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Biden Says He Doesn’t See Votes to Raise Tax Rates in Deal - Jenny Leonard and Josh Wingrove, Bloomberg ($). “President Joe Biden said he doesn’t think there are enough Democratic votes to raise tax rates in a deal on his economic agenda, but that he believes he’ll reach an agreement on the overall legislative package.”
‘I don’t think we’re going to be able to get the vote,’ he said in response to a question about individual and corporate rates at a CNN town hall on Thursday in Baltimore. ‘Look, when you’re in the United States Senate and you’re president of the United States and you have 50 Democrats, everyone is the president.’
A White House official said Biden was referring only to corporate tax rate increases, not other potential provisions to raise federal revenue, including other tax proposals.
Where President Biden’s economic plan appears to stand right now: From taxes to climate policy to Medicare to immigration – Jeff Stein, Rachel Roubein and Marianna Sotomayor, Washington Post. "Even as negotiations over President Biden’s economic package continue, Democratic officials have started signaling which parts of the White House agenda could be cut from the legislation and which are likely to be approved."
Democrats weigh massive changes to their tax plan. To pay for all the spending in the measure, the White House proposed trillions of dollars in new tax hikes on corporations and the rich. House Democrats advanced a roughly $2 trillion tax plan that similarly raised tax rates on individuals, corporations and wealthy investors, among other measures.
But due to resistance from Sinema, the administration is being forced to consider alternative approaches as the package inches forward. On a call this week with congressional Democrats, senior administration officials said they are discussing a series of measures that would not raise tax rates — which Sinema has opposed — but still raise trillions of dollars in new revenue, primarily from companies and the rich.
The measures discussed by the administration officials on the call included a new minimum tax on corporations, a plan to beef up tax enforcement through the Internal Revenue Service, a tax on companies issuing stock “buybacks” to company shareholders and, perhaps most surprisingly, a new tax on the assets held by American billionaires.
Democrats Weigh Tax Alternatives to Fund $2 Trillion Package – Andrew Duehren, Richard Rubin and Kristina Peterson, Wall Street Journal ($). “Democrats worked to find alternative sources of revenue to pay for their roughly $2 trillion social-policy and climate package, seeking to target businesses and wealthy individuals in novel ways after proposed rate increases ran aground in talks."
"The continued opposition by Sen. Kyrsten Sinema (D., Ariz.) to any increases in top marginal rates on corporations, individuals or capital gains has emerged as a major hurdle in the party’s quest to reach a new framework on the legislation. Democrats want to cover the full cost of the spending with tax increases, and the measures opposed by Ms. Sinema represent a major portion of the revenue the party was relying on to do so."
Top Democrats are now looking at other ways to raise revenue that would hit similar groups of businesses and people, including annually taxing billionaires’ unrealized capital gains, but those measures face their own dose of skepticism from centrist Democrats. The legislation will ultimately need the support of every Democrat in the 50-50 Senate and nearly every Democrat in the House.
'I think anytime you get into stuff that’s not proven in the tax code it becomes a bit dangerous,' said Sen. Jon Tester (D., Mont.), who has previously opposed proposed changes to how capital gains are taxed. 'So we’ve got some challenges there.'
Taxing unrealized capital gains will be no cakewalk in getting it through Congress:
Taxing capital gains – Renu Zaretsky, Daily Deduction. “Once Sen. Kyrsten Sinema’s objections to any corporate and individual tax rates hikes surfaced, Democratic leaders gave a second look at annual mark-to-market taxation of capital gains. A version of the idea has the backing of Senate Finance Committee Chair Ron Wyden but immediately ran into another roadblock. Moderate Democrat John Tester warned the idea had ‘challenges.’ Tester strongly opposed the similar idea of taxing unrealized capital gains at death. Losing Tester’s vote would sink the bill even if Sinema goes along.”
Taxing Companies Without Raising Trump’s 21% Rate: Options Guide – Laura Davison, Bloomberg ($). “Congressional Democrats debating revenue measures to pay for an expansion in social spending have dozens of options to increase the taxes collected from companies -- though nearly all of them are more complicated and politically risky than just increasing the top-line rate.”
The back-door corporate tax-hike options have the potential to raise hundreds of billions of dollars, but that would require Democrats to rely on a series of tax-code changes, ideas about which have yet to be fully developed.
Neal pushes back at proposed changes to reconciliation plan – Brian Faler, Politico. “The House’s top tax writer is pushing back against changes to Democrats’ reconciliation package being floated by the White House. Ways and Means Chair Richard Neal (D-Mass.) jabbed Wednesday at his colleagues’ scramble to develop a new plan, noting his panel approved a fully formed package — which Neal said he intends to defend in negotiations.”
‘We didn’t have a new tax plan every half hour,’ he told reporters. His Child Tax Credit provisions as well as ones subsidizing child care expenses, clean energy and family leave ‘ought to remain in the final package, as issued’ by his committee.
Sen. Sinema Mum On Corporate Tax Hike, Rep. Neal Says – Stephen Cooper, Law360 ($). “Senate Democrat Kyrsten Sinema of Arizona supports expanding renewable energy, family leave and child care, but remains noncommittal on raising corporate rates to fund the Democrats' Build Back Better bill, House Ways and Means Chair Richard Neal said Thursday."
Neal, D-Mass., made the remarks after a 40-minute meeting with Sinema, one of two moderate Senate Democrats whose vote is crucial to winning passage of President Joe Biden's $2 trillion domestic agenda in the evenly split U.S. Senate.
‘I made the argument for efficiency in tax policy and the way you do that is simplicity of corporate increases and pointed out that, not only are they efficient, but they weren't punitive,’ Neal said to reporters. ‘This was still good pro-growth economic policy.’
Sinema, however, did not commit to raising corporate rates during their talk, Neal said.
Manchin: Negotiators to miss Friday target for deal on reconciliation bill – Alexander Bolton, The Hill. “Sen. Joe Manchin (D-W.Va.) said he does not believe negotiators will be able to meet a goal laid out earlier in the week by Senate Majority Leader Charles Schumer (D-N.Y.) to reach a deal on the framework of the budget reconciliation package by Friday.”
‘This is not going to happen anytime soon, guys,’ Manchin told reporters Thursday afternoon.
Manchin, who doesn’t want to spend much more than the $1.5 trillion on the social spending package, said there’s still a massive amount of work to be done.
‘There’s a lot of work to do, everybody’s working hard, everybody’s communicating, working hard. A lot of meetings going on,’ he said.
Asked if the talks will drag past Friday, despite an effort by Schumer to get a framework deal wrapped up this week, Manchin said, ‘I believe so, yes.’
Not that I'm counting, but this is at least the third deadline that Democrats have missed when it comes to advancing the reconciliation bill. Perhaps they should be more laid back, and just go with the flow.
Sanders hits Sinema for opposing reforms on drug prices, corporate taxes – Alexander Bolton, The Hill. “Senate Budget Committee Chairman Bernie Sanders (I-Vt.) on Thursday expressed exasperation over Sen. Kyrsten Sinema’s (D-Ariz.) opposition to raising taxes and empowering Medicare to negotiate lowering prescription drug prices amid intraparty debates on the multitrillion-dollar budget reconciliation package.”
Asked if he was surprised by Sinema’s opposition to raising corporate taxes, which poses a major obstacle to a deal on the legislation, Sanders replied: ‘I am surprised that there is anybody in the United States Senate not prepared to do what the American people want, and that is demand that the wealthiest people in this country start paying their fair share of taxes and that we end all of the tax loopholes that the wealthy enjoy.’
‘I am very surprised that anybody would put themselves in that position,’ he added.
Next week could be interesting. Punchbowl News ($):
Here’s something we picked up on last night: The White House has been pressing the Democratic congressional leadership to move toward a House floor vote next week on BOTH the reconciliation package and $1 trillion bipartisan infrastructure bill.
Yes, you read that right. The White House really wants a vote on reconciliation and infrastructure next week. This would give PresidentJoe Bidenand Democrats two legislative wins -- desperately needed wins -- right before he heads to Europe.
Punchbowl the OddsMaker:
Is it possible? Yes, it’s been done before. Is it likely? Ahhh, count us as not only skeptical, but very skeptical. We can see an infrastructure vote because of the looming Oct. 31 highway funding deadline. But both seems very difficult.
Estate Planners Eye Tax Planning Potential of Non-Grantor Trusts – Jonathan Curry, Tax Notes ($). “Tax planning with grantor trusts will fall by the wayside if House Democrats have their way, which would set the stage for non-grantor trusts to have their moment in the tax spotlight.”
Losing grantor trusts would be akin to losing the cornerstone of estate tax planning, but non-grantor trusts would still offer a variety of tax planning opportunities in the right situations, practitioners agreed during an October 21 panel of the Notre Dame Tax & Estate Planning Institute.
Businesses spend heavily on sales tax compliance – Michael Cohn, Accounting Today. “Midsized businesses spend 163 hours per month on sales tax compliance, typically costing more than $17,000, according to a new survey.”
The survey, by NetReflector-Potentiate in conjunction with tax compliance software developer Avalara, polled both small and midsized businesses in the early months of this year focusing on businesses in the manufacturing, retail, and software industries. The vast majority of the small and midsized businesses surveyed (90%) file 10 or fewer sales tax returns annually. Four out of 10 companies surveyed (41%) file most of their returns on a semi-annual basis.
Pushback on IRS Reporting Rules – Genevieve Douglas, Bloomberg ($). “A House Democrat is speaking out about his concerns with a proposal to require banks to report some customers’ gross account inflows and outflows to the IRS.”
Rep. Charlie Crist (D-Fla.) said in a statement Thursday that he won’t support bank reporting requirements ‘that go after the middle class and working families.’
The Biden administration wants Congress to include the bank reporting requirements in the tax-and-spend bill as a revenue raiser, arguing that the additional data would allow the IRS to better target its enforcement efforts.
Crist said he’s ‘deeply concerned’ about the proposal, even with the higher threshold and exemptions proposed by Senate Democrats this week.
‘Allowing the IRS to data mine checking accounts raises serious privacy red flags and would increase costs, while targeting hardworking Floridians who are already struggling to get by,’ he said.
IRS Hiring Blitz Would Aim for Younger Workforce, Rettig Says – David Hood, Bloomberg ($). “The IRS is preparing to target a younger workforce for an upcoming hiring surge if it gets the funding boost sought in President Joe Biden’s budget request, Commissioner Charles Rettig said.”
The agency is looking to recruit people with college and graduate degrees with mid-level and junior experience, Rettig said during a tax conference hosted by University of California, Los Angeles, on Thursday. Much like a big law or big accounting firm, he said, the IRS plans to train new hires in-house with the planned hiring blitz.
IRS Preparing Guidance on Employment Tax Information Reporting – Aysha Bagchi, Bloomberg ($). “The IRS will be providing detailed guidance on how to provide information to the government on resolving employment tax issues ‘in the very near future,’ an agency official said Thursday.”
Daniel Price, an attorney in the Internal Revenue Service’s Office of Chief Counsel, made the comments at a tax conference hosted by the University of California, Los Angeles. He was responding to a question on best practices for resolving employment tax issues.
‘What we would encourage as an overarching principle is: At this time, we do expect information returns to be filed where they can be filed,’ he said.
IRS Issues LLC Tax Exemption Guidance, Seeks State Law Feedback – Sam McQuillan, Bloomberg ($). “The IRS is soliciting feedback on federal tax exemption requirements for limited liability companies and how conflicts with state laws might affect their eligibility.”
The Internal Revenue Service on Thursday announced guidance (Notice 2021-56) updating the determination letter process for LLCs to receive tax-exemptions as Section 501(c)(3) nonprofits. Along with articulating their charitable missions, LLCs will need to cite in their articles of organization and operating agreements a contingency plan in the event that any of its members become ineligible for tax-exempt status.
Automated Bots on Deck to Relieve IRS Phone Jams in 2022 – William Hoffman, Tax Notes ($). “The IRS processed a record 1.5 million online installment agreements in fiscal 2021 using new IT tools that will continue to help relieve a chronic shortage of phone help, a top agency official said. ‘I can recall when we were hopeful to break 200,000 [or] 300,000 agreements in a year,’ said Darren Guillot, commissioner for collections, IRS Small Business/Self-Employed Division, at the UCLA Extension Tax Controversy Institute October 21.”
The IRS posted a record 1 million online installment agreements, which allow taxpayers to apply for payment plans, in June before the final surge at the end of the fiscal year, he noted.
Guillot credited historic innovations in the IRS IT staff’s development and use of artificial intelligence applications and huge improvements in AI data analysis of the agency’s decades of taxpayer records for helping move more taxpayer queries online. That allowed the IRS to answer 3.8 taxpayer calls out of 10, instead of just two in 10, he added.
How does one answer .8 of a phone call? It’s either answered or not, correct?
Pot Sellers Would Be Taxed Better If Banked, IRS Official Says – David Hood, Bloomberg ($). “Businesses that sell cannabis products could be taxed more easily if banks were allowed to service them, an IRS official said Thursday.”
The cash-only approach in which cannabis companies commonly operate because of their lack of access to banks makes it more difficult to tax them, said Cassidy Collins, a senior counsel in the Office of the Chief Counsel. In addition, while marijuana use has been legalized in some form in about half the states, she noted, it’s difficult for those businesses to claim deductions and request relief for hardships offered to other firms.
Pandora Papers Expose U.S., UK Tax Transparency Flaws, EU Says – Stephen Gardner, Bloomberg ($). “The Pandora Papers should spur the European Union to get tough with the U.S. and the U.K. on tax transparency, European Parliament lawmakers said in a resolution adopted Thursday.The resolution—a statement of the parliament’s position that the European Commission is obliged to take into account in future rulemaking—was adopted 578-28 with 79 abstentions by lawmakers sitting in Strasbourg, France.”
Lawmakers said the Pandora Papers—financial documents of the ultra-rich leaked by the International Consortium of Investigative Journalists—showed that Alaska, Delaware, Nevada, South Dakota, and Wyoming ‘have become hubs of financial and corporate secrecy.’
They suggested that the EU should work with the Organization for Economic Cooperation and Development to persuade the U.S. to adopt the OECD’s Common Reporting Standard (CRS), which facilitates international exchange of information between tax authorities.
UK, France, Spain, Italy To Repeal Digital Services Tax – Matt Thompson, Law360 ($). “The United Kingdom, France, Italy, Spain and Austria issued a joint statement Thursday saying they will repeal their digital services taxes following the conclusion of talks by the Organization for Economic Cooperation and Development to reform the international tax system.”
As part of the agreement by the European countries to ditch digital services taxes, the U.S. has agreed to refrain from imposing any trade sanctions relating to taxes that remain in place until the OECD agreement is fully implemented. The five countries and the U.S. have agreed that any amount in excess of what would be collected under the international agreement will be available to reclaim for companies as a tax credit.
‘The [countries] will meet regularly to discuss progress implementing [the OECD deal] and any implications that may have for the appropriate application of the agreement,’ the statement said.
Digital Tax Deal Avoids Trade War, But Other Issues Remain – Isabel Gottlieb and Michael Rapoport, Bloomberg ($). “A deal between the U.S. and five European countries on digital taxes will help avert a trade war—though broader questions remain about rolling back those taxes as countries work to implement a new global tax deal. The deal will see the U.S. step back from the brink of imposing tariffs on Austria, France, Italy, Spain, and the U.K. over measures those countries have aimed at U.S. tech giants."
The five countries with DSTs will keep their taxes on the books for the next two years or until the global deal’s Amount A, the reallocation rules, is in place.
Thursday’s deal also outlines a credit system for companies that will go from paying DSTs to paying Amount A taxes.
Companies in-scope of Amount A will receive a credit to apply against future Amount A taxes. The credit represents the difference between what they paid under the DST and what they would have paid under Amount A, if the DST payment is higher.
Sunak to cut tax on banks to keep City competitive, say reports – Richard Partington, The Guardian. “Rishi Sunak is preparing to announce a tax cut for Britain’s biggest banks at next week’s budget to maintain the competitiveness of the City of London after Brexit, according to reports, despite plans to raise taxes on workers.”
Ahead of the setpiece budget and spending review next week, the Financial Times said the chancellor planned to slash the corporation tax surcharge imposed on the banking industry by more than 60%, taking the levy from its current level of 8% to just 3% from April 2023.
Hot diggity, it’s National Make A Dog’s Day! If you’ve been looking for a reason to adopt a dog, today is it! “One sure way to make a dog’s day is giving them a new, loving home through adoption,” states National Day Calendar. Our family adopted a white Havanese and he’s a total joy! Plus, Havanese have hair and don’t shed. Awesome bonus! He also plays with balls like a cat. My daughter wants a cat and I point to our dog playing with a ball and say, “we already have a cat.” My retort displeases her.