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Tax News & Views Summer "Fun" Roundup

Jay Heflin
June 3, 2024
Capital Building at Sunset

Key Takeaways

  • Will tax bills see action this summer?
  • Pass-thru deduction on the bubble.
  • Spinoff transactions.
  • Storm relief.
  • Partners respond to IRS.
  • Clean fuel guidance.
  • International updates.
  • Dems don’t need an update.
  • I’m outta here!

5 Tax Bills To Watch This Summer – Asha Glover, Law360 Tax Authority ($):

House and Senate lawmakers return to Washington, D.C., on Monday, where several tax-related bills await them in both chambers, including a stalled package that would restore business tax breaks and expand the child tax credit.

Here, Law360 takes a look at five bills that could move through Congress this summer.

Actually, it’s more likely that some of them don’t move at all.

Tax Relief for American Families and Workers Act

The House of Representatives passed the Tax Relief for American Families and Workers Act of 2024, or H.R. 7024, by a vote of 357-70 on Jan. 31.

Senator Mike Crapo (R-Idaho) has stopped the Senate from acting on this bill. This inactivity is expected to continue.

Federal Disaster Tax Relief Act of 2023

The House passed the Federal Disaster Tax Relief Act of 2023, or H.R. 5863, by a 382-7 vote May 21.

House lawmakers signed a “discharge petition” to force on floor vote on the legislation. Senate action on the bill is unlikely because other tax measures could be added to the bill that would prohibit it from passing Congress.  

Foreign Grant Reporting Act…

The bill would require Internal Revenue Code Section 501(c) organizations to report on their annual tax filings the names and addresses of foreign entities that they have provided assistance to, including grants, according to the bill's summary.

Both chambers need to approve this bill for it to become law. Given the crowded calendars in the House and Senate, there may not be room to schedule votes for this bill.

No Foreign Election Interference Act…

The bill, introduced by Rep. Nicole Malliotakis, R-N.Y., would prohibit tax-exempt entities from making any contributions to political committees for eight years after receiving a contribution or gift from a foreign national, according to the bill's summary. 

Again, crowded calendars may not permit votes on this bill.

Taxpayer Data Protection Act…

The bill would increase the maximum penalty for disclosing tax information without authorization to a fine of up to $250,000, a prison sentence of up to 10 years, or both…

Once again, crowded calendars may not permit votes on this bill.

The bottom line: Both chambers are focused on funding the federal government. This subject is usually fraught and time consuming. Tax bills might not get much floor time. 

 

Should We Breathe New Life Into the Passthrough Deduction? – Martin Sullivan, Tax Notes ($):

Even though in tax circles it is widely known that many passthrough businesses are large, proponents of section 199A won’t be able to resist implying that tax cuts for passthroughs flow exclusively to small businesses. The best official sources available to demonstrate that untruth are data from the IRS. In 2017 there were about 2,000 S corporations with an average of nearly three-quarters of a billion dollars of revenue. In 2021 there were 22,000 limited liability corporations that on average had $110 million in business receipts.

Facts won't really matter when it comes to extending 199A beyond its 2025 expiration. What will matter is the outcome of the 2024 election. If the GOP remains in control of the House, then the odds increase for extending the pass-thru deduction. 

 

IRS Updates

IRS Guidance Narrows Spinoffs Available For Preapproval – Natalie Olivo, Law360 Tax Authority ($):

Recent IRS guidance limiting the types of spinoff transactions that revenue officials will approve as tax-free ahead of time leaves practitioners and corporations to determine whether to pursue certain intercompany reorganizations without the agency's blessing.

Revenue Procedure 2024-24, issued May 1, appears to reduce the range of spinoff plans that companies can bring to the Internal Revenue Service for a private letter ruling stating that the transaction would be tax-free under Internal Revenue Code Section 355. For example, the guidance suggests the agency will no longer give PLRs for reorganizations where a parent company wants flexibility when retaining some of its spun-off subsidiary's shares or intends to use them to pay off short-term debt.

 

IRS announces tax relief for taxpayers impacted by severe storms and flooding in Massachusetts; various deadlines postponed to July 31 – IRS:

The Internal Revenue Service announced today tax relief for individuals and businesses in parts of Massachusetts affected by severe storms and flooding that began on Sept. 11, 2023.

These taxpayers now have until July 31, 2024, to file various federal individual and business tax returns and make payments.

 

Partnerships Are Responding to Compliance Letters, IRS Says – Benjamin Valdez, Tax Notes ($):

High-wealth partnerships have been responsive to the IRS’s recent effort to send alerts over balance sheet discrepancies, according to a top official.

As of March, over 60 percent of the partnerships that received compliance alert letters regarding balance sheet discrepancies have responded to the IRS, Holly Paz, commissioner of the Large Business and International Division, said at a May 31 Federal Bar Association conference. The agency sent a total of 480 letters in October 2023.

 

IRS Clean Fuel Tax Credit Guidance Details Eligibility Rules - Caleb Harshberger, Bloomberg ($):

The Treasury Department and IRS Friday issued new guidance on the Clean Fuel Production tax credit, laying out that a taxpayer must be registered as a producer of clean fuel at the time of production to be eligible for the credit.

The guidance (Notice 2024-49) provides information for taxpayers registering for both sustainable aviation fuel—or SAF—and non-sustainable aviation transportation fuel. The credit is equal to the product of the applicable amount per gallon (or gallon equivalent) for any transportation fuel that is produced by the taxpayer at a qualified facility during the taxable year and the emissions factor for such fuel as determined under the code, the IRS said.

 

Court Side

IRS Can Seek Tax Beyond Bankruptcy Deal, 11th Circ. Affirms – Anna Scott Farrell, Law360 Tax Authority ($):

A deal between the IRS and an Alabama real estate developer to settle his tax debt for $2 million during Chapter 11 bankruptcy proceedings wasn't final, and the agency can demand additional taxes from him, the Eleventh Circuit affirmed Friday.

A three-judge panel upheld a 2019 U.S. Tax Court ruling that rejected [the debtor's] challenge to notices of $16 million in tax deficiencies. The panel agreed with the lower court that the consent order at issue between the Internal Revenue Service and Breland wasn't a final determination of his tax liability.

 

International Zone

US, Bulgaria Sign Country-By-Country Reporting Agreement – Jack McLoone, Law360 Tax Authority ($):

The U.S. and Bulgaria signed an agreement Friday on the automatic exchange of country-by-country reports between the nations, Bulgaria's Ministry of Finance said.

Under the agreement, Bulgaria will receive information about the revenue, activities, assets and taxes of major U.S. multinational entities operating in the country, Bulgarian Finance Minister Lyudmila Petkova said in a news release. The agreement was signed on the U.S. side by Ambassador Kenneth Merten.

 

Spotlight on Global Minimum Taxes Shifts to Individuals – Mindy Herzfeld, Tax Notes ($):

Progressive tax advocates are fresh off the twin victories of countries’ formal adoption of a global corporate minimum tax and the promise that the U.N. will be taking on a larger role in multilateral tax policy coordination. Rather than resting on their laurels, activists are building momentum for the next initiative, a global minimum tax on billionaires. Brazil, which holds the G20 presidency, has made a global wealth tax a key plank of its agenda. But the Biden administration — which has been a strong supporter of a global corporate minimum tax — is opposed.

How might the political successes of the global corporate minimum tax be translatable to a global minimum tax on individuals’ wealth? Could the design of a global wealth tax draw from a corporate minimum tax to result in successful implementation?

 

From the “I know you are but what am I” file

Democrats Say They Don’t Need to Cram for 2025 – Doug Sword, Tax Notes ($):

There’s no need for Democrats to form working groups yet or pull all-nighters to get ready for 2025 since their caucus positions gelled with the writing and passage of giant tax bills in 2021 and 2022, top taxwriting committee staffers say.

That contrasts starkly with the Republican approach to educating members and staff about how they might address the expiration of $4.6 trillion worth of tax cuts at the end of 2025. House Ways and Means Committee Republicans have formed 10 tax teams expected to hold field hearings around the country, while Senate Finance Committee Republicans have more internally facing working groups whose goal is to reach a consensus on their approach to the Tax Cuts and Jobs Act [TCJA] expirations.

Tax-writing Republicans in both chambers are updating themselves on the expiring TCJA provisions. Democrats aren’t.

They might not need much of an update on the TCJA because they opposed the bill when it passed Congress in 2017. They will likely oppose extending it, especially if Republicans maintain control of the House.

The big question is how prepared House Democrats will be if they win the House majority after the 2024 elections. There is talk that they would let all TCJA provisions expire because they stem from a GOP bill and introduce their own tax bill that would provide tax relief (likely similar to TCJA provisions) that would benefit taxpayers who earning $400,000 or less.

 

What Day Is It?

Happy National Leave the Office Early Day! Bye-bye, I'm outta here!

 

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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.