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Guidance on Partnership Continuation Will Give Needed Clarity, Tax Pros Say - Erin Slowey, Bloomberg ($):
Partnerships don’t know when a partnership is considered terminated or continued after adjustments were made by the 2017 tax law, leading tax professionals to disagree on the interpretation.
The lack of clarity is causing collateral tax consequences for partnerships and their advisers who may be unintentionally terminating the partnership. The muddiness of Section 708 impacts partnerships’ elections and liability for adjustments.
Speaking of partnerships…
New Finance Committee Republicans - Kim Dixon, Bloomberg ($, scroll down page for article):
The three new Republican members of the Senate Finance Committee bring unique reasoning on why they sought to join the panel.For Sen. Ron Johnson (R-Wis.), a seat on Finance puts him on the panel expected to be front-and-center ahead of what could be a 2025 showdown over expiring provisions from the 2017 tax overhaul.
Back then Johnson was one of the final holdouts on the package, threatening to vote against it until a provision providing tax breaks for pass-through entities was made more generous. When asked what he sees his role on the panel ahead of this round of tax talks, he said he sees himself in the ‘same role.’
I worked for a tax lobby shop when the 2017 tax reform bill passed Congress. Do you know how many lobbyists took credit for getting Johnson onboard the bill by modifying the pass-thru deduction? All of them.
Manchin Says Yellen Is ‘Not Following the Law’ on EV Tax Credits – Keith Laing and Ari Natter, Bloomberg ($):
Senator Joe Manchin accused US Treasury Secretary Janet Yellen of ‘not following the law’ on electric vehicle tax credits as automakers push the Biden administration to apply broad interpretations to a bill that he largely wrote last year.
‘She’s basically not following the law and this administration is not,’ he told reporters Thursday.
Manchin said the administration has ‘cherry picked’ which of the new rules for EV tax credits it wants to follow.
I have it on very good authority that the IRS is hurting for tax pros and reassigning the ones they do have to the green tax credit space, which includes EV tax credits. Using the phrase “cherry picked” might be a little rough.
Breaking News:
Treasury Updates Vehicle Classification Standard for Clean Vehicle Tax Credits Under Inflation Reduction Act – Treasury Department:
Today, the U.S. Treasury Department updated the vehicle classification standard used to determine the applicable Manufacturer Suggested Retail Price (MSRP) limitation for clean vehicle tax credits available under the Inflation Reduction Act.
Schumer: Biden unified with Democratic leaders against negotiating over debt limit – Alexander Bolton, The Hill:
Senate Majority Leader Charles Schumer (D-N.Y.) told reporters Thursday that there’s no daylight between himself and President Biden on the question of standing firm against negotiating with House Republicans on raising the debt limit until they manage to pass a package of cuts or fiscal reforms.
Schumer said Biden and White House staff assured him the president is not looking to cut a debt limit deal with Speaker Kevin McCarthy (R-Calif.) if House Republicans can’t prove they have the votes to pass spending cuts through their narrowly divided chamber.
State of Play: Democrats have asked Republicans to name the spending cuts they want to raise the debt ceiling.
Inevitable: At some point, rank-in-file Democrats will want to be a part of this conversation and will propose tax increases (on individuals earning over $400,000 and all corporations). What are the odds that tax increases come into play? History says “likely.” Google “debt limit” and “sequestration” to see how things turned out in 2012.
For those curious about the debt ceiling, the U.S. Chamber of Commerce does a good job explaining it, which is here.
Retirement, 1099-K Fixes May Be This Year’s Easiest Tax Vehicles – Doug Sword, Tax Notes ($):
When it comes to likely legislative vehicles for tax policy in 2023, there are the mega-bills, such as expected trade and farm packages, and then there a couple of inexpensive sleepers that congressional watchers are keeping their eyes on.
A new potential tax vehicle that has arisen in recent weeks would be technical correction legislation to fix a reported error that may inadvertently bar both pretax and Roth catch-up retirement contributions beginning in 2024. Treasury is examining the issue, which arose from apparent crafting errors in provisions in the retirement title added shortly before the Consolidated Appropriations Act, 2023 (P.L. 117-328) passed at the end of 2022.
Californians to Decide Vote Threshold for Local Taxes in 2024 - Laura Mahoney, Bloomberg ($):
A measure to make it harder to enact local tax increases in California has qualified for the November 2024 statewide ballot.
Business groups backing the measure want to settle a long-running argument, stemming from a 2017 court ruling, over the vote threshold needed to approve local tax initiatives. They face opposition from local government and labor organizations that want the current rules to stay in place.
The ballot measure would require two-thirds approval from voters for all local tax increases and require that the tax measures have a sunset date.
Governors Focus on Families as Budget Rollouts Continue - Kathy Larsen, Bloomberg ($):
Children and families continue to figure prominently in governors’ tax agendas as the state chief executives lay out their policy and spending visions for the next year or two.
State Remote Worker Taxes Need High Court Resolution (Podcast) - David Schultz, Bloomberg ($):
Though never popular with neighboring state officials, New York’s tax on the income of out-of-state residents working for Empire State companies is being scrutinized more closely. A shift to remote work with the pandemic—as a choice by either the employee or employer—has meant that many former commuters don’t visit their New York offices as they did before.
NY’s senior tax breaks just got even more confusing, seniors likely to lose out this year – Michelle Breidenbach, Syracuse.com:
Under a new state law, seniors who make less than $50,000 a year can cut their property taxes in half.
But only if they live in a county, town, village or school district that decides to take the state up on the new higher income limit by March 1.
Washington State Department of Revenue launches new tax credit - KING 5. “The Washington State Department of Revenue launched a new tax credit Feb. 1 for Washington state residents. The Working Families Tax Credit (WFTC) is available for individuals and families who meet certain eligibility and requirements. “
Countries Agree to Treatment of US Minimum Tax in Global Deal - Isabel Gottlieb and Danish Mehboob, Bloomberg ($):
In guidance released Thursday, governments agreed that a domestic minimum tax—under a Pillar Two rule that countries can use within their borders—will apply low-tax income within a jurisdiction before another country’s controlled foreign corporation tax applies. That answers a major political question in the negotiations, because it determines how much revenue some countries will collect.
Many countries implementing Pillar Two are likely to adopt the qualified domestic minimum top-up tax, or QDMTT, stopping other countries from collecting extra tax from companies operating there.
More coverage on this subject was in yesterday’s Roundup.
From the “What Took You So Long?” file:
February 2, 2023:
Schiff Urges Investigation into Disclosure of Taxpayers’ Personal, Financial Information to Facebook – Press release from Rep. Adam Schiff Office:
Today, Congressman Adam Schiff (D-Burbank), and Reps. Judy Chu (D-Calif.) and Raja Krishnamoorthi (D-Ill.), members of the House Ways and Means and House Oversight Committees, respectively, urged the Internal Revenue Service to investigate the data-sharing practices of online tax filing companies that have been found to have disclosed taxpayers’ sensitive personal and financial information to Facebook.
The call for an investigation is based upon a report that went public and was widely report on last November. Here is the report:
November 22, 2022:
Tax Filing Websites Have Been Sending Users’ Financial Information to Facebook – Simon Fondrie-Teitler, Angie Waller and Colin Lecher, The Markup:
Major tax filing services such as H&R Block, TaxAct, and TaxSlayer have been quietly transmitting sensitive financial information to Facebook when Americans file their taxes online, The Markup has learned.
The data, sent through widely used code called the Meta Pixel, includes not only information like names and email addresses but often even more detailed information, including data on users’ income, filing status, refund amounts, and dependents’ college scholarship amounts.
Lawmakers apparently waited roughly three months to become “concerned” about this development. From the Schiff press release:
'We are concerned about the implications these findings have on the rights of taxpayers and on fairness for the working-class Americans who largely depend on the services of private companies to e-file their taxes… Bad actors in this space have the potential to profit from Americans’ most sensitive and private information, and simultaneously put their data at risk of further exposure,' wrote the members.
The cynic in me thinks that highlighting this issue now has something to do with tax season. I mean, why spend political capital by calling for an investigation on taxes in November?
Happy Bubble Gum Day! Fun to chew! Fun to blow bubbles! Unless you blow a bubble while facing a stiff wind and it pops on your face – I’m told…