Lately on the Hill
It’s been quiet on the Hill lately since Congress has been out of office for a two-week recess, but they’re back in session this week for a few days. Here is a roundup of the latest legislative and regulatory news on the tax front:
- We’re still talking about Social Security. We’ve been hearing about the Social Security and Medicare trust funds a lot lately. The latest news is that Sen. Bernie Sanders (I-VT) is starting to pitch his idea on how to save Social Security: fully fund the Social Security trust fund for at least 70 more years, including increasing benefits, by expanding payroll taxes on the wealthy, rather than the current threshold of the first $160,200 of income.
- Tax takes flight. Congress is getting ready to start working on legislation that reauthorizes federal aviation programs and related excise taxes to fund the Federal Aviation Administration (FAA) that expire September 30. Since the bill includes tax provisions, there is talk that Congress may try to include other tax policies in the legislation beyond those related to the FAA, including tax extenders like repealing changes to R&D expensing under the Tax Cuts and Jobs Act. This bill is in its early stages, but we’ll keep you posted on where this goes.
- LIFO legislation is back for round two. Senator Sherrod Brown re-introduced the Supply Chain Disruptions Act, which proposes to provide tax relief to auto dealers facing supply chain challenges and inventory shortages by providing dealerships with up to three years to replace their inventory before having to pay taxes on inventory sales from 2020 or 2021. A companion bill has been re-introduced in the House as well. The Senate passed the Supply Chain Disruptions Act in the last session, but it did not pass in the House before the close of session.
- Should ESG play a role in your retirement investments? Reps. Suzan DelBene (D-WA), Sean Casten (D-IL), Juan Vargas (D-CA), and Dean Phillips (D-MN) introduced the Freedom to Invest in a Sustainable Future Act, which would give workplace retirement plans the option to consider environmental, social, and governance (ESG) factors in their investment decisions or offer ESG investment options. Meanwhile, House and Senate Republicans are planning a floor vote this week to block the U.S. Labor Department from enforcing its new rule that permits retirement plans to consider any and all relevant factors, including ESG. Senate Republicans said they think they can get enough votes to pass the resolution, which means this may be President Biden’s first chance to issue a veto.
- Republicans want to stop government-backed digital currency. Representative Tom Emmer (R-MN) introduced the CBDC Anti-Surveillance State Act, which proposes to limit the Federal Reserve’s ability to develop a central bank digital currency. Republicans are concerned that a government-backed digital dollar would violate Americans’ privacy by giving the Federal Reserve too much access to people’s spending habits.
IN CASE YOU MISSED IT
- The U.S. Supreme Court held that non-willful FBAR penalties apply per form, not per account, in a 5-4 decision issued in Bittner v. United States. This means that failure to file an FBAR to report a financial interest in or signature authority over a foreign financial account with a value exceeding $10,000 should be capped at a maximum penalty of $10,000 per form, no matter the number of foreign accounts owned by the taxpayer.
- The IRS and Treasury issued final regulations amending the rules for e-filing returns and other documents. These regulations will require certain taxpayers to e-file beginning in 2024. This guidance impacts filers of partnership returns, corporate income tax returns, unrelated business income tax returns, withholding tax returns, certain information returns, registration statements, disclosure statements, notifications, actuarial reports, and certain excise tax returns.
- The IRS issued final regulations on the treatment of consolidated groups for purposes of Section 951(a)(2)(B). This affects consolidated groups that own stock of foreign corporations.
- The IRS has been ordered to issue partial refunds to tax return preparers after a district court found that the agency charged excessive preparer tax identification number (PTIN) fees. This arose out of a class action suit in Steele v. United States.
- The IRS issued proposed regulations relating to the use of forfeitures in qualified retirement plans, including a deadline for the use of forfeitures in defined contribution plans. These proposed regulations would affect participants in, beneficiaries of, administrators of, and sponsors of qualified retirement plans.
- Indiana enacted pass-through entity (PTE) legislation, retroactively effective January 1, 2022. This allows S corporations, partnerships, or LLCs treated as S corps or partnerships for federal income tax purposes to pay Indiana income taxes at the entity level. Learn more about the opportunities of state PTE elections.
- Disaster-area taxpayers in most of California and parts of Alabama and Georgia now have until Oct. 16, 2023 to file various federal individual and business tax returns and make tax payments. Previously, the deadline was postponed to May 15 for these areas.
- The IRS released statistics on its progress for the 2023 filing season compared to the same time last year. As of February 17, 2023, 36,859,000 tax returns have been received and 36,769,000 of those have been processed by the IRS. The average refund amount is $3,140, which is 11.2% less than the average refund amount in 2022.
This newsletter features developing content that is subject to change at any time. It does not constitute legal or tax advice. Consult your professional advisors prior to acting on the information set forth herein.