Tax News Highlights 3.11.22
What’s Up in Washington, D.C.
Government Funding But No Tax Changes
Congress finally passed an appropriations bill to fund the government for the remainder of its fiscal year. Several stop-gap funding bills, called continuing resolutions, had previously been implemented while lawmakers negotiated terms, with the most recent set to end Friday. An additional four-day measure was put in place to give the President time to review and sign the 2,700-page bill.
Many speculated that tax provisions such as extenders, a postponement of the R&E mandatory capitalization rules, reinstatement of the Employee Retention Credit for Q4 2021, or COVID-related credits would hitch a ride in the bipartisan omnibus bill, as has happened in the past with similar legislation. However no tax section was included this time to avoid further squabbling and delays on the must-pass bill.
This is particularly contentious for businesses who must now implement research expense capitalization and amortization requirements that began in 2022 as a result of the TCJA. First quarter estimates and provisions technically need to include an addback for what has historically been expensed. What’s even more complex, however, is that the provision is *likely* to be retroactively delayed in future legislation. That is, if a viable future legislative vehicle emerges. Until then, the law stands.
One tax-related item did make it in, though. The IRS will receive a small funding boost for fiscal 2022. It’s not the additional $80B figure requested over 10 years in the stalled BBB, but it will provide an increase of $675M over the prior year. Additional funding could be included in future legislation, if it’s able to progress. The agency (which manages the nation’s primary source of revenue) is in desperate need of a tech makeover, in addition to many more hands on deck to deal with the increased reliance on the tax code to implement and administer social, political, and disaster related policy.
Where Did It Go?
On the one-year anniversary of the American Rescue Plan Act (ARPA), Treasury released a
factsheet detailing how states spent relief money. Highlights by state are provided in this
summary as well.
Democrats proposed a bill to tax any benefit oil companies may receive due to the surge in pricing
related to the war in Ukraine, and its title doesn’t mince words. The Big Oil Windfall Profits Tax
Act would tax large oil producers and use funds collected to send payments directly to individuals
based on income. The bill is likely to receive criticism and its future is uncertain at best.
Help Is On The Way, Dear!
IRS leadership recently outlined an aggressive plan to reduce the tax return backlog affecting
millions of taxpayers and improve customer service. Action items include:
• Hiring 10,000 new employees
• Shifting 700 employees to process new returns, in addition to maintaining the newly
created 800-person surge team currently assigned to amended filings and mail
• Using contract workers and paying overtime
• Increased taxpayer communication including educational letters, online self-help portals,
expanded in-person and phone customer service
• Using a bot to process returns previously needing a human touch
• Suspending automated collection notices and other correspondence related to
• New bot voice and chat features to help answer simple payment or collections questions
(more areas to be added in the future)
The recent appropriations bill funding boost should help with these endeavors, but much more
is needed. Current backlog status below:
President Directs Federal Agencies to Consider Crypto
President Biden signed an executive order this week directing the federal government to gain a
better understanding of digital assets and assess their potential benefits and risks to our economy
and global competitiveness. The order has been on the back burner for years but with the recent
sanctions in Russia, digital assets have taken center stage and have shown to be a viable and
borderless economic structure.
The plan promotes and encourages “responsible innovation” in the area while acknowledging
and pursuing mitigation of its inherent risks such as data privacy, national security, crime, and
financial instability. It also aims to explore potential for a U.S. Central Bank digital currency in the
Not-for-profit research advocacy groups like CoinCenter and Blockchain Caucus have been
engaging with and educating policymakers to advocate for sensible regulatory approaches to the
blockchain and crypto currency ecosystem. We may start to see the knowledge gap between
those making policy decisions and those that understand the technology shrink, in addition to
further guidance on taxation.
Treasury Secretary Janet Yellen has been a vocal proponent of cryptocurrency utilization in the
United States and applauded the order as a move in the right direction.
Thanks to Ryan O’Keefe for contributing to this section.
In a slightly different tone, the Department of Labor (DOL) provided a warning to fiduciaries on
including digital assets like cryptocurrencies as investment options in 401(k) retirement plans.
Among other standards, fiduciaries have a duty to act in the financial interest of plan participants
and evaluate investment options made available in a plan.
The DOL is concerned that in this early stage cryptocurrencies and other digital assets, significant
risk of loss, theft, or fraud pose risks to investors and therefore caution fiduciaries to consider
these risks before including digital assets as an investment option in retirement plans.