Expanded ‘chips-plus’ package advances in Senate - Lindsey McPherson, Roll Call:
The substitute does not include a tax provision to restore full and immediate expensing of research and development costs that lawmakers had been pushing, despite Sen. Todd Young, R-Ind., floating it as a possibility earlier in the day.
The full and immediate expensing provision expired at the end of 2021, and companies now have to deduct domestic research and development costs over five years. Young had said earlier Tuesday that the negotiators were considering a one-year retroactive restoration, which would have renewed it just through 2022. But that didn’t make it in.
The next chance to restore current research cost expensing will probably be in December.
If Reconciliation Is Dead, It Must Be Time for Tax Extenders - Doug Sword, Tax Notes ($):
Besides the tax provisions that have already expired, five others are expiring at the end of 2022, including the biodiesel tax credit. That credit was first championed into law in 2005 by Finance Committee member Chuck Grassley, R-Iowa, who has led the charge for its temporary extension numerous times since.
“There’ll be other things, too,” Grassley said, noting that while his biodiesel credit has headlined tax extender packages in the past, there is a more likely candidate this year.
“That provision on R&D expensing — that’s probably the thing that’s going to drive getting 25 extenders done or none of them getting done,” he said.
The worst possible approach would be to extend the allowance of expensing of research costs for only one year, so that may well happen.
Sen. Joe Manchin Balks at Global Minimum Tax Championed by Biden - Richard Rubin, Wall Street Journal ($):
The Biden administration’s international tax agenda suffered a setback when Sen. Joe Manchin rejected a 15% minimum tax on multinational companies this past week, dimming prospects of turning last year’s global tax agreement into reality.
Biden administration officials had planned to use Democratic fiscal legislation to enact the U.S. piece of the deal struck last year by Treasury Secretary Janet Yellen and more than 130 other countries. They wanted quick action to set a 15% minimum tax on U.S.-based multinational companies in each country where they operate, a move aimed at showing international leadership and prodding other countries to follow suit.
IRS Voluntary Disclosure Guide Reveals New Details of Practice - Andrew Velarde, Tax Notes ($):
After the closure of the offshore voluntary disclosure program, the IRS in November 2018 announced new voluntary disclosure guidelines that generally call for a disclosure period of the six most recent tax years. Under the guidelines, the agency assesses one civil fraud penalty under either section 6663 or section 6651(f) for the tax year with the highest liability, but examiners maintain discretion.
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According to the guide, taxpayer interviews, IDRs, and summonses are left up to the examiner’s discretion. It emphasizes that taxpayer cooperation is “the bedrock” of the VDP and that examiners should first rely on IDRs and cooperative discussions with representatives.
"IDRs" are Information requests made by the IRS.
Related: Eide Bailly Offshore Voluntary Disclosure.
New IRS Strategic Plan: Agency issues five-year plan with goal to help taxpayers - IRS:
The IRS Strategic Plan FY2022-2026 will serve as a roadmap to help guide the agency's programs and operations. The plan will also help meet the changing needs of taxpayers and members of the tax community.
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The Strategic Plan, developed with input from external partners as well as IRS employees, focuses on four goals that will help improve customer service:
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Service – Provide quality and accessible services to enhance the taxpayer experience.
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Enforcement – Enforce the tax law fairly and efficiently to increase voluntary compliance and narrow the tax gap.
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People – Foster an inclusive, diverse and well-equipped workforce and strengthen relationships with our external partners.
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Transformation – Transform IRS operations to become more resilient, agile and responsive to improve the taxpayer experience and narrow the tax gap.
Federal Tax Policy To Watch In The 2nd Half Of 2022 - Stephen Cooper, Law360 Tax Authority ($). "Congressional Democrats would like to advance a scaled-down version of the tax priorities in President Joe Biden's domestic agenda while they still have a filibuster-proof majority in the Senate that can pass a reconciliation bill. House and Senate Republicans, meanwhile, will be just as determined to characterize those potential changes as tax hikes that will harm the U.S. economy and hurt working Americans who are suffering from inflation."
Tax Foundation Leader Steps Back, Replacement Sought - Maria Koklanaris, Law360 Tax Authority ($):
Scott A. Hodge, who shepherded the right-leaning Tax Foundation from a small think tank to a leading voice in tax policy, has stepped down as president, a role he held for more than two decades, the group announced.
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When Hodge took over at the Tax Foundation, it had a staff of six. It now has a staff of more than 25 and is recognized as one of the top tax policy think tanks. The group is generally right of center and espouses tax cuts. But under Hodge's leadership its experts have renown in the tax policy space — they are invited to speak all over the world, in front of audiences across the political spectrum.
Europe tacks on larger fuel taxes than the United States - Kay Bell, Don't Mess With Taxes. "That's why global inflation affecting automotive fuel costs is hurting European motorists even more than U.S. drivers. A few weeks ago when we were watching gasoline prices roar past a $5 per gallon average, drivers in several European countries would have welcomed those petrol prices. Some were paying more than $8 per gallon."
IRS Modifies Portability Election Rule - Roger McEowen, Agricultural Law and Taxation Blog. "With the increase in the exemption equivalent of the unified credit to $12.06 million per person for deaths in 2022, very few estates have any federal estate tax liability. That means it is often the case that there is a “leftover” (unused) exemption amount at death. Normally, that unused amount would simply be lost. However, starting in 2011, upon the death of the first to die of a married couple the estate of the first spouse to die can elect to “port” (transfer) the unused exclusion amount to the surviving spouse."
IRS Extends Time for Making a Portability Election From Two to Five Years - Parker Tax Pro Library. "The procedure, which supersedes Rev. Proc. 2017-34, extends the period within which an estate that is not required to file an estate tax return may make the portability election from the second anniversary of the decedent's death to the fifth anniversary of the decedent's date of death."
IRS Issues Applicable Federal Rates (AFR) for August 2022 - Bailey Finney, Eide Bailly. "The Section 382 long-term tax-exempt rate used to compute the loss carryforward limits for corporation ownership changes during August 2022 is 2.54%"
When Bad Recordkeeping Helps You (And Bad News for Some Canadian Professional Poker Players) - Russ Fox, Taxable Talk. "It’s clear that there are Canadian poker players who consistently make their living from poker, and who would likely be considered professional gamblers if the CRA were to look at their activities. I don’t practice in Canada, but I would advise any Canadian professional poker player to seek advice from a Canadian tax professional who understands gambling activities and this decision."
Clint Eastwood Wins Suit Over Fake Advertising, IRS Wins Too - Robert Wood, Forbes. "The suite was against a California-based marketing company, Norok Innovation, which leveraged Eastwood’s celebrity status to drive online traffic to a website selling CBD products. Articles and manipulated search results made it appear as if Eastwood had actually endorsed the products, which he had not... Are damages like this taxable income? Yes they are, yet many plaintiffs win a suit only to be surprised when they have to pay taxes."
Narrow definition of “Brokerage Services” for IRC §199A does not apply to IRC §1202 - Wolters Kluwer Tax & Accounting. "The CCA concerned a company that operated a website similar to peer-to-peer rental companies like Airbnb. Lessees could use the website to find and reserve facilities that lessors listed in the company’s database. Lessors paid the company periodic fees to be included in the database."
What businesses need to know about reporting nonemployee compensation and backup withholding to the IRS - IRS. "When a business hires an independent contractor, the employer is generally not responsible for withholding income taxes, Social Security, or Medicare taxes from their compensation. However, by law, business taxpayers who pay nonemployee compensation of $600 or more must report these payments to the IRS. They do this using Form 1099-NEC, Nonemployee Compensation."
Joe Manchin Pulled The Plug On Tax Increases. What Happens Next? - Howard Gleckman, TaxVox. "But unless Democrats somehow retain control of the House and increase their majority in the Senate, Manchin may have killed Biden’s tax agenda, not only for now, but for the foreseeable future."
Couple’s FOIA Crusade Collapses in Circuit Court - Mary Katherine Browne, Tax Notes ($, names omitted).
[The couple], both accountants, came to the IRS’s attention in the mid-2000s, when they created a tax scheme to artificially inflate business losses on their tax returns. Thomas created sham partnerships he used as tax shelters, which reported losses of over $1 billion. An IRS investigation uncovered the scheme, leading the agency to retroactively disallow the losses.
The couple filed 12 FOIA requests in May 2016 to learn how the IRS discovered their tax schemes. They asked for whistleblower records and records pertaining to third-party communications regarding their taxes.
Some tax shelters are marketed with a non-disclosure provision. I wonder if the couple's pursuit of a whistleblower might be an attempt to find someone to sue for breaking confidentiality. It apparently will remain a mystery.
Your move. Today is International Chess Day. Coincidentally, the current world chess champ, Magnus Carlsen, announced that he will not defend his title. Carlsen has won the title five times.
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