Talking Tax

Fewer opinions, frequent disputes about business expense deductions, and the importance of representation. These are takeaways from a Bloomberg Tax analysis of U.S. Tax Court opinions released during the second quarter of 2018. Legal editor Carolina Vargas and reporter Courtney Rozen reviewed every Tax Court case from early April through mid-June, tallying aspects such as judge, winner, and issue. They joined Bloomberg Tax’s Amanda Iacone on July 3 to talk about trends they spotted in their analysis of second-quarter cases.

Charles Rettig, President Donald Trump’s nominee for IRS commissioner, appeared before the Senate Finance Committee June 28. Committee Chairman Orrin G. Hatch (R-Utah) told Bloomberg Tax that he wants to wrap up Rettig’s confirmation process in three to four weeks. Capitol Hill reporter Kaustuv Basu spoke with Talking Tax Host Amanda Iacone July 2 about Rettig, House Ways and Means Chairman Kevin Brady’s (R-Texas) plans for a tax cut package later this year, and the Internal Revenue Service’s new draft 1040 form.

The focus of the tax community this week will be on a June 28 Senate Finance Committee hearing on the nomination of Charles Rettig for Internal Revenue Service commissioner. In other congressional business, some lawmakers are also pondering what they can do in the aftermath of a June 21 U.S. Supreme Court decision that removed a barrier to taxation of online sales. Capitol Hill reporters Allyson Versprille and Kaustuv Basu spoke with Talking Tax host Amanda Iacone June 25 about the Rettig hearing and other Hill news.

This summer is shaping up to be an important one for tax lawyers as they await regulations on some of the new tax law's most complicated provisions. Top Treasury Department officials have said guidance on the law's 20 percent deduction for pass-through businesses could come in early summer and proposed regulations on a one-time tax on companies' accumulated offshore earnings may follow shortly thereafter. House Ways and Means Committee Chairman Kevin Brady (R-Texas), who played a critical role in getting the new law passed, has met with Treasury officials, including Secretary Steven Mnuchin and Assistant Secretary for Tax Policy David Kautter, to discuss a regulatory road map for the remainder of 2018. Hill reporters Kaustuv Basu and Allyson Versprille spoke with Talking Tax host Amanda Iacone June 11 to discuss that meeting, the outlook for tax guidance, and other Capitol Hill news for the coming week.

The advent of blockchain’s ledger technology brings both opportunities and challenges for accountants. A set of working groups has been tasked this summer to sort through those technical challenges—as many as 200 issues have been identified so far. The groups are expected to make recommendations to the American Institute of CPAs later this year. Accountants' work is expected to change dramatically in the future because of the distributed ledger system. The initiative aims to help accountants prepare to use the technology and find market opportunities for them. Erik Asgeirsson, president and CEO of CPA.com—a technology subsidiary of AICPA—and Ron Quaranta, chair of the Wall Street Blockchain Alliance, joined Bloomberg Tax’s Amanda Iacone on May 30 to talk about the working groups, the technical questions they are set to explore, and what accountants can expect.

Congress takes a look at IRS funding this week as lawmakers continue to hammer their partisan talking points on the 2017 tax act.

Tax professionals will descend on Washington, D.C., May 10 for the American Bar Association tax section's spring meeting. The conference serves as an opportunity for top government officials to address recent developments and get feedback from practitioners on the year's regulatory agenda. A topic on nearly everyone's mind this year is the new tax law enacted at the end of 2017. The tax section's chair, Karen Hawkins, joined Talking Tax host Allyson Versprille to offer a look into what those attending the conference can expect. Hawkins previously served as the director of the Internal Revenue Service Office of Professional Responsibility, but has rejoined the private sector as an educator and consultant.

The Senate could use Federal Aviation Administration legislation recently passed by the House as a vehicle for technical corrections to the 2017 tax act. The FAA bill (H.R. 4) that advanced April 27 would reauthorize the agency to collect aviation excise taxes and fund its operations with federal money deposited into the Airport and Airway Trust Fund, among other provisions. Programs would be authorized through 2023; the current authorization expires Sept. 30. The legislation now moves to the Senate for consideration, where lawmakers could easily tack on tax law technical corrections—such as a clarification to a provision on qualified improvement property or a revision to the effective date for using net operating losses—because the bill already contains tax provisions. Reporters Laura Davison, Allyson Versprille, and Kaustuv Basu spoke with Talking Tax host Matthew Beddingfield on April 30 about this potential opportunity. They also discussed current and future openings on the House Ways and Means Committee

Congressional tax writers are aiming to shore up several tax issues—retooling the Internal Revenue Service, dealing with temporary tax provisions, and requiring online retailers to collect sales tax—left out of the 2017 tax act. The House just passed a package of bills that would establish an independent Office of Appeals at the IRS, boost cybersecurity, and update online systems. House Ways and Means Committee members also met to discuss the future of temporary tax credits and deductions, with an eye to release a plan by this summer about which should be made permanent and which should be eliminated. The U.S. Supreme Court also heard oral arguments in South Dakota v. Wayfair, Inc., a case that seeks to undo the court’s 1992 ruling in Quill Corp. v. North Dakota, prohibiting states from collecting sales tax from vendors without an in-state physical presence. The decision, which may come in June, could cause Congress to address the issue, after years of debate about state sales taxes and e-commerce. The qu

The IRS faces a long list of tasks if it plans to complete all of the items on its priority guidance plan to implement the new tax law. The Internal Revenue Service has highlighted several projects, including the pass-through deduction under tax code Section 199A and new international base erosion measures, to address by June 30, the end of the agency's business year. Pam Olson, the U.S. deputy tax leader and Washington National Tax Services practice leader at PricewaterhouseCoopers LLP, joined Talking Tax host Allyson Versprille on April 20 to discuss the status of regulations for the 2017 tax act (Pub. L. No. 115-97) and what taxpayers and practitioners should expect this summer. Before joining PwC, Olson was assistant secretary for tax policy at the Treasury Department. It may be difficult for the government to meet that end-of-June target if history is any indication, according to Olson. The IRS and Treasury have made good progress so far with guidance on the repatriation tax on foreign earnings an

On April 17, the U.S. Supreme Court heard oral arguments in the biggest state and local tax case in years. South Dakota v. Wayfair is a direct challenge to the high court’s 1992 ruling in Quill Corp. v. North Dakota, which prohibits states from imposing sales tax collection obligation on vendors lacking an in-state physical presence. The Justices explored a handful of topics during arguments, notably the role of Congress to regular inter-state commerce, the issue of compliance costs faced by small and medium-sized businesses, and how to define a new rule if they were to “kill Quill.” A decision is expected by June. Harley Duncan, leader of the state and local tax group of the Washington National Tax practice at KPMG LLP, sat down with Bloomberg Tax reporter Ryan Prete to analyze the oral arguments and discuss what sellers and states could face in the coming months while awaiting the decision.

For tax years beginning after December 31, 2017, the corporate tax rate under §11(b) was amended to remove the graduated rates in favor of a flat 21%. Additionally, for tax years beginning after December 31, 2017, §55(a) was amended, repealing the corporate alternative minimum tax. This led to questions regarding the applicable tax rates for a corporation whose tax year began before January 1, 2018 but after December 31, 2017. George Manousos and Jason Black of PricewaterhouseCoopers LLP’s Federal Tax Services out of Washington-National Tax Services joins talking tax’s host Joe Hagedorn to discuss the application of Internal Revenue Code’s §15 and how it applies to determine the applicable tax rate and alternative minimum tax rate for a fiscal year corporation. Additionally, George, Jason and Joe discuss the recently released IRS Notice 2018-38 which provides clarification on the application of §15.

House and Senate committees held several tax-focused events this week ahead of the April 17 tax filing deadline. Top Treasury Department, Internal Revenue Service, and Office of Information and Regulatory Affairs officials testified before lawmakers about the status of the 2018 IRS filing season and the process for reviewing and releasing tax regulations. OIRA and Treasury announced a deal that would allow the White House to review major tax rules before they are made public. The House Ways and Means Committee approved a package of legislation that would retool the IRS, and some of those bills are slated to get a vote on the House floor in the coming week. And, to top off a busy week, House Speaker Paul D. Ryan (R-Wis.), a key player in passing the 2017 tax act (Pub. L. No. 115-97), said he won't run for re-election. Reporters Allyson Versprille and Laura Davison spoke about all the moving pieces and what to expect next.

Lisa Zarlenga of Steptoe & Johnson, LLP, joins Talking Tax with host Andrea L. Ben-Yosef to discuss what tax advisors need to know about cryptocurreny. She discusses what cryptocurrency investors need to do as they file their returns, ICOs and airdrops and how they are taxed, and the impact of tax reform on cryptocurrency issues.

New guidance on a tax law change limiting interest deductibility tells taxpayers that the IRS is making progress in helping businesses deal with the change, but some of the more challenging issues have yet to be broached. Tony Nitti, a tax partner at WithumSmith+Brown PC in Aspen, Colo., joins Talking Tax host Allyson Versprille to discuss the guidance—Notice 2018-28—and what it means for businesses. The amended tax code Section 163(j) limits the business interest deduction to 30 percent of a company’s earnings before interest, taxes, depreciation, and amortization for four years starting in 2018. Beginning in 2022, the deduction will be limited to 30 percent of earnings before interest and taxes. The IRS's notice provides a handful of answers on how the limitation will work. It confirms, for example, that interest payments on debt held by members of a consolidated group—a group of corporations with a shared parent company that is treated as a single entity for tax purposes—would be allocated at the con

It's not every day the U.S. Supreme Court agrees to take on a tax case. The Supreme Court on March 21 decided a major tax case dealing with the obstruction of an IRS investigation when it ruled in Marinello v. United States that the Internal Revenue Service can only convict a taxpayer on obstruction charges when it can prove the taxpayer was aware of a pending tax-related proceeding, such as an investigation or audit, or that the taxpayer could "reasonably foresee that such a proceeding would commence." Another significant tax case, Wisconsin Central Ltd v. United States, currently being reviewed by the high court, involves the taxation of stock given to employees by a railroad company. The Supreme Court is scheduled to hear oral arguments on April 16. Bloomberg Tax's Carolina Vargas talked to practitioners to discuss the cases and their significance.

The House plans to vote this week on the omnibus spending bill that will likely include a tax change for agriculture cooperatives. In addition to the provision that rebalances the tax treatment of agriculture cooperatives and corporate grain buyers, some GOP lawmakers are also looking to include technical fixes to some drafting errors in the tax law. The negotiations were ongoing as of late March 16. Reporters Laura Davison, Allyson Versprille, and Kaustuv Basu spoke with Talking Tax host Matthew Beddingfield on March 19 about the upcoming bill and what Democrats can expect to get out of the legislation.

Professor Charlene Luke, University of Florida Research Foundation Professor at the Levin College of Law, joins Talking Tax host Andrea Ben-Yosef to discuss the federal tax implications of crowdfunding. Professor Luke describes the different types of crowdfunding, reviews current IRS guidance, discusses the tax provisions--including those in the 2017 tax act—that apply to crowdfunding, and ends with suggestions as to how the IRS can help in this area. For more information, please see her article “Crowdfunding: Federal Income Tax Considerations,” which was published in the TM Memorandum (Aug. 17, 2018). The article can be found at https://www.bna.com/crowdfunding-federal-income-m73014463754/?promocode=BTAX164AA.

The American Bar Association Section of Taxation meeting in San Diego this month was all about how IRS and Treasury officials view the new tax law. The tax reform bill becoming law is only the first step: the Internal Revenue Service and Treasury Department will be providing guidance on the statute's provisions for years to come. During the meeting, Bloomberg Tax reporters spoke with government officials about how they plan to prioritize regulations as they implement changes to complex areas of the 2017 tax act (Pub. L. No. 115-97), such as changes to international taxation, tax accounting, and transfer pricing. Reporters Laura Davison, Allyson Versprille, Alison Bennett, and Isabel Gottlieb spoke with Talking Tax host Matthew Beddingfield on Feb. 12 about how the IRS and Treasury plan to tackle the law's changes.

The new tax law lowers the corporate tax rate to 21 percent—a change that some lawmakers have suggested could prompt pass-through entities to convert to C corporations. Michael D'Addio, a principal in the New Haven, Conn., office of Marcum LLP who specializes in federal and state taxation, joins Talking Tax host Allyson Versprille to discuss the possibility of a mass conversion as a result of the different treatment of pass-throughs and C corporations. Under the new law, pass-through owners can deduct 20 percent of trade or business income. But for high-earning pass-through owners paying the top 37 percent individual tax rate, that averages out to a 29.6 percent tax rate. D'Addio explains some of the underlying issues that could factor into a pass-through's decision to convert—aside from the upfront tax rates—and why that may not be the best course of action for every taxpayer.