Extending the week. Congress had been scheduled to go home today, but now it looks like the session will drag through the weekend while they try to agree on spending and tax legislation.
Whither the extenders? The Hill reports that hope lives for permanent enactment of several of the important Lazarus provisions that have repeatedly died – most recently at the end of 2014 — and that need to be revived to be used on 2015 returns. From the report:
I understand the current projection is for the House to post the omnibus Monday and vote on it by Wednesday,” Senate Republican Whip John Cornyn (Texas) told reporters. “The goal is to wrap things up by Wednesday evening.”
He said the omnibus would be linked to a package extending expiring tax provisions. Senate negotiators say that package is likely to make several important tax breaks open-ended and place a moratorium on two ObamaCare taxes.
“They seem to be linked, although I can’t tell you whether it will be one vote or two votes, but clearly they’re part of the overall negotiations,” he added.
What would be made permanent? At least the R&D Credit and the $500,000 Section 179 deduction. These would be accompanied by permanent, and maybe increased, earned income credits, child credits, and education credits. How likely is it? The Hill says “Senate sources on Thursday said the chances of reaching a deal on a major tax deal were greater than 50 percent.”
Nothing is certain, though. Tax Analysts reports ($link) Permanent Tax Extenders Deal Continues to Elude Lawmakers. It quotes Rep. Steve Israel (D-N.Y.) as insisting that the child credit be indexed to inflation, and that other obstacles to agreement remain:
Israel noted that ultraconservative Republicans object to including renewable energy tax credits and family credits in the extenders deal, so votes from House Democrats are still essential regardless of what deal Senate Democrats reach with Republicans.
Here I’ll just note that there appear to be no such thing as “ultraliberals” to reporters, while “ultraconservatives” abound.
Rep. Bill Flores, R-Texas, chair of the House Republican Study Committee, said December 2 that his group believes that renewable energy credits should be phased out. “Special interest giveaways like the wind production tax credit and the solar investment tax credit have overstayed their welcome and their usefulness,” he said.
Flores’s group also does not support family credits, which he called “stimulus legacy items” that should not be renewed without heightened verification and oversight.
These obstacles could result in another two-year extension of the expiring provisions, though complete failure remains an option.
Just how stupid is U.S. foreign taxation? This stupid. A heartbreaking and infuriating piece by Allison Christians shows the brain-dead Kafkaesque nightmare created by Congress and enforced by IRS to “crack down” on overseas taxpayers: Understanding the Accidental American: Tina’s Story. It tells the story of a 62 year-old woman who was born in the U.S. while her parents were students, but has lived all but her first six months in Canada. Ms. Christians makes a powerful case:
Related to that point, I think a taxpayer has a right to learn that her whole financial life is subject to harsh deterrents and penalties solely for the reason that it is not located in the United States, even and especially when she is not located in the United States. Again, I think she has the right to learn that not from blogs or word of mouth, but from the government that seeks to impose these rules on her. I think she’s got a right to be informed about a life-destroying force like PFIC by the government that seeks to unleash that force upon her, and a right to avoid that punishment by making different choices. And if that government can’t or won’t bother to inform her, or address the utter absurdity of stripping a person of their life savings as a consequence of inadequate form filling, I think she’s got a reason to complain that this is a pretty unfair administration of a very complex law — a law designed for millionaires with expensive tax accountants and not for Canadians carefully saving for retirement and not hiding anything from anyone.
When the IRS and the politicians crow about how effective their foreign enforcement efforts are, remember that a lot of it is coming out of the pockets of taxpayers like Tina.
Kristine Tidgren, Iowa Court of Appeals Says LLC Corporate Veil Properly Pierced (The Ag Docket).
The court found that the trial court’s finding of inadequate capitalization was supported by substantial evidence. In so finding, the court noted the defendants’ history of moving funds between related entities, the lack of LLC assets and employees, and its failure to reduce losses to the plaintiff, despite knowing its funding was inadequate.
This sort of ruling will make businesses leery of using Iowa entities. An appeal to the Iowa Supreme Court is likely.
Friday means Buzz day for Robert D. Flach. Today he covers the legislation requiring IRS to use private debt collectors, preparer regulations and more.
Jana Luttenegger Weiler, Delinquent Taxes May Mean No Passport. “ Imagine the problems for a taxpayer who is unaware of this new rule and not finding out until being stranded in the midst of traveling.”
Jason Dinesen, Choosing a Business Entity: Determining S-corporation Reasonable Salary. “A salary that’s considered reasonable for one corporation may not be reasonable for another corporation.”
Leslie Book, Tis the Season For Tax Procedure Legislation (Procedurally Taxing). “Under the new legislation, the failure to file penalty may not be less than the lesser of $205 or 100 percent of the amount required to be shown as tax on the return (it used to be $135 or 100%).”
Robert Wood, Three Moves In December To Save Taxes Next April
TaxProf, The IRS Scandal, Day 946
Nicole Kaeding, Proposed Tax Increases in Alaska. Alaska may get an income tax.
Steven Rosenthal, Hillary Clinton Proposes Tough New Curbs on Corporate Tax Inversions (TaxVox). The “beatings will continue until morale improves” approach.
News from the Profession. Grant Thornton Hoping to Bring Soul-Crushing Disappointment to Charlotte Hornets With New Sponsorship (Caleb Newquist, Going Concern).