Tax News & Views Bears Down on Tax Bill Roundup

Wyden calls for GOP clarity on tax bill demands - Laura Weiss and Brendan Pedersen, Punchbowl News. "Here’s Wyden’s message to GOP colleagues: 'It’s time to decide. This has been out there for five weeks, and they haven’t even said — these critics — here’s what we want and… we’ll vote for it if we get the following things.'"

Wyden Waiting on GOP to Formally Propose Tax Bill Changes - Cady Stanton, Tax Notes ($):

Senate Finance Committee Chair Ron Wyden, D-Ore., told reporters February 26 that the changes Senate Republicans have said publicly they want to make to the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) raise concerns regarding whether those senators will support the deal once those changes are added and how the tweaks would survive another vote in the House.

The House passed the bill — which pairs a trio of business tax breaks with an expansion of the child tax credit, among other provisions — on a 357-70 vote January 31.

The House bill would retroactively restore the full deduction for domestic research costs, restore bonus depreciation, and ease limits for business interest deductions, through 2025. It would also enhance child tax credits. The scope of the child credit relief appears to be one of the sticking points in the Senate.

GOP Tax Writer Seeks to Sell Skeptical Senate Brethren on Deal - Chris Cioffi, Bloomberg.

House Ways and Means Committee Chair Jason Smith (R-Mo.) is going all in trying to ease GOP senators’ concerns about the child tax credit expansion in the $78 billion bipartisan tax package he helped broker.

Smith has been using his pulpit to push back on claims that expanding the child credit would be a boon for Democrats and undocumented migrants, or that it will discourage work. The legislation Smith forged with Senate Finance Chair Ron Wyden (D-Ore.) also could help Republicans take credit for legislation popular with voters while providing a persuasive political argument in this year’s election, Smith allies say.

How government funding might affect the tax bill - Bernie Becker, Politico:

Given where matters stand right now, Congress could very well need a very short stopgap funding bill in the coming days, maybe of a couple weeks or so. And put it this way: It’s hard to see how that would be a bad development for the Wyden-Smith tax package.

Those extra couple weeks could give Democrats and Republicans in the Senate the time they need to work the issues that GOP senators have with the bill, which would then allow them to attach it to a more robust spending package later in March.

Background in Jay Heflin's latest Capitol Hill Recap. 

Other News: Crypto  reporting; MN, UT tax bills advance.

Crypto Broker Tax Reporting Plan Prompts Bipartisan Backlash - Samantha Handler, Bloomberg ($). "A group of House Ways and Means Committee members, led by Rep. Claudia Tenney (R-N.Y.) and Suzan DelBene (D-Wash.) wrote that the proposed rule would encompass too many transactions with too short of a timeline to comply. Treasury and the IRS proposed the regulations in August, providing clarity on the reporting rules enacted in 2021."

Important Effective Date Item in Preamble to Digital Asset Broker Reporting Prop. Regs. - Annette Nellen, 21st Century Taxation. "Prop. Reg. 1.1001-7(c) and 1.1012-1(j)(6) provide that these proposed regulations are effective on the January 1 following when final regulations are published."

Utah House OKs Tax Exemption for Minors' Income - Jaqueline McCool, Law360 Tax Authority ($). "H.B. 510, which passed the House on Friday by  43-24 vote, would exempt those 17 years old and younger who file W-2s from paying income tax on their reported income. To be eligible, the taxpayer would have to be 17 or younger on the last day of the taxable year, the bill said."

Minnesota Fixes Drafting Error on Standard Tax Deduction - Michael Bologna, Bloomberg ($):

Minnesota Gov. Tim Walz signed legislation Monday fixing a drafting error in last year’s omnibus tax bill that left the standard deduction at levels intended for 2019.

Walz, a second-term Democrat, signed HF 2757, which builds an inflation adjustment into the standard deduction for tax year 2023. The bill boosts the deduction to $27,650 for married joint filers or surviving spouses, $20,800 for head of household filers, and $13,825 for all others. Revenue Commissioner Paul Marquart spotted the problem last summer and warned it would cost taxpayers an extra $350 million in taxes if lawmakers ignored the problem.

Nonprofit update

US Can Bring Quick Appeal In Donor Reporting Rule Fight - Anna Scott Farrell, Law360 Tax Authority ($):

The federal government can immediately appeal a ruling that would require it to prove a strong governmental interest in forcing nonprofits to report their major donors, an Ohio federal court decided Monday, saying there's significant room for a difference of opinion on the matter.

In certifying the government's request for an interlocutory appeal, U.S. District Judge Michael H. Watson agreed to allow the government to challenge his November ruling that so-called exacting scrutiny, which would require such a showing by the government, should apply in the case. The suit was brought by The Buckeye Institute, a conservative think tank that claims the disclosure requirements violate the First Amendment.

Trump Plans to Renew Attack on Johnson Amendment in Second Term - Fred Stokeld, Tax Notes ($). "Former President Trump says that scrapping the tax code provision prohibiting churches and charities from endorsing candidates for public office or otherwise engaging in partisan political activity will be part of his second-term agenda."

Related: How to Protect your Tax-Exempt Status.

Blogs and Bits

IRS Direct File is moving ahead, slowly - Kay Bell, Don't Mess With Taxes:

Direct File, the Internal Revenue Service's pilot program that will let some taxpayers in 12 states prepare and submit their 2024 tax returns straight to the agency, is off to a slow start.

But that pace is intentional.

If Your IRS Form 1099 Is Wrong, Here’s How To Correct It With IRS - Robert Wood, Forbes. "Information reporting has become the centerpiece of IRS enforcement efforts for decades, arguably even more so now. But suppose you receive a Form 1099 that you know to be wrong?"

Inside the IRS unit taking on America’s millionaires and billionaires - Spencer Woodman, International Consortium of Investigative Journalists. "Much of the IRS’s hiring for its high wealth division aims to bolster the agency’s ability to take on the rapidly growing phenomenon of “complex partnerships” — the amorphous webs of limited liability companies, trusts and other entities that can obscure movements of money. The number of these private investment structures has expanded by more than 600% over the past two decades. They are also ubiquitous in the private equity funds and hedge funds increasingly favored by the 1%."

Related: Eide Bailly IRS Dispute Resolution & Collections.

Strapped College Town Wants To Impose A $50 Per-Student, Per-Semester Tax - Kelly Phillips Erb, Forbes ($). "The University has been connected to the City of Newark for more than 250 years. Today, nearly 31,000 residents call Newark home—and 24,000 are University of Delaware students."

Tax Policy Corner

You Can Make a Difference – Apply to Become a Taxpayer Advocacy Panel Member by March 15 - Erin Collins, NTA Blog. "TAP is a federal advisory committee led by citizen volunteers dedicated to improving IRS customer service and tax administration. TAP members come from all walks of life and about half of the members are not tax professionals rather dedicated citizens wanting to make a difference with tax administration.... TAP is currently seeking candidates in the following states and territories: Alabama, Arkansas, California, Connecticut, Delaware, Hawaii, Indiana, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Minnesota, Mississippi, Montana, Nevada, New Hampshire, New York, North Dakota, Ohio, Puerto Rico, Rhode Island, Tennessee, Texas, Utah, Virginia, Vermont, West Virginia, and a member to represent taxpayers living or working abroad."

The Biden Administration’s Misguided Approach to Defining “American” Companies - Daniel Bunn, Tax Foundation. "The Internal Revenue Service collects data each year on where U.S. companies with more than $850 million in revenue pay taxes. These country-by-country reports show that on both a cash and accrual basis, the U.S. share of taxes owed by these companies was north of 50 percent each year from 2016 to 2020. In 2020, U.S. companies reported income tax paid on a cash basis of $311 billion in total, with $193 billion—or 62 percent—going to the U.S. The second-largest jurisdiction receiving U.S. companies’ tax dollars was the United Kingdom, which took in $13 billion—or 4 percent."

Related: Eide Bailly International Tax Services.

Tax in the Courts

Judge Lauber Provides Anatomy Of A Tax Dodge In Easement Decision - Peter Reilly, Forbes. "I was speaking to an Atlanta lawyer recently about a totally unrelated story, but he indicated that he had invested in one of the easement deals and was sweating it out. He did mention however that his buddy had emphasized that the courts have not yet ruled on the issue of whether an easement can be worth more than the value of the land that it encumbers. Well it looks like Judge Lauber may have filled that hole."

We discussed the case last week near the bottom of this post.

Former North Dakota tax preparer pleads guilty to preparing false returns for clients - IRS (Defendant name omitted)

According to court documents and statements made in court, Defendant, currently of Minneapolis, worked as a tax return preparer for a business located in Phoenix, Arizona. In 2019, Defendant prepared and submitted more than 100 fraudulent returns for clients, many of whom resided in the Fargo area. Defendant claimed false tax credits and fictitious business profits and losses on these returns, which inflated his clients’ tax refunds. In total, Defendant caused a tax loss to the IRS of approximately $294,000.

The plea agreement says the defendant prepared returns claiming inflated or imaginary Schedule C business losses, as well as education tax credits for nonexistent college expenses. 

Beware the "aggressive" preparer "who likes to work in the gray areas." Sometimes they're just making things up.

What Day is It?

Be careful around polar bears today. Today is both National Protein Day and International Polar Bear Day.