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New IRS Online ID Verification Process, With ID.me, Has 17 Steps - Naomi Jagoda, Bloomberg ($). “The IRS’s new option for creating an online account requires taxpayers to follow a 17-step process to verify their identity, including a virtual interview with a third-party representative.”
The agency announced this week that for this tax-filing season taxpayers will be able to verify their identity through virtual interviews with agents of a company called ID.me, instead of through facial recognition software. Taxpayers will also still be able to choose to verify their identity through ID.me using facial-recognition technology, the IRS said.
IRS Says Taxpayers Can Use Live Interview To Authenticate ID - David van den Berg, Law360 ($). “Taxpayers can now verify their identities to sign up for Internal Revenue Service online accounts by conducting virtual interviews with agents rather than providing biometric data or submitting selfies to the agency, the IRS announced.”
Taxpayers can still choose to provide their biometric data to verify their identities as part of creating online accounts, the IRS said Monday. The agency had earlier required taxpayers to provide ID.me, an outside identity verification vendor, a selfie and a photo of an identifying document such as a driver's license to verify their identities to create online accounts. The agency said new requirements have been put in place to ensure any such images provided by taxpayers are deleted.
Proposed Regs Issued on Required Minimum Distributions – Tax Notes ($):
The IRS has issued proposed regulations (REG-105954-20) on required minimum distributions from qualified plans; section 403(b) annuity contracts, custodial accounts, and retirement income accounts; IRAs and annuities; and eligible deferred compensation plans under section 457.
The document is here.
Online Gambling and Cryptocurrency Addresses for 2022 – Russ Fox, EA, Taxable Talk. “If you have one or more foreign financial accounts and you have $10,000 aggregate in those account(s) at any time during 2019, you must file the Report of Foreign Bank and Financial Accounts (the “FBAR”). This is Form 114 from FINCEN. (The IRS and FINCEN now allege that foreign online poker accounts are 'casino' accounts that must be reported as foreign financial accounts. The rule of thumb, when in doubt report, applies—especially given the extreme penalties.) You also should consider filing an FBAR if you have $10,000 or more in a non-US Cryptocurrency Exchange.”
There’s a problem, though. Most of these entities don’t broadcast their addresses. Some individuals sent email inquiries to one of these gambling sites and received politely worded responses (or not so politely worded) that said that it’s none of your business.
‘All Americans Should Pay Some Income Tax,’ Top GOP Senator Says – Doug Sword, Tax Notes ($). “The Republican in charge of trying to retake the Senate for the GOP released a plan that includes requiring all Americans to pay some income taxes, and offering proposals to drastically simplify the tax code.”
The plan focuses on lower income people paying ‘their fair share.’ Seriously.
Scott’s plan is mainly about social, economic, and political issues — treating socialism ‘as a foreign adversary,’ building the border wall and naming it after former President Trump, and bringing ‘a complete end to racial politics.’
But the proposal that quickly drew Democrats’ ire noted that more than half of Americans pay no income tax: “All Americans should pay some income tax to have skin in the game, even if a small amount,” according to Scott’s plan.
That proposal doesn’t include details as to how it would affect refundable tax credits, like the earned income tax credit, or low-income retirees who don’t make enough to pay income taxes.
This plan will sail through Congress. Not.
The plan is here.
Facing new Superfund taxes, chemical lobby boosted spending – Benjamin Hulac, Roll Call. “A major lobbying arm for the chemical industry boosted its spending by nearly 92 percent at the end of last year, compared with the same period in 2020, as Congress considered and passed legislation raising taxes on 42 chemicals.”
In the last quarter of 2021, the American Chemistry Council, or ACC, spent $7.32 million lobbying Congress and federal agencies, up from $3.81 million in the fourth quarter of 2020, records show. For the full year, the council increased its spending by 19 percent to $16.57 million, compared with $13.92 million in 2020.
‘The increase in spending was driven by a number of challenges and opportunities that came to the fore late in the year, specifically, the reimposition of Superfund Taxes on chemical manufacturers and a proposed tax on plastics,’ Jennifer Scott, a spokesperson for the group, said in an email.
Inflation Throws Inventory-Stressed Auto Dealers Another Curve – Nathan Richman, Tax Notes ($). “A tax accountant says he sees opportunities for auto dealers to take advantage of record inflation as a response to their pandemic-induced inventory woes, but he wonders what happens if price changes return to normal.”
The COVID-19 pandemic has snarled supply chains around the world, and the automobile industry has been highlighting the pain that has caused, especially because of microchip and superconductor shortages. The supply chain difficulties have generated a sustained effort led by the National Automotive Dealers Association (NADA) to persuade Treasury to invoke section 473.
Section 473 allows the IRS and Treasury to provide regulatory relief when taxpayers on the last-in, first-out tax accounting method can’t maintain their LIFO layers because of something like a major foreign trade disruption. NADA previously told Tax Notes that some auto dealers have been pushed into decades-old LIFO layers because of the current global supply chain disruptions.
Stalled Economic Agenda Demands Biden Action, Allies Argue - Colin Wilhelm, Bloomberg ($). “Outside groups are increasing pressure on the White House to play a more active role in revamping Democrats’ centerpiece economic legislation. The White House’s hopes of passing a roughly $2 trillion climate, social spending, and tax package stalled in December, when Sen. Joe Manchin (D-W.Va.) announced he wouldn’t support the plan.”
Fear is growing among left-leaning advocates that if the White House doesn’t quickly re-engage with Manchin and make tough decisions on how to get every Senate Democrat on board, the window will close on passing anything before the midterms. Key constituencies for Democrats—unions and environmental advocates—are waiting for President Joe Biden to follow through on his promise that he would make sure the ‘Build Back Better’ package passes.
‘We are in urgent need of regaining momentum,’ said Jason Walsh, executive director of the BlueGreen Alliance, an advocacy organization aimed at aligning labor unions and environmentalists on energy and trade policy. ‘We understand we’re not going to get everything. We’re pragmatic. But we have to get something, and it’s got to be strong.’
There is nothing - nothing - going on between Congress and the White House on moving this bill forward:
State of Play for Build Back Better: Murky – Jay Heflin, Eide Bailly:
A senior Democratic Senator on the tax-writing Senate Finance Committee offered a somewhat bleak assessment on Congress eventually passing the tax and spending reconciliation bill referred to as Build Back Better.
‘We’re on pause. We’re on hold. There is nothing immediately going on,’ he told a D.C. audience of tax professionals.
Lawmakers could refocus on Build Back Better in March - maybe:
Since the New Year, determining Senate support for the tax and spending reconciliation bill has become less of a priority. The Senate is now focused on passing a spending bill that funds the federal government through the fiscal year-end, September 30th.
'I do think we're going to try and get the omnibus done first before we can get to the Build Back Better agenda,' he said.
Lawmakers have until March 11th to reach an agreement on the spending package...
Warren Urges Treasury to Probe Revolving Door With Big CPA Firms - Amanda Iacone. Bloomberg ($). “Two Democratic lawmakers urged Treasury’s inspectors general to investigate the practice of recruiting senior policy staff from the largest U.S. accounting firms, calling the revolving door practice ‘corrupt.’
Sen. Elizabeth Warren (Mass.) and Rep. Pramila Jayapal (Wash.) said in a letter to two Treasury officials that their own investigation ‘raised new concerns about the accounting giants that take advantage of these revolving-door schemes.’
Pro-Sports Stadium Munis Would Lose Tax Exemption in House Bill - Danielle Moran, Bloomberg ($). “Democratic Congress members Don Beyer, Earl Blumenauer and Jackie Speier have introduced a bill that would end the tax-exempt status for new sales of municipal bonds that finance professional sports stadiums.”
The legislation, proposed this month and called the ‘No Tax Subsidies for Stadiums Act of 2022,’ says that any bonds sold to finance or refinance capital expenditures for a facility that’s used for professional sports games or practices wouldn’t be eligible for tax-exemption, a key feature of most municipal bond sales.
Important to note: Just because a bill is introduced doesn't mean it becomes law.
Dems Weigh Options For Revival Of Charitable Tax Break - Alan K. Ota, Law360 ($). “The December expiration of a temporary above-the-line charitable deduction has led several Democrats on Capitol Hill to explore options for reviving and broadening incentives aimed at encouraging families and businesses to contribute to nonprofits.”
Key Democrats have laid the groundwork to try to revive and potentially expand the temporary above-the-line charitable deduction created by the Coronavirus Aid, Relief and Economic Security Act and extended by an omnibus spending law before expiring at the end of 2021.
They said there was strong support for continuing the incentive for non-itemizing taxpayers, capped at $300 for individuals and $600 for married couples. If extended, the tax break could be claimed in addition to the standard deduction of $12,950 for individuals and $25,900 for married couples in 2022 under the 2017 Tax Cuts and Jobs Act .
DOJ Seeks Pretrial Ruling on Syndicated Easement Appraisals – Kristen Parillo, Tax Notes ($). “ A Georgia district court should hold that none of the appraisals prepared for EcoVest Capital Inc.’s syndicated easement deals complied with Treasury’s willing-buyer test, according to the Justice Department.”
Rather than valuing the underlying properties as vacant land with development potential, the appraisals improperly valued them as if they were already fully developed, the Justice Department asserted in its February 15 motion and brief for partial summary judgment in United States v. EcoVest Capital Inc.
The allegedly false statements by EcoVest’s principals and appraiser Claud Clark III that the appraisals were qualified under section 170 ‘paved the way for the astronomical valuations that fueled Defendants’ tax shelter scheme,’ the government added.
Rare Rebuke of Trump Financial Statements Sets Up Showdown - Amanda Iacone, Bloomberg ($). “Mazars USA LLP’s disavowal of a decade’s worth of Trump Organization financial statements was not only a rarely seen rebuke of a private company accounting client, but also a key turning point for the New York accounting firm.”
While it’s not unusual for firms to part ways with a client, it’s rare to disavow the client when firing them. It’s rare to determine that ten fiscal years of financial statements were not trustworthy. And it’s rare for an accounting firm to remark on those statements at all if it hadn’t audited or provided assurance on them.
‘Accounting firms rarely do this and rarely do it with any publicity,’ said James Cox, corporate and securities law professor at Duke Law School. ‘They don’t want to have the appearance of one, abandoning their clients, or blowing the whistle on their clients, or doing any conduct that’s going to cast aspersions on their clients. And of course, this appears to do all of that.’
Trump CFO Says N.Y. Charges Stem From Ex-Employee’s Vendetta – Erik Larson and Chris Dolmetsch, Bloomberg ($). “The Trump Organization ’s former chief financial officer claims criminal tax charges filed against him in New York are barred by his federal immunity deal in a separate case involving former President Donald Trump’s payments to a porn star.”
Allen Weisselberg said in a motion to dismiss filed Jan. 23 and unsealed Tuesday that the New York charges were largely fueled by former Trump lawyer and fixer Michael Cohen, who was convicted on federal charges related to hush-money payments to Stormy Daniels. Weisselberg claims his cooperation with federal prosecutors helped convict Cohen, who in turn went to New York state authorities.
Supreme Court Won’t Hear Passport Revocation, Other Tax Cases – Patrice Gay, Tax Notes ($). “The Supreme Court on February 22 denied review of an individual’s case challenging the revocation of his passport for a delinquent tax debt and denied review of two other tax cases.”
Jeffrey T. Maehr petitioned the Supreme Court for review of a Tenth Circuit decision that upheld the dismissal of his suit challenging the revocation of his passport after the IRS certified that he had a seriously delinquent tax debt of approximately $250,000. Section 7345, which was enacted in 2015 as part of the Fixing America’s Surface Transportation Act, allows for the revocation or denial of a taxpayer’s passport in the case of some unpaid taxes. After the IRS certifies a tax debt, Treasury transmits certification to the secretary of state for passport revocation.
The Court also declined to hear Adolfo Montero’s case. Montero sought review of Fifth Circuit orders that dismissed his appeal of a district court decision and denied reconsideration. In his petition, Montero argued that the government circumvents the Constitution and defrauds American citizens through the deeming clause in reg. section 31.3401(a)-3. He also claimed that the courts collude in the fraud. Montero v. United States, Sup. Ct. Dkt. No. 21-925 (2022), No. 21-50237 (5th Cir. 2021).
Joshua Harris also petitioned the Supreme Court for review of a Second Circuit decision that affirmed the Tax Court’s recalculation of his deficiencies and penalties in a case that had been remanded to the Tax Court. The Second Circuit held that the Tax Court couldn’t consider issues that were expressly or impliedly resolved in the prior circuit court decision and found that Harris’s arguments lacked merit. In his petition, Harris argued that he didn’t receive a fair and impartial trial and that he was denied due process. The Supreme Court denied review. Harris v. Commissioner, Sup. Ct. Dkt. No. 21-1035 (2022), No. 19-4278 (2d Cir. 2021).
California SALT Cap Workaround Changes Make It More Appealing – Laura Mahoney, Bloomberg ($). “California’s optional workaround for the federal cap on state and local tax deductions is much more likely to attract participants now that it has been expanded.”
Lawmakers removed the largest barriers to participation in the workaround for S corporations and partnerships, first enacted in 2021, with a bill Gov. Gavin Newsom (D) signed last week (S.B. 113), practitioners said.
California’s expansion comes as talks in Congress to increase or remove the $10,000 cap have faltered. More than 20 states have enacted workarounds that vary in details but hinge on pass-through entities with a strategy blessed by the Internal Revenue Service in 2020.
Pa. Tax Talk: Ambiguity Issue In High Court Qui Tam Ruling - Jennifer Karpchuk, Law360 ($). “Unlike many states, in determining taxable income, Pennsylvania does not start with federal taxable income.”
Instead, Pennsylvania maintains a unique approach whereby only income that falls into eight specified buckets is taxable. That irregularity in Pennsylvania law resulted in a challenge, O'Donnell v. Allegheny County North Tax Collection Committee, to whether qui tam payments fell within any of Pennsylvania's categories of taxable income.
Qui tam is a type of suit that allows a private individual to prosecute a lawsuit for the government and, if successful, to receive a reward.
Fla. High Court Takes Up County's Appeal In Tax Fight - Michael Nunes, Law360 ($). “The Florida Supreme Court will take up one county's appeal of a lower court's decision finding that it owed taxes on property it owns in another county, the state high court said.”
The court issued an order Monday saying it will take jurisdiction of the case, in which Pinellas County is seeking relief from property taxes on 12,400 acres that it owned in neighboring Pasco County.
West Virginia House Passes Plan Doubling Film Tax Credit - Donna Borak, Bloomberg ($). “West Virginia House lawmakers on Tuesday voted in favor of restoring and doubling the state’s annual film tax credit to $10 million starting this July.”
The House passed H.B. 2096 in an 87-11 vote, which will allow the West Virginia Development Office to retroactively give filmmakers financial incentives to work in the state. A companion Senate bill S.B. 51 was introduced in January.
Vail Resort’s Value Excludes Rental Income, Top State Court Says - Perry Cooper, Bloomberg ($). “Vail Resorts Inc. subsidiary Lodge Properties Inc. convinced the Colorado Supreme Court that net income from rentals of condominiums on its property isn’t part of the luxury resort’s actual value for tax purposes.”
The Eagle County assessor included the net income that sister company Vail/Beaver Creek Resort Properties received for managing condo rentals in the Lodge’s assessed value for the first time in 2017. The assessor’s conclusion that the Lodge had a value of $41 million was a dramatic increase from the previous assessment.
Expect More Details on Tax Deal’s 15% Rate By End of March: OECD - Hamza Ali, Bloomberg ($). “The OECD will launch three different public consultations related to new global minimum tax rules over the next few weeks, according to senior officials.”
The Paris-based organization is searching for 'the best way of implementing those rules in a way that not only delivers the intended outcomes, but does so in a sensible compliance burden,' Achim Pross, head of the OECD’s international co-operation and tax administration division, said Monday at a virtual event hosted by the group.
U.S. Opposes Canada’s Digital Services Tax Act Proposal - Eric Martin, Bloomberg ($):
U.S. urges Canada to abandon any plans for a unilateral measure and instead redouble its commitment to the rapid implementation of Pillar One of the Oct. 8 OECD/G-20 agreement and the negotiation of a multilateral convention, U.S. Trade Representative’s office says in comments filed with the Canadian government.
Amazon, Siemens Slam Global Tax Pact’s Sales Allocation Rules - Hamza Ali, Bloomberg ($). “Amazon.com Inc. and Siemens AG have complained that OECD-proposed rules on how to link sales to a jurisdiction fail to capture how they operate in practice.”
The proposals are part of a two-pillar plan, greenlit by more than 130 countries last October, to change international tax rules for multinational companies. Under a part of the rules known as Pillar One, the revenue of the world’s largest, most profitable companies would be taxed in countries where they make sales rather than simply where they are headquartered.
Silver Seeks to Parry Move to Throw Out Return Disclosure Suit – Andrew Velarde, Tax Notes ($). “A taxpayer’s suit over improper return information disclosure related to challenges to the global intangible low-taxed income provision and the transition tax regs is increasingly focused on what “tax administration” means.”
Monte Silver and his company filed their memorandum in opposition to defendant’s motion to dismiss in Silver v. United States (Silver III) in the U.S. District Court for the District of Columbia on February 22.
Cos. May Not Have Data Handy For Pillar 1, OECD Told - Dylan Moroses, Law360 ($). “Transactional data required to comply with draft rules under Pillar One of the OECD's global tax deal may not be available for certain companies subject to the proposed regime, according to comment letters made public Tuesday.”
Reallocating taxing rights to countries where companies have profits but lack physical presence will cause administrative hurdles that major firms and multinational companies are concerned the draft rules on sourcing and nexus issued by the Organization for Economic Cooperation and Development fail to address.
The letters, sent by accounting firms, business organizations and Amazon, said the draft rules need more details on what situations would permit the use of a proxy when specific sourcing data isn't available, and that Pillar One may also require an initial grace period.
Activist Groups Call For Lower Pillar 1 Nexus Threshold - Natalie Olivo, Law360 ($). “Tax specialists with ties to civil society groups have argued for lowering the earnings threshold that would trigger new global profit allocation rules for multinational corporations, according to letters released Tuesday by the Organization for Economic Cooperation and Development.”
Countries should reduce the threshold that would determine whether a company earns enough profits in a remote jurisdiction to reallocate a portion of its earnings under an international corporate tax overhaul, according to comments submitted to the OECD by civil society organizations. While the groups differed on specifics, they all contended that the current threshold — €1 million ($1.1 million) or €250,000, depending on a country's gross domestic product — should be lowered in some way.
Happy National Banana Bread Day! I can’t imagine a better way to use something that has ripened well beyond its original purpose. Bruised bananas should not be discarded but regarded as a sign that a sweet treat is near!