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Bramwell’s Lunch Beat: Online Sales Tax Gamble, Heated IRS Hearing, Ikea’s Taxes

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Feb 16th 2016
Staff Writer and Editor AccountingWEB
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Online sales tax supporters hope gamble pays off
Mario Trujillo and Naomi Jagoda of The Hill wrote that supporters of online sales tax legislation have been promised a vote in the Senate this year, but the timing is vague and House consideration is uncertain. So, to secure consideration of the online sales tax bill, known as the Marketplace Fairness Act, advocates traded away one of their major bargaining chips by allowing a separate long-term ban on local Internet access taxes to go forward. There is no guarantee the tactic will pay off amid a condensed election-year schedule, but advocates are bullish, nonetheless. And they are putting pressure on the House to deliver. The bill would give states more authority to tax purchases made online, even when someone in their state buys the online item from a retailer with no physical location in the state. States and retail groups have long called for a fix, arguing that physical stores are being outmatched by online stores because of the tax advantage.

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Tempers flare at IRS hearing
Naomi Jagoda also wrote for The Hill that a heated argument erupted during a Feb. 11 hearing on the IRS, with Democrats and Republicans trading charges about the work of the House Oversight and Government Reform Committee. Two Democrats accused their GOP colleagues of repeatedly holding hearings on the IRS for political reasons. Rep. Elijah Cummings (D-MD) complained that the hearing was the 23rd held about the IRS in recent years. He said Republicans are frustrated that they have never found proof that the White House conspired with the IRS to target conservative groups or shown that any IRS employee destroyed evidence during the investigation. Rep. Gerry Connolly (D-VA) also accused Republicans of slashing the IRS’s budget and making it hard for the agency to do its job. “The IRS was trying to get conservative Americans who were exercising their First Amendment, free speech right,” said Rep. Jim Jordan (R-OH). “Twenty-three hearings is a pretty small price to pay when you’re trying to protect fundamental liberties in the Constitution, for goodness sake.”

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Marco Rubio’s tax plan would cost at least $6.8 trillion
Jeanne Sahadi of CNN wrote that Republican presidential candidate Sen. Marco Rubio (R-FL) would give tax cuts to everyone, but the biggest would go to the wealthiest taxpayers and add at least $6.8 trillion to the debt over a decade – or $8.2 trillion if interest costs are included. Deficits in the second decade would be even larger. That’s according to a new analysis from the Tax Policy Center released on Feb. 11. “If the numbers added up, it would be a radical and innovative plan,” said Len Burman, director of the Tax Policy Center. That’s largely because Rubio would replace today’s income tax with a so-called progressive consumption tax. Essentially that means he would still tax wage income at various rates but eliminate all taxes on individuals’ savings and investment income. For businesses, he would let them immediately write off all investments but eliminate their interest deductions.

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Hedge-fund magnate Mercer backs group attacking IRS
The New York investor Robert Mercer, whose hedge fund Renaissance Technologies LLC avoided an estimated $6 billion in taxes through trades the IRS is challenging, has been funding a group that’s paying for an unrelated Tea Party lawsuit against the tax agency, wrote Zachary Mider of Bloomberg. Mercer’s family foundation gave $500,000 in 2014 to Citizens for Self-Governance, a new filing showed. Citizens for Self-Governance has been financing a federal class-action lawsuit since 2013 over the targeting of Tea Party organizations by the IRS. Mercer’s donation was to support a different project sponsored by Citizens for Self-Governance and is unrelated to the Tea Party case, said Mark Meckler, the group’s president. In 2012, the IRS challenged the treatment of some trades known as “basket options” that Renaissance made and demanded more taxes. Renaissance says the transactions were proper and weren’t tax-motivated.

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EU party says Ikea avoided at least $1.1 billion in taxes
Ikea avoided paying at least 1 billion euros ($1.1 billion) in taxes owed to nations in the European Union (EU) over the past six years, the EU’s Green party said as it sought a government investigation of findings in a report it commissioned, wrote Richard Bravo of Bloomberg. The Greens/EFA group in the European Parliament said the world’s biggest furniture retailer is using loopholes to avoid paying taxes. The report comes as European officials are pushing forward with probes into Apple Inc. and Amazon.com Inc. for tax deals they set up in Ireland and Luxembourg, respectively. The EU ruled last month that Belgium’s tax arrangement with about 35 companies, including Anheuser-Busch InBev SA, was illegal and separately it struck down deals involving Starbucks Corp. and Fiat SpA last year. The commission received the Green’s report and will study it in detail, said Vanessa Mock, spokeswoman for financial services and taxation.

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IRS technical guidance roundup (week of Feb. 8)
The IRS issued the following technical guidance last week:

Notice 2016-18 provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the Internal Revenue Code. In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I). The rates in this notice reflect the application of § 430(h)(2)(C)(iv), which was added by the Moving Ahead for Progress in the 21st Century Act and amended by Section 2003 of the Highway and Transportation Funding Act of 2014.

Notice 2016-19 provides that statements required under Section 6035, regarding the basis of property distributed from the estate of a decedent, need not be filed or furnished until March 31, 2016, rather than the current Feb. 29, 2016, deadline. The notice further recommends that executors and other persons who are required to file an estate tax return wait to prepare the statements required under Section 6035 until the US Treasury Department and IRS issue further guidance.

Notice 2016-20 provides for the allocation of the national limitation for qualified zone academy bonds among the states, the District of Columbia, and the possessions of the United States.

Quick Links:

  • Tax traps: The top 10 IRS audit triggers (CNBC)
  • Rubio tax cut got bigger and bigger (New York Times)
  • Rubio’s ambitious consumption tax would reduce revenue by $6.8 trillion, give most benefits to the highest-income households (TaxVox)
  • What would happen if Bernie Sanders taxed Wall Street? (Wall Street Journal)
  • Oil tax yes, gas tax no (Huffington Post)
  • President Obama sides with US corporate tax cheats (Huffington Post)
  • It’s still Groundhog Day, at least in America (Tax Analysts)
  • What would the administration’s $10 oil tax do to the economy and federal revenue? (Tax Foundation)
  • Justice Scalia’s legacy and what happens next (Tax Foundation)
  • Checking Bernie Sanders’ math (Tax Foundation)
  • Cleveland considers hike to the worst municipal income tax system in the country (Tax Foundation)
  • Harry Potter and the riddle of RBS’s disappearing tax bill (Bloomberg)
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