Tax News & Views Ring-A-Ding Roundup

By Jay Heflin
September 22, 2023

Contract Research Amortization Rule Has Capital Expenditure Root – Nathan Richman, Tax Notes ($):

The research amortization regime of the Tax Cuts and Jobs Act shined a light on the lack of clear rules on the provider side of contract research, according to a Treasury official.

The existing rules under reg. section 1.174-2 aren’t clear about what happens to a so-called research provider in a contract research arrangement, instead focusing on the treatment of the research recipients, Timothy Powell of the Treasury Office of Tax Legislative Counsel said September 21 at a program sponsored by Eversheds Sutherland (US) LLP and the Federal Bar Association.

Treasury Tackling R&D Questions About Software, Contractors - Caleb Harshberger, Bloomberg ($):

The Treasury Department is working to address tax professionals’ questions about R&D amortization of software development and research done by contractors, after the department released proposed guidance earlier this month.

Treasury tax policy adviser Tim Powell said Thursday at an event hosted by Eversheds Sutherland that the department is tackling those issues, and he encouraged those interested to chime in with comments.

Want to chime in? Details are here.

Proposed guidance is here.

Someone to explain said guidance is here.


Regs on Retirement Savings Early Withdrawals Will Incorporate SECURE 2.0 – Caitlin Mullaney, Tax Notes ($):

The IRS is working to incorporate relevant SECURE 2.0 provisions into the long-awaited regulations on the section 72(t) retirement plan early distribution tax, according to an agency official.

“There are at least 13 separate provisions relating to [section] 72(t) and SECURE 2.0. We’re working on integrating all of those various provisions into these proposed regs, and these proposed regs would obviously add new rules on [section] 72(t),” Pamela Kinard of the IRS Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) said September 21 on an American Law Institute Continuing Legal Education webcast.


GOP Prods IRS on Reported Taxpayer Harm From Record Destruction - Chris Cioffi, Bloomberg ($):

Senate Finance Republicans renewed demands from the IRS to provide answers on whether taxpayers were harmed by the destruction of 30 million unprocessed 2019 paperinformation tax returns.

Ranking member Mike Crapo (R-Idaho) sent a Thursday letter, signed by a dozen Finance members, to IRS Commissioner Danny Werfel citing recent reports that some taxpayers claimed the earned income tax credit for 2019, but that those claims were denied or challenged because their information returns were destroyed.

The letter is here

Here’s a rundown on what else occurred this week on Capitol Hill when it came to taxes:

Capitol Hill Recap: Should It Stay or Should It Go – Jay Heflin, Eide Bailly:

What Went Down:

  • Vetting the 2017 tax reform measures is set to begin next year and the tax chief is bullish on a year-end tax deal.
  • Lawmakers respond to government report highlighting IRS's challenges for ensuring taxpayer information.
  • House Budget Committee proposes budget that extends 2017 tax cuts and it will likely go nowhere.


Housing Tax Bill Backers Eye Way Ahead Amid Headwinds – Samantha Handler, Bloomberg ($):

Lawmakers seeking to expand the Low-Income Housing Tax Credit this year hope a new version resolves transparency concerns and that pressure from the affordable housing crisis will press their colleagues to act.

At the same time, they and advocates pushing the effort are aware of headwinds as amid a congressional battle over raising the debt ceiling and a ticking clock until elections kick into higher gear.

Some lawmakers seek to pass business tax relief by adding the aforementioned housing tax credit, which would replace modifications to the Child Tax Credit. This was attempted before and failed because the housing credit benefits the people who build the homes and not the ones who live in them. The Child Tax Credit benefits families.

Speaking of the Child Tax Credit:

This Republican senator wants an expanded child tax credit — with work requirements – Juana Summers, Noah Caldwell and Patrick Jarenwattananon, NPR:

Many in Washington, D.C., would like to see the child tax credit expanded again, including Florida Sen. Marco Rubio, a Republican.

But Rubio, unlike his Democratic counterparts, wants the expanded child tax credit to include work requirements.

There are basically two issues with the Child Tax Credit where the political parties disagree: adding a work requirement and limiting its refundability. Talks on these issues have been happening for over a year.

More on about this tax bill is below.


For those tracking a partial shutdown of the federal government:

Conservatives deal blow to McCarthy with second failure to advance Pentagon funding – Mychael Schnel, The Hill:

House conservatives defeated a procedural vote on a Pentagon funding bill Thursday, preventing the legislation from moving forward in the chamber for a second time this week and dealing an embarrassing blow to Speaker Kevin McCarthy (R-Calif.).

Six Republicans joined Democrats in voting against the rule for the Pentagon appropriations bill, which was enough to defeat the effort. The final vote was 216-212.

The failed vote marks another disappointment for McCarthy, who has tried to advance the appropriations process — and appease the conference’s right flank — as the end-of-the-month government funding deadline inches closer.

A partial shutdown looks more likely every day. Passing a year-end tax bill is not likely, according to staffers and lawmakers who have spoken off the record. Those odds are even lower if Congress can't agree on funding the federal government into next year.

If a partial shutdown doesn’t happen, the spending bill could originate in the Senate.

Punchbowl News ($):

House Republicans were cycling between Speaker Kevin McCarthy and Majority Whip Tom Emmer’s offices Thursday, planning out their quixotic quest to pass 11 appropriations bills in the next nine days. Meanwhile, Senate Majority Leader Chuck Schumer teed up a bill that could become the vehicle for a bipartisan stopgap funding package designed to keep government open past Sept. 30.

A partial shutdown has real consequences:

There’s a lot at stake for hundreds of thousands of federal employees – including military service members – who won’t get paid during a shutdown. We expect OMB to begin communicating with senior officials at federal agencies starting today to remind them to update their shutdown guidance for employees with the deadline just over a week away.

Imagine paying bills without a paycheck. 

A shutdown will affect the IRS:

IRS Isn’t Shutdown-Proof After All – Jonathan Curry, Tax Notes ($):

It was originally reported September 13 that the IRS would remain fully operational in the event of a government shutdown by drawing from the additional, long-term funding it received in the Inflation Reduction Act. That would’ve been a reprise of the position the agency took around the same time last year, but National Treasury Employees Union President Doreen Greenwald now says the IRS is changing course.

‘NTEU became aware from our members that the IRS was developing a new contingency plan that includes furloughing some of its workforce,’ Greenwald said in a September 21 statement provided to Tax Notes.


Can W&M Balance Impeachment and Tax Package Work This Fall? – Cady Stanton, Tax Notes ($). "The House Ways and Means Committee is set to juggle work on an impeachment inquiry with negotiations for a possible end-of-year tax package in the coming weeks, and Republicans and Democrats disagree on how to strike that balance.”

Can lawmakers tackle two issues simultaneously? They say that they can walk and chew gum at the same time. If past is prologue, they can’t. They really can’t.


IRS Wants Release Of Int'l Pricing Program Info, Official Says – Natalie Olivo, Law360 Tax Authority ($):

The IRS has been "very vocal" in requesting that a report be issued about the International Compliance Assurance Program, or ICAP, globally, according to Nicole Welch, director of the treaty and transfer pricing operations practice area in the agency's Large Business and International Division. This report from the Organization for Economic Cooperation and Development would give companies information about ICAP participants and outcomes, she said, speaking during a Tax Executives Institute conference in New York.

"I'm optimistic that hopefully we will have some movement on that front to better inform taxpayers who are considering ICAP as an option," Welch said.


This Famous Nordic Island Will Start Charging a Tourism Tax — What to Know – Michael Cappetta, Travel + Tourism:

Visiting Iceland will soon cost a little more, but the increased expense will go to a good cause. The Nordic country plans to add a new tax for tourists that will support climate and sustainability goals.

No specifics were given except that the tax wouldn’t be high. Taxing tourists for climate change seems to be a trend.

Many cities globally already have tourism taxes in place as a way to increase investment in the community, however, tourism taxes to support sustainability efforts have begun to gain popularity around the world. A new $10 tourism tax will be required for visitors to Bali to help with environmental efforts in 2024, according to a local press report.


US finalizes rules to prevent China from benefiting from $52 billion in chips funding – David Shepardson, Reuters:

The U.S. Commerce Department on Friday is issuing final rules to prevent semiconductor manufacturing subsidies from being used by China and other countries deemed to pose American national security concerns.

The regulation is the final hurdle before the Biden administration can begin awarding $39 billion in subsidies for semiconductor production. The landmark "Chips and Science" law provides $52.7 billion for U.S. semiconductor production, research and workforce development.

The document is here


From the “No, Not That Tax Bill” file:

Lawmakers Urge Swift Passage of Hurricane, Wildfire Tax Relief - Samantha Handler, Bloomberg ($):

House Republicans and Democrats are pushing their colleagues to provide tax relief for Americans recovering from hurricanes, wildfires, and the Ohio train derailment, as some taxpayers run up against an Oct. 15 deadline.

Lawmakers over the past year have introduced bills that would provide special tax treatment or allow exemptions relating to disaster aid and expenses incurred due to presidentially declared natural disasters. While the IRS allowed many taxpayers impacted by disasters to delay filing their tax returns until Oct. 15, that deadline is fast approaching and Congress, amid a looming government shutdown, doesn’t have plans to take up the bills before the end of the year.

This bill is about providing tax relief to areas affected by disasters and has been in the works for a while, according to tax staffers. It's not the tax bill that would modify business tax measures. The ONLY way this piece of legislation would include business tax relief (i.e., R&D expensing, broadening the 163(j)-interesting deduction and increasing Bonus Depreciation) would be if the parties agreed on modifications to the SALT cap and the Child Tax Credit. And so far, that agreement ain’t happening.


Happy Car Free Day! Take a walk. I did and found it freeing to not have to deal with a car.

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