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Tax News & Views SOTU Roundup

Jay Heflin
March 8, 2024
The White House

Key Takeaways

  • President calls for taxpayers to pay their fair share.
  • Youngsters cry over tax prep.
  • IRS not buying “doc” letters.
  • Tax agency backs down on inc. verify.
  • Nonprofits filing is a go; Red pen could be needed.
  • Calls for Entries.
  • Tax bill fate unknown.
  • Love peanuts and chocolate!

Corporate taxes, consumer costs top economic agenda for Biden State of the Union – Ryan Anastasio, CNBC:

President Joe Biden laid out plans to further reshape the tax system and promised to lower costs for Americans during his State of the Union address Thursday…

“The way to make the tax code fair is to make big corporations and the very wealthy finally pay their share,” said Biden.“A fair tax code is how we invest in the things that make this country great. Healthcare, education, defense, and so much more.”

More about the tax part

Capitol Hill Recap: President Biden to Pitch Tax Increases to Congress – Jay Heflin, Eide Bailly:

From the White House’s fact sheet on the President’s tax agenda:

President Biden supports continuing tax cuts for families making less than $400,000, but opposes extending tax cuts or restoring tax breaks for those making more than $400,000 per year. And he believes that any extensions should be paid for by asking big corporations and the wealthy to pay their fair share.

As has been reported before in the Recap, the revenue raised by TCJA expirations are already baked into budget. For corporations and wealthy to pay for extending TCJA tax cuts for folks earning less than $400,000 there must be “new” tax increases that have not yet passed Congress.

The president also wants to increase the corporate income tax rate to 28 percent, from 21 percent, which would be a “new” tax increase. The 2017 tax reform bill permanently reduced this rate. Raising it, however, seems to have bipartisan support, although some may call for a 25 percent corporate tax rate instead of 28 percent.

This tax issue (as opposed to the current tax bill) will likely be addressed in 2025.

Looking ahead, the biggest determination for which tax policies become law will be the outcome of the 2024 elections.

The corporate lobbyists have already gathered:

Business Groups Attack Biden’s Corporate Tax Proposals – Alexander Rifaat, Tax Notes ($):

President Biden’s renewed drive to increase taxes on corporations would dampen economic activity and lead to a surge in unemployment, business advocacy organizations warn.

In his State of the Union speech March 7, Biden argued for increases in the statutory corporate tax rate from 21 percent to 28 percent and in the corporate alternative minimum tax from 15 percent to 21 percent. He has also called for corporations to be denied the ability to write off compensation they provide to any employee earning over $1 million.

TCJA discussions have begun and paying to extend the tax cuts is be a big, big, big issue:

 

The dark side of tax season::

Doing taxes drives younger generations to tears – Bryan Llenas, Fox News:

Few people enjoy doing their taxes, but for younger Americans, it's stressful enough to make them cry – or possibly even send them to a therapist…

A recent Cash App Taxes survey revealed 54 percent of Gen Z and 38 percent of Millennials report the stress of filing taxes has either brought them to tears in the past or they expect it will this year.

Hmm…maybe hire an accountant?

Let us help you relieve your tax headache - Eide Bailly:

Federal, state, local, and international tax burdens and responsibilities consume time and cash flow. Whether you’re an individual, a business, a nonprofit, or handling a trust or estate, proper planning and guidance from a well-versed professional can make managing taxes less painful.

Eide Bailly has the depth of tax resources to help you gain peace of mind. Plus, our professionals are supported by the National Tax Office, allowing clients to dig into specialized tax situations.

 

IRS Corner

Why the IRS doesn’t believe your doctor’s note for tax-free health items – Anahad O-Connor, Washington Post:

For years, Americans have been using tax-free dollars from health savings accounts to cover a wide variety of health and wellness items, including eyeglasses, tampons, massage devices, acupuncture and even fitness equipment deemed medically necessary by a doctor.

But now the IRS says some companies are misleading consumers about what is and is not eligible under the rules of these Health Savings Accounts (HSAs) and Flexible Savings Accounts (FSAs), which allow consumers to use pretax dollars for various health needs.

The article further reports that companies are giving people “letters of medical necessity” to put things like gym memberships and dietary foods on health accounts, but the IRS isn’t buying it.  

Beware of companies misrepresenting nutrition, wellness and general health expenses as medical care for FSAs, HSAs, HRAs and MSAs – IRS. “Amid concerns about people being misled, the Internal Revenue Service today reminded taxpayers and heath spending plan administrators that personal expenses for general health and wellness are not considered medical expenses under the tax law.”

 

IRS Backs Down on Changes to Income Verification Program – Fred Stokeld, Tax Notes ($):

The IRS, bowing to criticism of recently announced limits on a program used to verify the income of borrowers applying for loans, has decided to put the changes on hold.

“We acknowledge the concerns raised and are assessing our ability to provide return information when necessary while keeping taxpayer information confidential and protected from disclosure,” the IRS said March 6 regarding its controversial cutbacks to the agency’s income verification express service (IVES), which provides tax transcripts to third parties, such as banks, to process loans.

 

IRS granting dyed diesel penalty relief as a result of Texas wildfires – IRS:

The Internal Revenue Service, in response to disruptions to the supply of fuel for diesel powered highway vehicles resulting from wildfires, will not impose a penalty when dyed diesel fuel with a sulfur content that does not exceed 15 parts-per-million is sold for use or used by diesel-powered vehicles on the highway in certain counties in Texas.

This penalty relief begins on February 23, 2024, and will remain in effect through March 22, 2024...

 

Nonprofits Can E-File 2023 Extensions Later This Month – David van den Berg, Law360 Tax Authority ($). “Tax-exempt organizations will be able to electronically file applications for extensions on returns including Form 990 starting March 17, when an Internal Revenue Service delay that impeded the filings ends, an agency official said Thursday.”

Nonprofits' Late 2020 Returns Require Paper Filing With Red Pen – Fred Stokeld, Tax Notes ($):

Exempt organizations may not be able to e-file amended 2020 returns unless they have a red pen handy.

“Filers should paper file their late tax year 2020 returns and write on the top in red, ‘The IRS no longer accepts electronic filing of tax year 2020 returns after December 26, 2023,’” said Robert Malone, director (exempt organizations and government entities), IRS Tax-Exempt and Government Entities Division.

 

IRS Seeks Public Input on 2024-2025 Priority Guidance Plan – Erin Schilling, Bloomberg ($):

The agency releases an annual plan outlining which projects it intends to target through regulations and other guidance. This plan will include priorities between July 1, 2024 and June 30, 2025.

The comment period ends May 31.

 

Court side

Disability Payments Are Gross Income, Tax Court Rules – Jared Serre, Law360 Tax Authority ($):

More than $1,500 in disability payments received by a Texas couple must be included in their gross income, the U.S. Tax Court ruled Thursday.

Charles and Linder Scott wrongfully argued that the funds should be excluded from their income after they failed to point to a specific exclusion that applied to themselves, leading Judge Christian N. Weiler to grant the Internal Revenue Service's motion for summary judgment.

 

International Zone:

W&M Members Debate Whether U.S. Should Walk Away From Pillar 1 – Cady Stanton, Tax Notes ($):

House taxwriters coalesced over their worries about the impact of the OECD global tax deal’s approach to digital services taxes but found little common ground across the aisle on whether the U.S. response should be to scrap participation or stick with the talks.

Members of the House Ways and Means Tax Subcommittee agreed regarding the complexity and disproportionate impact of amount A of the OECD’s proposed pillar 1 agreement on American businesses during a hearing March 7. But opinions on next steps, particularly over whether the U.S. should stay at the negotiating table, differed largely along party lines.

Don't Let Pillar 1 Die, Policy Experts Tell House Tax Panel – Dylan Moroses, Law360 Tax Authority ($):

Tax policy experts encouraged a U.S. House subcommittee Thursday to continue negotiations at the Organization for Economic Cooperation and Development over the taxing rights overhaul known as Pillar One and advocate for stronger double taxation relief and tougher language eliminating digital service taxes.

Speaking before a tax subcommittee hearing, the policy experts were critical of Pillar One in its current form, but encouraged Democratic and Republican lawmakers to work with President Joe Biden's administration and continue engagement at the OECD on the project in an effort to secure better outcomes for the U.S. government and U.S. businesses, rather than abandon the project altogether.

 

From the “Destination Unknown” file:

The tax bill’s Finance fracture - Laura Weiss and Andrew Desiderio, Punchbowl News ($):

It’s a tale of the twisted politics around the bipartisan tax bill: Two notable Finance Committee Republicans are staking opposite positions on a bill that many lawmakers like but key members of the Senate GOP seem eager to kill.

Both Sens. Thom Tillis (R-N.C.) and Todd Young (R-Ind.) are thought of as dealmakers. Young is playing to type and looking for ways to get the package of business tax incentives and an expansion of the child tax credit into law. But Tillis, tossing aside his inclination to find common ground, has come out as one of the deal’s toughest critics.

Senate passage will require support from both political parties. So far, that level of support has yet to materialize.

If Young can coax more GOP senators to go public with their support for the bill, it’s the sort that would make Senate Majority Leader Chuck Schumer more likely to hold a floor vote.

Some influential D.C. groups have begun expecting that the tax bill will not get a Senate vote and not become law.

 

What Day Is It?

Happy National Peanut Cluster Day! Peanuts and chocolate are a dynamic duo!

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About the Author(s)

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Jay Heflin

Director of Legislative Affairs
Jay brings more than two decades of experience to his job as Director of Tax Legislative Affairs in Eide Bailly’s Washington D.C. office. Jay provides political intelligence and guidance to the firm on the progress of tax legislation on Capitol Hill. Prior to joining the firm, he was a director at the tax lobbying shop Federal Policy Group, LLC, where he tracked tax legislation in Congress and participated in lobbying efforts to amend tax legislation. Before joining the Federal Policy Group, he was a Congressional reporter for several news organizations where his beat was tax policy.

Material discussed is meant to provide general information and it is not to be construed as specific investment, tax or legal advice. Keep in mind that current and historical facts may not be indicative of future results. This is meant for educational purposes only. Information presented should not be considered investment advice or a recommendation to take a particular course of action. Always consult with a financial professional regarding your personal situation before making any financial decisions.