Loading component...
Manchin says he won’t support new climate spending or tax hikes on wealthy – Tony Romm and Jeff Stein, Washington Post. “Sen. Joe Manchin III (D-W.Va.) told Democratic leaders Thursday he would not support an economic package that contains new spending on climate change or new tax increases targeting wealthy individuals and corporations, marking a massive setback for party lawmakers who had hoped to advance a central element of their agenda before the midterm elections this fall.”
Translation: All tax increases passed by the House last year in its reconciliation (aka Build Back Better) bill will not pass the Senate.
From the article:
Without Manchin, the party cannot proceed in the narrowly divided Senate, since Democrats need all 50 votes in the caucus, plus Vice President Harris’s tiebreaking vote, to use the special process known as budget reconciliation to overcome Republicans’ expected filibuster.
Reality Check: This is the only legislative vehicle that Democrats have that could increase taxes and pass both chambers of Congress. The prospect that tax increases will now pass Congress this year has narrowed considerably.
Another Reality Check: Lawmakers change their minds. Remember the phrase “I was for it before I was against it” during the 2004 presidential election? That phrase is still relevant. Position switching is quite common on Capitol Hill. Case in point, last week Manchin repeatedly said he wanted to reverse some of the tax cuts enacted in the 2017 tax reform bill.
Yet Manchin long had called for significant changes to the tax code. Only days ago, he signed on to one of many Democratic-backed plans to raise more revenue from the wealthiest taxpayers: a policy that would have helped extend the solvency of Medicare by closing a loophole that allows high earners to shelter income, one of the people familiar with the matter said. But the senator by Thursday appeared to change course.
What’s currently In and Out:
Manchin upends effort for a downsized `Build Back Better’ – Lindsey McPherson, Roll Call.
In:
Manchin and his staff told Schumer and the majority leader’s staff ‘unequivocally’ that he is ‘willing to support a reconciliation bill in August that includes only the provision to lower prescription drugs prices and a two-year extension of subsidies’ for health insurance, according to the Democrat briefed on the conversation.
Out:
On Thursday — after months of negotiations with Schumer — Manchin and his staff told the majority leader and his staff that he would not support two of the three pillars he’d previously identified for a narrow bill: climate spending and tax credits, and tax increases on wealthy individuals and corporations, according to a Democrat briefed on the conversations.
Manchin spokeswoman Sam Runyon did not dispute the news, which was first reported by The Washington Post.
Manchin supports lower prescription drugs (which would save the federal government money) and extending for two years the Obamacare premium tax credit that expires at the end of the year.
But is that all he agrees to???
...Manchin has been clear this week that nothing had been agreed to yet and Democratic leaders needed to proceed cautiously on the climate and tax provisions of any reconciliation package given the latest economic data...
Could Manchin be for it before he was against it, but after he is for it? Axios reports that might happen.
Manchin opens door to climate spending after July inflation numbers – Hans Nichols, Axios. “Sen. Joe Manchin (D-W.Va.) claimed that he didn't close the door to a climate and energy package with Senate Majority Leader Chuck Schumer, but that he's ready to support a plan to lower prescription drugs costs this month.”
Cut to the chase: Manchin would support a bill that only lowers prescription drug costs and extends Obamacare tax credits if Senate Majority Leader Chuck Schumer (D-NY) forces a vote on the bill in July. If Schumer waits until September to vote on the bill, Manchin would entertain passing legislation that would provide climate change provisions, which would be paid for by increasing taxes on businesses and wealthier individuals.
Here is a link to the interview that shows Manchin's current position (starts at 7:55).
Where Build Back Better discussions were a week ago and where they stand now:
Manchin rejects climate, tax elements of party-line Dem bill – Burgess Everett, Politico:
Schumer and Manchin had focused recent discussions on a H.R. 5376 (117) spending as much as $500 billion, mostly on climate and energy, while raising $1 trillion in new revenues from prescription drug reform and tax increases. Manchin himself first proposed keeping the bill focused on those areas four months ago, after rejecting a broader piece of legislation.
But Manchin soured intensely this week on those contours of a deal as inflation continued plaguing the economy, telling reporters on Wednesday that it was unclear what beyond prescription drugs Democrats could accomplish. He said anything Democrats pass needs to be “scrubbed” to make sure its not inflationary.
The current state-of-play:
Manchin Crushes Biden’s Hopes for Revival of Economic Agenda – Colin Wilhelm, Ari Natter and Steven Dennis, Bloomberg ($):
That leaves Democrats in a position of accepting a much skinnier package shorn of nearly all of their long-term ambitions from a year ago, or getting nothing.
The fate of Pillar Two has also been thrown into question:
Democrats planned to use the major tax and spending package to bring the US into alignment on one of the two major parts of that agreement, negotiated by the Treasury Department and representatives from over 130 countries. The global talks remain ongoing, but a de facto US withdrawal could throw sand in the gears of what appeared to be a unique international consensus.
On to the next piece of legislation, the China trade/semiconductor bill:
First, the latest from Punchbowl News ($):
Senate Majority Leader Chuck Schumer is telling rank-and-file senators to expect a vote as early as Tuesday to begin moving a narrow bill to aid U.S. semiconductor chip makers.
The legislation would include the $52 billion in funding for domestic manufacturers, as well as the investment tax credits from the FABS Act. Schumer may add more legislative items to the package if they’re ready, a source told us.
Adding a tax provision to the bill means that other tax provisions can be added to the bill, like a fix for R&D and163(j), as well as other measures that are considered must-do. But this bill is destined to fail:
But this push is dead for the moment. Senate Minority Leader Mitch McConnell said two weeks ago that he’d block USICA if Democrats pursued reconciliation.
GOP support is needed to pass the semiconductor bill through the Senate. But these lawmakers are expected to withhold that support because Senate Democrats are reworking the reconciliation bill (aka: Build Back Better) that could include tax increases.
This means that the semiconductor bill will not pass the Senate until Build Back Better is dead or disregarded.
In other words, Republicans are going to wait until the end of July to see if Democrats can pass a reconciliation bill. Then – and only then – will the GOP talk about passing a CHIPS bill.
With Manchin essentially killing Build Back Better, the semiconductor bill could be a legislative vehicle for tax provisions -- but not tax increases since Republicans oppose such things and their support for the bill is needed.
Regarding the semiconductor tax credits:
Senate to push ahead on semiconductor manufacturing bill – Aidan Quigley, Laura Weiss and Lindsey McPherson, Roll Call:
Senate Finance Chair Ron Wyden, D-Ore., and ranking member Michael D. Crapo of Idaho sponsored a stand-alone bill to provide new credits worth 25 percent of what a company spends building, reconstructing or buying U.S.-based semiconductor manufacturing facilities or equipment. Companies could elect ‘direct pay’ of the credits, which would allow them to get the subsidies in the form of a cash refund.
House Again Approves Pot Banking as Part of Defense Bill – Wesley Elmore, Tax Notes ($). “The House has approved a defense funding bill that includes bipartisan cannabis banking provisions, marking the seventh time those provisions have passed the chamber over the past two Congresses.”
Land Conservation Tax Break Under Increasing Scrutiny (Podcast) – Richard Tzul and Kaustuv Basu, Bloomberg ($).
Tax-advantaged land deals known as syndicated conservation easements are under increasingly heavy scrutiny from the IRS and Congress…
The transactions involve a tax break under tax code Section 170(h) that is designed to encourage property owners to give away the development rights for land or buildings for conservation purposes. Syndicated deals—which involve multiple parties who buy into a property, often based on promises of super-sized deductions worth several times more than their investment—are designated as tax schemes on the IRS’s infamous Dirty Dozen list.
Top House Tax-Writer Seeks Swift Comey, McCabe Audit Probe – Naomi Jagoda and Richard Tzul, Bloomberg ($). “House Ways and Means Committee Chair Richard Neal said Thursday that he hopes an IRS watchdog conducts a swift investigation into the audits of two former FBI leaders, and is urging the investigation’s findings be made public.”
‘I want this to be publicized at the end,’ Neal (D-Mass.) said after members of his committee met privately with IRS Commissioner Chuck Rettig on Thursday afternoon.
Neal Expects Resolution to FBI Audit Inquiry Before Rettig Leaves – Benjamin Guggenheim and Doug Sword, Tax Notes ($). “House Ways and Means Committee Chair Richard E. Neal, D-Mass., said he expects the inspector general investigation into the IRS audits of former FBI officials to be completed before the November 12 end of Commissioner Charles Rettig’s term."
The IRS watchdog will not be the only investigative body eyeing the IRS if political parties switch majorities in the House after the upcoming elections. Republicans have vowed to scrutinize the going-ons of ProPublica disclosing private tax information. But it remains to be seen whether the GOP will continue investigations involving the aforementioned FBI employees.
New Poll Finds Support for Foundations — but Not the Hefty Tax Breaks Their Donors Get – Alex Daniels, The Chronicle of Philanthropy.
Poll findings:
Large majorities of Americans from across the political spectrum say foundations and other philanthropic funds should direct money to charities faster instead of holding onto those assets for future use...
The criticism has come from all political directions, including from progressive social-justice organizations that want foundations to make more grants and from conservative politicians.
While 82 percent of those polled said foundations play an important role in society, about the same percentage of Americans disapprove of the tax breaks wealthy people receive to start foundations that operate forever and give money slowly over a long period.
Having conversed with congressional staffers and lawmakers, the notion of taxing foundations and donors has been taboo, but they all acknowledged that it could be a hefty revenue source.
IRS Considers Teleconferencing for Visits to Paid Preparers – Erin Slowey, Bloomberg ($).
The IRS is exploring conducting videoconferencing for visits to paid preparers, agreeing with recommendations from the Government Accountability Office.
IRS in-person compliance visits to paid preparers were limited due to the inability to be in person during the pandemic. The GAO recommended on Tuesday for the IRS to consider including videoconferencing as part of its Refundable Credits Return Preparer Strategy.
Democrats call on IRS to extend child tax credit deadlines for taxpayers without SSNs – Ragael Bernal, The Hill:
In a letter to Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig, the senators called on the administration to hold the child tax credit for families who have applied for their ITINs but haven’t received them due to delays.
‘We are concerned to learn that there may be numerous families that had hoped to file for and receive the enhanced child tax credit, but were unable to do so because of Individual Taxpayer Identification Number processing backlogs,’ wrote the senators, led by Sen. Bob Menéndez (D-N.J.).
‘In order to remedy this situation, we ask that you allow families who applied for an ITIN or ITIN renewal prior to April 15, 2022 to file for and receive the advanced CTC, if they file a return before or on October 15, 2022,’ they added.
You got CTC questions; the IRS has answers:
IRS revises the 2021 Child Tax Credit and Advance Child Tax Credit frequently asked questions – IRS:
This Fact Sheet updates the 2021 Child Tax Credit and Advance Child Tax Credit frequently asked questions (FAQs). These updates are to help eligible families properly claim the credit when they prepare and file their 2021 tax return.
IRS Gives Wealthy Families More Time to Shelter Assets from Estate Tax – Ashlea Ebeling, Wall Street Journal ($). “Under prior rules, a surviving spouse had up to 15 months to file the return. The application window was extended to two years in 2017 and then to five years last week because so many families were missing the deadline. This change means less hassle for widows and widowers, and their adult children helping to settle their estates, and it sets the families up for potentially big estate tax savings.”
Eighth Circuit Upholds Dismissal of Missouri's ARPA Lawsuit – Lauren Loricchio, Tax Notes ($). “In a win for the federal government, the Eighth Circuit upheld a lower court ruling that dismissed Missouri’s lawsuit challenging a provision in the American Rescue Plan Act that restricts states from using COVID-19 relief funds to offset reductions in net tax revenue.”
Nordstrom Allowed to Deduct Bad Debt, New York Tribunal Rules - Aysha Bagchi, Bloomberg ($). “New York tax authorities should have allowed deductions claimed by Nordstrom Inc. and affiliates for bad debt expenses, a state tribunal concluded.”
Cox Gets Internet Access Tax Case Revived by Virginia Court – Perry Cooper, Bloomberg ($):
Cox Communications convinced the Virginia Supreme Court it is entitled to a tax refund from Fairfax County for wrongly taxing the sale of internet access services.
The court ruled Thursday the Internet Tax Freedom Act preempts the county’s collection of business and professional occupational license taxes on Cox’s services and the act’s grandfather clause doesn’t apply.
No Tax Break for Concrete Used in Construction, N.Y. Court Says – Perry Cooper, Bloomberg ($). “A contracting company that constructs foundations and sidewalks must pay sales and use tax for purchases of concrete, a New York appeals court affirmed.”
NY AG Wins Intervention Bid In $13M Tax Whistleblower Case – Paul Williams, Law360 Tax Authority ($). “New York's attorney general can intervene and propose a settlement in a whistleblower case alleging that a headhunting firm shorted the state $13.3 million in taxes, a federal judge ruled Thursday, rejecting the whistleblower's claims that the intervention was unjustified.”
Donut go fraudin’:
New York Donut Shop Operators Sentenced to Prison for Tax Evasion – Department of Justice.
A New York family running donut shops gets multiple months in prison for tax evasion and helping to file false tax returns.
From 2012 to 2017, the defendants concealed from the IRS approximately $4.5 million in cash sales. During that period, they evaded more than $2 million in individual and corporate taxes by, among other things, depositing cash directly into their personal bank accounts instead of into business bank accounts, providing incomplete information to their accountants, causing their accountants to file false individual and corporate tax returns with the IRS, and funding personal expenditures directly with undeposited and unreported cash. They used unreported income to fund a lavish lifestyle that included multiple luxury vehicles, expensive watches, investment accounts and real estate.
Rookie mistake. They needed to wash the money before spending it. Any gangster movie could have taught them that. In the end, poppa got 30 months, momma got 20 months and junior got 10 months in the pokie. But that ain’t it.
[The judge] ordered each defendant to serve three years of supervised release and to pay more than $2 million in restitution to the United States.
Feeling blue because you can’t unwind? What to change that reality? Read on:
Nine Tips for a Relaxing Vacation for Tax Pros Who Can’t Unwind - Kelly Phillips Erb, Bloomberg ($):
I am terrible at taking vacation. My colleagues at Bloomberg Tax will back me up on this—as will almost everyone who has ever worked with me. Also? This isn’t something I’m proud of, and it’s something I have been actively working to improve.
I know that I am not alone. Americans are not great at taking vacations. Before the pandemic, over a third (36%) of Americans reported that they had not taken a vacation—defined as a leisure trip of at least a week to a destination 100 miles or more from home—in two years. Just over half (51%) had not taken a vacation in more than a year.
It’s National Give Something Away Day and National Gummi Worm Day. I suggest combining the two and give away your gummies. I have never understood their lure.