Tax News & Views Basis Tax Boost Watch Roundup

Joe Kristan
June 19, 2024
Using Smart Watches While Training

Key Takeaways

  • TCJA Expiration = 10% tax surge: CBO.
  • IRA credit prevailing wage, apprenticeship rules.
  • R&D claims no longer need to name names.
  • IRS attacks basis shifts; taxpayer suits expected.
  • Tax bill: not dead yet?
  • Kansas tax deal heads to Governor for signature.
  • Juneteenth
  • National Watch Day.

Individual Taxes Would Surge 10 Percent if TCJA Expires, CBO Says - Doug Sword, Tax Notes ($):

The Congressional Budget Office forecast, released June 18, pegs the long-term growth of tax collections from individuals at 4 percent a year, roughly $100 billion a year at current levels. But if the Tax Cuts and Jobs Act provisions expire and tax rates go back to what they were in 2017, and the standard deduction and gift and estate tax thresholds are halved, collections from individuals will surge 11 percent in 2026 and 10 percent in 2025, according to the nonpartisan budget scorer.


The report projects revenues from estate and gift taxes — estimated at $32 billion for 2024 — will grow by 40 percent in 2027 after the threshold for paying the taxes is halved following the scheduled expiration of the TCJA provisions.

National debt will exceed $50 trillion by 2034, budget watchdog estimates - Jacob Bogage, Washington Post. "The new figures add to the urgency facing policymakers in 2025 — and on the campaign trail — to tackle the nation’s financial health. Next year, vast portions of the tax code are set to expire, potentially forcing a steep tax hike on individuals and families. Congress suspended the debt limit in 2023, but that, too, will expire next year, setting up a showdown between the two parties over federal spending."

U.S. Debt on Pace to Top $56 Trillion Over Next 10 Years - Alan Rappeport, New York Times. "The C.B.O. also said an agreement by lawmakers, which Republicans insisted upon, to claw back $20 billion from the Internal Revenue Service would reduce revenues from corporate and individual income taxes by about $32 billion through 2034. That assumption stems from an expectation that the I.R.S. money would be used to crack down on tax cheats, resulting in more federal revenue."


Energy credit wage, apprenticeship rules issued.

IRS Clarifies Prevailing Wage and Apprenticeship Requirements - Mary Katherine Browne and Alexander Rifaat, Tax Notes ($):

The IRS issued final rules for taxpayers using certain labor incentives associated with a series of clean energy subsidies.


Under the prevailing wage requirement, taxpayers claiming some credits would receive only one-fifth of the available credit amount unless laborers and mechanics employed by their contractors and subcontractors in the construction and alteration or repair of their qualifying facility are paid the prevailing rates as determined by the labor secretary in accordance with the Davis-Bacon Act.

To meet the apprenticeship requirement, taxpayers must ensure that the applicable percentage of total labor hours are performed by qualified apprentices. For projects that began construction in 2022, 10 percent of labor hours must be performed by qualified apprenticeships. By 2024, that number has increased to 15 percent.

Regs. cover green energy incentive wage and apprenticeship requirements - Martha Waggoner, The Tax Adviser. "The PWA requirements apply to all contractors and subcontractors of the taxpayer that employ laborers and mechanics. However, taxpayers claiming the increased credit or deduction are responsible for ensuring that the PWA requirements are satisfied."

Links: T.D. 9998IRS press release 

Related: Eide Bailly Energy Incentive Program


Research credit refund rules eased

IRS Paves the Way for Easier Research Credit Refund Claims - Caitlin Mullaney, Tax Notes ($):

The IRS has removed two of the items of information taxpayers must provide when submitting research credit refund claims. 

Effective immediately, taxpayers submitting section 41 research credit refund claims no longer need to include the names of the individuals who performed each research activity or the information each individual sought to discover, the IRS announced in a June 18 update on its FAQ webpage

Related: Research & Development Tax Incentives


IRS attacks partnership basis shifting; challenges expected.

IRS Crackdown Takes New Aim at Partnerships’ Maneuvers - Richard Rubin, Wall Street Journal ($). "The proposals attack a technique known as basis shifting among related parties, where partnerships that share common ownership move tax basis from assets that can’t be depreciated—like stock and land—to assets such as equipment that can generate depreciation deductions. Sometimes, officials said, businesses repeatedly depreciate the same asset."

Planned IRS Rules on Partnership Maneuver Exposed to Challenges - Erin Schilling and Erin Slowey, Bloomberg ($). "But the tax code allows for a change in basis, tax professionals said, so regulations the IRS said it intends to release will likely be challenged in court. This latest move from the IRS comes as it sees an increase in Administrative Procedure Act litigation and awaits a pending Supreme Court case that could unravel some of its most controversial regulations."


Tax bill not dead yet? Kansas tax cut deal clears legislature. Oregon signs up for Direct File.

Just resting? An update from Politico's Burgess Everett says one important senator insists the House-passed tax bill, stalled since February in the Senate, isn't dead yet. "It’s been more than four months since the House passed a bipartisan tax bill marrying business tax breaks with an expanded child tax credit. And despite Congress' full-on slide into election season, Sen. Chuck Schumer says the bill is still alive."

Kansas Due for Tax Cuts as Lawmakers Pass Governor-Backed Bill - Michael Bologna, Bloomberg. "The most significant feature of the bill shifts Kansas from a three-bracket graduated income tax system with rates of 3.1%, 5.25% and 5.7%, to a two-bracket system with rates of 5.2% and 5.58%. The measure passed the Senate Tuesday morning by a vote of 34-4 and quickly won passage in the House by a vote of 121-2."

Oregon to Join Direct File for 2025; Pilot States to Stay - Benjamin Valdez, Tax Notes ($):

Treasury Secretary Janet Yellen on June 18, along with Senate Finance Committee Chair Ron Wyden, D-Ore., announced that Oregon would join Direct File for tax year 2025. The program, recently made permanent by the IRS, allows a limited group of taxpayers to file for free through the agency. All 50 states and the District of Columbia have been invited to integrate with the system.

All 12 states that participated in the pilot program opted to remain in the program for tax year 2025, Direct File Service Owner Bridget Roberts told reporters by telephone. Roberts added that the IRS hasn't yet settled on expansions to the tax situations supported by the program but that it "will have something to share in the coming months."


Blogs and bits

Tax ID theft victims waiting 2 years for refunds - Kay Bell, Don't Mess With Taxes. "Not only must they go through the process of alerting the IRS of the stolen identity and fraudulent refund claim, their wait for their rightful refunds takes much, much longer. In some instances, two years."

Will Filing Taxes Jointly Save Money? - E. Napoletano, Buy Side. "However, some couples may be better off filing separately, especially if they have unique financial circumstances including hefty unreimbursed medical expenses or one spouse with tax problems in their past."


Consent Order Signed by Debtor and IRS Does Not Preclude Additional Tax Assessments - Parker Tax Pro Library.  "The Eleventh Circuit affirmed the Tax Court and held that a Consent Order signed by a debtor in bankruptcy and the IRS was not a final determination of the debtor's tax liability for the years at issue."

Should You Handle Your Own IRS Tax Audit Or Hire A CPA Or Lawyer? - Robert Wood, Forbes. "Should an accountant or tax lawyer handle it for you? Either one is better than doing it yourself in my view. On average, I believe that taxpayers come out better if they don’t represent themselves. That’s so even taking the cost of professional fees into account. There are cases in which representing yourself can make sense, but they are rare."

Related: Eide Bailly IRS Exam Assistance


Tax Policy Corner

Five Things to Know about Trump’s Tariff and Income Tax Proposals - Erica York, Tax Policy Blog.

1. The Math Doesn’t Work. The individual income tax raises more than 27 times as much revenue as tariffs currently do, but it’s not the gap in revenue levels that makes replacement impossible. The bigger issue is the relative size of the tax base. The most recent Internal Revenue Service data for tax year 2021 shows American taxpayers reporting almost $15 trillion of individual income while paying $2.2 trillion of taxes, for an average tax rate of 14.9 percent. Total imports in 2021 were $3.4 trillion, but that includes services that are not subject to tariffs. Looking at goods alone, imports totaled $2.8 trillion in 2021, while tariff revenues were $80 billion, for an average tax rate of 2.9 percent.

Untipped: Why Trump’s Tax Cut Promise Would Hurt Many Service Workers - Howard Gleckman, TaxVox. "One example: Half of wait staff in the US make $32,000 or less annually, according to the Bureau of Labor Statistics. A single worker making $32,000 would owe roughly $1,900 in federal income tax. But that’s only if they could not claim benefits such as the Child Tax Credit or the Earned Income Tax Credit. Most parents making $32,000 or less who receive those credits already pay no federal income tax."

Debt burdens, tariffs, and Up Wing thinking - James Pethokoukis, Faster, Please! "There are a lot of smart tax plans out there, but one favorite of mine, as well as many economists, is the elegant Bradford X tax, a flat tax-variant meant to simplify taxation and encourage savings and investment. It consists of a progressive household wage tax with no capital income tax, and a business cash flow tax allowing immediate deduction of investment costs. The business tax rate matches the highest wage tax rate, based on revenue targets and desired progressivity."


In the courts

Tax Court Admonishes CPA For 'Unbecoming' Tax Positions - Anna Scott Farrell, Law360 Tax Authority. The taxpayer "who headed the audit department for Rising Pharmaceuticals Inc. when the taxes accrued for 2018, claimed without support that his wages weren't taxable unless he invested them and converted them to gains, Judge Elizabeth A. Copeland said, upholding the tax deficiencies."

Oklahoma City man pleads guilty to attempting to impede federal tax laws - IRS (Defendant name omitted): "Court documents allege that beginning in 2017, Defendant, knowing of the IRS enforcement actions, forged the signature of an IRS revenue officer onto IRS forms, including an IRS Installment Agreement and an IRS Release of Levy, in an attempt to have levied funds paid to himself rather than be sent to the IRS."

Back to the old drawing board.


What day is it?

Happy Juneteenth! And Happy National Watch Day.

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About the Author(s)

Joe Kristan

Joe B. Kristan, CPA

After 38 years centered on tax consulting for closely held businesses and their owners, Joe is joining Eide Bailly's National Tax Office. Joe's responsibilities include communication, process improvement and training. He is a principal contributor to the Eide Bailly Tax News and Views blog, providing daily updates on tax reform and other tax news. Joe is a Certified Public Accountant and a member of the AICPA Tax Section and Iowa Society of Public Accountants.

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.