Tax News & Views: Flag Day Roundup

Jenny McGarry
June 14, 2024

Key Takeaways

  • IRS Staffing, Notices, & Penalties
  • FBAR
  • Clean Vehicle Credits
  • Tax Plans
  • Carried Interest Tax Break
  • Conservation Easement
  • Digital Taxes
  • BBA
  • Corporate AMT

IRS Staffing, Notices, & Penalties

Staffing Hurdles Could Slow Impact Of IRS Audit Boost - David van den Berg, Law360($):

The Internal Revenue Service's intended ramping up of enforcement on wealthy people, large corporations and complex partnerships may not have a meaningful impact in the short term because of challenges in hiring and training people to do the work.

The agency said in a report last month that it intends to substantially increase audit rates for rich individuals, complex partnerships and big corporations in the 2026 tax year relative to tax year 2019 

IRS issues erroneous balance due notices to some taxpayers - Kay Bell, Don't Mess With Taxes. "The only thing worse than getting a notice from the Internal Revenue Service, is getting a wrong one. And the absolutely worst IRS communication scenario is getting a mailing that says you owe Uncle Sam when you are sure you paid your tax bill on time. That happened recently to some taxpayers."

A Surging IRS Penalty Is Costing Americans Billions. Here’s How to Avoid It - Laura Saunders Wall Street Journal($):

Here’s a wake-up call for millions of Americans who pay some or all their income taxes quarterly rather than through paycheck withholding: Penalties on underpayments of these taxes have surged recently. Second-quarter amounts are due June 17, so affected taxpayers need to act right away.

This group includes many investors, retirees, business owners and gig workers who aren’t employees, and some others who are. For example, two-earner couples or staffers with stock options could also owe penalties if they aren’t withholding enough.

Feds Strike Deal Ending $7M FBAR Penalty Cases - David Hansen, Law360($):

The U.S. government agreed to settle a pair of foreign bank account reporting cases in which it had sought a total of $7 million from a former insurance broker and his wife's estate, according to a court order filed Wednesday in California federal court.

The order did not specify the settlement amount, though the government had sought $4.6 million in penalties from the ex-broker, Raymond Galliani, and $2.4 million from his wife, Sharon Galliani, who had died in March 2023, according to court documents. In 2023, the court had assigned the case to a federal magistrate for settlement proceedings.

Clean Vehicle Credits

Treasury Issued Over $1B In Clean Vehicle Tax Credits - Kat Lucero, Law360($):

The clean vehicle tax credit of up to $7,500 has saved buyers more than $1 billion in total upfront costs since January, the U.S. Treasury Department announced Wednesday, saying the figures represent a major milestone in lowering transportation costs since the incentive was updated in 2022.

The issuance of $1 billion in tax credits is tied to the 150,000 new and used electric vehicles that consumers purchased with the incentive using its advance payment option to lower the cost of the vehicle at the point of sale, Treasury said. These estimates represent savings of $262 million annually on fuel and maintenance costs, as well as up to $3.2 billion in cost savings over the life of the vehicles, the department said.

Tax Plans

Trump Floats Plan to Eliminate Income Taxes - Alexander Rifaat,Tax Notes($):

Former President Trump openly pondered an attempt to axe income taxes if he wins the 2024 election.

In a meeting with congressional Republicans June 13, Trump said he wanted to explore the possibility of hiking tariffs to alleviate domestic income taxes.

House Ways and Means Committee member Nicole Malliotakis, R-N.Y., confirmed Trump discussed the move but downplayed suggestions his proposal was far-fetched.

“He was simply saying tariffs could be a way to bring revenue into the country. . .and decrease income taxes,” Malliotakis told Tax Notes.

Summers Says Trump Tax Ideas Mean ‘Mother of All Stagflations’ - Chris Anstey, Bloomberg($):

Former Treasury Secretary Lawrence Summers blasted policy ideas floated by former President Donald Trump as immensely damaging to both the US and the global economy.

“This is a prescription for the mother of all stagflations,” Summers said on Bloomberg Television’s Wall Street Week with David Westin Friday, with regard to replacing a major amount of income-tax revenue with tariffs. It would also create “worldwide economic warfare,” he said.

Other Tax News & Views

Senate Budget Chair Seeks End To Carried Interest Tax Break - Kevin Pinner, Law360($). "Lawmakers should end the favorable tax treatment of income from carried interest compared with ordinary earned income, Senate Budget Committee Chairman Sheldon Whitehouse said Wednesday."

Easement Deduction Limit Hurts Conservation, 11th Circ. Told - Anna Scott Farrell, Law360($):

A partnership's tax deduction for its donation of a conservation easement should not be limited to its adjusted basis in the property, the partnership told the Eleventh Circuit in urging it to overturn a U.S. Tax Court decision that it claims will hurt conservation efforts.

The IRS improperly argued that the Tax Court correctly reduced the partnership's allowable deduction to $3.7 million by finding that the land was inventory, relegating its tax treatment to that of a regular asset, Glade Creek said. The IRS relied on sections of law — including IRC Section 170(e) , governing charitable contributions of property — that don't apply to the partnership's case, Glade Creek said.

Digital Taxes May Take Hold Regardless Of Treaty Signing - Natalie Olivo, Law360($):

An internationally agreed-upon freeze on digital levies may continue to thaw even if countries meet their impending deadline to sign a related treaty for new corporate tax rules, in part because the accord faces a hazy path to formal ratification.

The momentum of digital services taxes may slow but not stop if jurisdictions meet their June 30 target date to sign a first-of-its-kind multilateral treaty required under a global deal that would give countries new taxing rights over large remote corporations.

Questions Remain on BBA Treatment of Limited Partner Exception - Kristen A. Parillo, Tax Notes($):

A Treasury official’s confirmation that a partnership’s calculation of self-employment earnings is a partnership item under the new audit regime may not quell tax professionals’ post-Soroban uncertainty over the limited partner exception.

Whether partnerships’ reporting of net earnings from self-employment properly falls within the new audit regime’s scope “requires consideration of the entire statutory and regulatory scheme,” Greg Armstrong of KPMG LLP told Tax Notes.
Corporate AMT Estimated Tax Penalty Relief Extended Again - Chandra Wallace, Tax Notes($):
The IRS and Treasury announced penalty relief on estimated tax payments for corporate AMT liability just days before quarterly payments are due, as they did last quarter, despite tax adviser requests to provide earlier notice.

Fifth Circuit Reverses ‘Inconsistent’ Reasonable Cause Ruling Mary Katherine Browne.
"The Fifth Circuit has reversed a district court’s finding that reasonable cause justified a company’s failure to timely file returns on behalf of its clients, holding that jury instructions given at the trial were “fatally inconsistent” with governing tax regulations."

What day is it?

June 14th is Flag Day. Once you have Old Glory flying, it may be time to consider your next summer read. Our own Joe Kristan helped you out with a review of Peter Reilly’s new book Reilly’s Laws of Tax Planning (& Life!). Reilly’s Laws: Timeless Planning Thoughts for a TikTok World - Joe B. Kristan, Tax Notes. 

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