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Tax News & Views One Hand Giveth, The Other Taketh Away Roundup

Jay Heflin
May 31, 2024
Young girl victim of hacking

Key Takeaways

  • Offsetting TCJA cuts
  • Remember that tax bill?
  • Direct File is a thing.
  • Court updates.
  • Both Pillars.
  • Gold, baby!
  • To Smile or Not to Smile.

Tax Cut Extensions Cost 50% More – Committee for a Responsible Federal Budget:

Extending certain parts of the Tax Cuts & Jobs Act (TCJA) would cost $4 trillion through 2034, according to new estimates from the Joint Committee on Taxation (JCT) published by the Congressional Budget Office (CBO). These revenue loss estimates have increased dramatically compared to prior estimates.

Comparing the cost of extending major elements of the TCJA over common years, we estimate: The cost of extension has grown by roughly 50 percent since the first extension estimate back in 2018, the equivalent of $1.2 trillion through 2034.

The prospect is likely that TCJA provisions will be extended beyond 2025. And given their escalating cost that could be a daunting chore. 

What is unclear is which of the TCJA provisions will be extended. The outcome of the 2024 elections will be a huge factor in determining which provisions stay and which go. But no matter which provisions are extended into 2026, the cost for doing so will likely be offset (or partially offset). And soaring costs means more offsets will be needed. This basically means that while some taxpayers will have their TCJA tax cuts extended, they might also be served with a tax increase to help pay for those extensions. One hand giveth, the other taketh away. 

Talks have already begun on Capitol Hill about extending TCJA provisions:

Capitol Hill Recap: Tax Teams Announcement – Jay Heflin, Eide Bailly:

Senator Mike Crapo (R-Idaho), the ranking member of the Senate Finance Committee, announced the creation of tax working groups.

These groups will seek to figure out which of the expiring provisions from the Tax Cuts and Jobs Act (TCJA) should be extended, allowed to expire, or modified… The same set-up is happening in the House Ways and Means Committee, where committee Republicans have created groups to scrutinize TCJA provisions.

 

About that tax bill that passed the House in January and would allow for R&D expensing:

Summer Could Be Tax Package’s Last, Best Hope – Doug Sword, Tax Notes ($):

The June-July summer session is the best remaining chance for the Senate to act on the House-passed tax package, a top Finance Committee staffer said May 30.

Jonathan Goldman, senior tax counsel to Finance Committee Democrats, arrived at that conclusion largely by discounting the chances of the $79 billion Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) advancing in the Senate’s September and post-election sessions.

Don’t get your hopes up about the bill being enacted. The Senate approving the House-passed bill as-is won’t happen. And Senate modifications to the bill probably wouldn’t pass the House. Lawmakers have been calling this bill “dead" for about two weeks. And the further from the 2024 tax season we get, the deader this bill becomes. 

 

Agency Updates

IRS makes Direct File a permanent option to file federal tax returns; expanded access for more taxpayers planned for the 2025 filing season – IRS:

Following a successful filing season pilot and feedback from a variety of partners, the Internal Revenue Service announced today that it will make Direct File a permanent option for filing federal tax returns starting in the 2025 tax season. 

The agency is exploring ways to expand Direct File to make more taxpayers eligible in the 2025 filing season and beyond by examining options to broaden Direct File’s availability across the nation, including covering more tax situations and inviting all states to partner with Direct File next year.

The IRS plans to announce additional details on the 2025 expansion in the coming months.

IRS Starts Expansion of Government Alternative to Private Tax Software – Richard Rubin, Wall Street Journal ($):

The Biden administration is inviting all 50 states and Washington, D.C., to participate, potentially creating a much bigger program than this year’s limited-scope 12-state pilot. Over the next several years, the Internal Revenue Service wants to make Direct File an option for all common tax situations, Treasury Secretary Janet Yellen said. 

“Direct File is an important component of a stronger comprehensive tax system that gives taxpayers electronic filing options that best suit their needs,” IRS Commissioner Danny Werfel told reporters Thursday. 

Direct File is just one part of the plan:

IRS plans to make its free tax filing program permanent – Katie Lobosco, CNN:

Direct File is just one of the many changes happening at the IRS after it received the new funding, totaling $80 billion over a decade, from the Inflation Reduction Act...
Now, the IRS is focused on ramping up audit rates of wealthy taxpayers and large corporations.

 

Court Side

Tax Court Nixes $30M In Conservation Easement Deductions – Anna Scott Farrell, Law360 Tax Authority ($):

The U.S. Tax Court upheld on Thursday the IRS' rejection of more than $30 million in charitable contribution deductions for Alabama conservation easements for partnerships acting as test cases for a larger group that took $187 million in deductions.

The court found that certain estimated property values forming the basis of the 2014 deductions in the test cases for the three Georgia partnerships — Excelsior Aggregates LLC, Alabama S&G LLC and Barnes-Escambia — were inflated based on inaccurate estimates of the land's potential for commercial sand and gravel mining, according to the opinion.

 

IRS’s Whistleblower Proceeds Do-Over Succeeds – Nathan Richman, Tax Notes ($):

The IRS successfully challenged a whistleblower petition for having insufficient alleged proceeds despite failing with that argument on a motion to dismiss, the Tax Court concluded.

While the failure of the petitioner in McCrory v. Commissioner to satisfy the $2 million proceeds requirement in section 7623(b) didn’t deprive the court of jurisdiction, it was enough of a threshold failure to prevent the case from proceeding after the IRS asserted it as an affirmative in its answer, Judge Emin Toro said in a May 30 memorandum opinion.

 

Tax Court Tosses Whistleblower Award Contest – Jack McLoone, Law360 Tax Authority ($):

The U.S. Tax Court ruled Thursday that it cannot review a woman's roughly $1,700 whistleblower award from the Internal Revenue Service because it does not meet a threshold for mandatory awards.

The IRS was granted summary judgment by Judge Emin Toro because Suzanne Jean McCrory's reward does not meet the $2 million statutory threshold for nondiscretionary awards established by Internal Revenue Code Section 7623(b)(5) , according to the memorandum opinion. The court can generally review only claims related to such nondiscretionary awards, it said, therefore requiring it to grant the IRS' motion.

 

Black Business Owners Sue to Stop Corporate Transparency Act - Caleb Harshberger, Bloomberg ($). “A collection of Black-owned businesses and groups supporting Black entrepreneurs in Massachusetts have sued the US Treasury Department over the Corporate Transparency Act—alleging that the beneficial ownership requirements are unconstitutional and harm businesses.”

 

International Zone

Two Administrative Guidance Packages on Pillar 2 to Come in 2024 – Stephanie Soong, Tax Notes ($):

Stakeholders can expect the release of two more rounds of OECD administrative guidance for the global anti-base-erosion (GLOBE) rules in 2024, with one containing measures that should benefit American companies, according to a Treasury official.

The package, which should be published soon, “will include certain administrative simplifications and also some key structural rules which should generally be favorable” to U.S. multinational enterprises, Brett Bloom, an attorney-adviser in Treasury’s Office of Tax Policy, said May 30 at a Federal Bar Association conference in Washington.

 

Later Pillar 1 Due Date Set For June As Tax Talks Wrap Up – Kevin Pinner, Law360 Tax Authority ($):

Diplomats agreed this week to finalize a treaty for reallocating some of large companies' tax payments and setting standards to simplify some transfer pricing in lower-income countries by June 30 after having missed a March deadline, according to a statement published Thursday by the OECD.

The multilateral treaty, nearly a decade in the making, will be signed as soon as it's practical, according to the statement by 126 jurisdictions that participated in meetings from Tuesday through Thursday as part ofthe Organization for Economic Cooperation and Development's inclusive framework group. The group, which now has 147 members, first endorsed outlines of what is known as Amount A, to link some taxing rights to economic presence instead of only physical presence, and Amount B, to simplify pricing transactions in countries that lack local comparable data, in 2021 under the collective title Pillar One.

 

From the “As good as gold” file

You Bought Gold at Costco. What Are the Taxes When You Sell It? - Laura Saunders, Wall Street Journal ($):

Gold is glittering. Recently, the spot price was around $2,360 an ounce, up about 21% in the past 12 months. Some buyers are snapping up gold bars and coins offered by Costco, while others are investing in funds holding bullion.  

Many buyers don’t know or care about taxes on gold sales, because they see their hoard as a hedge against chaos instead of an asset like a stock. If they need to sell, goes the thinking, maybe there won’t even be an Internal Revenue Service.

The thought of not having an IRS is likely wishful thinking, so you better pay up.

 The sale of gold coins or bullion held outside retirement accounts typically produces either capital gains or losses. Net gains or losses are short-term if the gold was held for a year or less before sale, and long-term if it was held longer than a year.

 

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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.