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IRS To Miss Deadline To Send Spending Plan To Yellen – David van den Berg, Law360 Tax Authority ($):
The Internal Revenue Service apparently will miss Friday's deadline to submit a report to Treasury Secretary Janet Yellen on how it plans to use the nearly $80 billion funding increase that the Inflation Reduction Act provides, with the agency telling Law360 only that it will have the plan in the 'coming weeks.'
The agency told Law360 in a statement Thursday that it has been working on the plan, which Yellen asked it to submit, and 'expects to deliver the plan to the secretary in coming weeks.' It did not offer further comment.
On August 8, 2022, Treasury Secretary Janet Yellen informed the IRS to provide its spending plan by February 17, 2023. That didn’t happen.
Auto Dealer Advocates See Chance to Pass Tax Deferral Tweak - Samantha Handler, Bloomberg ($):
Lobbyists advocating for relief from a supply-chain related tax crunch for auto dealers are eyeing ways for Congress to pass the bill without causing a tax policy fight.
Sen. Sherrod Brown (D-Ohio) introduced legislation this week to prevent a hike that businesse[s], mainly auto dealers, face because of how they account for their inventory. Auto dealers that use last-in, first-out accounting have gotten higher tax bills because they’re unable to replenish their stock due to shortages and supply-chain disruptions.
If I had a dime for every time a Senator introduced a bill that must first pass the House to become law, I’d have a lot of dimes.
Tax bills must originate in the House. The bill in this article is a Senate bill, or an “S” bill. To become a House bill, lawmakers in the lower chamber must transfer the contents from the S bill to a House bill, or an “HR” bill. The House must approve the HR bill then send it back to the Senate for approval.
However.
When the Senate receives a bill from the House, Senators can add/subtract provisions to/from that piece of legislation. House Republicans don’t want to send a tax bill to the Democratically-led Senate because they could add provisions (like expanding the Child Tax Credit) to the LIFO bill, pass it, then send it back to the Republican-controlled House where it will not pass.
Long story short: LIFO fix legislation doesn’t get enacted.
Energy Storage Projects Ready To Reap Tax Credit Rewards – Keith Goldberg, Law360 Tax Authority ($):
Developers and investors are grappling with how to take advantage of brand-new federal tax credit eligibility for energy storage projects, but a recently announced financing deal shows they're starting to find ways to cash in.
Thanks to the Inflation Reduction Act enacted last year, energy storage is now eligible for the investment tax credit, or ITC, which had only been available for solar, wind and other generation projects. The credit has boosted investor interest in both stand-alone storage and storage paired with generation projects, although attorneys say there are financial and regulatory issues that need to be tackled to unleash a flood of ITC deals.
Speaking of tax credits:
Business Credits & Incentives – Eide Bailly:
Tax credits and deductions help organizations save cash and keep more of their revenue invested in their business. The challenge for taxpayers is knowing what tax incentives exist and how they can qualify.
Clean Energy Tax Credits' Wage, Apprentice Rules: Key Points – Omar Samji, Law360 Tax Authority ($):
The tax incentives under the IRA are structured in two tiers: a base rate and a higher rate, also known as a bonus, that is five times the base rate when certain requirements are met.
The higher bonus rate will generally only be available to taxpayers with respect to a qualified solar, wind, hydrogen, or carbon capture facility, property, project, or equipment where the taxpayer begins construction on such facility on or after Jan. 29 of this year, if the taxpayer meets the prevailing wage and apprenticeship requirements under the IRA.
IRS Issues Prevailing Wage Guidance, Starts Clock on 60 Day Grace Period – Mel Schwarz, Eide Bailly:
How do I know if I am paying prevailing wages?
Prevailing wages are currently determined by the Department of Labor (DOL) under the Davis Bacon Act for construction of Federal buildings. The IRS guidance refers taxpayers to a DOL website at www.sam.gov to determine prevailing wages based on location and activity…
What are the apprenticeship requirements?
A percentage (12.5% in 2023, increasing to 15% thereafter) of labor hours must be performed by apprentices obtained through a registered apprenticeship program. However, a good faith safe harbor may excuse the taxpayer from satisfying the apprenticeship requirement if it attempts to hire apprentices but none are available.
New Law to Help Shed Light on State and Local Tax Subsidies - Michael Bologna, Bloomberg ($):
The new federal Financial Data and Transparency Act may well improve the quality of reporting on the billions of dollars spent on state and local tax subsidies. Meanwhile, remote work is costing large metropolitan areas billions, and tax refund programs offered in Georgia, Massachusetts, South Carolina, and Virginia may result in federal taxes for some recipients.
Kentucky Governor Approves GOP-Pushed Income Tax Reduction – Donna Borak and Angélica Serrano-Román, Bloomberg ($):
Kentucky Gov. Andy Beshear on Friday greenlit a Republican-led push to continue cutting income taxes, acquiescing to the GOP’s latest step toward phasing out the individual levy entirely.
The Democratic governor, who is seeking election to a second term this year, approvedH.B. 1, which will lower the state’s personal income tax rate by a half-percentage point to 4%, effective Jan. 1, 2024.
The cut comes after the Republican-controlled Legislature overwhelmingly overrode Beshear’s veto last year of a plan that would eventually lead to a phase-out of the personal income tax. Under last year’s bill, H.B. 8, the state’s personal tax rate dropped from 5% to 4.5% at the start of this year.
Treasury Releases Information on Corporate Alternative Minimum Tax – Treasury Department:
[On Friday] the U.S. Department of the Treasury and the Internal Revenue Service (IRS) released information on the Corporate Alternative Minimum Tax (CAMT), a key provision of the Inflation Reduction Act to ensure billion-dollar corporations pay a 15 percent minimum tax on the adjusted financial statement income they report to shareholders.
The guidance released today clarifies key issues related to insurance industry accounting practices.
The guidance is here.
Treasury Unveils Book Tax Guidance For Insurance Firms – Kat Lucero, Law360 Tax Authority ($). “Large insurers can use accounting practices in line with existing financial statements to determine what they owe under the corporate alternative minimum tax that took effect this year, the U.S. Department of the Treasury said in guidance released Friday.”
From the “Things That Make You Go Hmmm” file:
Opinion: Here’s a dirty little secret about Trump’s tax cuts – Catherine Rampell, Washington Post ($):
Truth:
Here’s a dirty little secret about those expensive, unpopular Trump tax cuts: We’re probably stuck with them for good, because neither party seems to have the political courage to let them lapse. Not the Republicans who supposedly care about fiscal responsibility, and not the Democrats who are on record as hating them.
More Truth:
[E]xtending the Trump tax cuts sounds pretty plutocratic: By far, the biggest benefits would go to higher-income households, according to estimates from the Tax Policy Center.
Hard Truth:
Many earners in the lower income quintiles don’t pay income tax or pay very little income tax. This means extending most of Trump tax breaks won’t benefit them much.
The Joint Committee on Taxation (JCT) is congressional committee that provides facts about tax policy to lawmakers. Each year, this group breaks down how much tax is paid by income groups.
The JCT's latest report shows (on aggregate) that most taxpayers earning up to $40,000 in 2022 did not pay income tax. Instead, many within the group received money from the federal government.
The JCT document is here. (The report is titled “JCX-22-22.” At the top of the page, click “Download Now." The information is on page 45.)
Beyond refundable tax credits, most taxpayers earning up to $40,000 (in 2022 dollars) wouldn’t benefit from extending the Trump tax cuts.
Bottom Line:
When someone claims that the Trump tax cuts only benefit the wealthy, they are pretty much correct. But you can respond, 'Hmmm, is that because many people with lower incomes don’t pay much income tax? I mean, to get a million dollar tax refund, don't you have to owe a million dollars in taxes?"
And for the record, I'm just sharing facts and not trying to start a political argument. FWIW, I'm bipartisan: I dislike both political parties.
National Day Calendar:
HOW TO OBSERVE PRESIDENTS DAY
- Some businesses close for the day, including banks and federal buildings, so make a note.
- Celebrate your favorite U.S. president.
- Watch a documentary about the POTUS. For example, The Presidents by the History Channel.
- See if you can name all the presidents in order.