALT Republicans Search for Unity While Blocking GOP Tax Bill - Samantha Handler, Bloomberg ($):

GOP members of the bipartisan SALT Caucus—dedicated to reinstating the full state-and-local tax deduction that the 2017 tax law capped at $10,000—are blocking their party’s tax bills from full House passage because it does not address the issue.

The GOP tax bill is the one that would allow for R&D expensing, expand the 163(j) interest deduction and up Bonus Depreciation to 100%.

Further down the article:

Even though their numbers are small, and the New York and California Republicans haven’t reached consensus on a specific SALT proposal, the Republicans’ thin House majority still gives them leverage.

‘To be honest, the SALT Caucus hasn’t landed on a single sort of negotiating strategy except for saying no,’ Rep. Mike Garcia (R-Calif.) said in an interview Thursday in his Capitol Hill office, ‘which is still a very good strategy when you have a five-seat majority.’

The SALT Caucus was offered raising the SALT cap to $30,000 and they said “no," according to a lawmaker who spoke off the record. They wanted the cap increased to $100,000, which would have benefited wealthier taxpayers. Republican leadership didn’t want to do that.

The state of play on an end-of-year tax bill – Benjamin Guggenheim, Politico:

The end of the year is closer than you think, and with that comes the possibility of an end-of year tax bill that could slide into the omnibus. Lawmakers are already gearing up to push for their favorite tax policies with that prospect in mind.

But in Congress, there’s no guarantee of anything. And when you boil it down, a lot of political gridlock needs to be resolved for any tax vehicle to come together.

Further down the article:

And when we caught up with SALT caucus member Marc Molinaro (R-N.Y.) last week, he told us he thinks there’s basically been no progress on talks between the Republicans demanding some form of state and local tax relief and the House Ways and Means Committee, chaired by Rep. Jason Smith (R-Mo.).

There are problems on the Senate side, too.

Even if there was an agreement on the SALT cap, the Child Tax Credit issue would need to be resolved for the tax package to clear the Senate. A solution for this issue doesn’t seem to be around the corner.

Asked and Answered - Andrew Desiderio, Max Cohen and Brendan Pedersen, Punchbowl News ($):

Question: Is there any prospect of a tax bill slipping through amidst this mess — child tax credit, Housing and expensing of R&D?

Answer: Anything is possible, nothing is likely. We’ve only just started to see signs that lawmakers are trying to have serious conversations about expanding the CTC again, for instance. Our sense is that Republicans and Democrats still have some major philosophical differences to hammer out. We think current spending fights will make those conversations more difficult to have – not less.

The two biggest issues are making the credit fully refundable and attaching a work requirement to it. The political parties can’t agree on either.


Speaking of R&D:

Research Amortization Notice Brings Tax Pros Answers and Questions – Nathan Richman, Tax Notes ($):

Tax professionals are happy to finally have some answers to questions posed by the new research amortization regime but still have questions about how to proceed.

Notice 2023-63, 2023-39 IRB 1, released September 8, provides a preview of substantive guidance on how to apply the Tax Cuts and Jobs Act’s changes to section 174, something taxpayers and professionals have been calling for, especially because the changes took effect for tax years beginning after December 31, 2021.

The Notice is here.  


IRS Hopes to Sic 3,700 New Revenue Agents on Big Businesses – Jonathan Curry, Tax Notes ($):

The IRS is looking to swell its ranks with several thousand new, experienced revenue agents as it ramps up enforcement on large partnerships and corporations.

The new crop of revenue agents would bolster the agency’s broader effort to crack down on large corporations and complex partnerships, the IRS said in a September 15 announcement. The open positions are for experienced individuals with backgrounds in accounting and the financial industry.

The announcement is here and includes the following:

As part of larger transformation work underway to make improvements, the Internal Revenue Service announced the opening of  more than 3,700 positions nationwide to help with expanded enforcement work focusing on complex partnerships and large corporations.

These compliance positions will be open in more than 250 locations nationwide and is part of a larger effort to add fairness to the tax system and expand tax enforcement involving areas of concern with high-income earners, partnerships, large corporations and promoters. The hiring will be for higher-graded revenue agents, which are specialized technical positions that generally focus on audits.


IRS Floats Adding Partnerships to Prefiling Compliance Program – Jonathan Curry, Tax Notes ($):

Amid a crackdown on complex partnerships, the IRS wants to know if those partnerships should have a shot at getting their tax issues resolved upfront.

The agency put out a call for comments in a September 15 release (IR-2023-171) on how it can improve issue resolution and tax certainty programs for businesses, and how to expand those services to all types of businesses. Several prefiling compliance programs already exist, but they’re generally limited to large businesses, the IRS noted.

The release is here.


Eleventh Circuit Denies Rehearing in ARPA Challenge – Christopher Jardine, Tax Notes ($):

The Eleventh Circuit has denied the U.S. Treasury's petition for rehearing en banc in West Virginia’s challenge to the American Rescue Plan Act’s tax mandate provision.

In a September 14 order in West Virginia v. U.S. Department of the Treasury, a majority of the judges of the Eleventh Circuit rejected the petition for a rehearing en banc, letting stand a January 20 decision upholding an injunction against ARPA’s tax mandate provision because the provision is ambiguous and injures the states’ sovereign interests by restricting the ability to set tax rates and raise tax revenue.


The $1.9 trillion ARPA appropriated $195 billion in federal aid for state and local governments to use for a variety of pandemic-related purposes. However, section 9901 of the act prohibits states from using ARPA funds to ‘either directly or indirectly offset a reduction in the net tax revenue of such State or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase.’

States don’t want to have to choose between ARPA funding and tax cuts.


Moore, Part 2: How to Tax Foreign Earnings – Mindy Herzeld, Tax Notes ($):

A tax on property takes as its tax base the value of the property. In contrast, section 965, a tax on income, uses a foreign company’s accumulated earnings as its tax base. Within the context of a tax on income, one can debate the appropriateness of the timing, the base, the identity of the taxpayer, and the rate. But those are matters for Congress to decide, and not questions of constitutional import.

To understand Congress’s 2017 decisions to mostly end deferral of tax on the income earned by foreign corporations and to tax currently the accumulated earnings of those companies to their U.S. shareholders (at a rate significantly lower than that applicable when the earnings were generated), one must understand the history leading up to the wholesale reform of U.S. international tax rules in 2017, in which section 965 played an integral part. This history reflects Congress’s ongoing struggles to tax cross-border income in a way that satisfies U.S. domestic economic and foreign policy goals, achieves those goals in a practical matter, prevents the erosion of the tax base through cross-border profit shifting, and mitigates other foreign tax planning opportunities.


Six Weeks, Three International Information Reporting Decisions – Patrick Martin, Sebastien Chain and Luz Villegas-Banuelos, Tax Notes:

In the space of just over six weeks, courts made three key judicial decisions. Those decisions helped clarify the requirements of individuals and the limitations on the powers of the IRS in assessing international information reporting penalties:

  • title 31 penalties for foreign bank account reports;
  • title 26 international information reporting penalties specific to reporting of ownership interests in foreign companies (and trusts1); and
  • how the federal statutory regimes of titles 31 and 26 cross over into international law as set forth in U.S. income tax treaties.

The three cases are interconnected and have significance for U.S. taxpayers with global lives, global assets, multinational family members, and businesses or accounts in different parts of the world.


From the "Why Can't Congress Pass a Tax Bill" file:

Taxes are not the biggest issue on Capitol Hill right now. Spending is, and it’s not going well:

Playbook: McCarthy’s latest gambit falls flat – Rachael Bade, Eugene Daniels and Ryan Lizza, Politico:

THE DEAL THAT WASN’T — After working through the weekend to bridge differences between their centrist and conservative wings, House Republican leaders announced last night that they had a deal that could unite the GOP behind a short-term spending patch and shore up their negotiating position with Democrats ahead of a potential Oct. 1 shutdown…

As details of the deal hashed out by leaders of the Main Street Caucus and House Freedom Caucus trickled out, a bevy of conservative hardliners piped up with various versions of ‘Hell No’ — rejecting a measure that would impose an 8% cut to most non-defense programs and implement an array of GOP border policies while extending government funding for a month.

This deal also wouldn’t pass the Senate or get support from the White House.

Punchbowl News - Jake Sherman and John Bresnahan:

Members from the House Freedom Caucus and Republican Main Street Caucus reached a deal on a proposed 30-day stopgap funding bill…

This House Republican CR would cut spending except for defense, veterans and Department of Homeland Security funding. Along with the modified H.R. 2 provisions (no mandatory use of E-Verify for businesses), it includes new prohibitions on asylum claims and other hardline immigration restrictions. However, billions of dollars of disaster aid sought by President Joe Biden isn’t in there.

None of this will be acceptable to House Democrats, the Senate or White House, so this isn’t going to help avoid a shutdown on Oct. 1.

Bottom line: Lawmakers need to approve a spending plan that extends into next year before they can pass a tax bill. 


Twofer! Today is National Cheeseburger Day! Friday was National Double Cheeseburger Day, which was noted in Friday’s Roundup and celebrated to its fullest. Does it get any better than this? Nay!

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