Key Takeaways
- School District avoids big penalties for 1095 reporting failure.
- The new IRS: punishing enemies, rewarding friends?
- Harvard sues Trump administration.
- House wants to move first; rate increase rumbles continue.
- Carving out Tariff exceptions.
- He should have worked harder on his laziness defense.
- Earth Day, National Jelly Bean Day.
Note: Mark your calendars for the HLB Webinar: 90 days in – Trade Policies and Tariffs – Where are we heading and what can we be proactively addressing now? Register here.
No Penalties for School District’s Tardy Filings - Erin McManus, Tax Notes ($):
Chief Judge Kathleen Kerrigan entered a stipulated decision in Arlington County School Board v. Commissioner, with the IRS agreeing not to impose penalties under section 6721 and section 6772 on the basis that the district’s failures to timely file and furnish necessary forms for the tax year ended 2019 were because of reasonable cause and not willful neglect.
...
The IRS didn’t seem interested in pursuing any agreement in its February 2024 answer to the district’s petition. The controversy arose after the district’s 2019 forms 1094-C, “Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns,” and 1095-C, “Employer-Provided Health Insurance Offer and Coverage,” weren’t sent by the March 31, 2020, deadline.
Tonya Rule, leader of the Eide Bailly ACA compliance practice, comments:
I've seen other school districts try to make the argument that there aren't a lot of staff around in the summer however there is typically always admin around to open mail and see IRS notices timely.
This size of a penalty can set a business back and they are fortunate to have them abated. We've been able to get these failure to furnish and failure to file penalties abated - but those taxpayers that get the abatement need to make sure to timely file and furnish their forms in the future. You're lucky to get the penalties abated once, let alone twice.
Related: Eide Bailly Affordable Care Act Compliance & Consulting
IRS Turmoil update
IRS takes center stage in political controversies, partisan battles - Tobias Burns, The Hill:
Trump has threatened to revoke Harvard University’s tax-exempt status after the university declined to comply with an order from the administration to crack down on alleged antisemitism.
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On the flip side, administration officials are also facing reports that they’ve used the IRS to do political favors. Treasury official David Eisner asked the IRS to review an audit the agency was performing on MyPillow CEO Mike Lindell, whom Eisner described as “a high-profile friend of the President,” according to the New York Times.
The New ICE-IRS Data Sharing Agreement Has Three Problems - Aravind Boddupalli, TaxVox:
The MOU relies on a specific exemption to taxpayer confidentiality rules and refers to a statute for immigrants with final deportation orders. The number of taxpayers whose personal information would potentially be shared ranges from 0.7 to 7 million. Litigation is ongoing. A separate implementation agreement between IRS and ICE is to come. Various experienced leaders at the IRS, including former Acting Commissioner Melanie Krause, have since resigned.
Although the MOU’s goal may be to facilitate the removal of individuals who are in the US without proper authorization, it may have downstream consequences for the fiscal health of the country, effective governance and data practices, and the well-being of US citizens and lawful residents.
Judge Orders Agencies to Set the Record Straight on Mass Firings - Mary Katherine Browne, Tax Notes ($):
In an April 18 order in AFGE v. U.S. Office of Personnel Management, Judge William Alsup of the U.S. District Court for the Northern District of California enjoined OPM from directing other federal agencies to terminate employees and told the departments of Agriculture, Defense, Energy, Interior, Treasury, and Veterans Affairs to fix their termination letters to clarify that the firings were attributable to governmentwide mass termination.
“Termination under the false pretense of performance is an injury that will persist for the working life of each civil servant. In pursuing future employment, each will have to concede that they have been terminated based on performance,” Alsup said.
When the layoffs occurred, White House economic advisor Kevin Hasset rolled with the "performance-based" story:
“I’ve never seen a person who was laid off for poor performance say that they were performing poorly,” he told reporters on Thursday.
Harvard sues the Trump administration in escalating confrontation - Susan Svrluga and Danielle Douglas-Gabriel, Washington Post:
Although some members of the administration have said their letter of demands sent this month was issued by mistake, Garber said, other statements and actions suggest otherwise: In addition to a freeze of $2.2 billion in federal funding, the government has considered taking steps to freeze an additional $1 billion in grants, initiated numerous investigations of Harvard’s operations, threatened the education of international students and said that it is considering a revocation of Harvard’s tax-exempt status.
Congressional Tax Tidbits
House Looks to Assert ‘First Mover’ Status on Tax Bill - Cady Stanton and Doug Sword, Tax Notes ($):
“I think some of that framework will be a nonstarter,” said Boddicker, now with Alston & Bird LLP. “While it may ultimately pass the House, it’s going to fall on the Senate then to figure out how to flesh out the rest of the bill in a way that actually can pass the Senate.”
The top rate question remains - Bernie Becker, Politico:
In fact, that very question clearly makes some Republicans uncomfortable, and it seems like it will hang over the 2025 tax bill proceedings until it’s resolved.
Case in point: Sen. John Kennedy (R-La.) told NBC’s “Meet the Press” on Sunday that he didn’t “believe in making tax policy on the basis of class warfare.” But Kennedy also stopped well short of saying he would oppose a plan that raised the highest rate for individuals from its current 37 percent.
Millionaire Tax Would Generate About $400 Billion in Revenue - Eric Wasson and Nancy Cook, Bloomberg via MSN. "The two estimates from non-partisan think tanks differ slightly because each group uses different assumptions about economic performance. But the figures suggest that the creation of a millionaire tax bracket could help President Donald Trump enact some of his campaign trail pledges, including eliminating taxes on tips, which is estimated to cost $118 billion over ten years."
Big business frets Congress will hike their levies - Zach Cohen, Bloomberg ($):
Ultimately, some of the ideas coming from the populist wings of the House or White House will run headlong into the reality that business still holds sway in the narrowly divided Congress.
Trump administration readies ‘X date’ for debt limit – Jake Sherman, Andrew Desiderio and Laura Weiss, Punchbowl News. "Sources in the House GOP leadership say they view the July 4 recess or the August break as true deadlines for reconciliation."
Tariff Talk
Businesses Plead for Tariff Breaks After Trump Spares iPhones - Tony Romm, New York Times:
On Monday, executives from retailers including Home Depot, Target and Walmart became the latest to raise their concerns directly with Mr. Trump, as the industry continues to brace for the possibility that steep taxes on imports could result in price increases for millions of American consumers.
Trump’s tariffs cause chaos among automakers, suppliers - Chris Marquette and Oriana Pawlyk, Politico. "'It’s really hard to make business decisions when the full rules have not been rolled out. It’s very fluid and pieces of the pie are incomplete still,' a person in the auto industry familiar with the impact of tariffs, granted anonymity because they are not authorized to speak with the media, told POLITICO."
Trump tariff talk roils US oil industry in bedrock Republican territory - Amanda Chu, Financial Times:
It might also upend the president’s plans to boost fossil fuel production in the state that launched America’s shale revolution.
US thrift stores bank on windfall from Donald Trump’s tariffs - Stephanie Stacey, Financial Times. "Shares of ThredUp and Savers Value Village — the two largest publicly traded thrift stores in the US — have climbed 31 per cent and 22 per cent, respectively, since Trump announced his 'liberation day' tariffs on April 2. The S&P retail select index is down 7 per cent in that time, according to FactSet data."
Blogs and Bits
Rapid-fire IRS leadership changes during tax filing week - Kay Bell, Don't Mess With Taxes. "And thanks to pressure from Department of Government Efficiency (DOGE) and the Trump administration, more IRS changes are on the way."
The Managerial Side of Transfer Pricing - Chad Martin, Eide Bailly. "HOWEVER, one thing that's not in place is buy-in from local-country stakeholders. When they are informed of the new policy which fixes or caps their margins, they push back forcefully, and even undermine the policy through uncooperative business and accounting decisions."
Tax Court Allows $41.5 Charitable Deduction Despite Lack of Qualified Appraisal - Parker Tax Pro Library. "The Tax Court held that a taxpayer who donated paintings to the Metropolitan Museum of Art failed to obtain 'qualified appraisals' because none of the individuals involved in preparing the appraisals was a qualified appraiser.' However, the court found that the taxpayer's deductions for the donations were nevertheless allowable because the taxpayer reasonably believed that the auction house that prepared the appraisals was a reputable firm whose appraisals were acceptable to the IRS."
Changes to IRS IP PIN Program - Matt Gaylor, Matt's Tax Firm Insights. "The IP PIN program is a valuable tool for preventing fraudulent tax filings - and it’s now more flexible. The new one-year opt-in option gives taxpayers a chance to try the program without a long-term commitment."
The Promise of Abundance and the Overlooked Obstacle of Fiscal Policy - Adam Michel and Veronique De Rugy, Liberty Taxed. "An abundance agenda that frees entrepreneurs from onerous rules must also free them from punitive taxes on the fruits of their efforts and unlock the investment they need to scale. In other words, to fully deliver on the promise of an abundant economy, we must reform tax and fiscal policy with the same ambition we bring to regulatory reform."
He should have worked harder on his laziness defense.
Former Ohio Atty Gets Prison Over Unpaid Payroll Taxes - Ryan Harroff, Law360 Tax Authority ($; Defendant name omitted):
U.S. District Judge Algenon L. Marbley imposed the sentence Thursday on Defendant, along with three years of supervised release, and the court entered judgment against the former attorney Monday. The government had argued he should be imprisoned for two years for using Elemental Dental as a "piggy bank" for vacations, tennis lessons, college tuition and housekeeping costs.
Defendant countered that he should face no prison time, asserting in his January sentencing memorandum that he was not the "greedy liar" he said the prosecution had painted him to be, but instead a "lazy" man who "intentionally failed to collect and pay the taxes because he had no desire to figure it out."
Amazing that this didn't work, as criminals are generally known for being hard-working, focused, and diligent.
What day is it?
You may be aware it's Earth Day, but it's also National Jelly Bean Day. For the planet!
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