Tax News & Views Alcohol and Hot Dog Tax

Alcohol Tax

Hard Seltzers, Canned Cocktails Spur Alcohol Industry Tax Fight – Chris Cioffi, Bloomberg ($):

The alcohol industry as a whole scored big wins in the 2017 GOP-led tax law by uniting on legislation cutting billions in tax for beer, liquor, and wine producers.

Now though, that comity has diminished as rival producers seek to defend their gains and rifts emerge over how to tax and where to sell new offerings like canned cocktails.

Vance

Trump VP Pick Vance’s Tax Views Swing Toward Economic Populism – Alexander Rifaat, Tax Notes ($).

"Sen. J.D. Vance, R-Ohio, who has pursued the elimination of tax exemptions for large corporate mergers and the repeal of energy subsidies tied to the Inflation Reduction Act, has been selected by former President Trump to join the Republican ticket as the nominee for vice president."

Clean Energy

Energy Groups Urge IRS to Broaden Domestic Content Safe Harbor – Erin Schilling, Bloomberg ($):

The Treasury Department and IRS issued guidance in May establishing the safe harbor, which allows developers to use a default cost percentages calculation determined by the Department of Energy instead of getting that information from supplier who are reluctant to share that sensitive business information with customers. Comments on the guidance were due July 15.

The American Biomass Energy Association requested that biomass and waste-to-energy power, among other energy production techniques, be included in the safe harbor. The association said in a July 15 comment letter that the exclusion puts certain clean energy technologies at a “competitive disadvantage.” New York State Waste-To-Energy Coalition and the Business Council for Sustainable Energy had similar requests.

Landlords’ Tax Breaks

Biden Calls for Scrapping Corporate Landlords’ Tax Breaks – Alexander Rifaat, Tax Notes ($):

President Biden has proposed eliminating lucrative subsidies for institutional investors if they raise rent on specific residential properties by more than 5 percent annually.

The White House called on Congress to pass legislation instituting a cap on rent increases for incentives like accelerated depreciation and the mortgage interest deduction to be obtained.

Conservation Easements

IRS Sweetens Offer for Land Tax-Break Deals It Has Blasted – Richard Rubin, Wall Street Journal:

The Internal Revenue Service is making unusually generous settlement offers to participants in the land-rights tax-break deals the agency has been attacking for years.

Investors in some transactions known as syndicated conservation easements can end their audits and avoid the risk of full-rate tax payments and 40% penalties by paying a 21% tax rate and a 5% penalty. That is a more favorable offer than the IRS has made in recent court cases, and it is a sign that even the money-flush IRS faces limits in how much complex litigation it can pursue and sustain.

Chevron

3 Tax Reg Groups That May Be Shaky After High Court Rulings – Natalie Olivo, Law360 ($):

The U.S. Supreme Court issued two rulings that, when combined, open up long-standing federal regulations to challenges without judicial deference to agencies — a pairing that could weaken several categories of tax rules, including guidance issued under the 2017 federal overhaul.

Although relatively recent, regulations published under the 2017 Tax Cuts and Jobs Act may be newly vulnerable in the wake of the high court's ruling in Loper Bright Enterprises v. Raimondo . In the 6-3 decision June 28, the court's right-leaning justices overruled Chevron deference, a 40-year-old doctrine that told judges to accept reasonable agency interpretations of ambiguous laws.

IRS Says Chevron Ruling Favors Its Foreign Entity Fight, Not 3M – Quinn Wilson, Bloomberg ($):

The US Supreme Court’s abandonment of Chevron deference cuts in favor of the IRS in its long-running legal battle over transfer pricing, not in 3M Co.'s, the agency told a federal appeals panel.

The IRS replied Friday to 3M’s response to the agency’s July 5 citation of supplemental authorities, arguing that its transfer-pricing adjustment is proper under the commensurate-with-income requirement under the Internal Revenue Code. It said that the June developments under Loper Bright Enterprises v. Raimondo work in favor of the IRS, not 3M, which the company cited in appellate briefs.

Federal Interest Rates

Applicable Federal Interest Rates to Drop in August – Jack McLoone, Law360 ($).

"Applicable federal rates for income tax purposes will decrease in August, the Internal Revenue Service said Tuesday, the second month-to-month drop in a row."

“Killer B” Transactions

Treasury Finalizes Rules to Block ‘Killer B’ Transactions – Michael Rapoport, Bloomberg ($):

The Treasury Department and the IRS issued final regulations aimed at reining in “Killer B” triangular reorganizations involving foreign corporations, which the government says companies have used to avoid taxes.

The final rules (TD 10004, RIN 1545-BM19) were issued Wednesday.

Virtual Currency

Virtual Currency Tax Compliance Enforcement Can Be Improved – TIGTA.

“The IRS civil examination enforcement efforts focused on digital assets are mostly indirect and negligible.”

In the Courts

Truck Co. Qualifies For $500M Tax Safe Harbor, 6th Circ. Told – Anna Scott Farrell, Law360 ($):

A Tennessee company asked the Sixth Circuit to shield it from more than $500 million in excise tax liabilities, saying a lower court correctly found that its refurbished trucks qualify for the safe harbor from the heavy-truck excise tax.

A judge and jury correctly found in July 2023 that Fitzgerald Truck Parts & Sales LLC is eligible for the safe harbor exemption under Internal Revenue Code Section 4025(f)(1), the company said Friday, urging the appellate court to reject the government's bid to overturn the decision.

Contractor Asks Justices to Review $1.3M R&D Credit Suit – Anna Scott Farrell, Law360 ($).

"A construction company's shareholders asked the U.S. Supreme Court to review a decision revoking their tax refund for the company's $1.3 million in claimed research credits, saying the Fifth Circuit wrongly deferred to the Internal Revenue Service in stopping their case from going to trial."

IRS Defeats Property Manager’s Bid to Shield Citibank Accounts – Tre’Vaughn Howard, Bloomberg ($).

"A Sacramento property manager can’t sue Citibank or the US in an attempt to shield her bank records from the IRS, a federal judge said, adopting a magistrate judge’s recommendation for dismissal."

7th Circ. Says Foreign Retirement Not Shielded in Bankruptcy – Anna Scott Farrell, Law360 ($).

"A professor who filed for bankruptcy in Illinois can't protect his Canadian retirement account from creditors because the account is ineligible under a state law shielding accounts that qualify as retirement plans under the Internal Revenue Code, the Seventh Circuit ruled Tuesday."

Couple’s Easement Claim Doesn’t Pass ‘Smell Test,’ Circuit Says – Kristen A. Parillo, Tax Notes ($):

The Tax Court properly denied a Virginia couple’s $5.1 million conservation easement deduction and imposed a gross valuation penalty based on their sloppy documentation and “evident greed,” according to a Fourth Circuit opinion.

A $5.1 million deduction for donating an easement on property purchased for $652,000 just a year earlier “simply does not pass any reasonable smell test, much less the tax law’s requirements,” the Fourth Circuit wrote in a July 15 opinion in Brooks v. Commissioner.

What Day is it?

Its National Hot Dog Day! “Hot-diggity-dog! ‘Relish’ in this savory favorite on National Hot Dog Day on the third Wednesday in July.”

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