Posts Tagged ‘iowa tax policy’

Tax Roundup, 2/26/16: Gronstal hints at approach to Section 179 coupling deal. And: Yes he can! (Release his returns)

Friday, February 26th, 2016 by Joe Kristan

couplingInteresting, if true. In opening hostage negotiations over the fate of Section 179 coupling, Iowa Senate Majority Leader Gronstal may have hinted at a “Main Street vs. Walnut Street” approach. From wcfcourier.com:

If the choice is between offering tax relief to a limited number of manufacturers “or taking care of 30,000 farmers, 25,000 small businesses,” Gronstal said he would “gravitate more toward the 50,000 or 60,000 effort to help those folks (rather) than something that is much more narrow in terms of its impact.”

I say “may have” because I think he is hinting at trying to get the Governor to reverse its regulatory change to sales tax rules on manufacturing supplies.

By “Walnut Street,” I refer to downtown Des Moines, where several of the big law/lobbying firms in town have their offices (Nothing against Walnut Street — that’s where Tax Update World Headquarters is located, too).  Whether or not Sen. Gronstal realizes it, the coupling issue is ultimately about whether to benefit a handful of insiders and big companies benefitting from special tax benefits, or whether to further the interests of the rest of the taxpayers who pay for any special deals.

The revenue cost from adopting the $500,000 Section 179 limit for Iowa is estimated around $90 million. Eight taxpayers by themselves claimed $35 million in research credits in 2015, of which around $30 million were paid to the companies in cash because they exceed the claimants income tax bills. Just last week the state promised $15 million to DuPont as a location incentive. The potential loss of Section 179 deduction is making its many beneficiaries suspicious of the multi-million dollar “economic development” tax credits that benefit relatively few insiders with lobbyists.

Walnut Street back in the day.

Walnut Street back in the day.

While Senator Gronstal will insist on concessions for passing the bill, I expect he will reach a deal without insisting on his full pound of flesh. More than anything else, he wants to remain Majority Leader, with control over whether legislation lives or dies. He has only 26-24 control of the Senate. If he is perceived as blocking coupling, it may be just enough to tip a close race or two against his party. I think his reference to the “50,000 or 60,000” shows he’s aware of this. That’s why I think an agreement to couple with the federal limit is now likely in the next two or three weeks. I have no insider information to confirm this guess.

Related: Me, Tax season impasse: why your 2015 Iowa tax return may be on hold. My new post at IowaBiz.com, the Des Moines Business Record Business Professional’s Blog.

Other coverage: Des Moines Register, Gronstal opens door to Iowa tax-coupling deal

 

Yes he can! Trump says he can’t release tax returns because he’s being audited (marketwatch.com). That’s not true, of course. While it’s illegal to release someone else’s returns without their permission, you can make your own returns public any time. The IRS doesn’t make you sign some sort of confidentiality agreement when they audit you.

Like every other silly thing he says, this probably will probably increase his standing in the polls.

Related: TaxGrrrl, Trump Won’t Release Tax Returns, Citing IRS Audit: Is It A Legitimate Excuse? “Trump could absolutely release those returns now – even in the middle of an audit.”

 

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Tony Nitti, Beachbody Coach? Rodan & Fields Consultant? At Tax Time, Beware The Hobby Loss Rules. “If your Facebook feed is anything like mine, videos of clumsy toddlers and unlikely animal pals have recently given way to a relentless string of friends pushing side businesses.”

Kay Bell, Penalty for late tax filing increases in 2017. “Starting in 2017, if you send in your Form 1040 (and additional forms and schedules) more than two months after the return is due, you’ll be slapped with a penalty of $205 or 100 percent of your due tax, whichever amount is smaller.” Another example of the ugly practice of funding the government through penalties instead of taxes.

Keith Fogg, Discharging the Failure to File Penalty in Bankruptcy (Procedurally Taxing).

Somehow I missed this: WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’ – SPECIAL TAX SEASON EDITION (Robert D. Flach). “An unprecedented tax season BUZZ!  Some good stuff that needs to be spread around now – and could not wait until April.”

Andrew Mitchel, Charts of Examples in Rev. Proc. 91-55: Form 5472 & Direct and Ultimate Indirect 25% Shareholders. A big issue when you have foreign owners of a U.S. corporation.

Robert Wood, Kanye West Could Still Get $1 Billion Tax Free. Why?

Jim Maule, Section 280A and the Tree House. “The reader asked, ‘Can a tree house qualify under the Section 280A rules? Can a tree house be depreciated?’ Though there’s no direct authority, careful reading of the applicable statute provides an answer.”

Party on Walnut Street.

Party on Walnut Street.

 

TaxProf, The IRS Scandal, Day 1023

Renu Zaretsky, Times get taxing for candidates… Today’s TaxVox headline roundup covers last night’s debate, candidate tax returns, and the lost credibility of the IRS under Shulman and Koskinen.

 

News from the Profession. Password Inundation: Password Policies We Love to Hate (Megan Lewczyk, Going Concern).

 

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Tax Roundup, 2/23/16: Governor Branstad reverses stand, now supports Section 179 and other extenders.

Tuesday, February 23rd, 2016 by Joe Kristan

coupling20160213Found money. Governor Branstad started out this legislative session saying the state couldn’t afford the $500,000 Section 179 deduction ever again. He also said the state couldn’t afford to couple to any other 2015 federal tax “extenders.”

Never mind.

The Governor’s office confirmed yesterday that it has decided to support the House-passed coupling bill, HF 2092. The House bill conforms to all 2015 federal extenders, including a permanent $500,000 Section 179 deduction. The Section 179 deduction allows taxpayers to deduct in the year of purchase equipment costs that would otherwise be capitalized and deducted over a period of years through depreciation.

The fate of the extender bill now is in the hands of Senate Majority Leader Gronstal, who controls which bills can come to a vote in the Democrat-controlled chamber. Sen. Gronstal and chief Senate taxwriter Joe Bolckom have announced their support for the Governor’s now-abandoned anti-coupling position. That means they now have a bargaining chip. From O. Kay Henderson:

Senator Mike Gronstal of Council Bluffs, the top Democrat in the legislature, said Senate Democrats are willing to pass these tax cuts, if Republicans are willing to adjust tax policy elsewhere. Gronstal suggested doing away with the $40 million tax break the Branstad Administration unilaterally gave manufacturers.

So now it’s a hostage negotiation.

The Governor’s office hasn’t said where he found the funding for the extenders on his road to Damascus, reports The Des Moines Register:

Spokesman Ben Hammes said in an email Monday that the governor now supports the bill, “given we can still fund the budget priorities of Iowans.” Hammes did not respond to direct questions about how Branstad would calculate the budget differently without funding concerns.

20151118-1I like to think that the Governor’s budget math was altered by a rebellion of his partisans in the General Assembly. Every Republican who voted on the House bill voted against the Governor’s position, and their minority contingent in the Senate would likely do the same thing.

While Section 179 is the biggest revenue item in the extender package, there are a number of other 2015 tax breaks at stake, including:

Exclusion for IRA contributions to charity
Exclusion of gain from qualified small business stock
Basis adjustment for S corporation charitable contributions
Built-in gain tax five-year recognition period
Educator expense deduction
Exclusion of home mortgage debt forgiveness
Qualified tuition deduction
Conservation easement deductions
Deduction for food inventory contributions

The Department of Revenue has warned taxpayers that they have no authority to claim these breaks until the legislature acts. The Department has so far provided no guidance so far on how to report some of these items, such as the exclusion for IRA charitable distributions.

I think the prospects for eventual Senate passage, which appeared bleak as recently as Friday, now are favorable. House Democrats also voted in favor of the House bill, 26-14. There is no reason to believe Senate Democrats feel differently. So while Sen. Gronstal can be expected to extract concessions, probably in spending priorities, he probably is under some pressure from his own caucus to move the bill. I don’t expect the Governor to surrender the manufacturing sales tax exclusion in any deal.

If the Governor and the legislature need to find some revenue to help make it up, I have a handy list of revenue ideas for them.

Related: Prior Tax Update Coverage.

 

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TaxGrrrl, Presidential Campaign Spending & That Checkbox On Your Tax Return, “In 2007, less than 10% of taxpayers checked the box and in 2013, only about 6% of taxpayers checked the box.”

Robert Wood, Dear IRS: Like Apple And Google, I’m Offshore For Taxes. Moving money offshore for taxes isn’t very practical, despite what some people who want to harass people with non-U.S. holdings even more seem to think.

Keith Fogg, Calculating Interest When the IRS Makes a Restitution Based Assessment (Procedurally Taxing)

Peter Reilly, IRS Rules Bingo Is For Charities Not A Charity In Itself. “Somehow I had managed to get through over 35 years of tax practice without realizing a portion of the Internal Revenue Code is dedicated to bingo –  Section 513(f) – Certain bingo games.”

Jason Dinesen, Glossary: Balance Sheet. “A balance sheet is a summary of a business’s assets, liabilities and equity.”

Kay Bell, 9 states considering gasoline tax hikes

Jack Townsend, NPR Planet Money Podcast on a Tax Protestor. “The show goes through basic tax and criminal law related to tax protestors / deniers.”

Paul Neiffer, If You Don’t Pay Income Taxes, You Lose the Farm! “It is almost always best to pay your taxes when they are due; otherwise you may end up losing the farm, just like Mr. Sanders.”

 

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TaxProf, The IRS Scandal, Day 1020. IRS continues to hold up Tea Party exemption applications. 1020 days later.

Scott Greenberg, Who Itemizes Deductions? (Tax Policy Blog). “When it comes to households with incomes over $75,000, a significant majority itemizes deductions:”

Jeremy Scott, A ‘Brexit’ Would Mean More if Labour Were In Power (Tax Analysts Blog). “It’s hard to know exactly what a post-exit United Kingdom would look like because neither political party has spelled out what leaving the EU would mean. But there would probably be much more continuity on the tax side than in other important financial areas — that is, unless the Conservative government fell as a result of the referendum and Labour took its place.”

Renu ZaretskyA Budget, Carbon, Fuel, the Environment… and a Revolt. Today’s TaxVox headline roundup covers a putative House GOP budget deal, carbon taxes, and gas tax hikes by the states.

 

Caleb Newquist, A Short List of Things Donald Trump Has Said About Releasing His Tax Returns (Going Concern). The list doesn’t include anything about, “they will be awesome,” but “they will be very good.”

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Tax Roundup, 2/22/16: DuPont spurns Iowa, as tax rates would predict. And: What Sec. 179 decoupling will cost Iowa farmers.

Monday, February 22nd, 2016 by Joe Kristan

20160222-1Taxes aren’t everything, but they are a thing. With the merger of DuPont and Dow, Iowa hoped the headquarters of the merged company would be in Central Iowa, home of the big DuPont Pioneer seed operation. It didn’t work out that way. It did work out the way you would think it would, though, if you looked only at tax rates.

First, O. Kay Henderson brings us up to date:

DuPont bought Iowa-based Pioneer Hi-bred International in 1999. Now, as the merger of chemical giants DuPont and Dow continues, company executives have decided the corporate headquarters will be in Wilmington, Delaware.

Iowa officials had offered the company millions if it had picked Johnston, where DuPont Pioneer has been based.

An agricultural unit of the newly-merged company will remain in Johnston. State officials are giving the company $14 million in research activities tax credits and a two million dollar forgiveable loan. It appears up to 500 people will work in the research facilities. More than 2600 people currently work at DuPont Pioneer in Johnston.

In short, the corporate headquarters will be in Delaware, but the company will continue to do seed research here, and collect taxpayer money too. That’s precisely the result one would anticipate based on The Tax Foundation’s Location Matters report on effective state taxes on different activities. The key numbers in choosing between Delaware and Iowa:

Iowa v Delaware 20160222

Iowa has one of the worst tax structures for corporate headquarters. Iowa’s 20.4% effective rate on a “mature” corporate headquarters is half-again higher than the rate in Delaware. Iowa’s highest-in-the-nation 12% corporate tax rate has something to do with that, as does its bad habit of subjecting business inputs to sales tax.

Because Iowa subsidizes research activities generously through the refundable research activities credit, its taxes on R&D facilities are significantly lower.

I don’t believe that taxes are the only thing corporations look at in location decisions, but to say they don’t matter defies basic economics and common sense. If you think taxing cigarettes and soda pop affects individual choices, it’s weird to say that taxing corporate headquarters doesn’t affect corporate choices.

20120906-1The DuPont decision is the natural consequence of Iowa’s policy of paying to lure and subsidize new companies, using high taxes from existing businesses. It’s like a guy bringing his wife’s purse to the tavern to buy drinks for the girls. The girls may take his money, but they realize he’ll do the same thing to them that he’s doing to his wife, so the smart ones aren’t going home with him. And any girls he “wins” aren’t likely to be great prizes.

Some of the politicians are figuring this out: Senate GOP Leader says DuPont Pioneer move shows need to eliminate income tax (O. Kay Henderson, again):

Bill Dix of Shell Rock, the Republican leader in the Iowa Senate, suggests this should be a wake-up call for state policymakers.

“Really shines a beacon on the fact that we are a very high-tax state,” Dix says, “one of the highest taxing states in the country.”

The State of Iowa is providing the company $14 million in research tax credits for the retention of up to 500 high-paying “R-and-D” jobs in Johnston. Dix says this corporate decision shows it’s time for a discussion of eliminating the state income tax.

“We tend to have had a policy of looking at what we can do to pick winners and losers and bring certain industries to our state and to some degree that has been successful,” Dix says. “…The states that are growing the fastest are the states that recognize that an income tax is a tax on productivity, hard-work, investment.”

Exactly. Unfortunately, the Governor and his unlikely Democratic allies in the state Senate are doubling down on their commitment to fund targeted tax breaks with high taxes on existing businesses. They are surprising Iowa businesses with a 2015 tax increase by refusing to adopt the increased Federal $500,000 Section 179 deduction and other federal tax breaks renewed in December.

Related: 

Corporate giveaways hurt Iowa (Steve Corbin). While I share his feelings about Iowa’s economic development bureaucracy, they don’t control most research credits.

Taxpayers May Lose Deductions Due to Legislative Inaction (Public News Service)

 

Paul Neiffer, How Much Will Farmers Pay to Iowa For Low Section 179:

Therefore, we would estimate that not coupling with federal Section 179 will cost Iowa Farmers between $40 and $75 million in 2015.  Since Iowa says this will be a permanent non-coupling, Iowa Farmers will face similar costs in the future (although it may get smaller each year due to increased depreciation deductions on amounts not allowed for Section 179).

I’m sure they’ll feel better about that when they think of the $14 million going to DuPont.

 

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Institute for Justice, Victory Over the IRS: IRS Returns N.C. Man’s Entire Life Savings After Seizing It Through Civil Forfeiture. Good. But why did he have to fight so hard when the IRS never said that he had cheated on his taxes?

Rose Heaphy, Internal Revenue Service scam haunts Des Moines woman (KCCI.com). If the caller says he’s from the IRS, he isn’t.

Kay Bell, Driving down your tax bill with auto-related deductions

Jason Dinesen, How is the Iowa Trust Fund Tax Credit Calculated?

Jim Maule, Yes, Damages for Emotional Distress Are Gross Income. “It is time for the distinction to be eliminated, but until and unless that happens, taxpayers are caught by it and must file their returns in compliance with what section 104 provides.”

Kenneth Weil, Will Bankruptcy Get Your Passport Back? (Procedurally Taxing).

Peter Reilly, Should enQ Get To Sell Spots In IRS Phone Queue? “Long wait times on calls to the IRS are nothing new.  But now there is something you can do about it – maybe.  Only it will cost you.  And the whole notion has me angry.” Weird and fascinating.

TaxGrrrl, Fraud Allegations At Liberty Tax Franchises Raise Questions

Russ Fox, Where I Became the “Messenger of Doom” (My Final Comments on Turf Rebates). Nice work if you can get it.

Robert WoodCrazy Sounding Tax Deductions That IRS Says Are Legit. “Cosmetic surgery costs are usually non-deductible, but an exotic dancer named Chesty Love tested this rule.”

 

TaxProf, The IRS Scandal, Day 1017Day 1018Day 1019. I’m featured on Day 1016, and Peter Reilly is spotlighted on Day 1018.

Alan Cole, Which Places Benefit Most from State and Local Tax Deductions? ( Tax Policy Blog). It has a wonderful map where you can find the answer county by county:

 

Map by Tax Foundation.

Len Burman, The GOP Proposed Tax Cuts Would be Unprecedented (updated) (TaxVox)

Career Corner. Bonus Watch ’16: Underachievers. (Caleb Newquist, Going Concern). “Good news for the lion’s share of you who are unexceptional: you’re getting paid!”

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Tax Roundup, 2/19/16: Sen. Bolkcom says Iowa coupling won’t happen. And: An expat writes the First Lady.

Friday, February 19th, 2016 by Joe Kristan

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Accounting Today visitors: Click here for the Presidents Day post.

The Fix is in. Small businesses fighting to retain the full $500,000 Section 179 deduction in Iowa got more bad news yesterday. Senator Joe Bolckom, Chairman of the Iowa Senate Ways and Means Committee, yesterday issued a statement saying it won’t happen:

Statement by Sen. Joe Bolkcom
Chair of the Senate’s Ways & Means Committee

“Based on a recommendation from Governor Terry Branstad and David Roederer, Director of the Iowa Department of Management, the Iowa Senate will not couple Iowa’s tax law with the federal changes for tax year 2015.

“We simply cannot afford to couple with federal changes this year and responsibly balance the state budget.”

I don’t recall Democratic Sen. Bolckom ever being so eager to accept Republican Governor Branstad’s recommendations. It appears that the fix is in. You might recall that the House passed a broad “coupling” bill overwhelmingly last month. I suspect the Senate would also, if it got a chance. Arrangements are apparently in place to ensure that vote never happens.

The Governor proposes (SSB 3107) to follow Congress only with respect to the research credit. Like Section 179 and the other provisions that the Governor proposes to not couple with, the research credit had expired at the end of 2014. Iowa law defines qualified research eligible for the credit with respect to the federal definition.  There may be no such thing as qualified research, and no research credit, for Iowa without retroactive coupling.

capitol burning 10904This means the Governor is proposing to continue big cash subsidies to some of Iowa’s largest corporations with retroactive coupling to the federal research credit renewal, while increasing taxes on Main Street taxpayers by not coupling the the Section 179 renewal.

The Des Moines Register reports on the controversy in today’s edition:

Sen. Randy Feenstra, R-Hull, criticized Senate Democrats on Thursday, saying they have failed Iowa farmers and small-business owners by choosing not to couple state law with federal tax depreciation changes. That will cost Iowans millions of dollars in additional taxes, he said.

“This is shameful,” Feenstra said. “This affects every small business and farmer in this state. Senate Democrats failing to move this bill will create significant hardships for many Iowans who anticipated we would pass this coupling legislation like we have in past years.”

The Register article closes:

Ben Hammes, Branstad’s spokesman, said late Thursday that the governor is working with the House and Senate to resolve their differences.

As the Senate and the Governor seem to be on the same side, resolution may be elusive.

The Department of Revenue has not issued guidance on how to deal on 2015 filings with non-coupled provisions, which include:

Exclusion for IRA contributions to charity
Exclusion of gain from qualified small business stock
Basis adjustment for S corporation charitable contributions
Built-in gain tax five-year recognition period
Educator expense deduction
Exclusion of home mortgage debt forgiveness
Qualified tuition deduction
Conservation easement deductions
Deduction for food inventory contributions

What to do? While efforts continue to prevent the unexpected tax increase caused by the Governor’s decision, that’s not the way to bet. If you have a big refund coming, or if you are a farmer who must file by March 1, file assuming that coupling won’t happen. But otherwise it may wise to wait for further guidance, especially for issues where the proper Iowa non-coupled treatment isn’t entirely clear — such as for IRA charitable distributions. And who knows – maybe the legislature will change its mind yet.

Related: Paul Neiffer, Why Won’t Iowa Couple Section 179?!

 

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Robert Wood, Dear Mrs. Obama, Why I Gave Up My U.S. Citizenship:

I have lived abroad most of my life. This is my 46th year in Canada. I married Canadian, my kids are Canadian, not American, I have worked my entire life in Canada. I invest here, and will retire here. I am Canadian, but as you are likely aware, giving up that USA brand is not easy. I have many relatives living in the 50. I used to love to visit them. At the moment, I couldn’t care less if I ever cross that border again.

This brings me to my main reason for handing in my passport: you are still taxing me.

Mrs. Obama couldn’t care less.

Kay Bell, IRS issues an extra tax phishing alert on the heels of its annual Dirty Dozen tax scams list

TaxGrrrl, IRS Issues ‘Dirty Dozen’ List Of Tax Schemes & Scams For 2016

Jack Townsend, IRS Issues Publication Warning of Abusive Tax Shelters and Scams

Keith Fogg, Trustee Personally Liable Based on Application of Insolvency Statute (Procedurally Taxing). “It can trace its roots back further into English common law and the statement ‘the King’s debtor dying, the King comes first.'”

 

Joseph Henchman, Letter to IRS Commissioner Re IRS Website Data Vulnerability

Howard Gleckman, How The GOP Candidate’s Tax Plans Stack Up Against One Another (TaxVox)

Jeremy Scott, Obama’s Oil Barrel Tax Would Be Extremely Regressive (Tax Analysts Blog)

TaxProf, The IRS Scandal, Day 1016

Robert Goulder, Revenue Losses From Profit Shifting: The Numbers Tell a Story (Tax Analysts Blog)

 

Career Corner: L’Affaire Denim: Accounting Firm Dress Code Debates Span Borders, Decades (Jim Peterson, Going Concern).

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Tax Roundup, 2/16/16: What Iowa considers more important than Sec. 179. And: Iowa’s sunniest counties!

Tuesday, February 16th, 2016 by Joe Kristan

Why we can’t have nice things, like the Section 179 deduction. Did you know the State of Iowa pays cash grants of $44.4 million to businesses every year? And that millions of dollars of these grants go to some of the largest corporations operating in Iowa?

capitol burning 10904The Iowa Department of Revenue has issued its 2015 Research Activities Tax Credit Annual Report. It is a rare and valuable example of transparency in the tax credit world. It discloses the total of Iowa’s research credits claimed in 2015, including the amount paid in cash subsidies. It also lists all recipients of over $500,000 in credits in 2015.

The Iowa Research Activities Credit — unlike the federal version — is refundable. That means if the credits exceed the taxpayer’s Iowa tax for the year, Iowa pays the taxpayer the difference in cash — a subsidy run through the tax return. Multistate corporations with most of their sales outside of Iowa, but who conduct research here, can have low Iowa tax and claim big cash refunds through the program.

According to the report, $57,147,847 in research credits were claimed in 2015. Corporations claimed $50,112,443. Individuals claimed the remaining $7,035,404, presumably as owners of partnerships and S corporations

The “refunded” amount — the amount paid as cash to taxpayers whose credits exceeded their Iowa tax for the year, was $44,428,444. The overwhelming majority of this, $42,078,611, was refunded to corporations. As a percentage of the credits claimed, just a hair under 84% of the 2015 credits for corporations were in the forms of cash grants claimed on tax returns.

Eight taxpayers claimed tax credits in excess of $1 million in 2015:

Source: Iowa Department of Revenue

Source: Iowa Department of Revenue

Assuming that the 83.97% portion of corporate credits applies to these recipients, that means about $29.5 million in cash grants were paid to just these eight corporations. Applying that percentage to individual companies, that translates to $10.1 million cash to Rockwell Collins, $6.2 Million to DuPont, and $1.4 million to Monsanto. To be clear, the report doesn’t disclose the actual refundable amount for any individual taxpayer, so those percentages are not correct for any taxpayer — some are higher, some lower. Considering these eight taxpayers account for 61.6% of the Iowa Research Activities Credits claimed by corporations in 2015, the numbers can’t be far off as a group.

And that gets us back to the Section 179 deduction. The Governor has concluded that the state budget can no longer support the $90 million revenue loss from coupling with the federal $500,000 Section 179 deduction. Section 179 allows businesses to deduct capital investments that would otherwise be capitalized and deducted over a period of years — typically five to seven. It is only allowed for taxpayers with new fixed assets of up to $2.5 million in a year, so none of the research credit recipients above qualify. It is, however, a big deal to smaller farmers and manufacturers in every county.

The state instead proposes to limit Section 179 to $25,000 for 2015 and beyond, with the limit phasing out dollar-for-dollar as fixed asset additions exceed $200,000. That means a single combine can blow a farmer past the new limit. Because the state coupled with the federal $500,000 Section 179 from 2010 to 2014, this amounts to a significant and unexpected tax increase for 2015. It comes at a time when many of the businesses that use Section 179 are hitting a rough patch due to the decline in commodity prices.

Section 179 is a classic Main Street deduction. The Governor finds plenty of room in the budget to fully fund Research Credit cash grants to big corporations, but not for capital equipment deductions for smaller Iowa corporations. Priorities, I guess.

 

Sunshine! The state has issued another report, this one showing where the state tax credit for solar power installations is claimed.

2012-2015 solar credit claims iowa

Based on this, the sun shines brightest in Northeast Iowa. Winneshiek County has a population of 20,768. With more than 100 solar installations, that means there is at least one solar array for every 207 residents. It also means there is a contractor up there selling solar arrays — and solar credits — pretty hard. In other words, Iowa pays sales incentives to heating contractors with your tax money.

 

O. Kay Henderson, ‘Prospect Meadows’ seeks ‘Field of Dreams’ tax break. Tax breaks are like feeding squirrels. Feed one, and they all show up.

William Perez, What You Should Know about Filing an Amended Tax Return

Peter Reilly, Easement Deductions – A Place In Greenwich Village And A $25 Million Eagles Nest. “If you sincerely want property you own to be preserved indefinitely in its current form, a charitable easement deduction is as close as you can come to a free lunch.” But there’s a devil in the details.

TaxGrrrl, How Former President Washington Dealt With The First Real Tax Crisis In America

Kay Bell, How taxes have — and haven’t — changed since JFK became the first president to visit IRS headquarters

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Allan Sloan, The Executive Pay Cap That Backfired (ProPublica). “A while back, Congress voted to curb soaring compensation for corporate officers by limiting tax deductions. Here’s how it went wrong.” (Via the TaxProf).

Stuart Gibson, It’s Still Groundhog Day, at Least in America. (Tax Analysts Blog) “Countries with parliamentary systems, like the U.K. and Ireland, have lowered corporate tax rates and adopted other business-friendly tax measures almost overnight.”

Renu Zaretsky, A Definite Crisis, Maybe an Evasion, and Lots of Talk. Today’s TaxVox headline roundup covers the Louisiana budget “hot mess,” Ikea taxes, and tax talk in last Saturday’s GOP debate.

TaxProf, The IRS Scandal, Day 1013

Robert Wood, Kanye West’s Tax Free $1 Billion From Mark Zuckerberg

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Tax Roundup, 2/8/16: When your password is a key for thieves. And: More Tax Credits!

Monday, February 8th, 2016 by Joe Kristan

20150910-2You need more than one password. Another home tax software company reports that its customers may have had their data stolen. Marketwatch.com reports:

In its letter to affected customers, TaxSlayer said it became aware Jan. 13 that hackers had accessed some of its customers’ accounts. The illegal access took place between Oct.10, 2015, and Dec. 21, 2015.

The letter said an “unauthorized third party may have obtained access to any information you included in a tax return or draft tax return saved on TaxSlayer, including your name and address, your Social Security number, the Social Security numbers of your dependents, and other data contained on your 2014 tax return.”

In its statement, TaxSlayer said it doesn’t believe its own systems were breached. Instead, “user credentials, stolen from other sources, were then used to misrepresent our customers and therefore access our program.”

They’re saying that they got passwords from another site and tried them on TaxSlayer, and they worked. That kind of breach is on the user, not the software company.

Reusing passwords is poor data security hygiene. McAfee Software offers some great tips for good passwords. The tips include a list of things people do that make them vulnerable to data theft, including:

Reuse of passwords across multiple sites: Reusing passwords for email, banking, and social media accounts can lead to identity theft. Two recent breaches revealed a password reuse rate of 31% among victims.

If you use different passwords for your different important accounts, one data breach won’t expose your entire financial life.

Related: TaxSlayer data breach is the 3rd tax software-related security issue so far this filing season (Kay Bell)

 

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Brent Willett, Iowa’s next economic frontier (IowaBiz.com). An unintended but useful followup to my IowaBiz post on Friday on the unwisdom of targeted tax credits, the post boosts a proposed new tax credit that I criticized by name. The post touts a new report promising “Fifty thousand jobs” to Iowa if we just enact a new “Bio-Based Chemicals” tax credit.

The post neatly checks off several items I note in my post:

Might these special favors be better for the economy than some farmer or small business who buys a new tractor or machine? You could make that case, but it would be plausible only if these favors were enacted by a process where the state looked at the vast menu of possible industries to support and carefully evaluated which ones were more persuasive. That never happens. Instead, the credits follow the path of the notorious Iowa film industry credits, where an industry gets some legislators and business boosters excited and builds support — sometimes with “studies” funded by booster groups. There is no evaluation of the opportunity costs, of whether the funds would be better used elsewhere.

No comparison to other industry opportunities? Check. Studies funded by booster groups? Check. Ignoring opportunity costs? Check.

I encourage your to read the Willett post and ponder why a government subsidy is needed if the industry is such a slam-dunk.  Also, consider whether you would get the same article by substituting other industries for bio-chemicals in the post.

 

 

Andrew Mitchel: New Expatriate Record for 2015 – Nearly 4,300 Expatriations:

2015 expatriations

“The escalation of offshore penalties over the last 20 years is likely contributing to the increased incidence of expatriation.”

Related: Record Numbers Renounce Their U.S. Citizenship (Robert Wood)

 

Jason Dinesen, Lots and Lots of Scam E-mails this Year. Jason posts many helpful examples. Be very skeptical of emails you don’t expect, and delete any purporting to come from IRS.

Annette Nellen, Ideas for Retirement Savings Reform. “One overall reform Irecommend is to change the focus of retirement plans from the employer to the employee, making them truly portable from job to job and if in employee or contractor status or both.”

Jim Maule, The Biggest Tax Refund?. Overwithholding will do the trick.

Leslie Book, The Limits of the “One Inspection” of Taxpayers’ Books and Records Rule (Procedurally Taxing). “One limitation on IRS powers is the Code itself, as Section 7605(b) provides that ‘only one inspection of a taxpayer’s books of account shall be made for each taxable year unless ․ the [Treasury] Secretary ․ notifies the taxpayer in writing that an additional inspection is necessary.'”

Robert D. Flach, TAX GUIDE FOR NEW HOMEOWNERS

Russ Fox, It Was Only a 13.33% Kickback. A police chief breaks the tax law.

TaxGrrrl, So About Those Cam Newton ‘Sunday Giveaway’ Game Balls…

 

Only the form of your destructor. What Would Be At Stake In A Trump v. Sanders Election? How About $24 Trillion in Tax Revenue (Tony Nitti).

 

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TaxProf, The IRS Scandal, Day 1003Day 1004Day 1005

Scott Greenberg, White House Calls for Targeting the Cadillac Tax by Location:

Why would the White House propose changes that would weaken the Cadillac Tax – a central part of the administration’s most significant policy achievement? In fact, these changes might be necessary to secure the continued existence of the tax. The White House has been fighting a losing battle to defend the Cadillac Tax, and these proposed changes may placate some of the tax’s opponents, particularly employers in states with high healthcare costs.

We must destroy the Cadillac Tax to save the Cadillac Tax!

Renu Zaretsky, Budget Hearings, Saving, and Entertaining (TaxVox). “There is almost always something perfunctory about the last budget of an outgoing president, but this year’s will generate even less interest than usual. In the ultimate insult, the GOP-run congressional budget committees won’t even invite White House officials to describe their fiscal plan.” And lots more in today’s TaxVox headline roundup.

I reject this false choice. Kentucky Can Attract Tourists Who Like Bible More Than Bourbon Without Violating First Amendment  (Peter Reilly)

 

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Tax Roundup, 2/4/16. Confirmed: Governor opposes coupling to ALL 2015 changes. And: Are hipsters really flocking downtown?

Thursday, February 4th, 2016 by Joe Kristan

coupling20160129Worst Iowa tax policy decision ever. Governor Branstad doesn’t want to conform Iowa’s tax law to any of the extender provisions passed in December for 2015. A reliable source has confirmed our earlier report that the Governor wants to skip coupling entirely for 2015, and then conform to everything except Section 179 and bonus depreciation in 2016 and beyond.

It’s bad enough that he doesn’t want to conform with the $500,000 federal Section 179 for the first time in years — imposing a big tax increase on small businesses and farmers in every county. But conforming to nothing means a whole host of separate Iowa computations for 2015 returns — and 2015 only. Without spending a lot of time, I come up with these:

Exclusion for IRA contributions to charity
Exclusion of gain from qualified small business stock
Basis adjustment for S corporation charitable contributions
Built-in gain tax five-year recognition period
Educator expense deduction
Exclusion of home mortgage debt forgiveness
Qualified tuition deduction
Conservation easement deductions
Deduction for food inventory contributions

I have asked the Department of Revenue for a complete list of affected provisions, and I will provide it if they send one.

These will have effects on thousands of taxpayers ranging from minor annoyance and more expensive tax compliance to major unexpected Iowa tax expense. To take a common example, the exclusion fo IRA contributions to charity allows taxpayers aged 70 1/2 or older to have their IRAs make contributions to charity directly. This means the contributions bypass their federal 1040s altogether. But for Iowa, the Governor would have the IRA holder include the contribution in taxable income and then, presumably, add it to their itemized deductions — if the taxpayer itemizes in the first place.

Some of these can be very costly. For example, the exclusion of gain for qualifying C corporation stock sales can apply to up to $10 million of capital gain. The exclusion benefits start-up businesses, which Iowa allegedly supports with at least four separate tax credits. Failure to couple would clobber a $10 million 2015 gain with an unexpected $898,000 tax bill.

There is bipartisan support for coupling with all federal provisions other than bonus depreciation for 2015. The Iowa House of Representatives has already passed such a bill on a bipartisan 82-14 vote. But Governor Branstad and Senate Majority Leader Gronstal have apparently reached a little bipartisan deal of their own to keep the Senate from ever voting on 2015 conformity. The Senate tax committee meeting yesterday was cancelled, which I hope means the Senate leadership is getting pressure to back off this stupid policy.

If you are affected, or if your clients are (they are), I encourage you to let your Iowa Senator know how you feel.

Related Coverage:

Iowa House passes $500,000 Section 179, but prospects bleak in Senate.

Iowa Governor reportedly opposes 2015 coupling for anything.

Branstad budget omits $500,000 Section 179 deduction for Iowa; no 2015 conformity.

 

20130218-1What do you mean, IBM doesn’t stock the vacuum tubes anymore? IRS Systems Outage Shuts Down Tax Processing (Accounting Today):

The Internal Revenue Service said Wednesday evening its tax-processing systems have suffered a hardware failure and that tax processing could be affected into Thursday.

“The IRS experienced a hardware failure this afternoon affecting a number of tax processing systems, which are currently unavailable,” said the IRS. “Several of our systems are not currently operating, including our modernized e-file system and a number of other related systems. The IRS is currently in the process of making repairs and working to restore normal operations as soon as possible. We anticipate some of the systems will remain unavailable until tomorrow.”

The IRS says it’s confident that it will have the system restored by the weekend and that any refund delays will be minor.

Related: IRS Having One of Those Days (Caleb Newquist, Going Concern); TaxGrrrl, IRS Website Hit With Hardware Failure, Some Refund & Payment Tools Unavailable.

 

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Jason Dinesen, The Iowa Trust Fund Tax Credit is $0 for 2015

Robert Wood, Perfectly Legal Tax Write-off? Lawyer Fees — Even $1,200 An Hour

Russ Fox, A Tale of Three States. “Hawaii, Indiana, and Mississippi are three states where daily fantasy sports (DFS) is being debated. The three states are representative of what is likely to occur in every state.”

Keith Fogg, Verification of Bankruptcy Action in a Collection Due Process Case (Procedurally Taxing). “Because Appeals employees often have very little knowledge of bankruptcy, this case points out the need to pay careful attention in CDP cases that follow bankruptcy actions and challenge verifications where the Appeals employee fails to acknowledge the impact of the bankruptcy case.”

Bob Vineyard, Aetna Not Pulling Plug on Obamacare …. Yet (InsureBlog). Many Iowans get coverage through Aetna’s Coventry unit. But as the company expects to lose $1 billion over two years on Exchange policies, their willingness to continue to provide ACA – compliant policies on the exchange will be sorely tried.

Jack Townsend, Another Taxpayer Guilty Plea for Offshore Account Misbehavior

Peter Reilly, Tax Dependency Exemptions For Noncustodial Parents – It Is All About Form 8332. It really is. Form 8332 provides a way for couples to continue fighting long after the divorce is final.

Jim Maule, “Can a Clone Qualify as a Qualifying Child or Qualifying Relative?”

 

Scott Greenberg, The Tax Benefits of Having an Additional Child (Tax Policy Blog). In case your decision hinges on this.

Renu Zaretsky, Debates, Energy, Credits and PrepToday’s TaxVox roundup covers tonight’s Democratic Debate, energy tax policy, and a shutdown of 26 Liberty Tax franchise operations in Maryland.

TaxProf, The IRS Scandal, Day 1,001

 

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Is Hip, Cool Des Moines Really Attracting Migrants? (Lyman Stone). I haven’t seen any local media pick this up, but this is a fascinating look at migration and population patterns Downtown and across Polk County. It is inspired by the recent Politico piece on how hip and all we are (emphasis in original):

In fact, throughout the article, there’s an interesting claim made that the population of downtown Des Moines has risen from 1,000 at some unspecified time in the 1990s, to at least over 10,000 as of 2016. In fact, throughout the article, there’s an interesting claim made that the population of downtown Des Moines has risen from 1,000 at some unspecified time in the 1990s, to at least over 10,000 as of 2016.

The claim turns out to be exaggerated, but only a little:

Downtown Des Moines probably did not gain 10,000 residents from the late 1990s to 2016, nor does it seem likely that it had just 1,000 residents at any time in the last few decades. However, that doesn’t mean the essential claims of Woodard’s story are wrong. Au contraire, Des Moines has gained about 10,000 people since 2000, and has about 9,000 more people than we would expect had 1987 growth rates continued. That’s a meaningful acceleration in urban growth, and a significant number have been headed to the very center of the city.

It’s a great read with some surprising observations about how suburban and downtown growth complement each other.

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Tax Roundup, 1/29/16: Iowa House passes $500,000 Section 179, but prospects bleak in Senate. And: Iowa may give guy a break.

Friday, January 29th, 2016 by Joe Kristan

Accounting Today visitors: Click here to go directly to the newsletter link on cheaper returns.

coupling20160129Accelerating to a stop. When a household is short of cash, the family usually spends less. Iowa has a different approach. They pick your pocket.

The Iowa House of Representatives yesterday voted 82-14 to retroactively couple with all of the 2015 federal tax law changes except bonus depreciation (HF 2092, formerly HSB 535). This would allow Iowa businesses to deduct up to $500,000 in annual purchases of otherwise-depreciable fixed assets under Section 179. Governor Branstad’s budget would limit the deduction to $25,000 — an unexpected departure from Iowa law for the past several years and a significant tax increase.

You would think that an overwhelming bipartisan vote in favor of the $500,000 version would foreshadow quick passage by the Senate. Alas, no.

I talked to some legislators yesterday when I participated in the Iowa Society of CPAs annual Day on the Hill. It appears that Governor Branstad and Senate Majority Leader Gronstal have a little bipartisan deal of their own to kill Section 179 coupling.

That’s not how Sen. Gronstal explains it. From the Quad City Times:

Senate Majority Leader Mike Gronstal, D-Council Bluffs, said his majority caucus would consider what the House passed, but he expressed doubt about moving ahead with a concept at variance with the governor given a similar course of action last session for education funded ended with a gubernatorial veto.

“I don’t like doing things that I know will get a certain veto,” Gronstal said. “That doesn’t seem to me to make a lot of sense. The governor doesn’t have this in his budget.”

I came away understanding that the voice of the majority caucus is really the voice of Sen. Gronstal, and that Section 179 coupling will never come up for a vote in the Senate. I assume it is because both the Governor and the Majority Leader want the money for their own priorities: more cronyist tax credits for Gov. Branstad, and more spending for Sen. Gronstal.

That’s a crummy deal for the thousands of small businesses that suddenly will see a big unanticipated tax increase. It also seems like a deal that would be vulnerable to an insiders vs. Main Street challenge. The tax credits that the Governor wants to fund go to a narrow set of taxpayers. For example, in 2014 $42.1 million of refundable research credits went to 16 big taxpayers. That’s almost enough to pay for half of Section 179 coupling $90 million cost by itself.

Here is the complete menu of incentive and economic development tax credits in the Governor’s budget:

Iowa credits fy 2017

The refundable sales tax credit goes largely to the big data center companies Facebook, Microsoft and Google. The Enterprise Zone Housing credit and High Quality Jobs credits are big company credits that you have to through the economic development bureaucracy to cash in on. The rest of the credits are mostly for favored industries who get breaks unavailable to the much larger universe of other businesses that have to pay full freight.

It might still be possible to get the Governor and/or the Majority leader to see things differently. That will require taxpayers and practitioners to convince their legislators that small businesses and farmers shouldn’t have to stand in line behind insiders.

It’s not clear to me what form the extension will take under the Governor’s program. I was unable to confirm whether the Senate will skip 2015 conformity entirely, as outlined in Sen. Anderson’s newsletter. I have inquiries in.

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Des Moines Register, Iowa agrees to review man’s $5,000 tax refund request. Some good news in the story we mentioned yesterday of the retired maintenance man who inadvertently conceded to a $5,000 liability he didn’t owe.

 

It’s serious. You know tax season is truly underway when Robert D. Flach posts his last Buzz roundup before disappearing into his hive to make his artisanal hand-crafted 1040s. Im starting to think Robert isn’t Donald Trump’s biggest fan.

TaxGrrrl live-blogged the GOP debate last night. I just did a drive-by, myself. Literally; I drove past the venue on my way home last night. No, I didn’t have it on the radio.

Robert Wood, What To Do If IRS Form 1099 Reports More Than You Received

Peter Reilly, Tax Foundation Analysis Of Sanders Plan Only Shows Downside. On the plus side, you could worry less about your investments, as you wouldn’t have as many.

Jason Dinesen, Having Negative Taxable Income Doesn’t Mean the Government Pays You Extra

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Scott Greenberg, The Sanders Tax Plan Would Make the U.S. Tax Rate on Capital Gains the Highest in the Developed World (Tax Policy Blog).

Renu Zaretsky, No Trump, No Problem. The TaxVox headline roundup today covers Google’s tax travails, “tampon taxes,” and candidate tax plans.

TaxProf, The IRS Scandal, Day 995

News from the Profession. Life at EY Involves Food, Technical Difficulties (Caleb Newquist, Going Concern).

 

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Tax Roundup, 1/28/16: Iowa Governor reportedly opposes 2015 coupling for anything. And: Ethanol execs accused of payroll tax crimes.

Thursday, January 28th, 2016 by Joe Kristan


couplingNo 2015 coupling at all? 
I had been under the impression that Governor Branstad’s budget proposal would not couple Iowa’s tax law for the $500,000 Section 179 limit or bonus depreciation, but would couple otherwise. A newsletter from Northwest Iowa Senate Republican Bill Anderson says I was mistaken:

Last week we learned Governor Branstad’s budget supports updating Iowa tax law to conform with changes in the Internal Revenue Code that resulted from federal legislation enacted during 2015. With three significant exceptions:

1. No tax year 2015 coupling. Meaning most of the changes are effective for federal tax purposes beginning in tax year 2015, the bill will not incorporate recent federal changes until tax year 2016. (Items that may impact you are: deduction for state and local sales taxes, above the line deduction for teacher classroom expenses ($250), above the line deduction for qualified tuition and related expenses, discharge of indebtedness on principal residence excluded from gross income.) The estimated fiscal impact of these changes in total is minimal compared to Section 179.

2. No section 179 expensing for tax year 2015 now or into the future, and

3. No bonus depreciation for now or into the future.

The newsletter also provides some detail of the fiscal impact of coupling:

Estimates project just coupling with Section 179 for one year is an approximate $90 million decrease in FY 2016 budget and a revenue increase in FY 2017 estimated roughly to be more than $20 million

This is a lot of money, but it’s a lot less than the $277.3 million the Governor proposes to spend next year on targeted tax credits. While Section 179 benefits business in every county regardless of whether they hire lobbyists or consultants, the targeted tax credits go to big taxpayers and insiders who know how to work the system. We’ll see which constituency is more important to the General Assembly.

Today is the Iowa Society of CPA’s “Day on the hill.” I will be there pushing for coupling. I will confirm the no-coupling-for 2015 report. I also hope to find out whether Senate Democrats have any interest in Section 179 coupling. The Republican House is expected to pass a bill (HSB 535) with Section 179 coupling (Update, 9:44 am: Full 2015 coupling (except bonus depreciation) passed in the House this morning, 82-14).

Related: Eye on the Legislature 2016.

 

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It’s an awful idea to “borrow” payroll taxes. Iowa Businessmen Indicted for Failing to Pay Employment Taxes (Department of Justice Press Release):

Randy Less, 48, of Hopkinton, Iowa, and Darrell Smith, 59, of Forest City, Iowa, are each charged with multiple counts of willfully failing to truthfully account for, and pay over federal income, social security and Medicare taxes that were withheld from the wages of the employees of Permeate Refining Inc., which was in the business of ethanol production.

According to the allegations in the indictment, Less was the majority owner, a general partner and the general manager of Permeate Refining Inc. in Hopkinton.  In those roles, Less had the responsibility to collect, truthfully account for and pay over to the Internal Revenue Service (IRS) federal income, social security and Medicare taxes withheld from the wages of his employees.  From approximately the fourth quarter of 2009 and continuing through the fourth quarter of 2010, Less is alleged to have willfully failed to pay over to the IRS more than $116,000 in withheld taxes.

The indictment further alleges that a company called Algae Energae purchased an ownership interest in Permeate in September 2009.  After that purchase, it is alleged that Smith, a corporate officer and manager of Algae Energae, also had the responsibility to collect, truthfully account for and pay over to the IRS taxes withheld from the wages of Permeate’s employees.  From approximately the first quarter of 2011 and continuing through the third quarter of 2012, both Less and Smith are alleged to have willfully failed to pay over to the IRS more than $307,000 in withheld taxes.

The IRS has resorted increasingly to criminal charges when payroll taxes go unpaid for a long time. While the defendants in this case are presumed innocent unless and until the IRS proves its case in court, the indictment reminds us that failing to remit payroll taxes is serious business. If you find yourself having to choose who to pay, remember that only the tax man has badges and guns, and that their liability doesn’t go away in bankruptcy.

 

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Robert D. Flach, WHO MUST FILE A 2015 TAX RETURN

TaxGrrrl, ‘Bug’ Exposes Uber Driver’s Tax Info, Including Name and Social Security Number

Kay Bell, Uber oops: driver’s tax info exposed on ride share site

Jack Townsend, More on the U.S. as the World’s Tax Haven

 

David Brunori, Most People Lose When Pols Pick Winners and Losers (Tax Analysts Blog). “Tax systems should have as little impact on economic decision-making as possible.”

TaxProf, The IRS Scandal, Day 994

Alan Cole, New CBO Report Shows Declining Share of C Corporations (Tax Policy Blog):

entity filings chart

Some businesses (but not all businesses, just those with a disfavored legal structure) pay a 35% rate at the entity level, followed by taxes of up to 23.8% at the shareholder level. Others, like partnerships and sole proprietorships, have taxes paid by their owners commensurate with their owners’ income in a single layer of taxation. Of course nobody wants to be a C corporation.

And yet certain politicians tell us that we just need to continue the beatings until corporate morale improves.

Renu Zaretsky, When Sharing is Caring… or Scary. Today’s TaxVox roundup covers candidate tax plans, Google and Facebook taxes, and more.

News from the Profession. I Am a Millennial Accountant, and I Hate Accounting (Chris Hooper, Going Concern)

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Tax Roundup, 1/21/16: Defying Governor, House conformity bill includes $500,000 Section 179 limit.

Thursday, January 21st, 2016 by Joe Kristan

20151118-1Reason to hope, reasons to despair. The Iowa House Ways and Means Chairman introduced a “code conformity” bill yesterday (HSB 535) that includes the federal $500,000 Section 179 limit. This defies the wishes of Governor Branstad, who says the state can’t afford the expanded deduction. He would only allow a $25,000 deduction for asset purchases that would otherwise have to be capitalized and depreciated.

The bill, as expected, does not adopt bonus depreciation for Iowa.

The Section 179 conformity proposal is is good news. It appears that Ways and Means Republicans sense that their business and farm constituents won’t appreciate a big tax increase, especially in a year that looks like it will be a down year around the state. Now attention will turn to the Senate, where Democratic Majority Leader Gronstal controls what legislation reaches the floor. If he supports the legislation, it is likely to pass. The Governor would probably be able to kill it with a veto, but would he?

That brings up my first reason to despair. Unless the Governor backs down or some compromise is reached, the conformity bill is likely to be delayed. Affected taxpayers will have to wait to file their 2015 Iowa returns until they know what the tax law is; if they guess wrong, they will incur the expense of amending their returns. It compresses the filing season into an ever-narrower window and delays refunds.

The biggest issue is likely to be the budget impact. While I haven’t seen a current figure, last year’s Section 179 conformity bill was estimated to reduce state revenues by $88.5 million.

capitol burning 10904I certainly have a list of possible pay-fors, starting with the newest proposed credit, a $10 million  “renewable biochemical tax credit” (SSB 3001). It is refundable, meaning it isn’t just a tax reduction, but an actual cash subsidy to taxpayers whose credit exceeds their Iowa tax. That easily could happen, as it is based on pounds of qualifying stuff produced. It will only go to taxpayers who “enter into an agreement” with the economic development administration. In other words, for insiders who know where to pull strings.

And here is another reason to despair. It appears this new boondoggle is going to slide right on through. From the Des Moines Register (my emphasis):

More than a dozen lobbyists representing businesses, farm organizations, economic development groups and other expressed support, and there was no opposition. Gov. Terry Branstad has listed renewable chemical manufacturing tax credits as a key item in his 2016 legislative agenda.

Under the bill, the maximum amount of state tax credits available annually to any one business for the production of renewable chemicals would be either $1 million or $500,000, depending how long the company has operated in Iowa.

Even Mark Chelgren (R-Ottumwa), who has in the past voted against corporate welfare tax credits, is on board with this one.

It will be very difficult to get the Governor to go along with the higher Section 179 limits without spending or tax credit cuts to offset the revenue loss. The Governor seems dead set against cutting cronyist tax credits. If the legislature agrees with him, Section 179 has a very difficult fight this session. Failure to adopt the federal Section 179 limit would represent a triumph of a handful of insiders over the businesses and farms in every county that would have their taxes increased to pay for subsidies.

 

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Iowa increases security to prevent tax fraud (thegazette.com):

The Iowa Department of Revenue has upped its security game after seeing more than 10,000 fraudulent tax returns last year.

This tax season, the agency will use technology to better track fraudsters, validate bank accounts before making direct deposits and share information with the IRS, other states, software providers and banks.

The story says Iowa stopped $11.6 million in fake refund claims last year on 10,600 fraudulent returns.

 

Hank Stern, O’Care in Real Life (InsureBlog):

So, one of my small group clients just lost the last person on his group plan. It had gotten so expensive that no one could really afford to stay on it. Shopping around didn’t help: everything we looked at was at least as expensive for comparable benefits. And the plan was pretty much bare-bones, not a lot of fat to trim.

Tom has been a client – and friend – for almost 30 years. A small business owner, he was proud to be able to offer his employees coverage. Now that’s gone.

He said “If you like your plan, you can keep your plan.” He didn’t say you could afford it.

Kristine Tidgren, Farm Lease Questions Often Arise This Time of Year (Ag Docket)

Robert D. Flach, A VERY IMPORTANT REMINDER. “Don’t listen to a broker, a banker, an insurance salesman, or your Uncle Charlie!   You wouldn’t ask your butcher for a medical opinion, so why would you accept tax advice from your MD?”

Keith Fogg, Public Policy Cases Accepted by the Taxpayer Advocate Service (Procedurally Taxing). “If you have an issue that raises policy issues for a group of taxpayers, you can bring this to the attention of the NTA in hopes that it will make the policy list and open the doors to TAS assistance.”

Paul Neiffer, Top 10 Reasons You Might Need Accrual Accounting. “Although this list is designed to be humorous, the reality is that all farmers should consider using accrual accounting to manage their farm operation.”

Kay Bell, Smooth tax season start? Not for some TaxAct users. “Just a few days before the filing season and Free File opened for business, the tax software manufacturer sent a letter to about 450 customers, notifying them of a data breach.”

Jack Townsend, Should Proof of No Tax Evaded Be Admissible as Defense in Crime Not Requiring Tax Evaded as an Element

 

Tony Nitti, An Ode To Tax Season: How To Bid Farewell To Your Family.

Tax season is here. Tax season is the worst. But don’t just abandon your family for the next three months with no explanation; make them aware of the series of mistakes that were set into motion long ago that led you to this self-imposed hell. And tell them with rhymes! 

That may be why my grown kid is a musician, and the high schooler wants to be one.

 

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David Brunori, Good Government Developments in the Tax World (Tax Analysts Blog). No Iowa items make the list.

David Henderson, The Economics of the Cadillac Health Care Tax, Part IPart II. “But now that I have done a more careful analysis with some plausible numbers, I am seriously undecided.”

Kyle Pomerleau, Senator Hatch To Introduce Corporate Integration Plan (Tax Policy Blog). “Not only does the double tax on equity investment increase the cost of capital, it creates economic distortions. The most obvious one is the distortion towards debt-financed investments.”

Renu Zaretsky, Market Woes and the Price of Breaks. Today’s TaxVox headline roundup covers stupid things from proposed financial transaction taxes to the ongoing Kansas budget and tax policy disaster.

 

Robert Wood, IRS Wipes Another Hard Drive Defying Court Order…But You Must Keep Tax Records. Darn right, peasant!

 

TaxProf, The IRS Scandal, Day 987.

 

Career Corner. Stop Doing Other People’s Work Because It Saves Time (Leona May, Going Concern). A classic symptom of Senior Accountant’s Disease.

 

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