IRS NOMINEE SOWS SALT UNCERTAINTY: It looks like there’s a bit more doubt about charitable deduction programs that states put in place for their residents to get around the $10,000 federal limit on deducting state and local taxes – in the form of Chuck Rettig, President Donald Trump’s pick to run the IRS.
The issue surfaced during Thursday’s hearing on Rettig’s nomination.
His uncertainty could throw a wrench in taxpayer plans to avoid the SALT cap, which was enacted as part of the Tax Cuts and Jobs Act. Rettig, a tax lawyer, questioned whether these new charitable programs would receive the same blessing from the IRS as past state charitable deduction programs for funding a variety of items, including scholarships, child care and road projects.
“It’s possible that the post-tax-act situation could be not on all fours with the earlier position taken by the Internal Revenue Service,” Rettig said at the Senate Finance Committee hearing.
Still, he hedged a bit. Rettig pledged to follow the law impartially and in a non-biased manner, adding that the IRS would examine all facts, relevant policies and procedures, and prior guidance to make final decisions, yours truly reported.
“Nobody should presuppose my position on any particular issue across the board,” Rettig said.
Generally light on controversy: The hearing barely touched on Rettig’s rental units in a Trump-branded property in Hawaii, details of which publicly surfaced the night before. He seemed to breeze past other possible tripwires, too, when questioned on Trump’s tax returns, prohibited political campaigning by churches, his own management experience and tax debt collection the IRS assigns to private contractors. He also signaled openness to IRS oversight of tax preparers.
Regulatory guidance: Rettig said he’d work to the best of his ability to improve the IRS on all fronts and called it “critical” for the agency to provide “clear, timely, succinct guidance” on all elements of the new tax law. He wants to get off on the right foot with lawmakers. As The Wall Street Journal put it, Rettig “said his priority is rebuilding trust among the tax agency, the public and Congress, contending that those better relationships will be crucial to smooth implementation of the new tax law.” Finance Chairman Orrin Hatch (R-Utah) said after the hearing that he hoped to advance Rettig’s nomination to the Senate floor in the next three to four weeks.
IT’S ALREADY FRIDAY for Morning Tax … and everyone else. Welcome to the almost weekend.
And not only is the weekend drawing nigh, but Congress is going on recess until July 10 – though don’t forget to share any tax tips that come your way between now and then. Email: [email protected], [email protected], [email protected], [email protected] Twitter: @berniebecker3, @tobyeckert, @brian_faler, @aaronelorenzo, @POLITICOPro and @Morning_Tax.
IRS ENTERS INTERNATIONAL CONSORTIUM: Offshore tax evasion is the focus of a new agreement between the IRS and tax authorities from four other countries – the U.K., Canada, the Netherlands and Australia. They’ll share information and collaborate on investigations, according to our Brian Faler. “Our goal is to be able to jointly work subjects and investigations” from “the account holders up and through the professionals that enable these crimes to be committed,” said the head of criminal investigation at the IRS, Don Fort. In addition to tax evasion, they’ll also police money laundering and cybercrime.
FARMERS REAP TAX BENEFITS: Mid-sized farms are getting better yields from the new tax cut law than small, large and very large farms, according to a fresh analysis from the U.S. Department of Agriculture. The average mid-sized family farm household would have had an effective income tax rate 5.8 percentage points lower in 2016 had the TCJA been in effect then, the report found. It classified farm sizes based on gross cash farm income, which ranged from $350,000 to $999,999 for mid-sized farms. Small farms with incomes less than that range would have had a 3-percentage point decrease. Large farms with incomes between $1 million and $4,999,999 would have had a rate 3.4 percentage points less than otherwise, and very large farms with income over $5 million would have experienced a 1.7-percentage-point reduction.
EXPANDING HEALTH SAVINGS ACCOUNTS: Ways and Means Chairman Kevin Brady (R-Texas) plans to mark up legislation next month to make health savings accounts more accessible, Tax Analysts reported. The markup will focus on HSA measures that lower health care costs for families, according to Brady. He later told reporters that HSA legislation would move independent of other tax legislation he and Republicans on his panel plan to push later this year, which they call tax reform 2.0.
TRADE TROUBLES STILL LOOMING: For all of Brady’s praise of the economic upside he and other Republican architects of the tax cuts believe in, he’s increasingly concerned about headwinds from Trump’s tariffs on steel and aluminum imports. Brady told reporters that Trump should exempt both Canada and Mexico from the steel duties to help chances of reaching a revised NAFTA agreement when negotiations resume sometime after the July 1 Mexican presidential election, POLITICO Trade’s Doug Palmer reports. “At some point, it’s going to have a real impact on our economy,” Brady said.
GROWTH DOUBTS OF A DIFFERENT SORT: Former Federal Reserve chair Janet Yellen expressed skepticism that the TCJA would generate the rate of U.S. economic growth its proponents have heralded, Reuters reported. Speaking in Paris, she said tax cuts should have some impact on investment spending and productivity as a result, but “the payoff is likely to be in tenths of a percent, which in growth is a lot but may not be what some people are hoping for,” Yellen said.
ADVANCING TO THE NEXT ROUND: A pair of Tax Court nominees received unanimous Senate Finance approval: Elizabeth Ann Copeland and Patrick Urda, both of whom Trump nominated in August 2017. Copeland has been a tax litigation partner at Strasburger & Price in San Antonio, and Urda has been counsel to the deputy assistant attorney general in charge of the Justice Department’s Tax Division. The committee favorably reported the nominations after enough members gathered outside a Senate floor vote. The nominations now go to the full Senate for consideration.
JERSEY BOY: Former vice president Al Gore is throwing his political weightbehind the millionaire’s tax plan from New Jersey by Gov. Phil Murphy. The Democratic governor and his wife are longtime Gore friends, reports POLITICO New Jersey’s Ryan Hutchins. Murphy has been locked in “a bitter state budget fight” against fellow party members in the state Legislature. Gore took to Twitter on Thursday afternoon on behalf of his pal in Trenton. “All of NJ’s elected officials must stand with him & finally deliver on the promises they’ve made, including asking millionaires to pay their fair share,” Gore wrote. Gore’s involvement “came as a surprise even to Murphy, who said he learned about it from reporters during a press conference on Thursday.” Murphy said he was “thrilled” for the support.
CANADIAN EVASION: Canadians are squirreling away some $3 billion annually in offshore accounts, according to a Canada Revenue Agency reportdetailed in the Toronto Star: “The government estimates Canadian individuals are hiding between $75.9 billion and $240.5 billion in offshore tax havens and elsewhere, and not paying tax on it.” Critics say so much wealth being hidden offshore is indicative of a dangerous attitude among the wealthy.
Higher education tax credits could use some cleaning up to better benefit lower-income students, according to the National Taxpayers Union Foundation.
Corporate stock buybacks since the new tax cuts law passed now total more than $500 billion, says a list compiled by Americans for Tax Fairness.
Family offices need not invite a challenge from the IRS, advises Forbes.