Tax News & Views Will Not Alter The Deal Roundup

By Joe Kristan
January 4, 2024
Bing Dall-e image of a plate of spaghetti

Key Takeaways

  • Butane and mixing tax credits don't mix.
  • Treasury Inspector General J. Russell George, a figure in the Tea Party scandal, dies at 60.
  • More on new IRS corporate ruling policy.
  • Employee Retention Credit voluntary disclosure details.
  • FBAR litigant told to bring cash home or call jail home.
  • How brackets work.
  • NY considers less silly date for pass-through entity tax election.
  • IRS looking to identify more return errors at filing.
  • Check the odometer now to support your business miles.
  • When is a foreign dividend "qualified" for the capital gain tax rates.
  • IRS goofs on deadline, has to live with it.
  • National Spaghetti Day.

Fed. Circ. Shoots Down Bid To Revive $550M In Fuel Credits - Anna Scott Farrell, Law360 Tax Authority ($):

The Federal Circuit on Wednesday denied a Philadelphia energy company $550 million in tax credits reserved for alternative fuels, becoming the third appellate court to conclude that a mixture of butane and gasoline doesn't qualify as an alternative fuel mixture.

The three-judge panel unanimously affirmed a decision by the U.S. Court of Federal Claims, which held that Philadelphia Energy Solutions Refining and Marketing LLC was not entitled to excise tax refunds for 2014 to 2017 because butane wasn't an alternative fuel for purposes of the credit.

Federal Circuit Nixes $550 Million Butane Mixture Credit Claim - Chandra Wallace, Tax Notes ($).

“This should be the death knell for the butane-gasoline alternative fuel mixture credit cases,” Peter A. Lowy of Chamberlain, Hrdlicka, White, Williams & Aughtry told Tax Notes. “Three federal appellate courts have now lined up against the [fuel mixers’] position.”


Philadelphia Energy was among several energy companies that retroactively amended their excise tax returns to claim millions of dollars of alternative fuel mixture credits for butane-gasoline mixtures and pursued refund suits against the federal government. None succeeded.



J. Russell George, Longtime TIGTA Chief, Dies - Jonathan Curry, Tax Notes:

J. Russell George, who spent nearly two decades keeping tabs on the IRS as head of the Treasury Inspector General for Tax Administration, died earlier this week. 

George had been on indefinite leave since late last year because of an unspecified medical condition, with acting Inspector General Heather M. Hill serving in his absence. TIGTA announced George’s death in a January 3 release. He was 60.

Longtime Tax Watchdog J. Russell George Dies After Illness - Naomi Jagoda, Bloomberg. "In May 2013, George’s office released what became a bombshell report finding that the IRS had subjected conservative groups’ applications for tax-exempt status to extra scrutiny and delays, triggering a political firestorm for the agency and the Obama administration."


Companies Get New Options for IRS Transaction Advice Memos - Caleb Harshberger, Bloomberg ($):

The IRS expanded the scope of allowable letter rulings to include a broader swath of corporate transaction issues—including corporate reorganizations and certain mergers and acquisitions that previous revenue procedures had precluded from letter rulings.

The bulletin Tuesday included Rev. Proc. 2024-1 and Rev. Proc. 2024-3, which lay out new areas where the agency will issue rulings. The bulletin removed an older section restricting rulings on Sections 332, 351, 368, and 1036, on topics such as liquidations of subsidiaries, corporate transfers, and certain mergers and reorganizations not covered in other sections with letter ruling restrictions.


IRS Releases New ERC Voluntary Disclosure Program Details - Tonya Rule, Eide Bailly:


The IRS requires applicants to submit Form 15434 online by March 22, 2024. This form is the only designated method for applying for the program and is not accepted via mail or fax. If the IRS accepts the program application, it will mail a closing agreement to be signed by the participant. The participant must sign and return the agreement to the IRS within 10 days of the mailing date.

Applicants must repay 80% of their ERC via the IRS Electronic Federal Tax Payment System, either at the time the Form 15434 is submitted or at the time the taxpayer signs the closing agreement, unless the IRS approves an installment agreement. Installment agreements should be submitted at the same time as the Form 15434.

According to the IRS, applicants who repay the full 80% at once will not be charged interest or penalties on the credit.


FBAR Litigant Held in Contempt Over Repatriation Refusal - Andrew Velarde, Tax Notes ($):

A taxpayer is being held in contempt for his failure to repatriate assets following a finding he was liable for nearly $1 million in foreign bank account reporting penalties.

The U.S. District Court for the Eastern District of Michigan issued its order adjudging James J. Kelly Jr. in contempt of court on January 3 in United States v. Kelly. The order states that an arrest warrant will be issued on January 5 if he doesn’t surrender to U.S. marshals before then. It also states that Kelly will be incarcerated and fined $100 per day until he complies with previous repatriation orders.

Related: Offshore Voluntary Disclosure


What the 2024 Tax Brackets Mean for Your Money - Ashlea Ebeling, Wall Street Journal ($):

A single person with $140,000 in taxable income in 2024 would be in the 24% tax bracket. This doesn’t mean all of their income is taxed at that rate. Their effective tax rate would be much lower than that top rate. 

That is because the first slice of your taxable income is taxed at 10%, whether you are an entry-level clerk or the chief executive officer. The next slice gets taxed at 12%, and so on. Only the portion of the individual’s taxable income from $100,526 to $191,950 would be taxed at the 24% rate.

That's why turning down extra income "because it will move me into a higher bracket doesn't make sense. Usually. There actually are "hidden" brackets related to income-based phaseouts of benefits where marginal rates can exceed 100%.


New York Bill Would Push Back Date for Pass-Through Tax Election - Danielle Muoio Dunn, Bloomberg:

Assembly member Amy Paulin (D) has proposed a bill, A8451, that would push back the deadline for choosing to pay the state’s pass-through entity tax from March 15 to Sept. 15, applicable for tax years beginning on or after January 2024. Diane Gurden, a spokesperson for Paulin, said in an email that the timing better supports assessing the impact of making the election and allows businesses created after March 15 to take advantage of it. It would also bring New York in line with the way “the majority of other states handle it,” Gurden said.


Ken Pokalsky, vice president of the Business Council of New York State, said of the 36 states that have a PTET, “the vast majority of those actually allow you to take the election upon filing your tax return for that year,” such as California.

Related: IRS Blesses Entity-level Tax Deduction used as SALT Cap Workaround 


IRS Seeks Outside Help With Identifying Errors During Filing - Lauren Loricchio, Tax Notes ($). "As part of that initiative, the IRS wants to notify taxpayers and tax professionals about potential issues when a return is filed to minimize the need to fix errors after filing. The plan says the IRS will 'also offer real-time checks and notifications to help taxpayers claim any credits or deductions for which they may be eligible but have missed on their returns.'"

It will help a lot if the IRS would just make it easier for preparers and taxpayers to double-check estimated tax deposits when preparing returns. Every preparer can tell a story about taxpayers who insist they "paid whatever you told me to pay," but didn't.


Odometer check time and other business mileage tax basics - Kay Bell, Don't Mess With Taxes. "A date-stamped smartphone image — either on the last day of the year, the first day of the next year, or, say some tax advisers, on both days — is a digital record that can help you determine how much you drove your vehicle for business."

It’s Time to Start Your 2024 Mileage Log - Russ Fox, Taxable Talk. "Why, you ask? Because if you want to deduct all of your business mileage, you must do this! IRS regulations and Tax Court rulings require this. Written is defined as ink, so that means you need a paper log or must be able to prove your smart phone log is contemporaneous."


U.S. Beneficial Ownership Information Registry Is Now Open For Business - Kelly Phillips Erb, Forbes. "The report must identify the company, including its legal name and any trade names, as well as the physical address of the company (no post office boxes), jurisdiction of formation or registration, and Taxpayer Identification Number."

IRS Issues Proposed Regs to Implement the Advanced Manufacturing Production Credit - Parker Tax Pro Library. "The IRS issued proposed regulations to implement the advanced manufacturing production credit established by the Inflation Reduction Act of 2022 to incentivize the production of eligible components (including certain solar energy components, wind energy components, inverters, qualifying battery components, and applicable critical minerals) within the United States."


Dividends Paid by Foreign Corporations – Are they “Qualified” & Eligible for Capital Gain Rates? - Virginia La Torre Jeker, US Tax Talk. "A dividend paid by a foreign corporation can be a 'qualified' dividend provided certain requirements are met, including the shareholder meeting a minimum holding period for the stock. The tax law clearly defines what is meant by QDI at IRC Section 1(h)(11)(B)(i)(II)).  Under the rules, “qualified dividend income” means dividends received during the taxable year from domestic corporations and from 'qualified foreign corporations.'"


California 13.3% Tax Is Now 14.4% In 2024 But Some Say Texans Pay More - Robert Wood, Forbes. " The top California income tax rate has been 13.3% for a decade, but effective on January 1, 2024, the new top rate is an eye-watering 14.4%. There been several proposals in Sacramento to increase the top rate as high as 16.8%, but a more modest 1.1% increase passed in 2023. The new 14.4% rate is the result of no limit on California’s 1.1% employee payroll tax for State Disability Insurance. It translates to a top 14.4% rate for those earning over $1 million."


I am altering the deadline. Pray I don't alter it any further. We know how things worked out for Darth Vader in the end. Things didn't work out for the IRS in Tax Court yesterday either. 

When the IRS sends a Statutory Notice of Deficiency - also known as a ticket to Tax Court - the notice includes a deadline for petitioning the Tax Court to contest the deficiency. In yesterday's case, the IRS sent a SNOD on October 7, 2021. That notice said the taxpayers had until December 5, 2022 to redeem their ticket to Tax Court.

Then someone in the IRS noticed a problem. The tax law generally gives taxpayers 90 days, not a 424 days, to file a Tax Court petition. The IRS the next day mailed another notice "correcting" the deadline to January 6, 2022. The taxpayer filed their Tax Court petition on March 3, 2022. The IRS asked the Tax Court to throw out the petition because it was filed after the corrected deadline. 

The Tax Court refused to alter the deal. From Judge Marvel's opinion (some citations omitted for brevity, emphasis added): 

The last sentence of section 6213(a), which was enacted in the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA), provides: “Any petition filed with the Tax Court on or before the last date specified for filing such petition by the Secretary in the notice of deficiency shall be treated as timely filed.”


The Petition in this case attached the first notice. The first notice unambiguously determines a deficiency against petitioners and is therefore valid. Petitioners filed their Petition before December 5, 2022, the last day specified in the first notice for filing a petition in this Court. This is sufficient to comply with the last sentence of section 6213(a), which in the words of the Tenth Circuit means that “if a notice indicates a petition date that is more than 90 days after the date of mailing, that date controls.” 

The record discloses no consent by petitioners to a rescission of the first notice in any manner, let alone in a form complying with Rev. Proc. 98-54. Absent a rescission with petitioners' consent, the first notice continued to “be treated as a notice of deficiency... Accordingly, respondent's issuance of the second notice without petitioners' consent did not have the effect of rescinding the first notice, either in whole or in part.

The Moral? Your ticket to Tax Court is good for 90 days, but if the IRS gives you a ticket with extra time, they can't alter the deal.

Related: Eide Bailly IRS Dispute Resolution and Collection Services.


Does that make tonight "national spot my shirt night?" It's National Spaghetti Day!

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About the Author(s)

Joe Kristan

Joe B. Kristan, CPA

After 38 years centered on tax consulting for closely held businesses and their owners, Joe is joining Eide Bailly's National Tax Office. Joe's responsibilities include communication, process improvement and training. He is a principal contributor to the Eide Bailly Tax News and Views blog, providing daily updates on tax reform and other tax news. Joe is a Certified Public Accountant and a member of the AICPA Tax Section and Iowa Society of Public Accountants.