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Tax News & Views Money Walking Roundup

Jay Heflin
April 19, 2024
Stacks of Money

Key Takeaways

  • Tax Day flushes accounts
  • “Tax Teams” not “Working Groups”
  • Funny story re: Stalled tax bill
  • Money pool
  • ERC grief
  • Donor-advised funds regs
  • Committing fraud is not good
  • Pillar “Three”
  • Bedtime reading
  • Cleaning cabinet intrigue  

Money-Market Assets Drop Most Since 2008 as Tax Day Takes Toll - Alexandra Harris, Bloomberg ($):

Money-market assets fell by the most since 2008, driven mainly by an exodus of institutional funds, as tax bills came due. 

About $112 billion flowed out of US money-market funds in the week through April 17, according to Investment Company Institute data. Total assets dropped to $5.97 trillion from $6.08 trillion the week prior.

 

Ways and Means’ ‘Tax Teams’ - Naomi Jagoda, Bloomberg ($) (scroll down):

House Ways and Means Chair Jason Smith (R-Mo.) told Bloomberg Tax Thursday that the panel’s GOP “tax teams” will be released “very, very soon.” 

The teams are designed to help lawmakers prepare for 2025, when much of Republicans’ 2017 tax law is set to expire. Smith emphasized in a brief interview after a huddle with some Ways and Means members Thursday morning that the committee is referring to these groups as tax teams, rather than “working groups,” as previous committees have formed.

“Tax teams are different from working groups, because working groups is when you’re trying to fix a problem,” Smith said. “Tax teams is when you’re trying to plan for success.”

BTW: Don’t call them “working groups.” You will be corrected by tax folk on Capitol Hill.

The reason these “Tax Teams” are being created is because few members currently on the House Ways and Means Committee were on the panel when the Tax Cuts and Jobs Act was enacted in 2017. They need to better understand its provisions, which will be the subject of much debate in 2025, and possibly longer.

 

Regarding the tax bill that is stalled in the Senate, which includes R&D expensing for domestic costs, ups bonus depreciation to 100%, and expands the business interest deduction and the Child Tax Credit, to name a few of its provisions:

Wyden Talks Tax Bill - Naomi Jagoda, Bloomberg ($) (scroll down):

Senate Finance Chair Ron Wyden (D-Ore.) said he believes there are enough senators willing to vote in favor of the $78 billion tax bill for it to clear the chamber if GOP lawmakers end a blockade allowing it to get a vote.

“I believe that if we had a vote on the floor of the United States Senate for what’s come to be called the Smith-Wyden tax bill, we would get well over 60,” he said Thursday during a session at the Semafor World Economy Summit. Wyden took the lead in negotiating the bill along with Ways and Means Chair Smith.

Funny story: I was in a meeting yesterday with a Senator who sits on the Senate Finance Committee.

He said that if anyone tells you there is a plan to move this bill forward they are lying to you. He also said that the longer this bill awaits action the less chance there is that action will happen on it. The bill has been stalled in the Senate for over two-and-a-half months. Tick. Tock.

 

IRS Updates

Contractors Reap Windfall From IRS Transformation – Lauren Loricchio, Tax Notes ($):

The IRS plans to award hundreds of millions of dollars in contracts over the next several years to help fulfill its transformation goals. 

A slide deck posted on SAM.gov from an Inflation Reduction Act industry day event in February outlines the agency’s proposals for dozens of contracting opportunities in the coming years.

 

Despite moratorium, IRS gets 20,000 ERC claims weekly, Werfel says – Martha Waggoner, The Tax Adviser:

Despite a moratorium since September on processing new claims for the pandemic-era employee retention credit (ERC), the IRS still averages 20,000 new applications weekly, Commissioner Danny Werfel told the Senate Finance Committee Tuesday. 

Werfel's comments came as Committee Chairman Sen. Ron Wyden, D-Ore., questioned him about the ERC and whether a tax bill — passed by the House in January and now stalled in the Senate — would help the IRS fight fraud in the program.

There is tax legislation that would move the ERC submission deadline from April 15, 2025 to January 31, 2024. However, that bill is stalled in the Senate. 

Here is what Werfel said at the committee hearing about the incoming ERC claims:

Capitol Hill Recap: Once More, With Feeling! – Jay Heflin, Eide Bailly:

“We did slow it, but even today…we’re still getting 20,000 new claims every week – even when we announced in September that we stopped processing,” Werfel said. “This is because the law allows these claims to be submitted through 2025 and these promoters are out there still pushing for these claims to be filed.”

Exhibit A:

Bogus 'tax service specialists' duped business owners in latest Covid relief debacle, IRS says – Laura Strickler and Ken Dilanian, NBC News:

When the pandemic upended daily life in his small Missouri town, small-business owner Scott Volner went into overdrive to keep his employees on the payroll, despite a drop in revenue. 

Then he started to get bombarded by telemarketers who were claiming to be “tax service specialists,” telling him he qualified for a special IRS pandemic relief credit. Among hundreds of calls and emails, he signed up with a company and agreed to pay a 10% fee. He ended up with a check for $330,000 — money he plowed back into his business.

Cut to the chase: Volner was not eligible for the ERC. He now must repay the money he used to pay his employees with funds he does not have..

 

Donor Fund Rules Unlikely To Be Retroactive, Officials Say – David van den Berg, Law360 Tax Authority ($):

Proposed regulations from the U.S. Department of the Treasury and Internal Revenue Service on donor-advised funds will likely be changed so that they don't apply retroactively, government officials said Thursday. 

The retroactive effect of the proposed rules — which would apply for tax years ending after they are finalized and published but permit reliance on them before publication — wasn't intentional, said Amber MacKenzie, an attorney-adviser in Treasury's Office of Tax Policy. She spoke during a Georgetown Law Office of Executive and Continuing Legal Education conference panel held in Washington, D.C., and online.

 

Lawmakers Press IRS on Identity Theft Case Backlogs and Delays – Chris Cioffi, Bloomberg ($):

Lawmakers are raising concerns about delays in taxpayers getting their identity-theft issues resolved, even as the IRS has been touting dramatic customer-service improvements it’s made in other areas. 

“Taking years to identify and resolve ID theft victims’ claims and problems is unacceptable, and both the delinquent resolution time and sheer volume of this backlog needs to be improved rapidly,” said Senate Finance Committee ranking member Mike Crapo (R-Idaho) during the committee’s April 16 hearing with IRS Commissioner Danny Werfel.

 

Court Side

Clinic Head Gets 9 Years For Medicare Kickback, Tax Scheme – Anna Scott Farrell, Law360 Tax Authority ($).

A health clinic manager was sentenced to nine years in prison and ordered to pay $40 million in restitution to the government for participating in a multimillion-dollar healthcare kickback scheme that involved tax fraud, according to documents in a New York federal court.

[The defendant], who ran several clinics in Brooklyn and Queens, was sentenced Wednesday for charges relating to what federal prosecutors say was his leadership role in a massive scheme that defrauded Medicaid and Medicare of more than $222 million. [The defendant] pled guilty last year to conspiracy to receive and pay healthcare kickbacks and conspiracy to defraud the Internal Revenue Service, according to court documents.

 

Court: No Theft Loss Deduction for ‘Stolen’ Controlling Interest – Kristen Parillo, Tax Notes ($):

The Tax Court rejected a claim by two brothers that they are entitled to theft loss deductions because their thrift bank failed after selling their controlling interest in it to a businessman later convicted of bank fraud. 

A controlling interest isn’t a thing of value that can be the subject of a deductible theft loss under section 165, Judge Patrick J. Urda held in an April 18 memorandum opinion in Giambrone v. Commissioner.

 

Atty In Tax Fraud Must Pay Full $2.5M Per Plea Deal, Feds Say – Anna Scott Farrell, Law360 Tax Authority ($):

A former Houston attorney set to be sentenced Friday for his role in an $18 million offshore tax scheme is trying to limit the government's ability to collect $2.5 million in restitution he promised to pay in a plea agreement last year, prosecutors told a Texas federal court Thursday.

[The defendant], who pled guilty in March 2023 to one count of conspiracy to defraud the federal government, has proposed a restitution order that violates his plea agreement and "surreptitiously inserts improper limitations" on the Internal Revenue Service, prosecutors said in a sentencing memo.

 

International Zone

EU Split Stops Move Toward Corporate Tax Harmonization – Bengt Ljung, Law360 Tax Authority ($):

A group of smaller European Union countries stopped a move toward harmonization of national corporate taxes when EU leaders met Thursday to discuss ways to promote investments in European businesses. 

After intense, eight-hour talks on how to boost the EU's economic competitiveness and capital markets, leaders from the 27-country bloc cut wording from the final conclusions that in earlier draftscalled for "harmonizing relevant aspects ... of corporate tax law to foster equity investment."

I attended a meeting yesterday full of D.C. tax pros. They referred to the EU tax situation as “Pillar Three,” meaning there could be no consensus on taxes between the EU countries and the U.S. will have to deal with them individually.  

 

From the “Trouble Sleeping? Read This” file:

IRS releases 2023 Data Book describing agency’s transformation through statistics – IRS:

The Internal Revenue Service today issued its annual Data Book detailing the agency’s activities during fiscal year 2023 (Oct. 1, 2022 – Sept. 30, 2023), including revenue collected and tax returns processed. 

For FY 2023, the IRS collected approximately $4.7 trillion, or about 96 percent of the funding that supports the federal government’s operations — to fund everything from education to national defense. 

During FY 2023, the IRS processed more than 271.4 million tax returns and other forms, including more than 163.1 million individual income tax returns.

The Data Book is here.

 

What Day Is It?

Today can be fun and alarming. It’s National Clean Out Your Medicine Cabinet Day! Tread carefully!

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About the Author(s)

Jay Heflin Photo

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.