Posts Tagged ‘economic development’

Tax Roundup, 4/8/14: So what do I do with the K-1? And: they also serve who go away!

Tuesday, April 8th, 2014 by Joe Kristan

So the K-1 finally showed up from my partnership or S corporation investment.  Now what?

Remember that the K-1 represents your share of the income and expenses of the partnership/S corporation/trust (henceforth “thing”) that issued it.  Different pieces of income and expense are treated differently on your tax return, and the K-1 tells you where your pieces go.  Sort of.  Before you get started plugging in your numbers, you should answer some questions for yourself.

- Do I “materially participate” in this thing? Your level of participation determines the forms you start with in preparing your returns, whether you can deduct losses, and whether your income from the thing is is subject to the Obamacare 3.8% Net Investment Income Tax.  If you spent more than 500 hours working in the thing, that usually means you materially participate; a more complete discussion of material participation is found here.

- Did the thing lose money?  If it lost money, then you have to clear three hurdles to deduct the losses:

1. You have to have basis.  This starts with your investment in the thing.  If you loaned money directly to the thing, you will get basis for the loan.  If you have a partnership, you will get basis for your share of the partnership debt, shown in part L of your K-1.  S corporation shareholders don’t get basis for their share of the corporation’s debt, even if it is guaranteed by hte shareholder.  Your basis is increased for your share of the thing’s income, and it is reduced for losses and distributions.  If you have no basis, you can’t take losses.

2. Your basis has to be “at-risk.”  This normally means that you are out-of-pocket for the investment.  If your basis comes from borrowed funds, you have to be personally on the hook for the debt — but if you borrowed from somebody with an interest in your thing, you might not be “at-risk” even if you will have to pay up if thing defaults.

If your basis comes from a share of the partnership debt, you are normally considered “at-risk” for debt shown on the “Recourse” and “Qualified Nonrecourse financing” lines on part K of your partnership K-1.  Your at-risk amount is computed on Form 6198,

3. You have to materially participate (see above), or have “passive” income from other activities.  If you don’t materially participate, you need to go to Form 8582 to figure how much, if any, of your loss is deductible this year.

 Got that?  Tomorrow we’ll look at what you have to do after you answer these questions.  Come back every day through April 15 for more !

 

Senator Hubert Houser

Senator Hubert Houser

Legislator of the Century.  Yes, the century is young, but it will be hard to beat the accomplishment of Iowa state senator Hubert Houser.  He went home.  From The Des Moines Register:

At issue is the fact that Houser, a Republican from Carson in southwest Iowa, hasn’t resigned. He has simply stopped coming to the Statehouse, saying he isn’t needed as a minority caucus member and doesn’t have a role in any legislation. He says it’s more important for him to spend time on his family’s farm, where he is expanding the livestock facilities.

Houser was not present in the Senate chamber again on Monday.

Secretary of the Senate Michael Marshall said Monday that Houser is still receiving his annual salary of $25,000.

The coverage implies that Sen. Houser is doing a bad thing.  Considering the dubious accomplishments of the ones that do show up, I can’t agree.  We’d be better off if they all went home.  The legislators should get all of their pay on Day 1 of the session, and they should get docked if it goes past a month.

 

Of course they do.  Iowa House panel OKs $2 million tax break for Knoxville Raceway.  (Des Moines Register)

 

RashiaQueen of IRS tax fraud needs a break.  Rashia Wilson, who famously held up big wads of cash on her Facebook page and taunted the feds to come and get her, is less liquid nowadays, according to a report by tampabay.com:

Busted down to a federal prison in Aliceville, Ala., she earns just $5.25 a month, she declares in newly filed court papers. That’s a problem because Wilson, 28, was ordered to pay a token $25 per calendar quarter toward the $3.1 million in restitution that she owes the IRS for filing false tax returns using stolen identities. She needs money to buy vitamins and hygiene items, too, she says. So she’s asking U.S. District Judge James S. Moody Jr. to suspend restitution payments until after her release date: Jan. 5, 2031. 

Then she’ll really get after it, I’m sure.

 

Peter ReillyNo Money For April 15 1040 Balance Due? Don’t Panic!

Tony Nitti, Where Is Your Tax Home When You Work In A Foreign Land?   

Jason Dinesen, Tax Court Case Involving Radio DJ Strikes Close to Home for Me.  ”I used to work in radio. I was the news director at KNOD radio station in Harlan, over in the western part of Iowa.”

I had a brief stint as an unpaid intern for KHAK, a country station in Cedar Rapids, in 1980.  I learned that I have a face for radio and a voice for print.

 

Roger McEowen and Kristine Tidgren, Understand That Easement Agreement Before You Sign It

 

Locust Street, Des Moines

Locust Street, Des Moines

TaxGrrrl, New IRS Commissioner Talks Tax, Scandal and Congress.  She gives him more credit than I do.

Andrew Lundeen, Kyle Pomerleau, Americans Pay More in Taxes than on Food, Clothing, and Housing Combined (Tax Policy Blog)

Renu Zaretsky, Ethics and Fairness, Growth and the Environment, Retirement and Tax Shelters.  The TaxVox headline roundup ponders, among other things, whether we should subsidize wind turbines forever.

Kay Bell, Energy efficient home improvement tax break might be back

TaxProf, The IRS Scandal, Day 334

News you can use. How to Cheat on Your Taxes. (David Cay Johnston, via The Taxprof)

News from the Profession.  According to Research, You Are Fat Because Busy Season (Going Concern)

 

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Tax Roundup, 4/3/14: Iowa Tax Burden ranks 29th. And: Koskinen doesn’t seem to get it.

Thursday, April 3rd, 2014 by Joe Kristan

The Tax Foundation yesterday released its annual ranking of “State-Local Tax Burdens.”  Iowa came in at 29th highest.

20140403-1

The Tax Foundation explains:

For each state, we compute this measure of tax burden by totaling the amount of state and local taxes paid by state residents to both their own and other governments and then divide these totals by each state’s total income. We not only make this calculation for the most recent year, but also for earlier years due to the fact that income and tax revenue data are periodically revised by government agencies.

In this annual study, our goal is to move the focus from the tax collector (how much revenue is collected) to the taxpayer (how much income is foregone). 

This ranking differs from the Tax Foundation’s State Business Climate Index, where Iowa ranks a dismal 40th in business tax congeniality.  While the two sets of rankings have different purposes, together they tell us that Iowa’s tax system is very poorly designed.  It collects a middling amount of revenue with a system of very high rates, a boatload of preferences for the well-connected, and baroque complexity.  You could collect the same revenue with a much simpler system with lower rates, and without the inherent corruption of special breaks for special friends of the politicians.  That’s the approach of The Tax Update’s Quick and Dirty Iowa Tax Reform Plan.

 

Corporate welfare watch:

Senator fumes at idea to cancel tax credit (Des Moines Register)

IOWA SPEEDWAY: Governor Signs NASCAR Tax Break Bill (WHOtv.com)

 

This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

Koskinen bemoans IRS funding, but doesn’t commit to taking the obvious step to restore it.  IRS Commissioner John Koskinen gave a little speech yesterday at the National Press Club.  He pointed out how the IRS is being given massive new responsibilities for running Obamacare and implementing FATCA, but faces funding cuts.  What he didn’t point out was that the GOP-controlled house isn’t likely to change that as long as it thinks the IRS is acting as an arm of the other party.  He defended the plodding IRS response to Congressional investigators in the Tea Party matter, and he offered what looks to me like a defense of the new Section 501(c)(4) rules proposed by the prior Commisioner:

While I was not involved in the issuance of this draft proposal, because it happened before I was confirmed as Commissioner, I believe it is extremely important to make this area of regulation as clear as possible. Not only does that help the IRS properly enforce the law, but clearer regulations will also give a better roadmap to applicants, and will help those that already have 501(c)(4) status properly administer their organizations without unnecessary fears of losing their tax-exempt status.

That’s too cute.  The provisions of the proposal mirror the rules overturned by the Supreme Court in Citizens United, including a rule preventing any political activity in the run-up to an election.  These items show that the current rules are an attempt to get around the Supreme Court to restrict political speech.   That’s why they are poison to the Tea Party set.

Either he doesn’t get it, or he pretends not to.  If the Commissioner wants to restore trust, the minimum he needs to do is to withdraw the proposed rules and start over, and to stop slow walking the investigation.  Until he does, it’s futile to expect the GOP-controlled House to give him more funding.  He’s quickly running out of time to do so.

Update: Washington Post gives Koskinen 3 Pinoccios: IRS chief: No ‘targeting’ of tea party groups, just ‘inappropriate criteria’     (Via Instapundit)

 

20140321-3TaxGrrrl, Taxes From A To Z (2014): S Is For Student Loans 

Kay Bell, 7 tax tasks to take care of by April 15

Annette Nellen, Filing season and rental activities

William Perez, Tax Reform Act of 2014, Part 3, Deductions

Stephen Olsen, Summary Opinions for 03/28/14, a roundup of tax procedure news, with a much-appreciated mention of the Tax Update post on the recent case on trusts and material participation.

Jim Maule, Tax Court and Eleventh Circuit Disagree on Interpretation of Section 36 Language.  I think the couple got a raw deal, but I’m sure glad the first-time homebuyer credit has gone away.

 

taxanalystslogoCara Griffith, Proceeding Cautiously With a Taxpayer Bill of Rights (Tax Analysts Blog):

The IRS is already struggling with administering our tax system. Perhaps issues of funding and employee training should be addressed before delving into a taxpayer bill of rights.

I disagree.  Rights come before enforcement.  We can start by a sauce-for-the-gander rule that requires the IRS to pay penalties it asserts to taxpayers if the taxpayers win on the contested issue.

 

Renu Zaretsky, Expirations, Compliance and Corporations.  The TaxVox headline roundup talks about Commissioner Koskinen’s speech and the status of the expiring provisions.

 

Russ Fox, Bozo Tax Tip #8: Nevada Corporations.  ”Now, if you’re planning on moving to Nevada incorporating in the Silver State can be a very good idea (as I know). But thinking you’re going to avoid California taxes just because you’re a Nevada corporation is, well, bozo.”

News from the Profession.  Sweatshop Saturdays: Rethinking Where We Work (Going Concern)

 

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Tax Roundup, 3/27/14: NASCAR subsidy heads to Governor. And lots more!

Thursday, March 27th, 2014 by Joe Kristan

20120906-1Don’t worry, our subsidies are carefully crafted to only help Iowans, and only for a limited time.  Until it’s slightly inconvenient.

When they built the big new racetrack in Newton, they had a unique deal: the track got to keep the sales tax it collected.  The deal was crafted to require the track be partly owned by Iowans, and that it would expire at the end of 2015.

Then NASCAR bought the track.  NASCAR is controlled by a wealthy North Carolina family , with nary an Iowan.  No problem!  The Iowa House sent a bill to the Governor yesterday (SF 2341) repealing the Iowa ownership rule and extending the subsidy through 2025.

The stories in Radio Iowa and the Des Moines Register only quoted the giveaway’s supporters.  For example:

Representative Tom Sands, a Republican from Wapello, said it’s a “performance based” tax break because NASCAR won’t get the rebate unless there are on-site sales.

“One of the questions might be: ‘What kind of return do we, taxpayers, get in the state of Iowa?’ And I drive on Interstate 80 twice every week like many of you do coming to Des Moines and have seen the construction that has happened around that Speedway just since it’s been there,” Sands said, “and we’ve got probably lots more of that we can expect into the future.”

The answer to that is: what makes this private business more worthy to keep its sales taxes than anyone else?  It’s a special deal that every other Iowa business competing for leisure dollars doesn’t get.  It’s the government allocating capital, and if anybody thinks the state is good at that, I’d like my Mercedes, please.

While this corporate welfare passed, at least some legislators are starting to wonder about this sort of thing.  14 representatives joined 9 state senators in opposing the bill.  When the Iowa Film Tax Credit passed, there were only three lonely opponents.  The 14 representatives who stood up for the rest of us: Baudler (R, Adair), Fisher (R, Tama), Heddens (D, Story), Highfill (R, Polk), Hunter (D, Polk), Jorgensen (R, Woodbury), Klein (R, Washington), Olson (D, Polk), Pettengill (R, Benton), Rayhons (R, Hancock), Salmon (R, Black Hawk), Schultz (R, Crawford), Shaw (R, Pocahontas) and Wessel-Kroeschell (D, Story).  Maybe we have the makings of a bi-partisan anti-giveaway coalition.

 

20120702-2Jason Dinesen, Iowa Tax Treatment of an Installment Sale of Farmland By a Non-Resident.  ”The capital gain is recognized in the year of the sale and is taxable in Iowa. But what about the yearly interest income the taxpayer receives on the contract going forward?”

TaxGrrrl, Taxes From A To Z (2014): N Is For Name Change   

Paul Neiffer, Painful Form 8879 Process is on its Way.  The IRS, which has forced us to go to e-filing, now plans to make it a time-consuming nightmare for practitioners and clients because of the IRS failure to prevent identity theft.

Tax Trials, U.S. Supreme Court Reverses Sixth Circuit on FICA Withholding for Severance Payments

Margaret Van Houten, Digital Assets Development: IRS Characterizes Bitcoin as Property, Not Currency

William Perez, Tax Reform Act of 2014, Part 2, Income

 

Illinois sealLiz MalmHow much business income would be impacted by Illinois House Speaker Madigan’s Millionaire Tax?

These data indicate that:

  • 54 percent of total partnership and S corporation taxable income in Illinois would be impacted by Speaker’s Madigan’s millionaire surcharge. That’s almost $10 billion of business income.

  • 6 percent of sole proprietorships AGI would be impacted. Important to note here is that not all sole proprietorships earn small amounts of income. Over three thousand would be hit by the millionaire tax, impacting $674 million of income.

  • Taken together, this indicates that 36 percent of pass-through business income is earned at firms with AGI with $1 million or more.

I don’t think this will end well for Illinois.  When you soak “the rich,” you soak employers.  When states do this, it’s easy to escape.

 

Christopher Bergin, Good Grief! Tax Analysts v. Internal Revenue Service (Tax Analysts Blogs)

I have been involved in two Tax Analysts FOIA lawsuits against the IRS. Neither one of them should have gone to federal judges. But the IRS’s secrecy, paranoia, and belief that it has the absolute right to hide information drives it in this area. This lawsuit was a waste of time and money – against an agency that argues that it doesn’t have enough of either — over documents that should have been public from the beginning.

I’m left to quote Charlie Brown: Good grief! What an agency.

Commissioner Koskinen’s pokey response to Congressional document requests needs to be considered in this context.  The IRS has not earned the benefit of the doubt.

Kay Bell, IRS chief Koskinen spars with House Oversight panel

 

Greg Mankiw, Not Class Warfare, Optimal Taxation:

Today’s column by Paul Krugman is classic Paul: It takes a policy favored by the right, attributes the most vile motives to those who advance the policy, and ignores all the reasonable arguments in favor of it.

In this case, the issue is the reduction in capital taxes during the George W. Bush administration. Paul says that the goal here was “defending the oligarchy’s interests.”

Note that when Barack Obama ran for President in 2008, he campaigned on only a small increase in the tax rate on dividends and capital gains. He did not suggest raising the rate on this income to the rate on ordinary income. Is this because Barack Obama also favors the oligarchy, or is it because his advisers also understood the case against high capital taxation?

Oligarchists everywhere.

 

20140327-1Leigh Osofsky, When Can Concentrating Enforcement Resources Increase Compliance? (Procedurally Taxing)

Cara Griffith, Taxing Streaming Video (Tax Analysts Blog)

TaxProf, The IRS Scandal, Day 322

Renu Zaretsky, Friendly or Penalty? Taxes on Married Couples, Businesses, and the Uninsured (TaxV0x).  Rounding up the tax headlines.

Jack Townsend, Scope and Limitations of this Blog: It Is a Tax Crimes Blog, not a Tax Crimes Policy Blog.  ”I conceive my blog as a forum to discuss the law as it is, including how it develops.  It is not a tax policy blog addressing issues of what the law ought to be.”

 

Russ Fox, Bozo Tax Tip #9: 300 Million Witnesses Can’t be Right.  Richard Hatch is not widely considered a tax role model.

News from the Profession.  Frustrated EY Employee Vandalizes Office Breakroom in Protest Over March Madness Blocking (Going Concern)

 

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Tax Roundup, 3/25/14: Shaky foundations can be costly. And: monitors!

Tuesday, March 25th, 2014 by Joe Kristan

20140325-1Not a firm foundation.  A U.S. District Court case out of Texas last week shows why using a tax-exempt entity can be hazardous to your health.  A Mr. Ziegenhals was “manager, director, trustee, and registered agent” of The Le Tulle Foundation, which was “formed in 1991 as a testamentary trust with the stated purpose of operating ‘exclusively for charitable purposes for the benefit of the citizens of Matagorda County, Texas [and] for no other purposes.’”

The court said an IRS audit found that Mr. Ziegnhals “used funds from the Foundation to obtain personal benefits and pay his expenses unrelated to the purported charitable purposes.”  That triggered a revocation of charitable status and taxes on “self-dealing,”  The total amount of “self-dealing” is alleged as $46,266.21.

What did that cost the alleged self-dealer?  From the decision (my emphasis):

The amount allegedly owed by Ziegenhals – $461,125.44 as of November 29, 2013 — is based on the IRS’s calculations of penalties, statutory additions, and interest that have accrued from his unpaid private foundation excise taxes in 2003 and his unpaid federal income taxes in 2007. See Docket Entry Nos. 42-13, 42-14, 42-15. The current amount owed is much larger than the original unpaid taxes of $46,266.21 from 2003 and $6,829.98 from 2007 because the IRS assessed several statutory taxes and penalties on Ziegenhals as both a self-dealer and foundation manager for each year until he was issued the notice of deficiency in 2009 -- an example of what can happen when someone fails to pay his taxes in the first place and then also does not cooperate in repaying the delinquencies in a timely manner.

For example, the IRS imposed a first tier tax of 5 percent for each act of self-dealing, see 26 U.S.C. § 4941(a)(1), a second tier tax of 200 percent of the amount involved for each act of self-dealing that was not corrected within the taxable period, see § 4941(b)(1), a first tier tax of 2.5 percent against Ziegenhals as the foundation manager, see § 4945(a)(2), and a second tier tax of 50 percent of the amount involved for refusing to agree to corrections, see § 4945(b)(2). In addition, the IRS determined that Ziegenhals’ actions constituted willful and flagrant conduct, and thus imposed a penalty equal to the amount of the private foundation excise taxes pursuant to § 6684. 

I don’t recommend private foundations for taxpayers who lack a huge amount of money.  While it can seem attractive to have something named for you that will outlive you, you need a lot of money to make it worth the hassle.  You have to file very detailed and complicated annual reports with the IRS, with $100 daily penalties for late filing.  Those filings are open to the public.  And if you or your heirs get careless in managing the foundation, the taxes and penalties can explode, as the gentleman from Texas now knows.

It’s much easier to use a donor-advised fund run by a competent charity, like The Community Foundation of Greater Des Moines.  They take care of the filings and hassles, and you get at least as good of a tax benefit as you get from having your own foundation.

Cite: Zeigenhals (USDC SD-TX, 3:11-cv-00464)

 

20120906-1Special interest break approaches the checkered flag.  The bill to extend the special sales tax spiff for the Newton racetrack passed the Iowa Senate yesterday.   The bill lets the track keep sales tax it collects from customers, up to a 5% rate.

The break was first passed when the track opened, with requirement that 25% of the ownership be from Iowa and with a 2016 expiration.  When NASCAR bought the track, that ended the deal.  SF 2341 extends the deal through 2025 and lets NASCAR, owned by a wealthy out-of-state family, keep this special deal that is unavailable for any other tourist and entertainment facilities competing for Iowa dollars (though an athletic facility under construction in Dyersville will have a similar break).  I’m sure they have a good story why they needed to pass this, but I don’t buy it; the track isn’t going anywhere, and NASCAR bought it knowing they didn’t qualify.

Like much bad legislation, it had bipartisan support, passing 36-9.  There is a glimmer of good news.  The total of nine “no” votes is the most I’ve seen for an “economic development” giveaway.  Hats off to Senators Behn (R, Boone), Bowman (D, Jackson), Chapman (R, Dallas), Chelgren (R, Wappelo), Guth (R, Hancock) , Quirmbach (D, Story), Schneider (R, Dallas), Smith (R, Scott) and Whitver (R, Polk).

 

Time for Project Oblivion!  The Des Moines Register reports West Des Moines data center project gets $18 million in incentives:

Iowa’s next major data center prospect seeking state-incentive money is headed to the Iowa Economic Development Authority with a stamp of approval from the West Des Moines City Council.

The council on Monday endorsed “Project Alluvion” as a consent agenda item without any discussion, offering up to $18 million in local incentives to land the major project.

Council documents show Project Alluvion would create at least 84 jobs and a minimum of $255 million in taxable valuation.

“People might say, ‘Geez, giving $18 million for only 84 jobs.’ The jobs are important, but it’s more than the jobs,” Councilman Russ Trimble said after Monday’s meeting. “It’s going to help us build the tax base and keep property taxes down.”

That’s 214,285.71 per “job.”   So, if we were to move our firm to West Des Moines, that would qualify us for about $7.5 million.  Hey, we use computers — we’re high-tech!  We’d even call it a cool name, like Project Oblivion!  Or Des Moines can pay us to stay, whatever.

Related:  LOCAL CPA FIRM VOWS TO SWALLOW PRIDE, ACCEPT $28 MILLION

 

Joseph Henchman, Wisconsin Approves Income Tax Reduction, Business Tax Reforms (Tax Policy Blog).

 

Kris20140321-3ty Maitre, Changes Coming for IRA Rollovers in 2015. (ISU-CALT)  ” So going forward, advise your client to make only one IRA rollover per tax year, or to be on the safe side one rollover every 366 days.”

Peter Reilly, No Margin For Error When Using IRA Rollover As Bridge Loan   

Kay Bell, IRS offers an easier way to deduct your home office 

TaxGrrrl, Taxes From A To Z (2014): M Is For Medicare Payments   

Paul Neiffer, One More Reason Why Tax Reform is Going After Cash Method:

 I ran across a posting on the net farm income and loss reported by Schedule F farmers for 2011 and 2012.  During each of these years, the USDA estimated that farmers had net farm income in excess of $120 billion.

However, on schedule Fs reported by individual farmers, they showed a net loss in 2011 of about $7.11 billion and for 2012 a net loss of $5.06 billion. 

Yeah, “simplification” is really why farmers need accrual accounting.  Not paying tax is a lot simpler.

 

Jeremy Scott, Portman’s Disappointing Tax Reform Plan (Tax Analysts Blog).

Len Burman, Profiles in Courage at the IRS (Really) (TaxVox).  It’s a good post, once you get past the manifestly false statement that the current scandals are “fake.”  And you’ll notice that Doug Shulman, unlike the hero of the Burman post, left on his own terms.

TaxProf, The IRS Scandal, Day 320

 

 

Going ConcernThe Debate Heats Up Over How Many Computer Monitors You Should Have.  The good folks at GC quote some loser who says nobody needs more than one monitor.  Here’s how I feel about the issue:

monitors

Now if the one monitor was, oh, 3′ x 5′, I’d reconsider.

 

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Tax Roundup, 3/24/14: Iowa corporate tax, $409 million; Iowa tax credits, $337 million. And: Bozo no-nos!

Monday, March 24th, 2014 by Joe Kristan


20120906-1
How about a trade: Corporate Income Tax for Corporate Welfare.
  Interesting numbers from The Des Moines Register:

The state awarded $278.5 million in tax credits during the 2013 fiscal year, down 9.3 percent from the year before, according to a new revenue report.

The department estimates that Iowa will have to pay a maximum of $436.9 million for fiscal 2014, and $487.9 million in fiscal 2015. Those numbers are considered the state’s “contingent liabilities.” However, the department expects claims on the awards will be less.

The department expects the state will pay about $337.9 million in fiscal 2014, and $366.8 million for fiscal 2015.

The entire net revenue from Iowa’s corporation income tax for 2013 was $403.6 million, with an estimate for fiscal 2014 of about $409 million.  So the entire Iowa corporate tax system takes about $400 million from corporations and then hands over 75-85% of it to other businesses.   Let’s consider the difference to be a fee for administering this system of taking from the productive and giving to the well-connected.  It’s about a wash.

From the outside, the answer seems obvious: no tax credits, no corporation tax.  Iowa would go from having one of the very worst corporation income taxes — and the one with the highest stated rate — to one of the very best.  The downside is that it would displace a little industry of tax credit middlemen and fixers idle economic development officials.   If that’s a downside…

Related: The Tax Update’s Quick and Dirty Iowa Tax Reform Plan.

Chelsea Keenan, Are tax incentives an effective economic development tool? (Cedar Rapids Gazette). “But an October 2013 study published in the Journal of Regional Science that examined the possible benefits to states that offer manufacturers tax incentives receive, and determined there is no measurable gain.”

Lyman Stone, Illinois Speaker Madigan Proposes 3 Percent High-Earner Tax (Tax Policy Good).  Illinois is doing its best to make Iowa look good.

 

20121120-2Jonathan Adler, Was Delaying the Employer Mandate Legal? Did the IRS Even Check? (Volokh Conspiracyvia the TaxProf):

The legal justification for the employer mandate delay offered by the Treasury Department has been exceedingly weak.  Perhaps this is because the Treasury Department never considered whether it had legal authority to delay the employer mandate until after it made the decision to delay it.

More of the results-driven regulation we’ve been talking about.

 

roses in the snowPeter Reilly, Do Some Looking And Thinking Before Signing Form 1040 .  ”I’d like to suggest that you take a deep breath and actually look at your return before you take that final step.”  Excellent advice.

Kay Bell, 4 tax breaks for older filers

William Perez: What to Do if You Get a Call from the IRS Asking for Money.  If they haven’t contacted you by mail, hang up.   It’s a scam.

Kristy Maitre, recently of IRS and now with the ISU Center for Agricultural Law and Taxation, tells how to go about Requesting the Transfer an of IRS Audit.  ”Do not simply say that you want to transfer the audit. That will result, in nearly all cases, with a non-transfer.   You must state your case.”

TaxGrrrl, Taxes From A To Z (2014): L Is For Lost Property

Jack Townsend, Another UBS Depositor Indicted; the Russian Connection

Keith Fogg, What is the scope of a tax lien discharge versus the remaining tax lien (Procedurally Taxing)

 

haroldJoseph Henchman, Kevin Spacey at Annapolis Bar Tonight to Lobby Legislators for Subsidies (Tax Policy Blog):

Kevin Spacey is my favorite actor—I spent my entire recent vacation flight watching his movies—so it’s hard for me to say bad things about him. But he’s also a celebrity with an alleged net worth of $80 million lobbying for tax subsidies from Maryland taxpayers.

Sure, asking folks to subsidize Hollywood millionaires may seem odd, but as an Iowan said during the height of our starry-eyed film credit debacle:

But some benefits can’t just be measured on a dollar-for-dollar basis. The movies provide employment to local actors, construction crews, artists, caterers, drivers and a host of others. They expose non-Iowans to what the state has to offer. More intangible is the benefit of interactions in a state that can be cut off from the trends and centers of power. Not to mention the excitement factor. We’ve relied on caucuses every four years to bring action and celebrities to town. Now, sightings are anytime, any place.

So pay up, peasants!  You might see a star!

 

Renu Zaretsky, Tax Talk in the District, the Midwest, and Abroad.  It’s the TaxVox news roundup.

Tax Justice Blog, Big News in Ohio: Governor’s Unfair Tax Cut Plan Unveiled.  

Annette Nellen,Book recommendation – Geezer Rap

TaxProf, The IRS Scandal, Day 319

News from the Profession.  PwC Competing Against Shaving, Toys and Delicious Food for Guinness World Record Award (Going Concern).

 

Sometimes bad examples are the best teachers.  Blogger  Russ Fox provides some with his “Bozo Tax Tips” series for this year, beginning with Bozo Tax Tip #10: Email Your Social Security Number.  Don’t do it!  ”As I tell my clients, email is fast but it’s not secure.”

 

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Tax Roundup, 3/13/14: Looming Payday Edition. And: incentives galore!

Thursday, March 13th, 2014 by Joe Kristan

20130104-1Deduction day looms.   March 15 is the deadline for calendar-year corporate return filings and payments.  It’s also an important deadline for accrual-basis taxpayers for another reason:  compensation accrued at year-end by a calendar-year accrual-basis taxpayer has to be paid by March 15 of the following year to be deductible in the year accrued.

As every first-year accounting student learns, accrual accounting tries to match expenses with the period in which the income is earned.  If a bonus is based on calendar-year sales or profits, it normally can’t be paid until after year-end, when the numbers are sorted out; still, the bonus is related to those sales, so accrual accounting counts the expense against that year’s income.

The tax law has many limits on accrual accounting.  For example, accrued expenses to “related parties,” typically owners and their families, can’t be deducted until the expenses are actually paid.  The tax law gives accrual businesses 2 1/2 months after year-end to pay accrued compensation to non-related employees.  Otherwise, the deduction is deferred until the year in which the employee is paid.

Does the compensation have to be paid by Saturday, or can I wait until Monday?  The tax law provides that when tax returns are due on a weekend, the deadline is extended to the following monday.  That’s why 2013 calendar-year corporation returns  are due March 17, 2014 – March 15 is on Saturday this year.

But the IRS says that doesn’t work for compensation.  Rev. Rul. 83-116 holds that it only applies to “acts required to be performed in connection with the determination, collection, or refund of taxes”  – things like filing returns.  So, according to IRS, the March 15 deadline still stands for payment 0f 2013 accrued compensation.  It’s not clear that the IRS would win in court on this — they have lost on a similar issue — but you don’t want to be the test case.  If you want to deduct 2013 accrued compensation on your 2013 return, pay it by Saturday.

 

 

haroldIncentives!  Coralville Likely on the Hook for Large Chunk of Von Maur Taxes.  Coralville marches to the beat of its own drummer, who apparently is heavily medicated.

Hey, let’s pay $34 million to build a Des Moines Convention Hotel!  Brian Gongol reports “The city financed the hotel to help spur convention business…but now it’s in danger of losing money.”  You don’t say.

Tax Justice Blog, Film Tax Credit Arms Race Continues: “Saying “no” to Hollywood can be a difficult thing for states, but here are a few examples of lawmakers and other stakeholders questioning the dubious merits of these credits within the last few weeks”.

Good.  Iowa doesn’t seem to have been badly hurt since it turned from subsidizing filmmakers to jailing them.

Related: Robert Wood, Film Taxes Ensnares Beckhams, Bob Geldof, Andrew Lloyd Webber, Annie Lennox & More

 

TaxGrrrl, Taxes From A To Z (2014): F Is For Foreign Tax Credit.  ”For many taxpayers, it’s more advantageous to claim income taxes you paid or accrued during the year to a foreign country or U.S. possession as a credit than as a deduction.”

William Perez, Chart: Total Refundable Credits from 1990 to 2011.  There are more of them now.

Peter Reilly, Hedge Fund, TEFRA And Community Property Give Woman Tax Nightmare

Russ Fox, The IRS Needs Volunteers for the Taxpayer Advocacy Panel

 

Cara Griffith, States’ Perspectives on Federal Tax Reform (Tax Analysts Blog)

Joseph Henchman, Nebraska Legislators Approve Inflation Indexing But Drop Major Tax Overhaul (Tax Policy Blog)

Howard Gleckman, Mike Lee’s Tax Plan: An Intriguing Idea That Would Add $2.4 Trillion to the Deficit (TaxVox)

Kay Bell, House panel finally looking at Internet sales tax legislation

TaxProf, The IRS Scandal, Day 308

News from the Profession.  Tweeting a Lot About Audit Stuff Can Get You a Job at Deloitte.  (Going Concern)

 

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Tax Roundup, 3/12/14: Hundreds of Panthers fear ID-theft. And: more smidgens!

Wednesday, March 12th, 2014 by Joe Kristan

uni-logoID Theft may affect 200 University of Northern Iowa employees.  KWWL.com reports:

In February, when the issue was first discovered, about 50 people had reported issues filing their federal income taxes. Now, University officials say 200 employees have come forward, and but not all of those are fraud. Still, that has psychology department secretary Jan Cornelius concerned. She said her social security number was stolen.

The problem was identified by taxpayers whose returns were rejected because somebody else had already filed under their numbers.  You need to be careful with your Social Security Number, and you should never transmit tax documents as unencrypted email attachments.  Use a secure file transfer portal, like Roth & Company’s Filedrop, to send tax files electronically.

 

Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

More Smidgens.  The House Oversight Committee investigating the Tea Party Scandal issued a report yesterday blasting the idea that the IRS stall on right-side 501(c)(4) groups was just a non-political coincidence involving bumblers in Cincinnati.  Using IRS documents and e-mails, the report paints a picture of an effort driven by a highly-political bureaucrat to “do something” through IRS regulation to administratively reverse the Supreme Court’s Citizens United decision.  From the report’s conclusion:

Evidence indicates Lerner and her Exempt Organizations unit took a three pronged approach to “do something about it” to “fix the problem”of nonprofit political speech:

1) Scrutiny of new applicants for tax – exempt status (which began as Tea Party targeting);

2) Plans to scrutinize organizations, like those supported by the “Koch Brothers,” that were already acting as 501(c)(4) organizations; and

3)“[O]ff plan” efforts to write new rules cracking down on political activity to replace those that had been in place since 1959. Even without her full testimony, and despite the fact that the IRS has still not turned over many of her e-mails, a political agenda to crack down on tax-exempt organizations comes into focus. Lerner believed the political participation of tax-exempt organizations harmed Democratic candidates, she believed something needed to be done, and she directed action from her unit at the IRS. Compounding the egregiousness of the inappropriate actions, Lerner’s own e-mails showed recognition that she would need to be “cautious” so it would not be a “per se political project.”

Committee Democrats continue to insist that there is no “political motivation,” and no evidence of White House involvement.  To deny that targeting “Tea Party” and “Koch-funded” organizations is political is to insult our intelligence.  As far as White House involvement, the Chicago Way isn’t for the Boss to pick up the phone and call the Cincinnati service center.  The President’s public in-your-face criticism of the Supreme Court for Citizens United at a State-of-the-Union address gave his supporters in the bureaucracy all the guidance they needed.

The TaxProf has a roundup.

 

roses in the snowWilliam Perez, Deductions for Self-Employed Persons.  ”Deductions that go on Schedule C reduce both the self-employment tax and the federal income tax.”

TaxGrrrl, Taxes From A To Z (2014): E Is For EE Bonds   

Russ Fox, The Moral Climate may have Changed but the Law Hasn’t. “Thus, until Congress changes the law a professional gambler cannot deduct gambling losses in excess of wins.”

Kay Bell, Beware tax break bait and switch.  ”Yes, gifts to your favorite charity can be deducted, but only if you itemize on Schedule A.”

Paul Neiffer, Permanent Means Permanent:

North Dakota law regarding easements is unique.  It appears to be the only state in the country that limits easements to 99 years by law.  Since the Tax Code requires that the conservation easement be of a permanent nature, the Tax Court ruled in favor of the IRS and disallowed all of the easement charitable donations.

Oops.  Still, I think anything “permanent” should be looked at skeptically.  Nobody knows whether it will seem wise to lock up a parcel 100 years from now.

Tony Nitti, Tax Geek Tuesday: Tackling The Dreaded Section 754 Adjustment   

 

20120906-1David Brunori, Where Is the Outrage? (Tax Analysts Blog):

According to Good Jobs First, there are 514 economic development programs in the 50 states and the District of Columbia. More than 245,000 awards have been granted under those programs. I ask again, where is the outrage? The system is antithetical to the idea of free markets. A quarter of a million times, state governments decided what is best for producers and consumers. That should make us cringe. First, the government is inefficient at providing public goods, and it is terrible at manipulating the markets for private goods. But more importantly, those 514 economic development programs are almost all the result of insidious cronyism. Narrow business interests manipulate government policymakers, and those interests prosper to the detriment of everyone else. Free markets be damned.

And while I’m looking for outrage, where are the liberals? The 965 companies in the report received over $110 billion of public money. Berkshire Hathaway, a company with $485 billion in assets and $20 billion in profits, received over $1 billion of that money. Its chair, William Buffett, is worth about $58 billion. Buffet, by the way, is still a darling of the left. He has some nerve to call for higher taxes. The billion dollars his companies took would pay for a lot of teachers, healthcare, and other public goods. 

They take just a little bit at a time from all of us so we don’t notice, and they give it in big chunks to their well-connected friends, who certainly do notice.   The report David refers to is here.

 

Joseph Henchman, State Sales Tax Jurisdictions Approach 10,000 (Tax Policy Blog).  Small wonder online sellers don’t want to collect everyone’s sales tax.

Elaine Maag, The Many Moving Parts of Camp’s Tax Reform for Low-Income Families (TaxVox)

 

Joseph Thorndike, The Last Time Everyone Gave Up on Tax Reform, It Actually Happened (Tax Analysts Blog).  But not this time:

Ultimately, Reagan agreed to make tax reform a priority. And his support was crucial. No lawmaker, no matter how exalted, well intentioned, or energetic, can move the ball like a president.

Which is one very important reason why 2014 is different from 1984. President Obama has no discernible interest in fundamental tax reform. So conventional wisdom is right: The Camp tax plan is going nowhere fast.

I think that’s right.

 

All it needs is a little pasta and fresh lemon.  Argentina: Authorities investigate tax evasion via garlic exports through shell companies

Career Corner.  It Is Almost Certain You Will One Day Be Replaced by Machines (Going Concern).  

 

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Tax Roundup, 3/11/14: The Taxpayer Hotel Edition. And: private-sector Kristy!

Tuesday, March 11th, 2014 by Joe Kristan

Des Moines public officials think a fancy new convention center hotel is just what we need to hang with the cool kids, reports KCCI.com:

A plan to build a four-star hotel next to Hy-Vee Hall and Wells Fargo Arena won’t happen unless Des Moines city leaders can convince the state’s economic development authority to fork over millions in tax incentives for the project.

Des Moines Assistant City Manager Matthew Anderson said this week is a prime example that proves why a hotel is needed next to the Iowa Events Center.

Fans from across the state are coming to downtown Des Moines in droves to cheer on their favorite teams at the boy’s state basketball tournament.

Cindy Curran said there’s something missing. “Accommodations to stay overnight,” said Curran. “A nice hotel with restaurants in there, amenities to go with that.”

wells fargo arena

A casual reader could be forgiven for thinking that there are no hotels within a few blocks of Wells Fargo Arena.  They might think that the Des Moines Marriot Downtown, with its own nice restaurant and bar, had suddenly vanished.  They might think the historic Renaissance Savery Hotel, home of Bos Restaurant, had closed down.  They might think the new Hyatt Place in the Liberty Building had already failed.  And has the historic Hotel Fort Des Moines and its Django Restaurant disappeared after all these years?

Nope, they’re all going strong, and all still connected to Wells Fargo Arena by an enclosed all-weather skywalk system.  In fact, Downtown Des Moines has more restaurants and places to stay than ever.  They need a new competitor, apparently, but one that can’t happen  without $34 million in subsidies tax incentives.

If a business can’t happen without taxpayer subsidies, that’s a sure sign that it shouldn’t happen in the first place.  Convention centers have been a money pit for governments around the country, as the think tank Heartland Institute reports:

As convention planners seek to have large new hotels and related facilities built for their events, taxpayers are often stuck footing the bill for what could be a building that sits empty much of the year.

It’s always easier to support a new business when you invest somebody else’s money.

Related: The Convention Center Shell Game.

 

KristyMaitreIowa’s IRS stakeholder liaison privatizes herself.   From the Iowa State University Center for Agricultural Law and Taxation:

CALT is pleased to announce that Kristy Maitre, the former IRS Senior Stakeholder Liaison for the State of Iowa, has joined our staff. Kristy brings 27 years of IRS experience to her role as CALT’s new tax specialist.

Practitioners who have attended our seminars are already familiar with Kristy and her vast breadth of practical knowledge of tax and estate planning. Kristy has taught hundreds of continuing education classes to tax practitioners around the country. At CALT, she will continue to offer training through live seminars, but will expand her reach with frequent webinars and other educational offerings through the CALT website. Stay tuned as CALT will soon unveil more exciting changes enabling us to better serve the tax practitioner community.

Great news for Kristy and ISU-CALT, bad news for IRS service.

 

William Perez, Free Tax Software Available Through IRS Free File

Russ Fox, Regulating Tax Preparers Always Prevents Tax Preparer Fraud (Not True, of Course)

potleafTaxGrrrl, It’s No Toke: Colorado Pulls In Millions In Marijuana Tax Revenue.  I think popular support for pot prohibition, with its attendant violence, prison crowding, and other social costs, will continue to decline.  At some point the lure of revenue will overcome the reflexive instinct of politicians to preserve control over things.

Jason DinesenWhat’s So Bad About More People Preparing Their Own Taxes?  “My goal is to have clients who actually need a professional preparer, or at the very least, people who could prepare their own taxes but who like the comfort provided by having a professional take care of it for them.”

One of these is not like the others  Filing season 2014: Death, taxes, root canals and refunds.  (Kay Bell)

 

Carlton Smith, Tax Court dodges CDP record rule ruling (Procedurally Taxing)

Jim Maule, Cracking the Tax Protest Movement.  ”The unfortunate thing about the tax protest movement is that most of the people in it are vulnerable folks who fall for the siren song of the ringleaders, just as those who support special tax breaks, even without benefitting from them, have fallen for the siren songs of those who procure special tax breaks for themselves and their clients.”

 

Joseph Henchman,  Idaho Considering Complicated and Gimmicky Job Creation Tax Credit.  (Tax Policy Blog) The best tax incentive is a simple, low-rate tax system without gimmicky incentives.

taxanalystslogoMartin Sullivan, If the Camp Tax Reform Bill Won’t Pass, Why Is It So Important? (Tax Analysts Blog):

The Camp discussion draft has changed the tax policy landscape like no other single document in the last three decades, for two reasons. First, it has burst the bubble of all the feel-good tax reformers who have been wasting our time promoting unrealistic tax plans. The Camp plan is the ultimate reality check on tax reform. It is far more complicated and painful than marketers of tax reform have told the public to expect. It is unlikely that any realistic tax reform would be any shorter or sweeter than the Camp draft.

The second reason the Camp reform is monumentally important is the extensive and detailed workmanship that went into it.   

I’m not convinced — I think the initial draft of a tax reform plan should be a lot more idealistic.  The cynical, politically-necessary modifications will arrive soon enough on their own, and conceding so many of them up front only invites more.

 

Jeremy Scott, Camp Hits Popular Deductions Hard (Tax Analysts Blog).  ”The elimination of the state and local tax deduction is one of the larger revenue raisers in Camp’s plan.”

TaxProf, The IRS Scandal, Day 306

 

Quotable:

When the law interferes with people’s pursuit of their own values, they will try to find a way around. They will evade the law, they will break the law, or they will leave the country. Few of us believe in a moral code that justifies forcing people to give up much of what they produce to finance payments to persons they do not know for purposes they may not approve of. When the law contradicts what most people regard as moral and proper, they will break the law–whether the law is enacted in the name of a noble ideal such as equality or in the naked interest of one group at the expense of another. Only fear of punishment, not a sense of justice and morality, will lead people to obey the law.

Milton Friedman, via David Henderson.

 

News from the Profession: The Profession is Really Reaching For the “I Still Let My Mom Pick Out My Outfits” Demographic (Going Concern)

 

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Tax Roundup, 2/17/14: Big tax subsidy edition. And: the $70 million doggie treat!

Monday, February 17th, 2014 by Joe Kristan

20120906-1Do you think the legislature would approve an $12 million annual subsidy to support the operations of a publicly-traded corporation?  Trick question!  They already have.

The Department of Revenue last week released its listing of claims for the Iowa research credit over $500,000 for 2013.  Unlike the federal credit, the Iowa credit is “refundable” — if the company claiming the credit has less tax due than its credit, the state writes the company a check for the difference.  Of the $58.2 million in credits claimed, about 65% of them exceeded taxes due and were granted as refunds, according to the report.

Two John Deere entities combined to claim over $18 million in credits in 2013; assuming the 65% figure applies to them, that means the got a net $12 million subsidy from Iowa taxpayers.

The Des Moines Register reports:

Twelve of Iowa’s major employers accounted for more than 86 percent of tax credit money awarded for research and development last year, according to a new Revenue Department report.

Companies claimed a total of $53.3 million in credits for research and development in 2013, with 12 companies claiming $46.2 million of that amount. Including individuals who claimed credits, the total rises to $58.2 million.

While recipients of the credits will always argue passionately for their virtues, it’s impossible to justify cash operating subsidies from the state for a dozen well-connected corporations.  The Tax Update’s Quick and Dirty Iowa Tax Reform Plan would benefit all taxpayers, not just those who hire tax credit harvest consultants to get cash for what they would do anyway.

 

Liz Malm, Richard Borean, Lyman Stone, Map, Spirits Excise Tax Rates by State, 2014 (Tax Policy Blog)

20140217-1

It looks like Iowa hits the sauce pretty hard.

 

Annette Nellen, State income tax filing post-Windsor.

Jason Dinesen, Glossary of Tax Terms: Enrolled Agent   

Kay Bell, IRS’ first batch of 2014 tax refund checks averages $3,317

 

Russ Fox, Tax on the Run Owners Run to ClubFed:

Here’s a scheme for you: The government has set up this new tax credit worth thousands of dollars. What if we find some impoverished individuals, have them fill out tax returns claiming this credit, and we pocket all that cash? We’ll just phony up some other parts of the return to make it look real. They’ll never catch us!

As an aside, this sort of thing happens with all refundable tax credits. It’s one of the reasons why they attract fraudsters like moths are drawn to bright lights.

Yes, this really happened…except for the part about never being caught.

But even if you catch them, that money is gone.

 

taxanalystslogoChristopher Bergin, To Fix the IRS, You Have to Fund It (Tax Analysts Blog)

This agency is so mismanaged that there may very well be corruption. But I have no proof of that. I do, however, agree with those who are calling for a special prosecutor. Because the way House Democrats are behaving – ignoring that there is any problem at all – is almost scandalous, and what the Obama administration is doing is useless.

And that brings me to the House Republicans. They think it’s a good idea to punish the IRS by cutting its budget. That won’t fix the problem, and it’s the classic cutting-off-your-nose-to-spite-your-face move.

We tax practitioners deal with the degrading IRS service levels every day, and it’s clear the IRS should be better funded.  It won’t happen, though, unless the IRS finds a way convince Republican appropriators that it isn’t a political arm of the other party.  Dropping the proposed 501(c)(4) regulations is probably a necessary, though not sufficient, first step.

 

TaxProf, The IRS Scandal, Day 284

Tax Justice Blog, Congress Is About to Shower More Tax Breaks on Corporations After Telling the Unemployed to Drop Dead.  Apparently the “extenders” bill is showing some life.

Jack Townsend, Government Files Protective Appeal in Ty Warner Sentencing 

 

Via Wikipedia.

Via Wikipedia.

The $70 million doggie treat.  The greyhound industry is a legacy of the early days of gambling in Iowa, but as opportunities to lose money recreationally have expanded, gamblers have lost interest in the doggies.   Yet state law still requires two casinos to retain their dog tracks.  Now the Des Moines Register reports that the casinos are willing to buy out the dogs for $70 million:

Combined betting on greyhound races in Dubuque and Council Bluffs has dropped from $186 million in 1986 to $5.9 million in 2012, a 97 percent decline. Both dog tracks typically have only a scattering of fans in grandstands that once held thousands of patrons.

The proposed legislation envisions a payment of $10 million annually for seven years for Iowa’s greyhound industry. This would include a total of about $55 million from Horseshoe Casino in Council Bluffs and about $15 million from the smaller Mystique Casino in Dubuque.

The casinos say they are losing $14 million annually on the dogs.   I would guess that horse racing in Iowa has a similarly hopeless economic model.

Somewhat related: Tyler Cowen, Triply stupid policies.

 

News from the Profession: Just What Every Accountant Wants for Valentine’s, Another Calculator (Going Concern)

 

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Tax Roundup, 2/14/14: Dallas county leads Iowa AGI. And: will you all be my valentines?

Friday, February 14th, 2014 by Joe Kristan

iowa countiesDallas County leads Iowa’s counties in AGI race; Decatur brings up the rear. The IRS this week released its individual tax return statistics by county and zip code this week.  I can’t resist wading into the data — I could wallow in it all day, but I won’t get paid for that this time of year.  I can get away with a few observations, though.

  • Iowans filed 1,420,569 1040s in 2011, reporting a total adjusted gross income of a little over $54 billion — an average of $53,033 per return.
  • Dallas County had the best 2011, reporting an average AGI of $78,169.  Dallas County is a fast-growing suburban county west of Des Moines.
  • Decatur County, a rural county on the Missouri border, was 99th and last, with average AGI of $35,323.
  • Polk County, Iowa’s most populous county, had average AGI of $59,570.
  •   $54 billion of Iowa’s $75 billion in AGI was wages.  $1.1 billion was interest and $1.2 billion was dividends.
  • Iowans reported $2.093 billion in AGI “business or profession net income.”  When politicians want to increase tax rates on “the rich,” they are taxing Iowa employers, whether or not they realize it.

 

20120906-1Iowa Senate extends NASCAR sales tax break.  When the Iowa Speedway opened in Newton, the Iowa General Assembly gave them a unique gift: they let the track keep sales tax it collects for 10 years.  One of the conditions for the gift was continued 25% ownership by Iowans, which inconveniently went away when NASCAR bought the track last year.

No problem!  The Des Moines Register reports that the Senate is moving swiftly to enact new legislation not only allowing the out-of-state owners to keep the sales tax they collect, but they are extending the deal, which was to expire in 2016, for an additional 10 years.

I’m sure the NASCAR people are fine folks, but so are the people who run every entertainment venue in Iowa that competes for Iowa’s leisure dollars.  Only NASCAR gets this special break.  NASCAR is also the beneficiary of a special federal break for “qualified motor sports entertainment facilities.”   NASCAR is controlled by a single wealthy North Carolina family.  It’s strange how the bipartisan leadership in the legislature gives them special treatment.

 

Wikipedia image

Wikipedia image

Beaned.  The Justice Department has filed a notice of appeal of the extraordinarily lenient tax evasion sentence — community service and no jail time — to the inventor of the Beanie Baby.   (Chicago Tribune)

 

William Perez, What Goes Where on the 2013 Form 1040

Paul Neiffer, John Deere Expects Increase (Hopes For) in Section 179 and Bonus Depreciation.  It’s good for equipment sales.

TaxProf, The IRS Scandal, Day 281

Jamie Andree, Celebrating Valentine’s Day with Comments on the Innocent Spouse Regulations.  (Procedurally Taxing).  Nothing says “I love you” like claiming innocent spouse relief.

 Tax Trials, Court of Appeals Rules that IRS Cannot Regulate Return Preparers

 

Scott Hodge, How Much More Redistribution is Needed to Make Every Family “Equal”? (Tax Policy Blog).   It will never be enough for some people.

Howard Gleckman, Why is the U.S. Olympic Committee Tax Exempt? (TaxVox).  Probably for much the same reason NASCAR gets special federal and Iowa tax breaks.

 

The Critical Question. Could a flatulence tax on cows slow climate change? (Kay Bell)

News from the Profession.  Turns Out Your Non-Diverse Wardrobe Probably Makes You a Better CPA (Going Concern)

Happy Valentine’s Day!  Infanti: Big (Gay) Love: Has the IRS Legalized Polygamy? (Going Concern).  Will you be my Valentine?  And you, and you…

 

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Tax Roundup, 2/12/14: Lawless and Unregulated edition. And: Lincoln!

Wednesday, February 12th, 2014 by Joe Kristan

20130121-2As we reported yesterday, the IRS preparer-regulation power grab failed in the D.C. Court of Appeals.  The three-judge panel unanimously ruled that “The IRS may not unilaterally expand its authority through such an expansive, atextual, and ahistorical reading” of the law.

One grumpy IRS person told us that we would regret it, that Congress will pass a worse IRS-run preparer regulation regime.  While it’s possible, I don’t think Congress is in any mood to give the IRS more power right now (see TaxProf, The IRS Scandal, Day 279).

It’s a victory for taxpayers, for preparers, and for the rule of law.  One hope it is a good omen for future court decisions on the on-the-fly rewrites of the Obamacare effective dates.

My endzone dance is here.  The Tax Prof has a roundup of coverage, as well as a guest op-ed: Johnson: The D.C. Circuit Rejects the IRS’s Regulation of Tax Return Preparerswhich says “At bottom, Loving stands for the proposition that exigency does not excuse illegality.” 

Other tax bloggers weigh in:

Russ Fox, DC Court of Appeals Rules Against IRS: Loving Decision Upheld.  ”The real problem is the huge complexity of the Tax Code, and the biggest villain here is Congress. Rather than regulating tax professionals, we need to regulate (gut) the Tax Code itself.”

Leslie Book, Initial Reactions to the Government’s Loss in Loving (Procedurally Taxing):  ”The government may seek to get Supreme Court review of the matter, or may work with Congress to get specific legislative authority. I offer no views on the odds of the government seeking cert, but its sound beating in two opinions leaves the possibility of obtaining cert and a victory in the Supreme Court seemingly small.”

Joseph Henchman, Big Win for Taxpayers: IRS Loses Effort to Expand Power Over Tax Preparers (Tax Policy Blog).  ”In May 2013, we filed a brief opposing an IRS appeal of a court decision striking down their regulation of small tax preparers.”  That’s the brief I joined, along with fellow tax bloggers Russ Fox and Jason Dinesen.

Trish McIntire, The IRS Lost!  “I don’t know if there can be any more appeals (not a lawyer) but I bet there will be a tax preparer bill in Congress soon.”

 

20130419-1Paul Neiffer, When Farmers Barter.  While bartering is taxable, Paul muses: “Some of these barter transactions are properly reported, however, my educated guess is that much higher percentage is not.”

William Perez, How to Handle Owing the IRS

Tony Nitti, Tax Geek Tuesday: Allocation of Partnership Liabilities ”Admit it. Nobody really understands what’s going on in this remote corner of the K-1; typically, most tax preparers just apply the tried-and-true “same as last year” approach to allocating liabilities, and trust that it won’t matter in the end.”  Oh, it does, it does.

Jana Luttenegger, “Extensive Wait Times” Ahead with the IRS (Davis Brown Tax Law Blog).  And it’s not like they were brief before.

Kay Bell, The pros and cons of tax refunds.  While logically you don’t want to let the taxman sit on your money, clients always seem happiest with a fat refund.  That leads many tax advisors to sandbag a bit on payments.

TaxGrrrl, Yes, Olympic Wins Are Taxable (And Should Stay That Way) 

 

Peter Reilly, Pilot To Black Panther To Pastor Calls For Financial Transparency In Churches 

 

Jack Townsend, Corporate Corruption Case Charged With Swiss Bank Accounts to Hide the Loot 

Tax Trials, The Tax Education of Lauryn Hill

Annette Nellen links to the Video of IRS Commissioner Koskinan on the filing season.

 

The Iowa Department of Revenue has a Facebook page!  It’s a good idea, and they actually answer questions, like this:

 20140212-1

It’s great that they are answering disgruntled taxpayers for everyone to see.  Best thing is that it’s available to anybody, not just Facebookers.  You don’t have to bring yourself to “like” the Department of Revenue to read it.

 

David Brunori, Tax Breaks for Lawyers — No Joke (Tax Analysts Blog):

I read recently in the Kansas City Business Journal that Missouri gave a big law firm $2.8 million in tax incentives to move to Kansas City. I thought there must be some kind of mistake. Certainly, no politician would agree to give citizens’ hard-earned money to lawyers. And certainly, they would not give citizen money to big-firm, wealthy lawyers. But once again, reality trumps good tax policy. The Missouri Department of Economic Development gave the nearly $3 million to attract the international law firm Sedgwick LLP to downtown Kansas City. 

Must be a rough neighborhood if that’s considered an improvement.  Or, more likely, Missouri has completely lost its mind.

 

Tax Justice Blog, The States Taking on Real Tax Reform in 2014.  One blog’s “real tax reform” is another blog’s march to madness.

News from the Profession: Big 4 Dude Says Dudes at His Firm Rewarded For Treating Non-Dudes Like Dudes (Going Concern)

 

LincolnToday is Abraham Lincoln’s birthday.  He was born 205 years ago today in Kentucky, before anybody thought of an income tax.  His presidency saw the first U.S. federal income tax, passed to finance the Civil War.  The Revenue Act of 1861, Section 49, imposed a flat 3% levy “upon the annual income of every person residing in the United States, whether such income is derived from any kind of property, or from any profession, trade, employment, or vocation carried on in the United States or elsewhere, or from any other source whatever” over $800.  It was replaced by a progressive levy in 1862, with a 3% rote on income over $600, with a 5% rate kicking in at $10,000.

The tax expired under its own terms in 1866, after Lincoln’s death.  Lincoln never came back, but the income tax returned to stay in March 1913.

 

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Tax Roundup, 1/29/14: E-cigarette panic! And: SOTU, SALY.

Wednesday, January 29th, 2014 by Joe Kristan
Via e-cigarettepedia.com

Via e-cigarettepedia.com

Jeff Stier, Iowa should tread carefully on e-cigarette rules, on the weird impulse to restrict and tax water vapor:

Restricting the use of e-cigarettes, known as “vaping” for the vapor they emit, would undermine the very goal of this law.

First, it wouldn’t reduce exposure to environmental smoke, better known as second-hand smoke, because there is no smoke. There isn’t even any first-hand smoke.

More important, a ban on vaping in public places would damage public health because it would make e-cigarettes a less convenient alternative to cigarette smoking. It would also send the implicit (and incorrect) message that they are also equally dangerous, not only to the user, but to those exposed to the vapor.

All true.  There are two explanations for the why politicians have their dresses over their heads over what amount to very small room vaporizers.

First, because people vaping look a little like smokers, and smoking is a great sin these days, they must be sinning, and sin must be stopped.  For the children!

The second explanation is more cynical, so it probably is true.  The state has a nicotine addiction.  Iowa collected $227 million in tobacco taxes in 2013.  If smokers use e-cigarettes to quit, that money dries up.  We can’t have that.

 


EITC error chart
Tax Analysts’ 
headline ($link) on its story about the tax proposals in the State of the Union doesn’t exactly scream Hope and Change:  ”Obama Proposes EITC Expansion in State of the Union, Otherwise Reiterates Old Tax Proposals.”

One hopes that Congress will do something to keep 20-25% of the EITC from being issued “improperly” to grifters before it increases the theft pot.  We can expect the President’s other tax proposals to go nowhere, as they went nowhere when he was in better political shape.  The dead-on-arrival proposals include disallowing more of the Section 199 deduction for f0ssil fuels and tax credits to “build fuel infrastructure” and to subsidize alternative fuels.

His budget also provides for a hodgepodge of other tax incentives.  His revenue-raisers include repealing LIFO inventories, slower depreciation for aircraft, changing grantor trust rules so they are treated the same for income and tax purposes, and limiting the size of retirement accounts — all doomed absent an unlikely comprehensive tax reform.

Related:  Tax Policy is MIA in the State of the Union (Howard Gleckman, TaxVox). “The president perfunctorily restated his support for business tax reform but added no new twist to make his plan any more acceptable to congressional Republicans.”

Good Jobs First, a left-side think tank, has released Show us the Subsidized Jobs, a report on state tax incentives.  Iowa only scores 27%, largely because there is no online disclosure of recipients of the Industrial New Jobs Training program and the Iowa New Jobs Tax Credit.  I would give Iowa zero percent, because these hidden subsidies wouldn’t exist in a well designed tax system.  They should be repealed and replaced by the Tax Update’s Quick and Dirty Iowa Tax Reform Plan.

 

Broadbandits.  Speaking of corporate welfare, SSB 3319 was introduced yestarday in the Iowa Senate.  Among other ways to pay providers for something they will do anyway if customers want it, the bill includes a 3% credit on the cost of “new installation of broadband infrastructure.”  Just one more step away from simplicity and transparency.

 

20111040logoDavid Henderson, Marginal Tax Rates: Singing Taxman to My Class:

Think about the Beatles’ earnings. Late 1963 was when they first started making real money. Then in 1964, they hit it big. Presumably they didn’t spend it all but started investing, figuring that they would get interest and dividends on their investments. They probably did. But those returns would be taxed at the 95% rate. When would they start noticing this? Probably some time in 1965. Thus the 1966 song. 

And we all know what an economic dynamo the UK was then.

Martin Sullivan, The Obama Administration’s Backdoor Bailout of Puerto Rico (Tax Analysts Blog):

But here’s a little secret that the powers that be inside and outside government don’t want you to know: The Obama administration has already provided a multibillion-dollar bailout to Puerto Rico. Nobody in the major media outlets has noticed because the issue is highly technical.

And because Look!  Justin Bieber!

 

Tony Nitti, Tax Geek Tuesday: Why You Should Never Hold Real Estate In A Corporation? 

William Perez, Filing Requirements for Tax Year 2013

TaxGrrrl, ‘Same Love’ Grammy Wedding: Married Is Married For Tax Purposes

Leslie Book, Corbalis v Commissioner: Tax Court Holds it Has Jurisdiction to Review Interest Suspension Decisions (Procedurally Taxing)

 

Scott Hodge, President Obama Signs Executive Order to Increase Minimum Wages Paid by Federal Contractors (Tax Policy Blog).  Spending our money to show us how generous he is.

Tax Justice Blog, Has the Tax Code Been Used to Reduce Inequality During the Obama Years? Not Really.   They’ve tried, but it doesn’t work.

Jeremy Scott, BEPS Project Should Include Digital Economy Permanent Establishment (Tax Analysts Blog).   Should companies be taxable in a country because they have a “digital permanent establishment”?  I say they shouldn’t be taxed at all.

 

TaxProf, The IRS Scandal, Day 265

Jack Townsend, DOJ Tax AAG Keneally Reports on Swiss Banks Joining DOJ Swiss Bank Program

Kay Bell, Mortgage tax break contributes to fading American dream.

 

Robert D. Flach is a sensible man:

I did not watch the State of the Union address last night.  Instead I watched the wonderful film GAMBIT with Michael Caine and Shirley MacLaine on TCM.

I ate a delicious dinner and had pie for dessert, with the TV off.  My view of the whole SOTU thing is well-reflected here.

 

Career Corner: You Can Run But You Can’t Hide. Therefore, Sabotage Your Coworkers (Going Concern)

 

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Tax Roundup, 1/27/14: Job destruction incentives. And: did you ride your bike today?

Monday, January 27th, 2014 by Joe Kristan

 

Flickr image courtesy Retrofresh! under Creative Commons license.

Flickr image courtesy Retrofresh! under Creative Commons license.

You mean state tax credits aren’t magic beans for economic development?  A frequent commenter on the Econlog blog, Daniel Kuehn, shares some early work on a paper he is preparing on “job creation tax credits” (my emphasis):

 The paper is on the employment and earnings effects of job creation tax credits (and actually investment credits… I’ve recently found out they were phased in using the same selection rule so I can’t distinguish the two, which is fine I guess).

My prior was that they would create jobs and raise wages. I have a good identification strategy – an RDD model. But one thing lacking in the existing literature on it is a way of dealing with displacement effects (in other words, person A gets the job from the tax credit by displacing person B who was not eligible for the credit). I can deal with that (at least within-county displacement). I expected that would reduce the effect somewhat of course, but I was sure even after accounting for displacement the credits would still generate jobs.

So far, they seem to reduce employment. Displacement appears to be a big problem.

There is one other explanation I’m investigating now. You have to create full time jobs to get the credit, so it is possible that I’m seeing a negative employment effect because part time jobs are being replaced with full time jobs. I’m investigating that now with individual level data. So in the end, it may create full time jobs and destroy more part time jobs, in which case it would be interesting to look at the impact on total hours.

I’m not sure how it will all shake out in the end, but I am definitely less confident in policy than I was before I started this.

Mr. Kuehn should be respected for following his data in spite of his prior assumptions, but that’s the result I would have expected.  The money going to the subsidized jobs has to come from somewhere, and much of it comes from unsubsidized businesses.  The politicians like to point to the jobs they “create” with “Economic development” incentives, but they ignore the loss of jobs in competing businesses and from the increased taxes on the unsubsidized.

It’s the old broken window thing.

Related: IF TRUTH IN ADVERTISING APPLIED TO ECONOMIC DEVELOPMENT AGENCIES

 

Scott Drenkard, Indiana House Unanimously Approves Incentive Study Commission.  Iowa did this a few years ago, and the study panel was unable to identify any clear economic benefit to the giveaways.  And they just went on enacting more giveaways.

 

William Perez points out some Resources for Getting Organized for Tax Time

Kay Bell, Tax filing checklist 2014

Paul Neiffer reminds us that You Must Start IRAs Draws at Age 70 1/2!.  Except for Roth IRAs, of course.

Jana Luttenegger, Taxing Bike Share Programs.  She discusses the expiration of a tax break for bike commuters, but notes:  ” With our recent below-zero weather, the bikes likely aren’t being used much currently… “

Enjoying a short Des Moines winter commute.

Enjoying a short Des Moines winter commute.

Russ Fox answers the question, It’s Only $1,300; Do You Really Have To Send Me the 1099?

 

Annette Nellen, Minnesota Storage Tax Problems.  She discusses an expansion of Minnesota sales taxes:  ”Any base broadening should only cover consumption of individuals (non-businesses).”

Peter Reilly, Obama Administration Weak On Church State Separation? Clergy Housing Allowance Appeal.  The Department of Justice has appealed the Wisconsin District Court Ruling disallowing tax-free cash “housing allowances” for pastors.  The ruling is stayed pending the appeal.  I suspect this is just a maneuver to get through this tax season with minimal disruption to existing plans.  I think it is likely that the District Court ruling will be upheld, and churches should plan accordingly.

 

tax fairyJack Townsend, Yet Another B***S*** Tax Shelter Goes Down Flaming.    There is no tax fairy.

Stephen Olsen, Summary Opinions for 1/24/2014 (100th Post!!!), a roundup of tax procedure news.

 

TaxProf, The IRS Scandal, Day 263

That’s a funny way to aid the nurses.  Second Nurses Aide Sentenced for Conspiracy to Defraud the Government (U.S. Attorney press release)

Tax Trials, Willie Nelson, The IRS’s Most Talented Musician.  Talk about not building expectations.

News from the Profession: The SEC Bans Big 4 Member Firms in China For Failing to Show Their Work (Going Concern)

 

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Tax Roundup, 1/23/2014: Ideas edition. And: why are we taxing pot?

Thursday, January 23rd, 2014 by Joe Kristan

20130117-1Bad idea.  Refundable tax credits are the favorite kind of credit for tax fraudsters because they generate tax refunds even when there is no tax paid or withheld.  The earned income tax credit is refundable, and that feature has something to do with 20-25% of the credits issued annually being improper.

An intrepid group of Iowa legislators isn’t letting that stop them.  They have introduced HF 2027 to create a new refundable tax credit in Iowa — a piggyback credit equal to 25% of the als0-refundable (and fraud-ridden) American Opportunity Tax Credit.

The AOTC is based on a percentage of tuition paid for the first four years of college.  It phases out at higher income levels.

Politicians can’t resist using the tax law to pass out political favors.  But even the best-intended ones make the tax law more complicated and, by creating a class with something to lose, they make it that much harder to reform.  When there already countless tuition aid programs, not to mention state-funded colleges and universities, it’s unwise to just throw in one more program willy-nilly.

 

Good idea.  Republican Party to vote for repeal of U.S. anti-tax dodging law (Patrick Temple-West).  

Approved in 2010 after a tax-avoidance scandal involving a Swiss bank, FATCA requires most foreign banks and investment funds to report to the U.S. Internal Revenue Service information about U.S. customers’ accounts worth $50,000 or more.

Criticized by banks, libertarians and some Americans living abroad as a costly and unneeded government overreach, FATCA is on the books, but its effective date has been delayed repeatedly, with enforcement now set to start on July 1.

I hate the headline on the article.  I would have written it “Republican Party to vote to decriminalize personal finance for Americans abroad.”  FATCA makes outrageous demands of non-U.S. institutions that have made Americans unwelcome at many foreign banks.

Related: Republicans Target FATCA As Another Windmill to Attack  (Jack Townsend)

 

haroldWorse idea: film tax credits.

Accounting Web, Film Credits: Your Tax Dollars at Work Making Movies:

Actor/director Ben Affleck told the Los Angeles Times he’s filming part of Live by Night in Georgia, a state that is popular for its film credit availability.

“It comes down to the fact that you have X amount of money to make your movie in a business where the margins are really thin,” he said.

Understood – but there’s a disconnect here. Affleck and his fellow actor/director, Matt Damon, both advocate and participate in using film credits to reduce taxes so they can make their movies. But both are also on record saying, because they are wealthy, their taxes should be raised.

What’s wrong with this “picture?”

Why is the film business, of all businesses with thin margins, entitled to special breaks?  Because politicians are suckers for celebrities.

Joseph Henchman, The Economist Reviews State Film Tax Credit Programs (Tax Policy Blog):

The report notes that it’s getting tougher to compete with Louisiana’s 30 percent refundable credit or New York’s $420 million annual budget to subsidize film and TV, and that independent analyses find these do little on net for job creation or economic growth.

But you can’t forget the intangibles!  As a Des Moines columnist breathlessly reported at the high point of the Iowa film credit looting spree:

But some benefits can’t just be measured on a dollar-for-dollar basis. The movies provide employment to local actors, construction crews, artists, caterers, drivers and a host of others. They expose non-Iowans to what the state has to offer. More intangible is the benefit of interactions in a state that can be cut off from the trends and centers of power. Not to mention the excitement factor. We’ve relied on caucuses every four years to bring action and celebrities to town. Now, sightings are anytime, any place.

Fortunately, Iowa is sadder but wiser now.

 

20130916-1Russ Fox, More Work for Tax Professionals: Submission IDs for Efiled Returns:

In the past, the taxpayer signs the 8879, the tax professional signs it and files it away. Now, the taxpayer signs it, the tax professional signs it, and the return is filed. Once the IRS accepts the return, the software company will assign the Submission Identification Number (SID) to the return. The tax professional must either print another copy of the Form 8879 (this one would have the SID on it) and attach it to the Form 8879, print a copy of Form 9325 (Acknowledgement and General Information for Taxpayers Who File Returns Electronically), or the tax professional must write the SID on the original 8879.

It doesn’t seem like much, but that extra minute for every tax return probably equates to an additional 500 minutes of time if you efile 500 returns in a tax season.

And anybody who’s been around a tax prep office during tax season knows there aren’t all that many extra minutes lying around.

 

TaxGrrrl, 11 Questions To Ask When Hiring A Tax Preparer .  A good list.

Leslie Book, The Ban on Claiming the EITC: A Problematic Penalty (Procedurally Taxing).  ”We have not addressed the special EITC ban that arises when a taxpayer inappropriately claims the EITC.   The following gives some context, with a focus on the two-year ban for reckless or intentional (but not fraudulent) errors.”

William Perez, Which Tax Form to File?

 

Peter Reilly, Is Tax Court Rebelling Against Supreme Court?  Short answer: no.

Tyler Cowen, Income inequality is not as extreme as many citizens think.

TaxProf, The IRS Scandal, Day 259

Cara Griffith, When State Taxes and Interstate Compacts Collide (Tax Analysts Blog).  ”But states can’t have their cake and eat it too; a compact cannot be both binding and offer states significant choices on whether to follow its terms.”

Tax Justice Blog calls the IRS budget cut The Dumbest Spending Cut in the New Budget Deal.  It’s bad policy, but it’s asking a lot of Congressional Republicans to fund an organ of their opposition.

 

20130607-2Because they can.  Why Exactly Are We Taxing Pot? (David Brunori, Tax Analysts Blog):

But I must ask: What is the rationale for imposing special taxes on marijuana? Excise taxes are appropriate to pay for externalities – the costs to society of using the product that are not borne by the market. But it is unclear what, if any, externalities are created by smoking pot.

Economic development in the Doritos aisle?

 

Kay Bell, IRS audit results in $862,000 lawsuit award for taxpayer.  Because he tripped over a phone cord.

 

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Tax Roundup, 1/22/14: Let’s pay it for Hollywood! And: choosing a preparer.

Wednesday, January 22nd, 2014 by Joe Kristan

haroldTaking your money and giving it to Hollywood.  Oscar Nominees Cash In On State Tax Subsidies (Howard Gleckman, TaxVox):

Each of the nine movies nominated for this year’s Oscar for best film may already have taken home a pile of tax subsidies. Seven brought back state goodies from the U.S. and two got cash for their work in the U.K.

And, according to data collected by the Manhattan Institute, the winner is….Wolf of Wall Street. The $100 million black comedy about (irony alert) over-the-top greed among sleazy stockbrokers got a 30 percent tax credit for making the movie in New York State.

The Empire State isn’t even the most generous when it comes to doling out tax incentives to filmmakers. In Louisiana, moviemakers not only get a 30 percent credit against overall in-state production costs but also an additional 5 percent payroll credit. Even better, filmmakers with no state tax liability can monetize the credits by selling them to firms that do owe Louisiana tax or even selling them back to the state at 85 percent of their value.

Iowa used to do this, until its film tax credit program collapsed in scandal and disgrace following revelations that filmmakers were charging fancy cars and personal items to Iowa taxpayers under the guise of “economic development.   Further revelations showed that millions of dollars of pretend expenses were used to claim the credit, taking advantage of credulous administration and almost non-existent oversight.

More from Howard Gleckman:

No doubt these credits are good for filmmakers. And I’m sure residents get a kick out of seeing Leonardo DiCaprio shooting a scene in their neighborhood (assuming they are not steamed over the related traffic jam). But is there an economic payoff in return for these substantial lost tax revenues as supporters claim?

Most studies conclude there is not.

It’s amazing that politicians think Hollywood deserves their taxpayers dollars.  Fortunately, Iowa film subsidies now are limited to housing and meal expenses for filmmakers.

 

Jason Dinesen, Deducting Miles Driven for Charity.  ”Taxpayers can take a deduction of 14 cents/mile for mileage driven in giving services to a charitable organization, or taxpayers can take a deduction for the actual cost of gas and oil associated with giving services to a charitable organization.”

Tony Nitti, Tax Geek Tuesday: The Sneaky Tax Consequences of Real Estate Repossessions 

 

Choosing a preparer?

Kay Bell, Time to pick the proper tax pro.  She gets one thing wrong about the IRS:  ”For years, the agency has been trying to set up a system under which it register and test tax preparers to help ensure that they meet a minimum competency level.”

No, the agency simply wants to expand its control over preparers and help powerful friends in the big tax prep franchises.  The “minimum competency level” stuff is a weak pretext.

Robert D. Flach, IT’S THAT TIME OF YEAR AGAIN – CHOOSING A TAX PREPARER:

Contrary to the popular “urban tax myth”, unfortunately perpetuated by uninformed journalists and bloggers, just because a person has the initials “CPA” after his/her name does not mean that he/she knows his arse from a hole in the ground when it comes to preparing 1040s.  

True.  But a lot of the best prepaers are CPAs.  Not everybody needs a CPA.  Many folks just need somebody who knows a little more than they do to help them put the W-2 income in the right place.  But if you are doing a complex business return — even on a 1040 — a CPA may be your best bet.

That’s not to say only CPAs are competent preparers.  Enrolled Agents can be very good, and there are many very competent unregulated preparers, like Robert.  I think the competence curve between CPAs and unenrolled preparers would look something like this:

competence curve

The more complex your return, the more likely it is that you will want to bring in an Enrolled Agent or a CPA, but if you already have a strong unregulated preparer who is taking care of your tax needs, you’d be foolish to switch.

 

Paul Neiffer, Average is Important for 2013 Tax Filing.  Farm income averaging, that is.  Another example of a provision that would result in frivolous return penalties for anyone but farmers.

Fairmark.com: Share Identification Under Attack

 

20121120-2Tea Party: Resolved: Obamacare Is Now Beyond Rescue.  Oh, wait, that wasn’t the Tea Party.   It was a debate audience on New York’s Upper West Side.  

TaxProf, The IRS Scandal, Day 258

William Perez, The Number of Sole Proprietors has been Rising for 30 Years

Tax Justice Blog: CTJ Submits Comments on the Finance Committee Chairman Baucus’ International Tax Reform Proposal.  They have very different, and largely opposite, concerns from the Tax Foundation.

Jack Townsend, Tax Notes Article on IRS 2013 Victories in Offshore Evasion

 

gatsoNext: automated pedestrian jaywalking camera fines, for our own safety:  NYC Cops Allegedly Beat Up Jaywalking Elderly Man, Refused to Tell Son Which Hospital He Was In (Ed Krayewski, Reason.com)

But I thought it was about traffic safety, not money…  Council members: Traffic camera revenue helped keep property taxes down, pay for public safety.

 

The importance of philanthropy: Warren Buffett Offers $1 Billion For Perfect March Madness Bracket  (TaxGrrrl)

 

The Critical Question: A Meat Tax? Seriously?  (Joseph Thorndike, Tax Analysts Blog).

News From the Profession: Guy Who Couldn’t Hack Two Years in Public Accounting Needs Validation He Isn’t a Loser (Going Concern)

It’s Academic!  How Not to Use Your Faculty Laptop (TaxProf)

 

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Tax Roundup, 12/30/2013: Paying for those last-minute write-offs. And: Harold Hill marches on.

Monday, December 30th, 2013 by Joe Kristan


20121228-2
How to pay for those last-minute deductions.
  We’re down to the wire, kids.  2013 ends in less than 48 hours, so if you are going to claim some last-minute deductions, get busy!  Some things to keep in mind:

- A credit card is as good as cash. Better, even, because if you incur a business expense before the end of the year, you have your credit card statement to prove it.

- If you mail a check for a business expense, the check needs to be in the mail and postmarked in 2013 to be a deductible 2013 expense. If it’s a big check, maybe you should spend a little extra to send it Certified Mail so you can document the postmark.

- If you receive a check in the mail, it’s taxable the day you receive it, even if you don’t deposit it.

- There is no “close is good enough” rule for cash basis taxpayers. Just because you could have paid a bill doesn’t get you a deduction if you didn’t pay it before year-end.

- Don’t overdo it. If you prepay expenses more than a year out, you don’t get the deduction until the year to which the payment applies.

- If you are making a gift to a loved one to qualify for the $14,000 annual gift tax exclusion, having the check in the mail isn’t good enough. A check has to be cashed for the gift to count against this year’s exclusion.

And in case you didn’t check in over the weekend:

What you need to pay by year-end to get a 2013 business expense deduction and

Hie thee to the altar! Maybe.

Check in tomorrow for the last 2013 year-end tax tip!

 

haroldL.A. Times: Transferable Movie Tax Credits Hurt States, Enrich Studios, Tax Lawyers (TaxProf):

Reitz is one of Hollywood’s new financiers. Just about every major movie filmed on location gets a tax incentive, and Reitz is part of an expanding web of brokers, tax attorneys, financial planners and consultants who help filmmakers exploit the patchwork of state programs to attract film and TV production.

In his case, he takes the tax credits given to Hollywood studios for location filming and sells them to wealthy Georgians looking to shave their tax bills — doctors, pro athletes, seafood suppliers, beer distributors and the like.

Money for Hollywood, fixers, middlemen, and the well-connected, at your expense.  Sort of like every other “economic development” tax credit, only even more so.  Fortunately Iowa, sadder but wiser, has turned to jailing film folks instead of subsidizing them.

 

Russ Fox, Bring Me the Usual Suspects: Small Business Policy Index 2013.  Iowa is 43rd.  Not surprising, when “Of the 47 measures included in the 2013 edition of the Index, 22 are taxes or tax related…”

 

William Perez looks at the Top Tax News Stories of 2013.  His top story took place on the first day of 2013:

1. American Taxpayer Relief Act was passed on January 1, 2013. This tax law instituted at top personal tax rate of 39.6%, bumped up the top capital gains rate to 20%, provided for indexing the alternative minimum tax to inflation, reinstated the phaseouts on itemized deductions and personal exemptions. This law was Congress’s way of dealing with the fiscal-cliff, which was the name applied to the expiration of a several tax laws first enacted during the Bush administration.

I hope nothing so awful happens on the last day of the year.

Robert D. Flach also looks back with 2013: THE YEAR IN TAXES – PART TWO

 

The income tax, the Ultimate Swiss Army Knife of public policy.  Flickr Image courtesy redjar under Creative Commons license.

The income tax, the Ultimate Swiss Army Knife of public policy. Flickr Image courtesy redjar under Creative Commons license.

Annette NellenNew IRS Commissioner – Does anyone care?

“Despite running a significant organization with over 92,000 employees that collects over $2.2 trillion of revenue and affects the lives of most people in the U.S., it doesn’t seem to me that anyone really cares about who is running the IRS.”

That’s unfortunate.  As the tax law has become the Swiss Army Knife of public policy, the Commissioner oversees a sprawling portfolio ranging from health policy to campaign finance to industrial policy.  There’s more power in the IRS than in most cabinet agencies.  And as the disastrous regime of Doug Shulman proved, an awful Commissioner can cause a lot of damage to taxpayers and to the agency.

 

Jim Maule, Contracting a Tax Outcome.  ”When a taxpayer signs a contract, the terms of that contract quite often dictate the tax consequence.”

 

 

What could go wrong?  French High Court OKs 75 Percent Tax For Top Earners (Iowa Public Radio)

Enjoying a short Des Moines winter commute.

Enjoying a short Des Moines winter commute.

Tony Nitti, A Tax On Cycling: Too Steep A Hill To Climb Or Just Around The Corner?  With talk of replacing gas taxes with mileage charges based, presumably, on tracking your whereabouts, it’s not surprising that they want to tax any alternatives to cars.

 

 

 

 

TaxProf, The IRS Scandal, Day 235

Jack Townsend, Judge’s Improper Question of Defendant as Witness is not Reversible 

 

That’s the only way the team overachieved.  St. Louis Rams say they collected too much ticket sales tax (Kay Bell)

 

Oh, this will end well.  “The Game: I’m a pot-smokin’ Tax Fraud“ (TMZ).  The first rule of Tax Fraud Club: don’t talk about Tax Fraud Club.

TaxGrrrl takes a look at Mr. Game’s tax claims in  Game Offers Tax Advice To Rappers: Write Off Strippers, Sneaks And Medical Marijuana:

Next, those Jordans. Clothing is deductible if the only purpose of the clothing/uniform is for business purposes (meaning that you must wear them as a condition of employment) and not suitable for everyday use. Clothing is not deductible if you could wear it outside of your workplace (even if you don’t). Those Jordans? Not merely for business purposes. And Game would totally wear them outside of business. 

In case you’re wondering, rappers are not required to take any tax continuing education.

 

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Tax Roundup, 12/26/2013: Tax loss harvest time! And: people like you to give them money.

Thursday, December 26th, 2013 by Joe Kristan


harvest
Harvest those tax losses.  
Just as millions of disappointed gift recipients rush the retailers to improve on Santa today, investors can get busy over the next few days trying to make the best of their own disappointments.  They can cash out losses on disappointing investments to shelter their 2013 gains.  Some tips to make sure you do it right:

- You have to take the loss in a taxable account. A loss in an IRA or 401(k) plan doesn’t help you.

- Normally the “trade date” is the effective date for tax purposes, so you can sell a stock as late as December 31 this year and still deduct the loss on your 2009 1040.

- If you have a loss on a short sale, the tax law treats it as closing on the settlement date, not the trade date, so you can’t wait to the last minute to close a short sale to get a deduction.

- You don’t need to overdo it.  You can deduct your capital losses only to the extent of your capital gains, plus $3000.  But if you do overdo it, individual capital losses carry forward indefinitely.

- Harvesting losses helps taxpayers subject to the Obamacare/ACA Net Investment Income Tax to the extent it helps for regular taxes.

- Watch out for the wash sale rules. If you buy the same stock within the 30 days preceding or following the sale of a loss stock, your loss is disallowed. This is true even if you sell from a taxable account and buy in an IRA, according to the IRS.

Come back tomorrow for another 2013 year-end tax tip!

 

Paul Neiffer offers Some Quick Year-End Tax Tips

 

20120906-1Give away money and folks will line up.State tax credit program hits a big bump: It’s out of money, and that’s a good sign,”  reports the Des Moines Business Record:

Economic development officials in Des Moines and other Iowa cities have been told to stop sending requests for a state economic development tax credit. The reason: The fund is tapped out.

Greater Des Moines developers were told during a meeting last week with officials from the Iowa Economic Development Authority and the city of Des Moines that a tax credit program used to provide gap financing for multimillion-dollar developments has reached its $3 million annual cap on the ability to transfer the credits, a key element in financing the projects.

“Transferable” tax credits are actually subsidies. It is economically identical to giving the developers a license to factor the state’s receivables at a small discount.

Local developers, the Greater Des Moines Partnership, and state officials will press the Iowa Legislature to at least raise the $3 million cap and make adjustments that could eliminate the ranking system.

So people who want the state to give them more of our money and the state officials that give away our money want the legislature to make it easier to give away our money. What could go wrong?

 

Speaking of the people giving away our money,  State-owned Honey Creek Resort near Moravia continues to struggle financially.  (thegazette.com, via Gongol) What madness led the government to open a resort?  Maybe the same madness that makes people think the government should be allocating investment capital.

 

tf logoJoseph Henchman, Tax Foundation Wins State Tax Notes Honor, Third Year Running:

For three years running now, we have been honored as most influential in state tax policy by State Tax Notes (subscription req’d). This year, they present it as an unranked list of ten recipients. The list is five state officials, three lawyers, one legislator, and us…

Given the response of the Iowa legislature to my suggestions, I am sure that I rank among the ten least influential in state tax policy.  I wonder if there’s a prize for that?

 

Howard Gleckman,  TheTaxVox 2013 Lump of Coal Award: Wait ‘Til Next Year Edition.  He doesn’t think the Tea Party scandal was more than “merely bungling the job on a bipartisan basis.”  Given the overwhelming attention paid to the right, that’s an unsupported statement.   Mr. Gleckman is a man of the center-left; when it’s your opponents being targeted, it’s easier to conclude that it’s all fair.

 

Tony Nitti, Tax Geek Tuesday: When Structuring The Sale Of Your Business Goes Wrong   Tony addresses the related-party debacle of Fish v. Commissioner, where a Kansas City taxpayer generated $9 million in ordinary income when he thought he was going to have capital gains, because a partial cash-out of his business worked out to be a sale of goodwill to a related party.

Margaret Van Houten,  Do My Estate Planning Documents Need to Have Special Language to Deal with My Digital Assets?  (Davis Brown Tax Law Blog)

Russ Fox, Nominations Due for 2013 Tax Offender of the Year.  Sadly, Russ will have plenty of worthy candidates.

 

TreeTreetreetreetreePeter Reilly offers Kind Christmas Wishes To Those Behind Bars And The Tax Collectors Too  “So when you think treeabout it, you realize that one of the reasons that Jesus was born in Bethlehem was that Joseph and Mary were tax compliant.”

Kay Bell, The Christmas tax story

Jason Dinesen, Greatest Hits: Deducting Mileage from a Home Office   

TaxProf, World Giving Index 2013: U.S. Is #1

Me, What’s new in year-end tax planning, my new post at IowaBiz.com, the Des Moines Business Record’s Business Professionals’ Blog.

Career Corner. How to Choose Between Two Big 4 Offers When You Have No Clue What Either Involves (Going Concern)

 

TaxGrrrl, The True Cost Of Christmas: Santa’s Tax Bill:

Compensation is taxed to the elves as income – but Santa has taxes to pay on their behalf. Payroll taxes – at the employer contribution rate of 7.65% – for the elves work out to $1,890,927.

Santa doesn’t pay income taxes on compensation paid to the elves but he does have to manage their withholding according to any forms W-4 provided to him. Fortunately for Santa, there is no withholding requirement for state taxes in Alaska. 

I would argue the residency issue.  Technically, the North Pole is in the middle of the ocean, and I don’t believe there are territorial claims though.  Of course, with his fearsome legendary powers of retaliation, no IRS agent wanting to be on the “nice” list would mess with him.

 

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Tax Roundup, 12/19/2013: Government finally to stop promoting identity theft. And more year-end tips!

Thursday, December 19th, 2013 by Joe Kristan

DMFGovernment shuts down identity theft enabling operation: its own.  The budget compromise headed to the President’s death places new restrictions on the Social Security Death Master File.  While prized by genealogists for their work, it’s prized even more by thieves, who use the information on it to snap up fraudulent tax refunds in the names of the dead.  It’s been a multi-billion dollar problem for years.

The person who stole the identity of the late husband of Jason Dinesen’s client almost certainly did so using DMF information, stealing unknown amounts from the government and disrupting the client’s tax life for years.

Bloomberg Business explains the new restrictions:

The legislation would exempt the records from the federal Freedom of Information Act and give the Commerce Department 90 days to set up a process to certify legitimate users. The public would have access to the data three years after an individual’s death.

The language in the bill was taken from a Senate Finance Committee draft from which lawmakers had asked for comment by mid-January, said Alane Dent, vice president for taxes and retirement security at the American Council of Life Insurers.

While the restrictions seem long overdue, not everyone is happy about them, aside from identity thieves.  Newsweek reports:

“Closing the Death Master File is ludicrous,” said Melinde Lutz Byrne, one of the nation’s top genealogists and part of a small group of forensic researchers at Boston University. They have banded together and for two years have fought similar proposals in Texas and Florida to block public access to the Death Master File.

“It is my opinion that the science of it all has bypassed our elected representatives and even the courts,” she said.

It’s a trade-off, but I think preventing fraud deserves priority here.  Still, the objectors are right about this:

“The IRS is handing out money like candy – and nobody wants to acknowledge it,” said Sharon Sergeant, a forensic researcher, technologist and tax-software programmer who strongly supports the Boston University group. “Why isn’t it checking to make sure dead people aren’t getting tax returns? Somebody who reads the obituaries and makes up a social security number the right way, according to the algorithm, can file a tax return and get a payment. It’s got nothing to do with the Death Master File. It has everything to do with the IRS not doing its job.”

But The Worst Commissioner Ever felt it was more important to expand power over preparers than to stop the thieves.

 

2013 year-end tip: Donate your appreciated stock now!  The tax law allows you to claim a full-value charitable deduction for donating appreciated long-term capital gain securities that are publicly-traded.  It’s a tax-efficient way to donate, as you get the full deduction without ever paying tax on the appreciation.

But there is a hitch: you have to get the stock to your favorite charity’s brokerage account by December 31 to get the deduction.  That can take time, especially when dealing with less-sophisticated smaller charities.  If you want a 2013 deduction, start by contacting the charity and learning how they want you to get the securities to them by year-end. Remind the charity that they need to provide you a written acknowledgement of the gift.  And make sure your own broker knows the transfer has to be completed this year.

Come back tomorrow for another 2013 year-end tax tip!

 

20120906-1Just bluffing.  ”Archer Daniels Midland Co. decided Wednesday to set up its new international headquarters in Chicago even after it failed in its bid for millions of dollars in state tax breaks.”  Next time our politicians claim to have “created jobs” by giving away your money, remember that they are giving their friends money to do things they would be doing anyway.

 

 

Cara Griffith, The Tax Reform Debate…for a Limited Few in Wisconsin (Tax Analysts Blog):

What was advertised as an “outstanding opportunity for the hardworking taxpayers” to engage in discussions about tax reform are also closed to the public…

Making tax proposals available to the public and opening up a dialogue with affected taxpayers can be eye-opening for people who will eventually have to develop and administer the proposal. If tax legislation is enacted, those who wrote the legislation, those who will enforce it, and those who will be affected by it should all understand what the legislation was designed to do. 

Politicians and their friends don’t like company.

 

Christopher Bergin, Transparency Is in Our DNA (Tax Analysts Blog):

Tax Analysts is involved in litigation in the commonwealth of Kentucky to get its Department of Revenue to begin releasing redacted copies of final letter rulings. The agency is resisting that, which is why we are in court.

Bureaucrats and their friends don’t like company either.

 

Chris Stephens, Pressure Mounts Against “Jock Tax” in Tennessee (Tax Policy Blog):

For example, a player at the NBA league minimum of $500,000 who is paid per game would make about $6,097 per game. If the player plays only one game in Tennessee he would pay a tax of $2,500 for that game, which is a tax rate of 41 percent. It is also worth noting that the player would also pay approximately 40 percent in federal income taxes, potentially leaving almost nothing in take home pay.

The states that want to pick the stars’ pockets forget that not everybody is paid like LeBron.  Unfortunately, the federal proposal to prevent state income taxation of employees only in-state for a few days doesn’t cover athletes or entertainers, treating the couch-surfing musician the same as Peyton Manning.

 

20111040logoTaxGrrrl, IRS Finally Announces Start Date To 2014 Tax Filing Season  Filing season starts January 31.

Paul Neiffer,  Tax Filing Begins January 31, 2014

Jason Dinesen, Six Things I’m Talking to My Small Business Clients About at Year-End (Part 1)   

Tony Nitti, With Tax Break Set To Expire, Partnerships Should Consider Converting To C Corporations Before Year End.  This is a 100% exemption on gains for C corporation stock received on original issue held for at least five years.

Kay Bell,  Homeownership tax breaks to take in December

Robert D. Flach, WHAT’S NEW FOR NEW YORK INCOME TAXES FOR 2013

Margaret Van Houten, How to Maintain Records for your Digital Assets  (Davis Brown Tax Law Blog)

 

Janet Novack, Minus Taxes And Hype, $636 Million Jackpot Shrinks To $206 Million — Or Less 

Jim Maule, Let’s Not Extend The Practice of Tax Extenders.  Agreed.

Stephen Olsen, The “IRS Investigations” Scam.  A client he helped through the OVDI “amnesty” program gets targeting by a scammer.  Troubling.

Jack Townsend, Judge Rakoff Speaks on the Dearth of Prosecutions from the Financial Crisis   He quotes the judge: “But if, by contrast, the Great Recession was in material part the product of intentional fraud, the failure to prosecute those responsible must be judged one of the more egregious failures of the criminal justice system in many years.”

It’s at least as much political fraud as financial fraud, but political fraud is never prosecuted.

 

Tax Justice Blog, Murray-Ryan Budget Deal Avoids Government Shut down but Does Not Close a Single Tax Loophole, Leaves Many Problems in Place

TaxProf, The IRS Scandal, Day 224

 

News from the Profession: Future CPA Seeking the Best CPA Review Course Someone Else’s Money Can Buy (Going Concern)

 

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Tax Roundup, 12/16/2013: Ames! And: if you’re explaining, you’re losing.

Monday, December 16th, 2013 by Joe Kristan

It’s a cold day In Ames, Iowa, but it’s toasty warm with 315 or so eager participants in the last session of this year’s ISU Center for Agricultural Law and Taxation Farm and Urban Tax Schools!  

20131216-1

The Ames Crowd!

It’s a fun school, with lots of good attendees with great, challenging questions.  I’ve enjoyed working on the Day 1 panel with emcee Roger McEowen and IRS Taxpayer Liason Kristy Maitre

 

20120906-1“In economic development, if you’re explaining, you’re losing.”  An article at WCFcourier.com makes an often-overlooked point about how economic development spiffs that complicate the tax law end up backfiring:

A simpler tax system may top all other requests from the business groups, said Steve Firman, director of government relations for the Greater Cedar Valley Alliance and Chamber.

Firman pointed out that Iowa ranked 40th among states in the Tax Foundation’s 2014 tax climate comparisons because it is tough to explain the complexity of federal deductibility that blurs Iowa’s true tax picture.

Firman, explaining his position, pulled out a line he said he likes to use:

“In economic development, if you’re explaining, you’re losing,” he said.

Iowa’s byzantine tax system, with its dozens of special breaks, requires a lot of explaining.  The Tax Update’s Quick and Dirty Tax Reform Plan, with low individual rates and no corporate tax, would be a much better sell.

 

William Gale,  The Year in Taxes: From the Fiscal Cliff to Tax Reform Talks (TaxVox):

Although Camp and Baucus do not appear to have reached agreement on how much revenue should be raised or on how to raise it, the two leaders have nonetheless raised some interesting ideas. But the sorry state of tax reform can probably best be summed up by a small business owner who attended the New Jersey stop of a listening tour that the two chairmen held last summer. She urged the two leaders to “get rid of the deductions that don’t affect me.” As long as that attitude prevails, meaningful tax reform will not happen.

The same dynamic is at work in Iowa.

 

TaxGrrrl, Budget Faces Challenge From Senators Wary Of Spending, User Fees To Taxpayers   

William Perez, Use Fundsin a Health Care Flexible Spending Account (Year-End Tax Tips)

Kay Bell, Tax deductible mileage rate drops a half-cent in 2014

Annette Nellen, What’s My Rate? Challenges of Understanding 2013 Federal Taxes

Paul Neiffer, How Many 2013 Tax Brackets

 

IrwinIrwinIrwinirwin.jpgPeter Reilly, Euro Pacific Capital’s Peter Schiff Defends His Tax Protesting Father Irwin Schiff   Peter has a lot of interesting background on tax protester Irwin and his controversial, but much more prudent, son. And: “I can’t blame Peter Schiff for sticking up for his dad.  I would too, if I still had one.”

 

 

Irwin

TaxProf, The IRS Scandal, Day 221

Jack Townsend, Article on New Sentencing Guidelines on Unclaimed Deductions and Credits

 

Robert Rizzo

Robert Rizzo

Russ Fox, Former Bell Administrator Pleads Guilty to Tax Fraud; That’s the Least of His Problems:

 In what is (and was) a huge scandal, Mr. Rizzo and his cronies basically used the City of Bell as their own personal piggy bank. He’s going to be going to state prison for 10 to 12 years (his sentencing will be in March). The scandal allegedly included salaries of up to $800,000; gas tax money being used for these salaries; and falsifying city documents to hide the salaries. The city council members from that time period are awaiting trial.ta

Just a humble public servant.

 

News from the Professon:  Grant Thornton Employees Break Out Dynamic Christmas Sweaters for Holiday Party

Jason Dinesen,  North Dakota Taxes, Same-Sex Marriage, And a Really Bizarre Twist 

The party’s over.  Unemployed German couple accused of tax fraud after caught hosting sex parties.   They had a $250, er, cover charge.

 

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Tax Roundup, 12/13/13: Government by Connections edition. And how not to butter up your tax evasion judge.

Friday, December 13th, 2013 by Joe Kristan

20121220-120120906-1A Des Moines Register report on the introduction of the new ownership of the Iowa Speedway in Newton tells us how things work in Iowa:

No one needed super sleuth Sherlock Holmes to figure out one of the first priorities of NASCAR as the new owners of Iowa Speedway introduced themselves Thursday during a press conference.

Three Iowa legislators were parked front and center in a reserved seating area. Multiple times during the news conference, officials thanked Sen. Bill Dotzler and Representatives Dan Kelley and Rob Taylor.

When the event sprinted toward its own finish line, only the trio with desks at the statehouse were publicly asked to jump on stage for a photo with new track president Jimmy Small.

So why do our humble public servants get to hang with big NASCAR celebrities?   Because the ownership group that bought the speedway doesn’t qualify for the special corporate welfare that the legislature enacted just for the speedway a few years ago, and they want it re-enacted:

The law, as it stands, requires Iowa-based ownership. So the spigot that delivers that sales tax benefit, which Dotzler estimates at about $4 million to date, is being shut off as NASCAR grabs the steering wheel.

Dotzler promised to reintroduce the measure when the legislative session roars to life on Jan. 13, adding that he would support extending it beyond the original end date of 2016.

Government by special favor.  And who benefits?  NASCAR is a private company owned by a very wealthy family — one that evidently knows how to play the connections game.    Meanwhile the guy running the pizza joint, the real estate office, the implement dealership, he gets a horribly complicated Iowa tax system with high rates to pay for lots of loopholes for other people.  He gets automatic penalties for every honest mistake made in attempting to comply with this byzantine system.  But hey, NASCAR!

The legislature is just too darn busy to find a way to enact a simple tax system with low rates and low compliance costs for everybody.  But they have plenty of time to go to a press conference to sell a special tax break for a single wealthy out-of-state family.  Priorities.

 

William Perez has been cranking out lots of good stuff lately, including today’s Donating an IRA as a Year-End Tax Strategy.

Margaret Van Houten,  Do your Digital Assets have Value? Are they Important? (Davis Brown Tax Law Blog).  Don’t leave the heirs without the password to your Bitcoin vault.

 

20130419-1Christopher Bergin, Walk the Talk: The IRS Needs a Chief Who Supports Transparency (Tax Analysts Bl0g).  And by that, he means for the IRS, not just for us.

Tax Justice Blog,  New CTJ Report: Congress Should Offset the Cost of the “Tax Extenders,” or Not Enact Them At All.  I like the second alternative best.

Janet Novack,  Congressional Work Undone: Lapse Of Tax Credits Will Hit Job Creators 

Roberton Williams, Where Are Tax Rates Headed? (TaxVox)

 

If you like your kludge, you can keep it.  Obamacare’s Never-Ending Fix-a-Thon (Megan McArdle)

 

TaxProf, The IRS Scandal, Day 218.  ”IRS Targeting: Round Two; The First Time Around, Targeting Conservatives Was a Secret. Now, Not So Much

Jack Townsend, Judge Rakoff, the Wegelin judge, Is Interviewed on the U.S. Initiative Against Swiss Banks

Phil HodgenRenunciation trends in Auckland ”I received an email yesterday from a contact in New Zealand. Renunciations in the Auckland Consulate are apparently way, way up compared to last year.”

Stephen Olsen, Preparer Knappe(s) on the job: Delinquency Penalties, Advisors, and Reasonable Cause (Part 2 — I Finally Get to my point on Thouron). (Procedurally Taxing)

Get your friday Buzz! from Robert D. Flach!

 

ShockerGAO: IRS Lacks Adequate Internal Controls (TaxProf).  Maybe the $5 billion in annual refund fraud tipped them off.

Woo-hoo!  Tax and other fun at deductible office holiday parties (Kay Bell)

News from the Profession.  Aren’t You GLAD For This McGLADrey Holiday Card? (Going Concern)


OtterThe Otter legal strategy.  A tax protester in Texas decided that his already slim chances in federal court would be helped by a really stupid and futile gesture.  It went as you might expect, reports Courthouse News Service:

It took a federal jury just one hour of deliberation to convict a Texas man of hiring a hit man to try to murder the federal judge presiding over his tax-evasion case.

Phillip Monroe Ballard, 72, of Fort Worth, was convicted Wednesday of attempted murder-for-hire, after a two-day trial. He faces up to 20 years in prison.

It’s not the first time a tax protester has tried to improve his case by going after the judge.  If it worked, though, that would have been a first.

 

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