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2020-21 Officers and Directors Election
NAEA’s membership elected directors and officers for terms beginning in May 2020. The results follow:
|President Elect: ||David Tolleth, EA, PhD|
Secretary: || Kathy Brown, EA|
Directors: ||Lori Carpenter, EA; Kerry Freeman, EA; Jeffrey Gentner, EA; Tracey Ann Gordineer, EA; and Lynn Jacobs, EA, USTCP|
Congratulations to newly elected (or re-elected) leaders and thanks to Jean Nelsen, EA and her Nominating Committee.
| || LEGISLATIVE & TAX ADMINISTRATION NEWS|
Congress has had a surprisingly productive two weeks. Defying inside-the-beltway expectations, Congress in the last two weeks agreed to and passed the Defense Authorization bill, and all 2020 appropriations. For good measure, Congress also repealed several major ACA taxes (e.g., medical device, Health Insurance Providers Fee (aka HIT), and insurance plan excise tax (aka “Cadillac tax"), and enacted almost all extenders through 2020.
As an aside, as we go to print, the House of Representatives is scheduled to finalize the USMCA trade bill (notably with labor support), and it appears ready to be approved by the Senate early next year.
All of this while the impeachment process was fully underway. Not shabby…
Oprah on the Hill: “You get a tax break, you get a tax break, everybody gets a tax break!”
This week, Congress passed a $428 billion hodgepodge tax bill with something for everyone: a slew of tax extenders addressed both retrospectively and prospectively. It also put the kibosh on a controversial tax on church parking, rescinded several ACA taxes, expanded tax breaks to victims of natural disasters, and included a retirement savings bill that had been stalled for over a year.
Key tax extenders, some of which are far more interesting than others to enrolled agents, are retroactive to January 1, 2018, and effective through December 31, 2020. They include:
The plan, piggybacking on a must-pass budget bill needed to fund federal agencies through this fiscal year, represents the biggest tax bill likely to be enacted before next year’s elections.
- Discharge of indebtedness on qualified residence
- Mortgage Insurance Premiums
- Medical Expense Deduction
- Qualified Tuition Expenses
- Empowerment Zone Incentives
- Biodiesel Incentives (through 12/31/22)
- Plug-in Electric Vehicles
- Credit for Energy-efficient New Homes
- Alternative Fuels Excise Tax Credits
- New Markets Tax Credits
- Employer Credit for Paid Family and Medical Leave
- Work Opportunity Tax Credit
- Beer and Booze Tax Benefits
Additionally, the legislation rescinds a provision included in the 2017 tax law taxing fringe benefits of churches and other nonprofit workers. It clears up a provision that resulted in some survivors of military personnel having to pay higher taxes.
It also repeals the unpopular Cadillac tax on pricey health insurance benefits and a special tax on medical devices and another on insurance companies. The plan would also forestall tougher rules on when people can write off medical expenses.
Finally, it includes substantial changes to the laws governing retirement and savings – the so-called SECURE Act. Most significant to many older taxpayers, the bill raises the age at which people must begin making mandatory withdrawals from individual retirement accounts to 72 from the current 70-and-a-half.
Keep in mind, however, none of these tax changes are paid for at a time when the government is already projected to run trillion-dollar deficits for the foreseeable future. E@lert again invokes Oprah, “You get a trillion-dollar deficit. You get a trillion-dollar deficit. Everybody gets a trillion-dollar deficit.”
- Jamie Hopkins at Forbes starts to unpack this provision, which to paraphrase Joe Biden, is a big stinkin’ deal (n.B. Biden may have exchanged “stinkin’” for something a little saltier.)
- Here’s the Ways & Means Committee narrative explaining HR 1994, The SECURE Act of 2019.
IRS Receives FY20 Budget
Included in the same year-end grab bag bill, IRS is slated to receive $11.5 billion—an increase of $208 million from FY19. The Administration had proposed almost $11.9 billion in its FY20 budget, and the House initially provided $12 billion, while the Senate ponied up $11.4 billion.
We’ll take what we can get, and at the same time continue to advocate for an appropriately funded IRS—to meet taxpayer (and practitioner) service as well as to ensure a serious enforcement presence.
Several state items of interest:
- Washington State is cautioning that businesses importing goods may be subject to tax under recent business and occupation (B&O) and sales tax economic nexus law changes.
- The Ohio Department of Taxation has updated the Sales/Use Tax Application for Refund (STAR) and STAR Checklist. Those forms, plus others, are available here.
- The Massachusetts DoR has finalized a permanent rule implementing a $100k annual sales economic nexus threshold for remote sellers and “marketplace facilitators.” Deloitte provides a summary.
- According to Politico, an informal group of Pennsylvania officials has released five separate plans for revamping the state’s school property tax system.
- The Pennsylvania DoR has launched “Schedule a Call,” a new online service that will allow tax professionals to schedule a call with a department service representative.
- Virginia just posted new Pease limitations (and we thought Pease was dead—the limitation, not the late Congressman, who has in fact been dead for years)
IRS has issued proposed regs (REG-107431-19) on how to treat contributions made to a charity in return for SALT credits. Thomson Reuters unpacks the issue.
U.S. Tax Court
Judge Goeke presides over this week’s U.S. Tax Court case, Northern California Small Business Assistants Inc. v. Commissioner (153 T.C. No. 4). Petitioner, a California corporation operating a medical marijuana dispensary legally under CA law, makes three arguments it is not subject to § 280E.
The most interesting defense of the three petitioner raised, is whether § 280E imposes a gross receipts tax in violation of the Eighth Amendment to the Constitution. At stake is income tax of $1.26M and (you guessed it) a § 6662 accuracy-related penalty of $253K. Goeke writes, “To conclude § 280E violates the Eighth Amendment’s Excessive Fines Clause, we must accept that the Eighth Amendment applies to corporations, that § 280E operates as a penalty, and that the penalty in this case is excessive.”
Petitioner argues the purpose of § 280E is to punish, rather than tax. Goeke is having none of that. He fights Amendment with Amendment, in this case the Sixteenth, which grants Congress the power to collect taxes on “incomes, from whatever source derived.” He goes on to remind us that the Supreme Court has held that any deductions from gross income are “a matter of legislative grace” (E@lert can hear the dulcet tones of NAEA’s Past President Frank Degen, EA, USTCP on this particular tidbit). And he closes with “Petitioner does not cite, and we are not aware of, any case in which the disallowance of a deduction was considered a penalty.”
Spoiler alert: petitioner loses on the other two arguments as well.
For readers who would like just a little bit more, happy holidays! We provide for your consideration both a December 2014 Chief Counsel Memorandum, which of course, may not be used or cited as precedent, and Ed Zollars’ take on the case, in Current Federal Tax Developments. And given the panel included nine judges, a read of the concurring and partially concurring opinions starting on page 17 will also reveal a few nuggets. You’re welcome.
| || EVERYTHING BUT THE KITCHEN SINK|
Since last week, Christmas has come unbelievably close, and those of you who haven’t started shopping had better get the lead out. Three songs to help get you into the spirit: Yo-Yo Ma and Allison Kraus bringing The Wexford Carol; The Barenaked Ladies with Sara McLachlan bringing God Rest Ye Merry Gentlemen/We Three Kings; LeAnn Rimes brings I Want a Hippopotamus for Christmas (btw, here’s an interview with the original singer…charming); and, of course, the two-hour Christmas classics with a continual fireplace video (stream to your television, of course).
In other timely news, Die Hard is a *still* a Christmas movie (for disbelievers, the WaPo says yes); 15 activities that are worth your time; the top books of 2019, according to the New Yorker (E@lert can resist anything but a list of well-reviewed books); and, Martha Stewart on her Christmas preparations.
Otherwise, aside from this nod to the Boss (and, by extension, to the woman who hired E@lert), we offer a sackful of tax-related items, pulled especially for America’s tax experts:
- The New York Times exhorts its readers to check out the new Form W-4. And quotes NAEA member Beth Logan, EA, to boot. Btw, here’s the new Form W-4 and FAQs, too.
- Nancy Colvin, EA, reports the North Carolina Society of Enrolled Agents sponsored on December 10th another “Tax Pros on Call” for the local NBC affiliate in Raleigh, NC. Some 19 NC EAs participated in the three-hour program, NCSEA’s 17th effort. It was a great opportunity to promote EAs and provide a valuable service to the community.
- IRS reminds non-profits of a requirement to file returns electronically. KPMG provides an explanation.
- Hate the game, not the player: Former tax lobbyist sent to the hoosegow (E@lert loves that word; we don’t know why) for understating his income by more than $2.2 million between 2010 and 2014.
- Looks like IRS is stepping up the pressure on conservation easements—a loophole that has long caused agiitas at least in some corners of DC.
- The acting Taxpayer Advocate recently penned a blog in which she suggests an IRS publication error (in Pub 54) may have caused certain married taxpayers fling separately to fail to file required tax returns.
- We continue to talk about pot much more frequently than E@lert would ever have guessed. In this case, the San Francisco Chronicle reports a local pot dispensary fights IRS—though actually the dispensary, Harborside, is fighting a Judge Mark Holmes US Tax Court ruling in Harborside v. Commissioner (151 TC No 11). Peter Reilly in Forbes unpacks the original decision.
- Social Security Administration several years ago stopped mailing annual statements, which are useful for many wage earners to review and to use for planning purposes. Instructions on how to access the form online and sample statements are available here.
“We are never so defenseless against suffering as when we love.’”
— Sigmund Freud (1856-1939), Austrian psychoanalyst
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NAEA E@lert | Volume 2: Issue 2
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