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Governor Kim Reynolds is proposing an end to state income taxes on pensions and retirement accounts and lowering the state income tax to a single rate of just 4% within four years.
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Reynolds proposes that retired farmers no longer be taxed on cash rent for their farmland and she said Iowans who’ve earned stock in the company where they work should no longer be taxed when they sell shares.
The plan on the Governor's website explains the corporate stock exemption:
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Allow one lifetime election to exclude the net capital gains from one stock of one qualified corporate or employee stock ownership plan (ESOP) from state income tax.
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Qualified corporations must have done business in Iowa for a minimum of 10 years. Employee owners must have acquired capital stock while employed by the corporation for at least 10 years.
Current law has a 50% gain exclusion election for sales to ESOPs. It's not clear how this would coordinate with the federal Section 1042 deferral provision, which allows gains from certain sales of stock to ESOPs to be rolled into publicly-trades securities and not taxed until those securities are sold.
While not mentioned in the Governor's speech, Governor Reynolds also proposes reforms to Iowa's corporation tax. The Iowa top corporate tax rate is 9.8%, one of the highest rates in the country. From the governor's web site:
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For every fiscal year in which net corporate income tax receipts exceed $700 million, the surplus will be used to buy down the current top rate.
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Following the close of the fiscal year, the Department of Revenue will determine the new top corporate income tax rate and apply it effective January 1 of the following tax year.
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New top rates will be determined each fiscal year that net corporate income tax receipts exceed $700 million, until a uniform 5.5% corporate income tax rate is achieved, at which time it would be capped.
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Once the rate is capped, excess tax revenue beyond $700 million will go into the state’s general fund.
Governor Reynolds is a Republican, and Republicans control both houses of the Iowa legislature, which would seem to auger well for the plan, but legislative taxwriters are notoriously independent, so changes are likely.
Md. Gov. Proposes Using Surplus For Retirement Tax Relief - Asha Glover, Law360 Tax Authority ($). "State lawmakers should pass legislation to phase out retirement taxes in Maryland beginning in the 2022 tax year for all retirees 65 and older who claim Social Security, Republican Gov. Larry Hogan said during a news conference."
Universal health care bill advances in California Assembly - Adam Beam (AP), Washington Post ($). "But the proposal that cleared a legislative committee in the state Assembly is still a long way from becoming law. It faces strong opposition from powerful business interests who say it would cost too much. And even if it does become law, voters would have to approve a massive income tax increase to pay for it — a vote that might not happen until 2024."
Related: California Considers Doubling its Taxes.
House Dems Envision Whittled-Down ‘Build Back Something’ Bill - Doug Sword, Tax Notes ($). "Democrats like to say it isn’t smart to negotiate in public, but with the roughly $2 trillion Build Back Better Act (H.R. 5376) mired in the Senate, some appear ready to begin talks based on whatever Sen. Joe Manchin III, D-W.Va., wants."
Dems' Push To Enforce, Restrict Mega-IRAs Faces Hurdles - Alan Ota, Law360 Tax Authority ($):
Senate Finance Committee Chairman Ron Wyden, D-Ore., and House Ways and Means Committee Chairman Richard Neal, D-Mass., have promoted the BBB Act's limits on individual retirement accounts valued at $10 million or more for those earning more than $400,000 for individuals or $450,000 for married couples. The measure would bar contributions that push an account's value over $10 million, and would provide for required minimum distributions from accounts exceeding that threshold.
To enforce the new mega-IRA restrictions, the bill would double to six years the statute of limitations for IRA noncompliance, including prohibited transactions and valuation-related misreporting.
With Build Back Better becalmed in the Senate, the fate of these proposals is uncertain.
SBA Issues Year-end PPP Loan Forgiveness Report - Mark Friedlich, Wolters Kluwer Tax & Accounting:
The report indicates that overall:
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81% of all PPP loans have submitted forgiveness applications
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Forgiveness has been requested for 85% of the total loan value of all PPP loans
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80% of all PPP loans have been fully or partially forgiven
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83% of been the total PPP loan value has forgiven, in full or in part
Tax statements you need to file your 2021 return - Kay Bell, Don't Mess With Taxes:
In addition to income statements, such as the 1099-NEC I got, 1099s with details on investment earnings, and W-2 forms for folks with wage-paying jobs, there are beau coup documents reporting tax-related transactions.
Among the most common are forms detailing home related mortgage interest and taxes paid from escrow accounts, retirement account distributions, prize and gambling winnings, and in some cases, health care information.
And this 2022 tax filing season, millions of us also are getting special Internal Revenue Service letters about COVID-19 relief payments.
Frozen Returns: If You Made an Extension Payment on May 17th And Haven’t Received Your Refund…. - Russ Fox, Taxable Talk. "If you made an extension payment on exactly May 17, 2021 (the last day to file a 2020 extension) and are receiving a refund, your return may have been “frozen” by the IRS computer system. (I had my second such case today.) I don’t know how extensive this issue is, but the representative I spoke to yesterday told me that he had dealt with 'many' such cases."
January 31 Deadline Is Fast Approaching for Forms W-2 and 1099 - Parker Tax Publishing. "Extensions of time are available for filing Form 1099-NEC and Form W-2 with the IRS, if taxpayers can't make the January 31 deadline and meet one of the criteria listed on Form 8809. The request for an extension of time to file Form 1099-NEC or Form W-2 must be filed on the paper version of Form 8809, Application for Extension of Time to File Information Returns. One 30-day extension to file Form 1099-NEC or Form W-2 may be requested. However, it's important to note that the extension of time does not extend the time for furnishing statements to recipients."
Comparing Europe’s Tax Systems: Cross-Border Tax Rules - Daniel Bunn, Tax Foundation. "The United Kingdom’s cross-border tax system ranks highest in the OECD. Like most OECD countries, the UK operates a territorial tax system, fully exempting foreign-earned dividends and capital gains from domestic taxation. The UK has the broadest tax treaty network in the OECD, at around 130 countries. As a result, depending on the tax treaty, foreign entities from these countries are either not subject to the 20 percent withholding tax on interest and royalties earned in the UK or pay a reduced rate. There is no withholding tax on dividends."
A New Analysis Shows How Much Business Income Goes Untaxed - WIlliam Gale, Swati Joshi, Christopher Pulliam, and John Sabelhaus, TaxVox. "Finding a way to tax what business owners effectively earn, rather than what they report to the IRS, would have important revenue and distributional implications. And it may be the key to more effectively taxing the wealthy, an idea that has attracted significant attention among policymakers."
Canadian Province of Quebec Says Tax Coming for Unvaccinated - Paul Vieira, Wall Street Journal ($). "The tax, which Mr. Legault said officials are now drafting, marks another sign of the impatience among government leaders and heads of state for citizens who won’t get vaccinated and the steps officials are prepared to take to change people’s minds."
Former New Mexico Taxation and Revenue employee pleads guilty to wire fraud, identity theft, money laundering - US Department of Justice (defendant name omitted). "[Taxpayer] perpetrated the fraud by copying tax returns that had already been processed or creating new returns in taxpayers’ accounts. He altered information such as taxpayers’ Social Security numbers, bank account numbers and withholding amounts in the returns. By changing the withholding amounts, he increased the amounts of the refunds. Martinez fraudulently directed $689,797 into accounts in his control."
It's all downhill when you go home. Today is National Take The Stairs Day. Apparently not just in case of fire.