Bramwell’s Lunch Beat: Pot Shop Challenging IRS Penalties

Jason Bramwell
Staff Writer and Editor
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Lawmakers turn to stealth tax measures
Brian Faler of Politicowrote on Wednesday that even though Congress may be deadlocked over tax increases, lawmakers are finding lots of agreement on another way to raise revenue: throwing the book at tax dodgers.

“Owe back taxes? Lawmakers want to cancel your passport,” Faler wrote. “They want to give the IRS more power to investigate you. And enlist private debt collectors to help track down your old debts. If you’re a doctor, they want to seize your Medicare payments. They’d also like a bit more information about the mortgage interest tax deduction you’re claiming.”

What’s prompting this quiet outbreak of bipartisanship? They need money. Lawmakers are scrambling to find almost $10 billion just to keep a roads maintenance program running through the end of this year, and another $3 billion for new tax cuts promised to startup companies and other small businesses, bike-sharing programs, and theatrical productions, among others.

Going after tax scofflaws also allows both parties to claim victory, Faler noted. Democrats can say they’re raising revenue, heading off more cuts in funding for government programs, while Republicans can say they held the line on tax increases.

“Making cheaters pay their taxes is way more attractive than making honest taxpayers pay more,” said Len Burman, head of the nonpartisan Tax Policy Center, according to the article.

IRS fines unbanked pot shops for paying federal payroll tax in cash
In a case that could have enormous tax ramifications for hundreds of marijuana dispensaries nationwide, Allgreens LLC of Denver is challenging the IRS practice of collecting what amounts to millions of dollars in penalties the businesses are helpless to avoid, David Migoya of the Denver Postwrote on Wednesday.

Allgreens, a medical marijuana dispensary, says in its petition filed in US Tax Court that it can’t pay via the Electronic Federal Tax Payment System because it has no bank account as a result of federal laws that make banks leery of doing business with the marijuana industry.

Migoya noted that Allgreens had a bank account – and paid its withholding taxes electronically – until mid-2012, when the bank closed the account. Allgreens has been unable to locate a new bank that will take its business.

Since the account closed, Allgreens has diligently hand-delivered cash payments on the tax twice monthly to the IRS office in downtown Denver – the only one in the state that accepts cash. As a result, the company has been assessed a 10 percent penalty every quarter of the tax cycle.

Allgreens asked the IRS for a waiver of the penalty, saying it had complied with the law and had not intentionally avoided making the electronic payments, according to the article. The IRS sent the company a letter with a copy of its internal policies, which say companies have two alternatives to pay electronically. Both methods required Allgreens to funnel the cash to a third party, who could then make the tax payment on its behalf.

States take lead on gas tax hikes
Gas tax increases in several states are taking effect ahead of the holiday weekend as Congress struggles to raise the tax nationally or find another way to cover transportation funding, Keith Laing of The Hillwrote on Wednesday.

New Hampshire, Maryland, and Indiana all implemented increases in their state gas taxes on July 1, according to reports. New Hampshire’s levy went up four cents per gallon and Maryland’s increased by a half of a penny per gallon. Indiana, meanwhile, switched from a flat rate to a percentage of the monthly gasoline price average in the state.

Laing noted that the movement in the state gas taxes comes as congressional debate about transportation funding has largely stalled. Infrastructure advocates have pushed lawmakers to increase the federal gas tax for the first time in 21 years as the US Department of Transportation said this week that it would soon begin cutting back on infrastructure reimbursements to states.

The gas tax, which is currently priced at 18.4 cents per gallon, has been the traditional source of funding for the Highway Trust Fund, which is set to run out of money in August. The gas tax only brings in approximately $34 billion per year, however, and current transportation funding is closer to $50 billion a year, according to the article.

Why we need to raise the gas tax – and then get rid of it
Emily Badger of the Washington Post’s Wonkblogrecently interviewed Representative Earl Blumenauer (D-OR), who last December introduced a bill to raise the gas tax by 15 cents, which is less than a plan currently on the table.

But according to Badger, the lawmaker’s long-term vision – shared by many transportation wonks – looks dramatically different: “I am working very hard for Oregon, which gave you the first gas tax, to pioneer getting rid of it,” Blumenauer said.

During the interview, Badger talked to Blumenauer about why people hate the gas tax so much, what Congress is likely to do about it this summer, and how we might fund transportation in entirely new ways in the future.

On why there is no love for the gas tax, Blumenauer said:For the first 80 or so years of the fund, the receipts increased because the American population grew, and we were driving more and more and more and more. It started running into trouble in the last 20 years for two reasons: One is that gasoline is the only product that we price in real time. The typical American sees the price of gasoline about five to 20 times a day, if they pay attention at all.

“You don’t see changes in the price of bread or milk in the same way. This is in your face,” he continued. “And over the course of the last 30 years, particularly over the last 10, gasoline prices have been extraordinarily volatile. Oil prices even more so. This triggered some resentment or anger. The combination of the volatility of the pricing, and the fact that it’s in your face, made people resistant. It’s not a favorite tax.”

House lawmakers press on IRS probe
John D. McKinnon of the Wall Street Journalwrote on Wednesday that House lawmakers are planning to step up pressure on the US Justice Department to act on a contempt-of-Congress citation against former IRS official Lois Lerner.

Legislators view the citation – passed by the House in May – as a potential pressure point in their broader efforts to force action by the Justice Department in the controversy concerning IRS treatment of conservative tax-exempt organizations, committee aides said.

US Attorney General Eric Holder has said the Justice Department continues to investigate, while not discussing details. But GOP lawmakers believe the department has shown little appetite for probing the politically fraught matter, McKinnon wrote.

“Members are broadly concerned about the DOJ doing their job and following the law and having a thorough investigation,” said Frederick Hill, a deputy staff director for the GOP-led House Oversight and Government Reform Committee, according to the article.

He said the committee is planning to take a “closer look” at the Justice Department’s role in the IRS matter in coming weeks.

Quick Links:

  • Some Europeans told the European Commission to fire PwC over conflict of interest (Going Concern)
  • Big 4 fears of social unrest in Hong Kong were totally overblown (Going Concern)
  • KPMG congratulates KPMG on the Rothstein Kass acquisition (Going Concern)
  • PwC promotes record women partners (Economia)
  • PCAOB announces 102 scholarships for the 2014-2015 academic year (PCAOB)
  • Moss Adams announces new leadership for Financial Services Group (Moss Adams)
  • The fleeting benefits of overseas corporate marriages (DealBook)
  • Corporate move signals need for tax reform (Detroit News)
  • Destination Maternity latest to seek to lower taxes with overseas HQ move (Fortune)
  • Walgreen’s potential move draws Dixon mayor’s ire (Chicago Tribune)
  • Independence Day brings fireworks taxes to light (Tax Foundation)
  • IRS strategic plan highlights effects of budget cuts (Forbes)
  • The time has come: Defund the IRS (Forbes)
  • Stop starving the beast of the IRS (Washington Post)
  • Why the GOP really wants to defund IRS (Washington Post)
  • What’s behind the brain drain at the IRS (Tax Analysts)
  • Censorship in New Hampshire? (Tax Analysts)
  • Fitness enthusiasts exercised over DC’s new yoga sales tax (Don’t Mess With Taxes)
  • Japan tax revenue at 6-year high (Wall Street Journal)
  • California lawmakers weigh tax credit for bomber program (Los Angeles Times)
  • After battle, Pa. House OKs Philadelphia cigarette tax (CBS Philadelphia)


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