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Government's Use of Economic Substance Doctrine May Increase –Andrew Velarde, Tax Notes ($):
Taxpayers may have to be on the lookout for more controversy involving the economic substance doctrine, with a recently filed district court case possibly foreshadowing increased litigation.
Speaking at the American Bar Association Section of Taxation meeting on October 14, Peter Blessing, IRS associate chief counsel (international), said that the government could ‘look to bring up the economic substance doctrine to a greater extent than in the past.’
The economic substance doctrine is codified under section 7701(o), which states that transactions that do not change a taxpayer’s economic position in a meaningful way, beyond taxes, or have a substantial nontax purpose will not have economic substance. Section 7701(o) applies to transactions ‘to which the economic substance doctrine is relevant.’
JCT Plans Explainer Of Inflation Reduction Act For Early 2023 – Stephen Cooper, Law360 Tax Authority ($):
The Joint Committee on Taxation plans to release a technical explanation of the tax provisions in the Inflation Reduction Act in early 2023, including possible areas for technical corrections to the new law, a committee staffer said Saturday.
Jared Hermann, JCT legislation counsel, said the 'best case scenario' for the committee would be to combine the explanation of the law's tax provisions in a single volume that also includes all the tax legislation enacted in the full two years of the 117th Congress.
The Joint Committee on Taxation regularly provides explanations for recently enacted tax bills.
Treasury Planning More Comment Requests on Energy Provisions – Naomi Jagoda and Michael Rapoport, Bloomberg ($):
The Treasury Department expects to release additional requests for comment on energy provisions in the new tax-and-climate law in the next few weeks, a department official said Saturday at a conference in Dallas hosted by the American Bar Association’s Tax Section.
Tom West, deputy assistant secretary for tax policy at Treasury, said the clean-energy provisions in the law are a more immediate implementation priority than the book-income tax and the stock buyback tax, noting there are some quick deadlines for guidance in the energy area.
Help Wanted: Treasury and the IRS Gear Up on IRA Energy Guidance – Marie Sapirie, Tax Notes ($):
When Congress added a host of new credits, concepts, and changes to the energy provisions in the tax code through the Inflation Reduction Act (IRA, P.L. 117-169), it became clear that the guidance writers at the IRS and Treasury would have to clear their calendars this fall. Last year’s legislative back-and-forth over Build Back Better gave a preview of the general direction the energy provisions might take. That provided the IRS and Treasury with a head start in thinking through the range of issues that guidance might need to address. But guidance projects can’t start in earnest without a statute, and the August enactment of the IRA marked the formal beginning of implementation.
Treasury Plans Energy Credit Labor Requirement Guidance in 2022 – Naomi Jagoda, Bloomberg ($). “The Treasury Department plans to release guidance this year on prevailing wage and apprenticeship requirements for clean-energy tax breaks, a department official said Friday.”
‘The prevailing wage and apprenticeship provisions are just about our top priority in terms of implementation,’ Tom West, Treasury deputy assistant secretary for tax policy, said at a conference in Dallas hosted by the American Bar Association’s Tax Section.
IRS Actively Considering 2017 Tax Law’s Loss-Acquisition Rules – Erin Slowey, Bloomberg ($):
The IRS is actively reviewing rules that limit losses a target company can use that were acquired through a merger when calculating their tax write-offs, an agency official said Saturday.
The agency said in May it will re-propose rules under tax code Section 382(h). The rules were first proposed in 2019 as part of the 2017 tax law. The IRS is ‘still considering everything,’ Terry West, who is with the Internal Revenue Service Office of Chief Counsel, said at a conference in Dallas hosted by the American Bar Association’s Tax Section.
IRS on Track to Clear Most Retirement Law Regulations in 2023 - Austin Ramsey, Bloomberg ($). “The IRS has set a tentative deadline for the end of 2023 to complete most of its regulatory work implementing workplace retirement plan changes under the SECURE Act, according to officials speaking at the American Bar Association’s Fall Tax Meeting in Dallas.”
Congress could potentially pass “Secure 2.0” after the election so getting “Secure” out the door might be a good idea.
Variety of Employee Benefits Plan Regs Expected This Year – Caitlin Mullaney, Tax Notes ($):
Three big reg projects Treasury hopes to issue by year-end are the section 413(e) multiple employer plans (MEPs) final regs, the section 401(a)(9) required minimum distribution (RMD) final regs, and the section 401(k) proposed regs, William Evans of the Treasury Office of Benefits Tax Counsel said October 14 during the American Bar Association Section of Taxation meeting.
IRS Wants to Create Tests to Determine Partnership Liabilities – Erin Slowey, Bloomberg ($). “The IRS plans to create ‘mechanical tests’ to help determine liabilities during the transfer of property to the partnership or partner, an official said Saturday in Dallas at a conference hosted by the American Bar Association’s Tax Section.”
Further down the article:
'They are trying to come up with more mechanical tests that are good for both us and for the taxpayers,' [IRS Office of Chief Counsel Kelly] Madigan said.
The ‘bummer’ of the $7,500 electric vehicle tax credit: Its full value may be hard to get – Greg Iacurci, CNBC:
The historic climate legislation President Joe Biden signed in August offered a federal tax break — worth up to $7,500 — to households that buy new electric vehicles.
But it may be tough for consumers to get the full value of the tax credit — at least initially.
That’s largely due to the structure of the clean vehicle credit and certain requirements for consumers and car manufacturers. Those roadblocks, however, are poised to ease in the longer term, experts said.
Republicans go to town on Dems' IRS funding boost – Brian Faler, Politico:
Republicans are hammering the IRS — and the $80 billion Democrats recently pushed through for the agency — as they try to drive turnout in next month’s midterm elections.
They’re spending millions in the waning weeks of the campaign on ads in races in Georgia, Arizona, Nevada and elsewhere, amping up their questionable assertions that the funding will translate into an army of tax collectors targeting average Americans.
Don’t believe everything you hear when it comes to these ads. Believe or not, Politicians don’t always tell the truth – stunning, I know.
Estate Tax Transcript Request Won’t Trigger Audit, Official Says – Jonathan Curry, Tax Notes ($). “Tax professionals have no reason to be concerned that requesting a transcript of an estate or gift tax return will move the return to the top of the examination pile, according to an IRS official.”
‘I can tell you honestly, requesting a transcript has no impact on examination selection,’ Lisa M. Piehl, estate and gift tax policy manager, IRS Small Business/Self-Employed Division, told attendees at the American Bar Association Section of Taxation meeting October 14.
Treasury Plans to Clarify Aggregation Rules for Book Tax - Erin Slowey, Bloomberg ($). “Aggregation rules would apply similarly to how they did before President Joe Biden’s tax-and-climate law for determining if a corporation will be subject to the book tax, a Treasury official said Friday at a conference in Dallas hosted by the American Bar Association’s Tax Section.”
Corporate AMT Guidance Will Clarify Aggregation Rules – Kristen Parillo, Tax Notes ($). “Treasury intends to clarify how the aggregation rules for controlled partnerships and other entities apply when determining if a corporation is subject to the new corporate alternative minimum tax, an official said.”
Major companies race to buy back stocks ahead of new corporate tax – Tobias Burns, The Hill. “Major corporations are scrambling to repurchase their own shares before a new tax on stock buybacks passed as part of Democrats’ major spending bill over the summer goes into effect, an effort that may sap one of the bill’s main sources of revenue.”
The Fashion in Beneficial Ownership Reporting – Lee Sheppard, Tax Notes ($):
Recently finalized FinCEN rules require ownership reporting for corporations, partnerships, and limited liability companies…
Effective January 2024, ownership must be reported to FinCEN for nearly all corporations, limited liability companies, limited liability partnerships, limited liability limited partnerships, business trusts, and limited partnerships. All entities created under U.S. state or tribal law must register (87 F.R. 59498 (Sept. 30, 2022)).
The article notes that five million new and 32 million existing companies will have to register.
Further down the article:
The new law and the FinCEN rule could have the effect of putting U.S. secrecy jurisdictions Delaware, Nevada, South Dakota, Florida, Wyoming, and New Hampshire out of the game. Lawyers warn that miscreants will no longer be able to hide behind LLCs to do what they are afraid to do in their own name.
New York State Tax Receipts Surpass Projections by $2.4 Billion – Bloomberg ($):
New York state tax receipts for the first half of the state fiscal year exceeded projections by $2.4 billion, totaling $58.4 billion, according to Office of the New York State Comptroller Friday.
Newsom Presses California to Lead on Windfall Oil Profits Tax – Michael Bologna, Bloomberg ($):
The most overlooked state tax development of the last week must be Gov. Gavin Newsom’s proposal for a windfall profits tax on the oil industry. Dismissed by some as empty political rhetoric in response to sky high gas prices, the California governor is suggesting something unique in the annals of state tax policy. No state has a windfall profits tax, and rarely has the concept been implemented at the federal level. If Newsom is successful, he could create a foundation for future actions and a path for other states to follow.
Calif. Pork Law Fight May Guide Post-Wayfair Tax Challenges – Paul Williams, Law360 Tax Authority ($):
A pending U.S. Supreme Court decision in a challenge to a California animal welfare ballot initiative could signal how claims that state tax systems impose undue burdens on remote sellers may be viewed under the dormant commerce clause.
The justices heard oral arguments Tuesday in a case centering on whether a 2018 voter-approved initiative that bans in-state sales of meat from pigs born to mothers confined in small spaces unconstitutionally regulates out-of-state conduct because California imports most of its pork products from other states. The case has piqued the interest of tax professionals who see parallels between arguments presented in the dispute and those raised in tax-related litigation.
Bar Retroactive Sales Tax, Group Urges Massachusetts High Court – Perry Cooper, Bloomberg ($). "Massachusetts’ retroactive application of the US Supreme Court’s Wayfair decision would leave the state’s tax system 'vulnerable to challenges' under the federal commerce and due process clauses, a free-enterprise advocacy group told the state high court."
DC Exempts Student Loan Relief From Tax – Michael Nunes, Law360 Tax Authority ($). “Washington, D.C., will exempt student loan debt forgiven from district taxable income as part of a plan announced by President Joseph Biden in August, the district's chief finance office of tax and revenue announced.”
Mississippi judge blocks private schools' tax-funded grants – Emily Wagster Pettus, Associated Press via ABC News. “A Mississippi judge on Thursday blocked a state law that put $10 million of federal pandemic relief money into infrastructure grants for private schools.”
Mo. Seeks Supreme Court Review Of ARPA Tax Offset Case – Sanjay Talwani, Law360 Tax Authority ($). “Missouri asked the U.S. Supreme Court to review an Eighth Circuit decision that it has no standing to challenge a federal law prohibiting states from using coronavirus aid to offset tax cuts.”
Texas Appeals Court Revives Squatter’s Property Ownership Suit – Perry Cooper, Bloomberg ($). “A woman arguing that she has used and cared for a piece of land long enough to get title to it has convinced a Texas appeals court her suit was improperly dismissed.”
Indicted Promoter of Green Tax Breaks Loses Bid to Toss Charges - David Voreacos, Bloomberg ($). “Jack Fisher , a major promoter of land conservation deals, lost his bid to dismiss an indictment alleging he and six others engaged in fraudulent syndicated deals that led to at least $1.3 billion in phony charitable tax deductions.”
IRS Foreign Tax Credit Rule Due Soon; PTEP Rules Slip to 2023 – Michael Rapoport, Bloomberg ($):
A much-awaited proposed new rule addressing some of companies’ complaints about the Treasury Department’s foreign tax credit regulations should be issued very soon, in ‘weeks, not months,’ an IRS official said Friday.
Another high-profile rule proposal, on previously taxed earnings and profits, won’t be out until the first half of 2023, said Peter Blessing, associate chief counsel (international) for the IRS, speaking at a conference of the American Bar Association’s tax section in Dallas. Treasury officials had previously indicated at least the first part of these so-called PTEP rules were expected by the end of 2022.
Treasury Rule on IP Repatriation Could Slide to 2023 – Michael Rapoport, Bloomberg ($). “The Treasury Department will issue a new regulation on the repatriation of intellectual property late this year or early in 2023, an official said—a time-frame that suggests the rule might come a little later than previously anticipated.”
Kwarteng Sacked As Chancellor As Gov't Reverses Tax Plan – Matt Thompson, Law360 Tax Authority ($). “Kwasi Kwarteng stepped down on Friday after the U.K. government reversed plans to cancel a rise in the corporate tax rate to 25% from 19%, the latest U-turn after the Chancellor of the Exchequer unveiled his mini-Budget of tax cuts in September.”
From the “now you see it, now you don’t” file:
San Francisco woman mails check to IRS, has it returned with all ink vanished – Michael Finney and Renee Koury, ABC 7:
It began when Bassan filed a petition with the U.S. tax court to dispute a big IRS penalty.
She paid the $60 filing fee with a check made out for $60. But a couple of weeks later, the court sent the check right back to her.
To her amazement, it was totally blank. All the ink on her check had disappeared.
Lou Ann Bassan, who wrote the check, thought she might have had a ‘senior moment’ and forgot to fill in the check before mailing it. That was not the case.
Further down the article:
The tax court notice says the mail had been ‘irradiated’ - zapped with radiation.
And that caused the ink on her check to disappear.
Documents sent to the IRS have been irradiated since 2001 anthrax scare when the agency received parcels full of the poison. For Bassan, the agency said she had to find a pen that “resists irradiation, and write another check.”
An online search showed such instruments cost over $250.
‘I'm not gonna go buy a special pen just to write one check. I refuse,’ she said.
In the end, the IRS reconsidered her case and waived the penalty, so no high-priced pen was needed. Oddly, the disappearing act drew attention to Bassan’s case and it wound-up saving her $60.
Happy National Mulligan Day! What is National Mulligan Day, you ask? When someone gets a Mulligan it means that get second chance at doing something they want to improve upon. The phrase got its start in golf, where regrets over a drive or putt can be common and the desire for a do-over is a constant feeling.