Tax News & Views Nonconformity, Crime and Punishment Edition

Iowa Nonconformity: Taxpayer Certainty and Disaster Tax Relief Act of 2019  - Iowa Department of Revenue. 

If you had your home mortgage debt forgiven in 2019, Iowa might not be the best place for that - at least for tax filing. The Iowa Department of Revenue just announced how to deal with the federal tax changes enacted at the end of 2019 if you file an Iowa return.

For 2019, Iowa copies the federal tax law as of March 28, 2018. That means the tax "extenders" passed in December 2019 don't apply to Iowa returns the way the do for federal filings. This press release recaps the differences created by the recent federal changes. Key differences include:

• Exclusion from gross income of discharge of qualified principal residence indebtedness 
• Deduction for mortgage insurance premiums as qualified residence interest
• Reduction in medical expense deduction floor
• Deduction for qualified tuition and related expenses
• Energy efficient commercial buildings deduction
• Qualified employer plans prohibited from making loans through credit cards and other similar arrangements
• Expansion of section 529 plans to apprenticeships.

One unpleasant item from non-conformity is that Iowa still imposes the "parking tax" on non-profits; this rule was repealed for federal tax purposes in December.

The Iowa General Assembly has a history of changing the tax conformity date in the spring session to reflect this sort of last-minute change. This Department of Revenue guidance might push the legislature to get that done, but with other tax legislation under consideration, nothing is certain.

Iowa issues rules for grain bin sales tax exemption. The Iowa Department of Revenue has proposed rules for the grain bin sales tax exemption enacted last year. The exemption depends on the use of the bin - grain storage - not on whether the owner is a farmer. This is good news for co-ops and other grain buyers. From the proposal:

In general, materials that are permanently attached to a grain bin and are required to hold loose grain for drying or storage are used to construct a grain bin and thus exempt from sales and use tax. This generally does not include equipment used to move loose grain into or out of a grain bin.

The guidance provides a useful list of grain bin components that are tax-exempt and taxable. Taxable parts include, among other things, bucket elevators, distributers, receiving stations, conveyors, and scales.

Davenport Man sentenced to Prison for Tax Crimes - US Department of Justice. 

According to this story, the defendant didn't file for 16 of 17 years. He filed for the one year after an IRS exam started, and that return apparently left off a lot of income. Not a great approach to an IRS exam. 

Manhattan U.S. Attorney Announces Guilty Plea Of U.S. Taxpayer In Panama Papers Investigation - US Department of Justice. The first of what promises to be a series. "Using the specialized criminal services of global law firm Mossack Fonseca, [Defendant] set up shell companies and off-shore accounts to conceal millions of dollars.  Now, after years of concealment from the United States, [Defendant] has admitted guilt in a U.S. court and awaits sentencing that could result in a term in a U.S. prison."

Massachusetts State Representative Charged with Embezzling Campaign Funds, Bank Fraud and Tax Fraud - US Department of Justice. "It is alleged that Nangle, a former House Ethics Committee Chairman, used his campaign committee’s debit card to make personal purchases, including thousands of dollars in gift cards for his personal use, among other things."

Trump Pardons Ex-NYPD Commissioner, Texas CEO for Tax Crimes - Alexis Gravely, Tax Notes ($).  "Trump’s grants of clemency — and full pardons for seven of the 11 — come amid the IRS’s increased efforts to ramp up enforcement of civil and criminal tax fraud." More here.

Proposals to Decouple From Interest Limits Pending in 2 States - Amy Hamilton, Tax Notes ($). "New York and Kansas would join the states decoupling from the Tax Cuts and Jobs Act’s limitations on the business interest expense deduction under proposals pending in legislative taxwriting committees." 

The other six: Connecticut, Georgia, Indiana, Missouri, South Carolina, and Wisconsin.

Dealing with a missing W-2 or using Form 4852 instead - Kay Bell, Don't Mess With Taxes. "There are some steps you can take to track it down or get it reissued. If that fails, though, you can turn to this week's Tax Form Tuesday featured document, Form 4852, Substitute for Form W-2, Wage and Tax Statement."

Analysis of Democratic Presidential Candidates Corporate Income Tax Proposals - Erica York, Tax Policy Blog. "2020 Democratic presidential candidates have proposed various changes to the corporate income tax to raise revenue for their policy proposals. This includes increasing the corporate income tax rate, ranging from 25 percent to 35 percent, imposing a corporate surtax or a minimum tax, and lengthening depreciation schedules."

How Can We Increase EITC Participation? - Elaine Maag, TaxVox.