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Tax News & Views Questioning Tax Bill Passage Roundup

Jay Heflin
March 18, 2024
Denial Management Program

Key Takeaways

  • Passing tax bill remains unclear.
  • Will ERC restrictions become law?
  • TCJA talk.
  • ERC correction deadline.
  • Conservation easement in court.  
  • $3 billion tax scheme.
  • Groucho Marx relates to tax policy.  
  • Zombie tax breaks.
  • Be your awkward self.

Senate tax standoff imperils bid to prevent $80B in ERC fraud – Brian Faler, Politico Pro ($):

A major tax package is teetering on the brink of failure in the Senate — and, with it, a chance to quash nearly $80 billion in fraud... 

If the legislation dies, lawmakers will squander their last chance anytime soon to help the IRS fight a torrent of fraudulent claims for the Employee Retention Credit, a break for businesses worth up to $26,000 per worker. The agency says it is receiving 20,000 requests for the break every week.

Wow:

IRS chief Danny Werfel now estimates that 19 out of every 20 claims is suspect... 

This article is about the tax bill that passed the House with resounding, bipartisan support in January by a 357 to 70 vote. It includes R&D expensing for domestic firms, expanding the 163(j)-interest deduction, upping Bonus Depreciation to 100%, modifying the Child Tax Credit, and other provisions. It partially pays for the relief by restricting the Employee Retention Tax Credit.

Playbook: An upbeat start to another shutdown week – Ryan Lizza, Rachael Bade and Eugene Daniels, Politico Playbook. This website covers several D.C.-related issues. It had this to say about the fate of the current tax bill that has stalled in the Senate:

We may be approaching fish-or-cut-bait time for the tax bill. To catch you up: The bipartisan deal that would pair a child tax credit increase with extensions for key business deductions remains stuck in the Senate. Sen. MIKE CRAPO (R-Idaho), the key holdout, traded proposals last week with Senate Finance Chair RON WYDEN (D-Ore.), but as our friends at Morning Tax put it last week, “the vibes aren’t great.” Watch this week to see if Schumer moves closer to scheduling a cloture vote in order to force a climax to this long-running saga.

Rumor mill: Senate Majority Leader Chuck Schumer (D-NY) could put the House-passed tax bill on the Senate floor and dare Senators to oppose it. For those who do, they might have to explain to their constituents - in an election year -  why they opposed legislation providing tax relief. If this rumor turns out to be true, then floor action should happen this week. Both chambers of Congress are scheduled to be out of session for the next two weeks and return a week before the end of tax season. 

Important to note: Taxes are not a top priority on Capitol Hill. Spending is the big one. Lawmakers must agree to extend Federal funding for certain agencies beyond Friday (March 22nd) or contend with a partial shutdown of the Federal government. Could the tax bill hitch a ride on the spending bill? Sure! Will it? Who knows!

If you feel like you have read about a spending fight on Capitol Hill before, you have (emphasis added):

Federal government is – once more – counting down to a partial shutdown – Betsy Klein, Tami Luhby and Katie Lobosco, CNN:

Congress is running up on yet another critical government funding deadline on March 22, with one week to go before the potential, partial shutdown of several critical departments…

If this feels familiar, that’s because this is the fifth time since September that lawmakers have run up against a funding deadline, passing stopgap bills in the nick of time in September, November, January and earlier this month to keep the government running.

 

The Tax Angle: House GOP Plots TCJA Renewal Strategy – Stephen Cooper, Law360 Tax Authority ($). This news happened last week during the GOP conference.

House Republicans left Washington this week for their annual two-day legislative issues conference, hoping to expand their control of the chamber in the upcoming November elections and planning their strategy for renewal of their historic 2017 tax overhaul law.

House Budget Committee Chair Jodey Arrington, R-Texas, maintained that the U.S. economy grew and poverty rates were halved in response to passage of the Republicans' Tax Cuts and Jobs Act in 2017. He told reporters that Republicans discussed the possibility of using the budget reconciliation process to pass their pro-growth agenda that calls for lower government spending and renewal of TCJA's tax incentives when they begin to expire in 2025.

A huge factor that will determine the fate of expiring TCJA provisions will be the outcome of the 2024 elections.

Another thing: Rep. Arrington’s idea for using “budget reconciliation” to extend TCJA provisions only works if one political party controls both congressional chambers (and possibly the White House). Right now, election prognosticators foresee a split Congress. Also, they would not be surprised if the 2025 tax fight extends into 2026.

 

IRS Morsels

March 22 deadline approaching to resolve incorrect Employee Retention Credit claims; IRS urges businesses to review questionable claims to avoid future compliance action – IRS:

With a key March 22 deadline rapidly approaching, the Internal Revenue Service renewed calls for businesses to review the Employee Retention Credit (ERC) guidelines to avoid future compliance action for improper claims.

Amid aggressive marketing that misled many businesses into filing claims for ERC, the IRS has sharply increased compliance action through audits and criminal investigations – with more activity planned in the future. To help those who were misled, the IRS has made a limited-time offer available to employers through March 22 to correct improper claims at a sharp discount.

 

IRS Asked To Change Effective Date In Part-Time Worker Rule – David van den Berg, Law360 Tax Authority ($):

The effective date for proposed IRS rules on participation of long-term, part-time employees in retirement plans would violate administrative law if not changed in final regulations, an attorney speaking for a benefits organization told the agency and the U.S. Treasury Department at a hearing Friday.

The final rules would violate the Administrative Procedure Act unless they apply only for first plan years starting at least 18 months after being published in the Federal Register, said Adam McMahon of Davis & Harman LLP. The proposed rules released in November apply to plan years that started on or after Jan. 1, 2024.

 

IRS provides more information in various languages; part of ongoing transformation effort to expand services to taxpayers – IRS:

The Internal Revenue Service today reminded individuals and businesses that the agency continues to increase the amount of information available in multiple languages.

As the tax filing deadline approaches, the IRS reminds taxpayers that there a variety of ways that people can get help in multiple languages. IRS work in the multilingual area continues to expand, and providing information in more languages is part of the IRS transformation work under the Strategic Operating Plan, made possible by additional resources provided by the Inflation Reduction Act.

 

Court Side

Conservation Easement Inventory Issue Restored for Trial – Erin McManus, Tax Notes ($):

The Tax Court on reconsideration will allow the IRS to argue that a conservation easement donor held the property as inventory before the donation, making it ineligible for a charitable contribution deduction.

Judge Christian N. Weiler ruled March 6 that the IRS may argue the inventory issue, noting that other divisions of the court have previously ruled in conflict with a January 19 order, finding that the agency isn’t obligated to affirmatively plead the issue before the court in Jackson Crossroads LLC v. Commissioner.

 

$3B In Employment Tax Credits Claimed In Scheme, Feds Say – Anna Scott Farrell, Law360 Tax Authority ($):

Three New Jersey men who said they were leaders of religious and charitable organizations fraudulently claimed nearly $3 billion in employment tax credits from a federal pandemic loan program, according to a criminal complaint filed in New Jersey federal court.

The men — Rudolph Johnson, Frantz Pasteur and Frederick Anderson — obtained just over $1 million in tax refunds from the Internal Revenue Service after making 131 fraudulent tax filings on behalf of nine sham organizations from 2021 to 2023, according to the complaint, filed Wednesday. Federal prosecutors said the organizations "had limited tax histories, never paid any W-2 wages, and made only nominal, if any, payments to the IRS."

 

Virginia Man Pleads Guilty to Not Paying Employee Withheld Taxes – Bloomberg ($):

A Great Falls, Va., man who owns and operates several businesses has pleaded guilty to $1.8 million tax fraud, according to the Department of Justice Friday.

Between 2015 and 2021, Rick Tariq Rahim didn’t pay the IRS the taxes he withheld from his workers’ paychecks, and also did not file required quarterly employment tax returns reporting those withholdings, the government said.

 

 

Liberty Global: Codified Economic Substance Doctrine’s Day in Court, Part 1 - Stephen Olsen, Tax Notes ($):

This post is the first of two that will discuss the holding in Liberty Global Inc. v. Commissioner, No. 1:20-cv-03501 (D. Colo. 2023), which provided one of the first robust discussions by a district court of the codified economic substance doctrine under section 7701(o). Many practitioners believe that this topic is going to become more prevalent in controversy matters moving forward. 

Part Two ($) is here.

 

International Zone

Rewarding tax havens? Why Ireland may cash in on OECD reforms – Eleanor Butler, euronews.business:

Major firms - famously Big Tech - have long flocked to Ireland, enticed by the country’s low level of corporation tax.

Since 1997, the official rate has been held at 12.5%, although this changed in January with the arrival of a long-awaited reform.

Along with around 140 other nations, Ireland introduced a 15% minimum tax rate on the profits of multinationals, a policy spearheaded by the Organisation for Economic Co-operation and Development (OECD).

The article wonders if new minimum tax will scare companies away from Ireland. It appears that the jury is still out on answering this question.

 

Tax Foundation Response to UN Request for Public Input on a Framework Convention on International Tax Cooperation – Daniel Bunn and Cristina Enache, Tax Foundation:

Successful international tax coordination requires shared principles and a shared vision of outcomes. One failure of the tax coordination process at the Organisation for Economic Co-operation and Development (OECD) during its two-pillar approach has been the lack of consistent economic and policy principles. One academic frequently remarks that the OECD project works on Marxist principles, just not Karl Marx’s. It was Groucho Marx who said, “those are my principles, and, if you don’t like them, I have others.”

 

From the "Talk about Hang-Time" File:

The Zombies of the U.S. Tax Code: Why Fossil Fuels Subsidies Seem Impossible to Kill – Lisa Friedman, New York Times:

The oil and gas industry enjoys nearly a dozen tax breaks, including incentives for domestic production and write-offs tied to foreign production. Total estimates vary widely; environmental groups take a broad view of what constitutes a subsidy while the industry hews to a more narrow definition. The Fossil Fuel Subsidy Tracker, run by the Organization for Economic Cooperation and Development, calculated the total to be about $14 billion in 2022.

Two of the biggest tax breaks have been in place for about a century.

The oldest, known as “intangible drilling costs,” was created by the Revenue Act of 1913 and was aimed at encouraging the development of U.S. resources. The deduction allows companies to write off as much as 80 percent of the costs of drilling, things like employee wages and survey work, in the first year of operation, even before producing a drop of oil.

Many of the tax breaks used by the oil industry are also used by other industries. Their argument to keep their tax breaks (and I know this because I was in the room) is 'if you're going to kill our tax break then it should be killed for all industries.' So far, it seems that argument is a pretty good one becasue the tax breaks are still available. 

 

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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.

Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.