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Tax News & Views ERC Deadline Extension? Roundup

Jay Heflin
March 25, 2024
Deadline concept and stop time on classic clock

Key Takeaways

  • IRS rethinks ERC suspension date.
  • Billions stopped in ERC dubious claims.
  • Tax Bill’s fate murky, but undecided.
  • Charitable remainder annuity trusts get listed.
  • Corp AMT regs in the pipeline.
  • Energy credits move offshore.
  • IRS v. Backlog.

IRS Leaves Door Open to Resume ERC Voluntary Disclosure – Lauren Loricchio, Tax Notes ($):

The IRS’s voluntary disclosure program for employee retention credit claims will be suspended after the March 22 cutoff, but the program could resume later, IRS officials said.

“Even though one deadline is passing today with the voluntary disclosure program, the IRS work in this area continues to intensify,” an IRS official said March 22 during a call with reporters. “We have thousands of audits underway, criminal investigations taking place, and we plan to send more compliance letters.”

 

IRS stops billions in dubious ERC claims – Michael Cohn, Accounting Today:

The Internal Revenue Service's efforts to halt fraudulent claims for the Employee Retention Credit have protected more than $1 billion since the IRS imposed a processing moratorium on new ERC claims last September, IRS officials said Friday, and an additional $3 billion in claims is being reviewed by the agency's Criminal Investigation unit.

The IRS's special ERC Voluntary Disclosure Program, which ends Friday, has yielded more than $225 million from over 500 taxpayers, with another 800 submissions still being processed and more being filed at the last minute before the March 22 deadline. The IRS may later decide to reinstate the program, according to an IRS official who asked not to be identified during a press conference Friday.

Friday's Roundup included more on this subject, which is here

 

What’s Up With the Tax Bill - Kim Dixon and Chris Cioffi, Bloomberg ($). “The $78 billion business-and-child tax break bill is on hold for another two weeks at least, and Senate Finance Committee Chair Ron Wyden (D-Ore.) before the break predicted a grassroots campaign in that time to build support for the bill.”

Senators return on April 8th. We’ll have a better idea of the tax bill’s fate after they return to Capitol Hill.

The ERC is an issue with the tax bill:

Understanding the Employee Retention Credit Offset in the Bipartisan Tax Bill – Caroline Osborn and Andrew Lautz, Bipartisan Policy Center:

The Senate is considering a bipartisan tax bill that, if passed, would grow the economy and extend financial support for working families. The bill proposes offsetting some of the costs for these provisions with changes to the Employee Retention Tax Credit (ERTC). The ERTC is a pandemic-era tax credit that was designed to help businesses remain open and their staff employed during the height of the COVID-19 outbreak and subsequent economic recession. Since then, the cost of the ERTC has far surpassed initial projections, in part due to fraudulent and improper claims. The bipartisan tax bill will reduce ERTC fraud and provide about $79 billion in offsets.

 

Reg Update

IRS Proposes Annuity Trusts As Listed Transactions – Kat Lucero, Law360 Tax Authority ($):

The Internal Revenue Service unveiled proposed rules Friday that would list certain charitable remainder annuity trusts as transactions that can potentially be abusive tax shelters, requiring additional disclosures under the threat of penalty for participants involved in such arrangements. 

Taxpayers that have to provide the IRS more information on a charitable remainder annuity trust, or CRAT, transactions in the proposed regulations include individuals or entities whose tax returns reflect the tax consequences, such as affecting any gift tax return, in those transactions. Material advisers, who get a gross income of more than $10,000 tied to the arrangements, are required to disclose more information on them. 

 

Corporate AMT Regs Double-Counting Answers to Be Consistent – Andrew Velarde, Tax Notes ($):

Upcoming proposed regs on the corporate alternative minimum tax will address additional double-counting situations in a manner that is “intellectually consistent” with the controlled foreign corporation dividend relief, an IRS official said.

Notice 2024-10, 2024-2 IRB 1, released in December 2023, allows dividends that CFCs pay to U.S. shareholders or other CFCs to be disregarded in the calculation of adjusted financial statement income for purposes of the corporate AMT when that income is already captured elsewhere in that calculation. The relief provided in Notice 2024-10 is narrow in scope, applying only to CFC dividends within the meaning of section 316 (which defines dividends for tax purposes), determined without taking into account section 959(d) (which carves out some CFC distributions from dividend treatment). Despite the narrow scope, Treasury promised that forthcoming proposed regs will provide additional guidance about dispositions of CFC stock and dividends from non-CFCs.

 

Court Side

3rd Circ. Says Tax Court Has Power To Tackle Debt Offset Case – Anna Scott Farrell, Law360 Tax Authority ($). “A woman whose tax refunds were withheld by the Internal Revenue Service for five years to satisfy what the agency said was her underlying tax liability will get another chance to convince the U.S. Tax Court that the government was wrong, the Third Circuit ruled Friday.”

 

Man indicted over hiding $20M from IRS – David Voreacos, Accounting Today:

A Brazilian-American businessman was indicted in Florida for allegedly using Credit Suisse Group AG, UBS Group AG and other Swiss banks to hide more than $20 million in assets from US tax authorities over 35 years.

Dan Rotta, 77, was charged in Miami with hiding assets from the IRS in two dozen secret Swiss accounts between 1985 and 2020, the U.S. Justice Department said in a statement. A Sao Paolo man, Sergio Cernea, was also charged in the case, the department said. 

 

Up Next At High Court: Abortion, Jury Trials And Estate Tax – Katie Buehler, Law360 Tax Authority ($):

[T]he Supreme Court will hear arguments over whether the proceeds of a life insurance policy taken out by a closely held corporation on a shareholder are considered corporate assets for federal estate tax purposes.

The estate of Crown C Supply's former co-owner Michael Connelly has asked the justices to reverse an Eighth Circuit ruling denying it an $890,000 tax refund. The estate contends the appeals court wrongly found that $3.5 million in life insurance proceeds, which the company used to redeem Connelly's shares, increased the company's value under the willing-buyer and willing-seller test.

 

International Zone

IRS Opens Bonus Energy Credits To More Offshore Wind Sites – Kat Lucero, Law360 Tax Authority ($):

The Internal Revenue Service unveiled guidance Friday that would allow more parts of offshore wind facilities to qualify for the bonus production and investment tax credits that provide incentives for clean energy projects being built in so-called energy communities.

In Notice 2024-30, the IRS said facilities that house control operations for offshore wind energy systems can be located in ports that can be an "energy community" and therefore eligible for bonus credits created by the 2022 landmark climate law, known as the Inflation Reduction Act. Energy communities include a brownfield site or area whose economy once relied on the fossil fuel industry based on employment information.

The notice is here.

 

June Deadline Approaches for U.S. Taxpayers Abroad – Tax Notes ($) . "The IRS has reminded (IR-2024-79) taxpayers living and working outside the U.S. that they have until June 17 to file their 2023 federal income tax return, while taxpayers in Gaza, Israel, and the West Bank are granted relief until October 7.”

 

US Unlikely To Move On Hungary Tax Treaty, Official Says – Natalie Olivo, Law360 Tax Authority ($):

Hungary's low corporate tax rate and other policies will likely prevent the U.S. government from resuming negotiations on a stalled 2010 tax treaty after terminating its existing Hungarian treaty in early 2023, an IRS official said Friday.

The U.S. historically has engaged in treaty negotiations only with countries that have reasonable corporate tax systems, according to Gregory Texley, a senior technical reviewer in the Internal Revenue Service's Office of Associate Chief Counsel, International. Currently, Hungary has no withholding tax on outbound payments and a corporate tax rate that is below 10% in most cases, he said, speaking during a conference in New York hosted by the U.S. branch of the International Fiscal Association.

 

Stock Buyback Tax Regs Imminent, Treasury Official Says – Kevin Pinner, Law360 Tax Authority ($):

Proposed regulations on the federal stock buyback tax will be released imminently and will address feedback on a rule designed to prevent foreign companies from avoiding the tax using U.S. affiliates, a Treasury official said Friday.

The proposed regulations are in the final stages of clearance, Brenda Zent, special adviser to the international tax counsel at the U.S. Department of the Treasury, said during an International Fiscal Association conference in New York.

 

From the “On Your Mark, Get Set, Go!” file

IRS tries to catch up on backlog as returns flood in – Michael Cohn, Accounting Today:

The Internal Revenue Service has been making progress on catching up with its backlog of unprocessed tax returns, but more work needs to be done, according to a new report.

The report, released Friday by the Treasury Inspector General for Tax Administration, found the IRS significantly reduced the number of unprocessed tax returns and other kinds of tax account work last year, and many of the functions in its tax processing centers have gone back to pre-pandemic levels.

The report is here.

 

What Day Is It?

Happy Tolkien Reading Day! (The guy who wrote The Lord of the Rings.) Today could also be Tolkien Binge-Watching Day.

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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.