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Top Dem vows party won't let expanded child tax credit expire at month's end – Aris Folley, The Hill. “House Democratic Caucus Chairman Hakeem Jeffries (D-N.Y.) on Wednesday voiced confidence that Democrats would not allow the expanded Child Tax Credit to expire at the end of the month as scheduled.”
During a press conference, Jeffries defended the expanded credit as transformative for American families and said House Democrats 'will not allow this tax credit to expire' and added he doesn’t 'believe that the Senate will either.'
Jeffries said President Biden stressed to the party that the credit stood at 'the top of the list' of Democratic-backed priorities tucked away in his sprawling social spending plan, dubbed the Build Back Better Act, that the party is working quickly to pass through Congress.
IRS Is About to Send December’s Child Tax Credit Payment. January’s Depends on Congress. – Richard Rubin and Andrew Duehren, Wall Street Journal ($). “Democrats are racing to keep monthly child tax credit deposits flowing to households, using the payments’ potential lapse to build momentum for finishing their roughly $2 trillion education, healthcare and climate bill before December ends.”
Unless Congress acts, the monthly payments from the Internal Revenue Service will stop after next week’s deposits, ending a program that has propped up millions of households’ finances since it started in July. Beyond that, many lawmakers have put the credit at the center of their campaigns for next year’s midterm elections and are eager to promote it as soon as they can…
The IRS will make its sixth set of payments—up to $300 for children under age 6 and $250 for kids ages 6-17—on Dec. 15. Under the social-spending and climate-change bill the House passed last month, payments would continue through 2022.
Wyden Says Reconciliation Tax Section Will Be Out December 10 – Doug Sword, Tax Notes ($). “Senate Finance Committee Chair Ron Wyden, D-Ore., told reporters late December 9 that his committee’s portion of the Build Back Better Act (H.R. 5376) would be released the following day.
‘Tomorrow [i.e., today] we expect to be putting out text,’ Wyden said. ‘It will have some technical corrections. It will have some substantive changes as well.’
Wyden said his proposal for a billionaire’s tax won’t be in the bill but that he would continue to push for its inclusion during ongoing negotiations. The billionaire’s tax would annually mark to market the publicly traded assets of taxpayers with more than $1 billion in assets or with income exceeding $100 million for three consecutive years.
Democrats have a goal of getting the landmark package signed into law by December 28, he said. That’s because the bill includes a one-year extension of the expanded child tax credit, which otherwise would expire at year’s end.
The goal has been that the Senate would complete the bill by Christmas and send it to the House for approval. Under Wyden's December 28th timeline for enactment, that would mean that the House would accept the Senate bill as-is - and not propose additional changes to the legislation. It is not clear if the House will accept all changes the Senate makes to the bill. If it doesn't, enactment of the bill could slip into 2022.
While the bill text is expected out December 10, ‘negotiations are going to continue because there are still some outstanding issues,’ Wyden said. That includes Democrats’ disagreement over how and by how much to roll back the state and local tax deduction cap.
‘SALT talks are continuing,’ Wyden said. ‘Members are going to be talking to me over the next few days about the billionaire’s income tax, and there are other issues that my colleagues want to talk about,’ he added, without identifying those issues.
Let me get this straight, Senator Wyden will release the tax portion of the reconciliation bill that is not complete and subject to change. Novel approach. Most times, a bill is competed before it is introduced.
A $25,000 SALT Deduction Cap Would Be Only A Modest Improvement Over The House’s $80,000 Version – Howard Gleckman, Tax Policy Center. “As Congress struggles to pass the Build Back Better bill, some congressional Democrats are exploring new proposals to raise the $10,000 cap on the state and local tax (SALT) deduction. These would increase the deduction limit to $25,000 for all taxpayers or, alternatively, raise the cap to $25,000 only for those making $400,000 or less.”
A new Tax Policy Center analysis shows that, like earlier ideas, these options would primarily benefit those making more than $250,000-a-year and do almost nothing for middle-income households. However, they’d be less regressive than the House plan to raise the cap to $80,000. And they’d cost substantially less.
Union-Friendly Electric Car Credit Predicted to Pass Budget Test – Paige Smith and Kaustuv Basu, Bloomberg ($). “A labor-friendly electric vehicle tax credit is likely to withstand scrutiny by the Senate parliamentarian on whether it should be included in Democrats’ nearly $2 trillion tax and social spending plan, according to former Congressional budget staffers and policy analysts.”
If that happens, and opponents like Sen. Joe Manchin (D-W.Va.) withhold support of the broader package, lawmakers will need to negotiate a change to the credit, although it’s unclear whether that will be necessary. The credit could also be chopped altogether.
Vaping Tax Out of Senate Democrats’ Reconciliation Package - Colin Wilhelm, Bloomberg ($). “A proposal to federally tax e-cigarettes and other vaping products on par with traditional nicotine has been dropped from the tax-and-social spending bill Senate Democrats are negotiating, according to Senate Finance Chairman Ron Wyden. The vape tax, part of the House-passed reconciliation package, was projected by the nonpartisan Joint Committee on Taxation to raise roughly $8.6 billion over 10 years.”
- Wyden (D-Ore.) told reporters Thursday that the proposal had been dropped from discussions, shortly after the Wall Street Journal reported it was out.
- A broader plan to also raise taxes on traditional nicotine products was abandoned by House Democrats earlier this year due to concerns about violating President Joe Biden’s pledge that he wouldn’t raise taxes on anyone making under $400,000 per year.
Biofuel Groups Press Congressional Leaders on Green Jet Fuel – Kim Chipman and Jennifer Dlouhy, Bloomberg ($). “Biofuel groups are calling on U.S. congressional leaders to exclude fuels made by co-processing biomass with petroleum at oil refineries from proposed tax incentives for sustainable aviation fuel, or SAF.”
- Such fuels are not permitted for the biodiesel and renewable diesel tax credit, they argue in a letter to top lawmakers, including House Speaker Nancy Pelosi and Senate Republican leader Mitch McConnell
- ‘Congress should clarify in the Build Back Better legislation that all transportation fuels – including aviation fuels - made by co-processing biomass with non-biomass feedstocks are ineligible for incentives,’ the groups write
Bring Back the Tax Ferrets - Yair Listokin, Bloomberg ($). “The IRS is overmatched. The agency is up against taxpayers willing to pay armies of experts top dollar to devise intricate, and legally problematic, tax avoidance schemes. Increasing IRS funding is one way to combat this juggernaut, but we should do something else: Bring back a 19th-century tax enforcement mainstay—the ‘tax ferret.’”
These individuals or organizations would be government contractors with the right to audit the tax returns of taxpayers with incomes over $1 million and large corporations and get a cut, say 20%, of the additional revenue they collect, giving the ferrets the resources and incentives to uncover problematic tax schemes that may be uncollectible for IRS agents receiving government salaries.
In the past, state and local governments levying property taxes contracted with tax ferrets to identify untaxed or undervalued properties or stocks. The ferrets, who were authorized to operate in over 20 states, received a percentage of any additional property tax they secured for the government. Modern tax ferrets would do something similar for the federal government, reducing the tax gap in exchange for a cut of the extra revenue.
The IRS has used third-party collectors. And the horror stories are legendary. Taxpayers were threatened, stalked, and intimidated into paying what was owed. The article proposes putting these sorts of contractors on commission. Sure. Imagine the lengths they will go if wrestling money from a taxpayer puts more money in their pocket. As Bart Simpson would say: ¡Ay, caramba!
Community Banks Plead for Loan Loss Accounting Opt-Out - Nicola White, Bloomberg. “More financial institutions are pleading with U.S. rulemakers for an exemption from accounting rules that will overhaul how they calculate losses on failing loans.”
The intense data collection required to implement the current expected credit loss (CECL) accounting standard just won’t work for small community banks, the Independent Community Bankers of America wrote to the Financial Accounting Standards Board.
‘Community banks in the United States are quintessential relationship lenders that extend credit based on a customer relationship that takes into account many qualitative factors well beyond what a quantitative credit model can show,’ ICBA wrote in a Dec. 7 letter.
U.S. Debt-Ceiling Hike on Path for Final Passage Next Week – Laura Litvan and Erik Wasson, Bloomberg ($). “The U.S. Senate passed legislation creating a fast track to raising the nation’s debt ceiling, paving the way for Congress to act next week to eliminate the risk of a U.S. default. The measure passed Thursday on a 59-34 vote and now heads to President Joe Biden’s desk for his signature. The bill gives the Democratic majority one-time authority to raise the country’s borrowing limit in a separate piece of legislation without threat of a GOP filibuster.”
The amount of the increase hasn’t been announced, but is likely to cover borrowing into January 2023. Timing for a vote on the debt limit hike, which can be passed by a simple majority, hasn’t been set. It will then go to the House, which has scheduled a vote on final passage for Tuesday.
Questions on IRS Backlog – Bloomberg ($):
Nearly 100 House Republicans pressed the IRS for an update on its backlog in processing tax returns.
The lawmakers, in a letter sent Thursday, asked the agency to detail its plan for processing all remaining paper tax returns before the start of the filing season early next year.
'The agency must take urgent action now to alleviate the backlog and be ready for the start of the 2022 filing season,' the lawmakers said, requesting a response from the IRS by Dec. 17.
IRS Tax-Exempt Unit Hires Nearly 30 Employees in a Month – David Hood, Bloomberg ($). “The IRS’s tax-exempt division has hired 28 employees in the last month, according to the unit’s director, ahead of congressional efforts to boost the agency’s funding to bolster its workforce.”
Robert Malone, director of the Tax Exempt & Government Entities Division (TEGE), said 17 agents have been brought in to work in determinations, and 11 to be tax examiners.
IRS Rolling Out Electronic Exemption Application, Official Says – David van den Berg, Law360 ($). “The Internal Revenue Service will roll out a new electronic tax-exemption application form in 2022, the agency's exempt organizations head said during an online meeting Thursday.”
In the early part of next year, the IRS will roll out an electronic version of Form 1024, Robert Malone, director of exempt organizations and government entities in the IRS' Tax-Exempt and Government Entities division, said during the American Institute of Certified Public Accountants' Fall Tax Division Meeting, held virtually. There will be a 90-day grace period during which paper filing will still be allowed, but electronic filing of the form will be required in 2022, he said.
DeSantis Wants Cop Bonuses, Gas Tax Cuts in $100 Billion Budget – Danielle Moran and Jonathan Levin, Bloomberg. “Florida Governor Ron DeSantis wants to raise pay for state employees, pilot cryptocurrency programs and provide gas tax relief in next year’s budget.”
DeSantis, a Republican, unveiled his nearly $100 billion spending proposal, dubbed the ‘Freedom First Budget’ for the fiscal year starting July 1, during a press conference at the state capitol in Tallahassee on Thursday.
‘This is a huge, huge budget,’ DeSantis said from behind a podium with a shadowed Florida map branded with ‘Freedom First.’ ‘Freedom works in Florida, we are proud of that. I think the economic results are something that have been very very positive.’
Michigan Passes New Incentive in ‘Subsidized War’ for EV Jobs – Alex Ebert, Bloomberg ($). “Fearing further losses in the battle to land electric vehicle manufacturing jobs, the Michigan Senate on Thursday passed legislation that allows for appropriations into incentive funds that help companies buy land or expand operations. The measures are heading toward final approval by lawmakers and the governor.”
The bills (S.B. 769, S.B. 770 and S.B. 771) would create a Legislature-controlled ‘Strategic Outreach and Attraction Reserve Fund’ into which lawmakers could dump unspecified amounts of the state’s roughly $10 billion budget surplus. Bill sponsors declined to comment on the potential cost of the incentives, but state developers say Michigan is competing for 11 projects worth roughly $74 billion, and potentially 27,000 jobs.
‘Cookies’ Don’t Trigger Sales Tax, Massachusetts Tax Board Finds – Michael Bologna, Bloomberg ($). “Massachusetts can’t impose tax duties on a California online seller under the state’s “cookie nexus” rule for periods prior to the U.S. Supreme Court’s ruling in South Dakota v. Wayfair, the state Appellate Tax Board ruled.”
The board granted summary judgment to U.S. Auto Parts Network Inc. and abated the Massachusetts Department of Revenue’s $60,000 sales tax assessment dating to Oct. 1, 2017. The board ruled U.S. Auto Parts’ use of cookies—small chunks of data placed on a user’s computer while web surfing—didn’t constitute “physical presence” in Massachusetts for tax purposes, negating any duty to remit taxes to the state.
The board also determined the Supreme Court’s June 2018 Wayfair ruling can’t be applied retroactively to the tax period at issue. Wayfair permitted states to impose tax collection obligations on remote retailers based on economic activity in a state rather than physical presence.
Opponents Ask Court to Invalidate Washington Capital Gains Tax – Laura Mahoney, Bloomberg ($). “A Washington state trial court judge will decide in February whether to grant a request to invalidate a new capital gains excise tax as unconstitutional on its face."
Opponents filed a motion for summary judgment in Douglas County Superior Court this week asking Judge Brian C. Huber to rule the tax invalid without proceeding to trial. Washington residents, farmers, and business owners filed the legal challenge in May, arguing the tax violates the U.S. and Washington constitutions.
‘Cognizant of the nearly century-long constitutional prohibition on graduated income taxes, the Legislature has attempted to recharacterize this tax as an excise tax, but that attempt fails,’ the group said in a motion filed Dec. 6. ‘Merely relabeling a tax cannot alter its essential character and cannot save it from constitutional scrutiny in the courts.’
Companies Owe Predecessors’ Unpaid Taxes, New Mexico Court Says – Sam McQuillan, Bloomberg ($). “A car repossession company and a restaurant are on the hook for unpaid gross receipts taxes from defunct businesses after a New Mexico appeals court determined they were ‘mere continuations’ of their predecessors.”
In separate rulings the New Mexico Court of Appeals on Wednesday affirmed and reversed two Administrative Hearings Office decisions, holding that High Desert Recovery LLC and TVSLR LLC were continuations of two defunct companies and inherited their delinquent tax burdens. The court held that tax liability transferred over to the acquiring companies because they met several factors under the state Taxation & Revenue Department’s 'substantial continuity test.' Only one factor is needed to presume an acquiring company as a successor.
Treasury Sees Issuing Foreign Tax Credit Rules by Year-End - Michael Rapoport, Bloomberg ($). “The Treasury Department still aims to issue long-awaited regulations on foreign tax credits by the end of 2021, a Treasury official said Thursday.”
‘Our goal is still to get this published by the end of the calendar year,’ said Jose Murillo, Treasury’s deputy assistant secretary for international tax affairs, speaking at a virtual conference of the International Fiscal Association’s U.S. branch. Murillo had previously said in September that Treasury’s plan was to have the rules issued this year.
The foreign tax credit rules will finalize proposed regulations (REG 101657-20; RIN 1545-BP70) issued in 2020.
Debt-Equity Regs’ Future Hinges on Build Back Better Act Interest Rule – Andrew Velarde, Tax Notes ($). “The viability of Treasury’s anti-interest-stripping regs may depend on the legislative outcome of a newly proposed global interest deduction limitation provision in the Build Back Better Act.”
The section 385 regs 'are still obviously on the books,' said Jose Murillo, Treasury deputy assistant secretary for international tax affairs. ‘The fate of those regs . . . whether they’re narrowed, whether they’re withdrawn completely, I think, depends on what happens with [section] 163(n),’ he added.
Talks On Global Revamp 'In The Weeds,' OECD Tax Chief Says – Molly Moses, Law360 ($). “Discussions on the first pillar of a global tax revamp are ‘in the weeds’ as negotiators tackle industry carveouts and eliminating double taxation on reallocated profit, the Organization for Economic Cooperation and Development's top tax official said Thursday.”
Designing an exception for extractive industries in the OECD-led negotiations is difficult enough, Pascal Saint-Amans told those at a digital conference hosted by the Financial Times. Even harder, he said, are basic questions such as how to ensure companies aren't taxed twice when the portion of profit known as 'Amount A' is redistributed among countries.
Happy Dewey Decimal System Day! Libraries unite! And celebrate! The System “is the most widely used classification system in the world. Libraries in 135 countries around the world have translated the DDC into 30 different languages,” states National Day Calendar.
Also, the Encyclopedia Britannica was first published on this day in 1768.