Key Takeaways
- Government heads towards shutdown as House bill fails.
- Freeze on IRS enforcement funds.
- Senator introduces Rural Historic Tax Credit Improvement Act.
- Representative introduces Residence-Based Taxation for Americans Abroad Act.
- Unpacking effects of a TCJA extension.
- IRS increases standard mileage rate for 2025.
- Direct File difficult to implement nationwide.
- National Go Caroling Day!
House Bill Fails
House Rejects GOP Plan Backed by Trump as Government Barrels Toward Shutdown - Lindsay Wise, Katy Stech Ferek, and Siobhan Hughes, The Wall Street Journal:
The revised legislation proposed extending government funding for three months and providing more than $100 billion in disaster relief and aid for farmers, while stripping out a series of other provisions, such as restrictions on investments in China, 9/11 healthcare funds and new rules on pharmacy-benefit managers. It also proposed suspending the nation’s borrowing limit for two years.
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If no bill is passed and signed into law by President Biden by 12:01 a.m. Saturday, the federal government would partially shut down, furloughing hundreds of thousands of federal workers, though critical services would continue to function.
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If no bill is passed and signed into law by President Biden by 12:01 a.m. Saturday, the federal government would partially shut down, furloughing hundreds of thousands of federal workers, though critical services would continue to function.
House Rejects Stopgap With Freeze on IRS Enforcement Funds - Cady Stanton, Tax Notes ($):
An attempt to avoid a looming government shutdown and retain a freeze on $20 billion in IRS enforcement funds was rejected by the House as it voted down a stopgap funding bill.
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The CR would have extended government funding at fiscal 2024 levels until March 14, repeating a $20.2 billion clawback of enforcement funds for the IRS granted to the agency in the Inflation Reduction Act. The government is set to shut down at midnight December 20 without continued funding.
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The CR would have extended government funding at fiscal 2024 levels until March 14, repeating a $20.2 billion clawback of enforcement funds for the IRS granted to the agency in the Inflation Reduction Act. The government is set to shut down at midnight December 20 without continued funding.
More on Capitol Hill
Capito Bill Would Enhance Historic Tax Credit in Rural Areas - Tax Analysts, Tax Notes ($):
The Rural Historic Tax Credit Improvement Act, introduced by Sen. Shelley Moore Capito, R-W.Va., would increase the rehabilitation credit for buildings in rural areas and allow credit transfers to third parties in the first year of use, among other measures.
LaHood’s Tax Bill: Residence-Based Tax For Americans Abroad - Virginia La Torre Jeker, J.D., Forbes:
Representative Darin LaHood just introduced the “Residence-Based Taxation for Americans Abroad Act” on December 18, marking a potentially transformative moment for Americans living overseas. This bill aims to overhaul the United States' unique system of citizenship-based taxation—a regime that taxes citizens on their worldwide income regardless of where they live—and replace it with a residency-based system. If enacted, this change could significantly alleviate the compliance burdens that expatriates have endured for decades.
Unpacking the TCJA: Who Benefits and Who Loses from Extending Major Provisions - Margot Crandall-Hollick, Joseph Rosenberg, Tax Policy Center:
The TCJA was a sweeping piece of legislation that made major temporary changes to many individual tax provisions, including reducing marginal tax rates, expanding the standard deduction, expanding the child tax credit, modifying the alternative minimum tax (AMT), and introducing a new deduction for businesses organized as pass-through entities (199A). It raised taxes by repealing personal exemptions and limiting itemized deductions.
Figure 1 shows the net effect of extending the expiring TCJA provisions (left panel), further breaking down the average effect of provisions that reduce taxes and those that raise them (right panel).
Figure 1 shows the net effect of extending the expiring TCJA provisions (left panel), further breaking down the average effect of provisions that reduce taxes and those that raise them (right panel).
IRS Updates
Beginning Jan. 1, 2025, the standard mileage rates for the use of a car, van, pickup or panel truck will be:
- 70 cents per mile driven for business use, up 3 cents from 2024.
- 21 cents per mile driven for medical purposes, the same as in 2024.
- 21 cents per mile driven for moving purposes for qualified active-duty members of the Armed Forces, unchanged from last year.
- 14 cents per mile driven in service of charitable organizations, equal to the rate in 2024.
The rates apply to fully-electric and hybrid automobiles, as well as gasoline and diesel-powered vehicles.
- 70 cents per mile driven for business use, up 3 cents from 2024.
- 21 cents per mile driven for medical purposes, the same as in 2024.
- 21 cents per mile driven for moving purposes for qualified active-duty members of the Armed Forces, unchanged from last year.
- 14 cents per mile driven in service of charitable organizations, equal to the rate in 2024.
The rates apply to fully-electric and hybrid automobiles, as well as gasoline and diesel-powered vehicles.
Taking Direct File Nationwide Would Be Challenging, GAO Says - Benjamin Valdez, Tax Notes ($):
In a report released December 19, the Government Accountability Office said the IRS’s Direct File pilot worked well for the 140,803 taxpayers that used it to file but that several challenges face the agency if it is to fulfill its goal of expanding the program to the whole country, especially because of states’ varying tax filing platforms.
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“Even if state revenue agencies are willing to join, they may need approval from their governors or legislatures to participate in Direct File,” the GAO wrote, noting that state administrators’ decisions for not joining in 2025 vary. Some state officials cited low pilot participation as a reason, while some are focused on other priorities.
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“Even if state revenue agencies are willing to join, they may need approval from their governors or legislatures to participate in Direct File,” the GAO wrote, noting that state administrators’ decisions for not joining in 2025 vary. Some state officials cited low pilot participation as a reason, while some are focused on other priorities.
Tax Trouble
According to the indictment, from 2017 to 2019, Defendant was an attorney and sole owner of (omitted), a law firm in San Diego specializing in providing legal services for companies seeking to become publicly traded. During that time, he allegedly attempted to thwart the IRS’ ability to assess his income tax liability by, among other things, providing his return preparer with false and inaccurate information and causing inaccurate returns to be filed with the IRS that underreported the income he earned from his law practice. In addition, Defendant allegedly has not filed personal federal income tax returns since 2018.
Tax Shelter Defendant Charged In Investment Ploy - Anna Scott Farrell, Law 360 Tax Authority ($):
Federal prosecutors have accused two men, one of whom is already facing charges of promoting tax shelters, with wire fraud and money laundering in connection with their operation of a multimillion-dollar fraudulent investment fund, according to an indictment unsealed Wednesday in Colorado federal court.
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The men worked with an unindicted, unnamed co-conspirator who ran a fund in the U.K. for which ROI was a feeder, according to the indictment. The U.K. fund, Hemingway Global Capital, began operating around 2019. The following year, McPhee began promoting it at seminars hosted by Private Banking Concepts, his supposed tax-mitigation business, prosecutors said.
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The men worked with an unindicted, unnamed co-conspirator who ran a fund in the U.K. for which ROI was a feeder, according to the indictment. The U.K. fund, Hemingway Global Capital, began operating around 2019. The following year, McPhee began promoting it at seminars hosted by Private Banking Concepts, his supposed tax-mitigation business, prosecutors said.
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