Key Takeaways
- Commissioner faces questions on promotion of dubious tax credits.
- Promoters made contributions to his dormant campaign fund.
- Trump visits the Hill to lobby for tax bill.
- SALT lobby continues to hold out.
- Passthroughs "alarmed" by SALT cap workaround limits.
- Rescue dog day.
Trump’s Pick to Lead I.R.S. Promoted a Nonexistent Tax Credit - Andrew Duehren, New York Times:
Mr. Long’s effort to promote the tax credit, along with his peddling of a separate, fraud-ridden pandemic-era tax break, will be under close scrutiny on Tuesday when he appears before the Senate Finance Committee for his confirmation hearing.
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The I.R.S., responding to a request from Senate Democrats, told lawmakers there was no such credit. “We can confirm that these tax credits do not exist,” the agency wrote in March. “Taxpayers who claim credits that don’t exist are subject to penalties and possible examination. Furthermore, promoters of these credits may be subject to civil or criminal penalties.” The Treasury Department declined to comment on whether the credit exists.
A hearing a long time coming - Bernie Becker, Politico:
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But notably, the first questions that [Elizabeth] Warren raise are over whether Long will insulate the IRS from political interference.
It’s an issue that’s taken on new urgency ever since Trump himself started weighing in on Harvard’s tax exemption, while the House’s tax bill would also give the Treasury secretary new powers to strip groups of tax-exempt status.
If you think Billy Long is likely to be a strong independent force at the IRS, consider his work on X/Twitter.
Senators Probe Cash Funneled To Trump IRS Nominee - Helen Santoro, The Lever:
The seven companies now being probed by the Senate Democrats were included in the contributions identified by The Lever.
Big Big Beautiful Bill Day
Divided GOP Closes In on Tense House Vote - Siobhan Hughes and Olivia Beavers, Wall Street Journal.
They are banking on the president to help them. Trump, who has urged lawmakers to get on board, on Monday met with GOP lawmakers one-on-one and is planning to speak to the broader House Republicans conference on Tuesday morning on Capitol Hill, according to people familiar with the matter. The House Rules Committee is planning to meet shortly after midnight Wednesday morning to try to then send the package later that day to the House floor.
SALT Agreement Remains Elusive for House GOP on Trump Tax Bill - Jack Fitzpatrick and Steven Dennis, Bloomberg ($):
But the meeting failed to produce a deal on SALT, among the thorniest issues for House leaders navigating the political realities of pushing an expensive tax bill through the narrow and factious Republican majority.
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The bill approved last week by the House tax committee sets a $30,000 cap for individuals and couples. That draft called for phasing down the deduction for those earning $400,000 or more. That plan was quickly rejected by several lawmakers who called the plan insultingly low.
House GOP Still Building Consensus on Tax Bill, Johnson Says - Katie Lobosco, Tax Notes ($):
Changes are expected to be made to the tax-and-spending-cut bill before the Rules Committee votes, to appease some House Republicans. Johnson can afford to lose only three Republican votes to pass the legislation, and several factions are demanding changes.
Some members want more relief from the state and local tax deduction cap. The bill raises the SALT cap from $10,000 to $30,000. And budget hard-liners want changes to the proposed Medicaid reforms, as well as faster phaseouts of clean energy credits provided under the Democratic-backed Inflation Reduction Act.
Passthroughs Alarmed by Proposals to Limit SALT Cap Workarounds - Kristen Parillo, Tax Notes ($):
As pointed out by a Joint Committee on Taxation description of the proposals (JCX-21-25), the bill would abrogate Notice 2020-75, 2020-49 IRB 1453. In the November 2020 guidance, the IRS essentially endorsed states’ passthrough entity tax regimes, which generally allow passthrough entities to pay state and local income taxes at the entity level (where it can be deducted in full) and then provide a credit or exclusion to the business owners so the income isn’t taxed again by the state at the individual level.
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According to Spengler, the bill would create winners and losers by allowing only some classes of passthrough owners to continue to benefit from states’ SALT cap workarounds. Partners and S corporation shareholders of entities qualifying under section 199A would “win,” while those in service-based passthrough businesses would “lose,” he said.
Things in the Bill
Breaking Down What’s in the GOP Tax Bill - Richard Rubin and Danny Dougherty, Wall Street Journal. "The bill extends tax cuts, keeps the expanded $2,000 child tax credit, and imposes a looser $30,000 limit on state and local tax deductions."
GOP Drops Measure to Boost Treasury’s Power Over Tax-Exempts - Erin Schilling, Bloomberg ($). "The bill no longer includes a provision, decried by the tax-exempt community, that would allow the Treasury secretary to gain the power to suspend the tax-exempt status of terrorist-supporting organizations."
Trump's 'One Big Beautiful Bill Act': How remittance tax plan might deliver a big economic blow to US allies? - The Economic Times (India):
Big Beautiful Borrowing
White House Downplays Rating Drop Linked to Tax Bill - Alexander Rifaat, Tax Notes ($):
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Treasury Secretary Scott Bessent dismissed the rating downgrade and blamed the Biden administration for concerns regarding the fiscal trajectory.
“I think that Moody’s is a lagging indicator,” Bessent said during an appearance on NBC’s Meet the Press on May 18. “We didn’t get here in the past 100 days. It’s the Biden administration and it’s the spending we have seen over the past four years.”
Donald Trump’s ‘big, beautiful’ tax bill heightens concerns over US debt - Financial Times:
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The 30-year Treasury yield on Monday rose to a peak of 5.04 per cent, its highest level since 2023 after the House Budget Committee advanced the legislation and on the heels of Friday’s Moody’s rating cut.
Tax Administration Update
Deportation fears trigger decline in tax filings in immigrant communities - Lauren Kaori Gurley and Jacob Bogage, Washington Post:
Blogs and Bits
GOP’s one big beautiful bill includes new MAGA savings account for newborns and young children - Kay Bell, Don't Mess With Taxes. "No tax is due while the MAGA account grows, but distributions, even those used to pay qualified expenses, would be taxed."
Tax Court Rejects Argument That Software Was to Blame for Failure to File Forms 8300 - Parker Tax Pro Library. "The Tax Court held that an automobile dealer did not establish reasonable cause for failing to file multiple Forms 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, and thus was liable for penalties assessed by the IRS."
Tax Court Provides Insight on Scope of Review in Passport Cases: Garcia v. Commissioner - Ed Zollars, Current Federal Tax Developments. "The case, Alberto Garcia, Jr. v. Commissioner of Internal Revenue, 164 T.C. No. 8, reviewed by the full court, clarifies that such reviews in the Tax Court can be de novo, based on a new record developed in court, rather than being limited to the administrative record. This ruling has significant implications for how these cases will be litigated."
Related: Eide Bailly IRS Dispute Resolution and Collections Services.
Tax Court Rejects Too Good to be True Tax Shelter Defense Based on Tax Opinion Purchased to Support a Reasonable Cause Defense - Jack Townsend, Federal Tax Procedure. "I find the penalties interesting because the taxpayers recognized that the shelter might be subject to penalties and, for that reason, 'purchased' a tax opinion that, they hoped, would protect them against penalties if the IRS saw through the smoke and mirrors in the documents and disallowed the tax benefits of the shelter."
Not so Independent
Charleston man sentenced for federal tax crime - IRS.
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Defendant admitted that some time prior to June 30, 2015, he and the two employees agreed that he would begin treating them as independent contractors. Defendant further admitted that he knew this arrangement would relieve him of paying the employer portion of the employment taxes to the IRS and of withholding the employee withholdings of the two employees.
As a result of this arrangement, Defendant paid gross wages by check to the two employees even though neither changed their job duties or responsibilities. Defendant admitted that he knew that neither was an independent contractor while he paid each by check throughout their continued employment. Defendant further admitted that he did not pay the trust fund taxes to the IRS that were owed and did not pay over the employer’s share of employment taxes for the two employees each quarter during the duration of this arrangement.
This looks like an egregious example of avoiding payroll taxes by reclassifying employees as independent contractors. This case shows how that move can be a disaster.
What day is it?
It's National Rescue Dog Day! They are the best.
