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Xenia man guilty of false tax claims - Xenia Gazette

Google IRS Federal Income Tax - Wed, 2016-07-13 12:13

Fairborn Daily Herald

Xenia man guilty of false tax claims
Xenia Gazette
According to court documents, between January 2012 and July 2012 Coates filed false claims for income tax refunds with the IRS. Coates presented himself to be a tax preparer in Xenia, and filed fraudulent income tax returns on behalf of individuals who ...
Xenia tax preparer pleads guilty to tax fraudDayton Daily News

all 2 news articles »
Categories: Tax news

Is there any relief for astronomical drug costs? - PBS NewsHour

Google IRS Federal Income Tax - Wed, 2016-07-13 11:05

PBS NewsHour

Is there any relief for astronomical drug costs?
PBS NewsHour
However, as prior Ask Phil pieces have explained, having Part A is regarded as being on Medicare, and folks on Medicare are disqualified from participating in a tax-favored HSA plan. ... Sadly, you are dealing with Social Security, Medicare and the IRS ...

Categories: Tax news

Will Oklahomans See a Sales Tax Question this November?

Tax Foundation - Wed, 2016-07-13 08:30

On November 8, Oklahomans may be asked to decide on State Question 779, a one percentage point sales tax increase. The ballot question’s status is uncertain: in late June, opponents filed a legal challenge contending that the ballot description and summary fail to adequately explain the sales tax increase proposal. They seek removal of the measure from the ballot. Should the measure indeed go to the voters, however, it bears asking what the proposal entails and how it would impact the state’s economy.

State Question 779 proposes a one percentage point increase to the sales tax rate that would generate an estimated $550 million in annual revenue. This revenue would be dedicated to a new limited purpose fund called the Oklahoma Education Improvement Fund. 

Allocation of Oklahoma Education Improvement Fund Teacher salary increases and teacher shortage prevention 60% Adopt or expand programs to improve early reading, high school graduation rates, and college and career readiness 9.5% Improve college affordability by funding education and general operating budgets of higher education institutions 19.25% Improve career and technology education 3.25% Increase access to early learning opportunities for low-income and at-risk children 8% Source: Calculations based on text of Oklahoma State Question 779

The largest share of the fund would be used to give every teacher in the state—regardless of current salary or experience—a $5,000 salary increase. The remaining revenue would support higher education budgets and fund the expansion or addition of other educational programs. This funding may not be used to maintain preexisting programs.

Though the sales tax increase would provide a financial boost to state education, it could also make the state less economically competitive. The tax increase contained in State Question 779 would give the Sooner State the second highest combined state and local sales tax rate in the nation, after only Louisiana.

My colleague Scott Drenkard wrote about the proposal in November of last year, arguing that the sales tax increase would hurt Oklahoma’s competitiveness on a national scale. Note that I have updated analysis with the latest local option sales tax calculations, just released.

While the Oklahoma statewide sales tax currently sits at 4.5 percent, and the hike would bring the statewide rate to a modest 5.5 percent, local sales taxes are hefty in Oklahoma, adding an average of [4.35 percent] on to the total sales tax consumers are likely to see on their receipts. If the state sales tax hike were enacted, the combined average state and local sales tax rate would be [9.85 percent], with towns like Fort Gibson paying as high as 12 percent, and Tulsa paying 9.517 percent.

A decrease in competiveness could discourage long-term growth and disincentivize relocation to Oklahoma. It would likewise impact individual pocketbooks, placing the highest burden on those with lower incomes and possibly leading consumers to purchase less, engage in cross-border shopping, or buy online.

Furthermore, counties, cities, and towns in Oklahoma rely on local sales tax revenue to pay for essential services. A higher state rate could provide them with less flexibility on local rates.

Decreased competitiveness, greater burdens on lower-income individuals, and the second-highest combined sales tax rate in the nation could be on the Oklahoma ballot this November. If voters get the opportunity to decide on State Question 779, they should be wary of the economic costs associated with the proposed sales tax increase.

Categories: Tax news

Music, Tax & The Prime Minister: How Live Aid Changed The UK And The World - Forbes

Google IRS Federal Income Tax - Wed, 2016-07-13 08:19


Music, Tax & The Prime Minister: How Live Aid Changed The UK And The World
(Keep in mind that only donations to qualified charitable organizations count for purposes of a US federal income tax deduction and that means those recognized by the Internal Revenue Service (IRS). Donations to foreign charitable organizations do not ...

and more »
Categories: Tax news

Lunch Links: Petition for Trump Tax Returns; Quintupling of North Dakota Cigarette Tax; Virginia in the Red

Tax Foundation - Wed, 2016-07-13 05:45

Today is July 13, the date in 1866 when Congress repealed most of the excise taxes passed to fund the Civil War (the income tax, while reduced, hung on until 1872). Today also would have been supply-side tax cut champion Jack Kemp’s 81st birthday.

Here are some interesting links I came across:

Switzerland and Potential Drawbacks of Wealth Taxation: My colleague Alex Durante explains why it’s so hard to tax something that’s hard to measure, building on recent analysis of Switzerland’s system. (Tax Foundation / Wall Street Journal) Petition for Trump to Release Tax Returns: 400,000 people signed, and they were delivered to Trump Tower yesterday. Quintupling North Dakota’s Cigarette Tax Likely to Be on Ballot: Supporters of the effort to raise the tax from 44 cents per pack to $2.20 per pack submitted 22,000 signatures to the Secretary of State. (KVLY) Virginia Ends 2016 Budget Year in the Red: Virginia ended up $266 million in the red for the fiscal year ending June 30. Gov. Terry McAuliffe (D) says the revenue brought in was a record level but payroll and sales tax receipts were below expectations. Republicans say the 1.7 percent revenue growth is worrisome. (Washington Post) Los Angeles Local Income Tax Proposal Dead: The county had considered the tax for funding homelessness services, but it failed to get support. Local income taxes in California are rare. (State Tax Notes) Massachusetts Considers Taxing AirBnb to Boost Earned Income Tax Credit: Imposing the existing hotel-room tax on short-term rentals would raise about $8 million, while boosting the EITC would cost $50 million. I’m unclear why they should be tied together. (MassLive) Ranking State Business Climates: Ball State University (Indiana) took seven major state rankings (including our State Business Tax Climate Index) to see where they overlap. Top five states are Utah, North Carolina, Indiana, Nebraska, and South Dakota; bottom five states are Illinois, Rhode Island, West Virginia, California, and New Jersey. They also summarize tax ranking research, noting that “rankings that focused on mostly tax variables did have some explanatory power of growth in state output, employment, and wages,” and further noting that the Tax Foundation’s State Business Tax Climate Index has some explanatory power for state GDP growth. (Ball State University)
Categories: Tax news

Amazon: How the World's Largest Retailer Keeps Tax Collectors at Bay - Newsweek

Google IRS Federal Income Tax - Wed, 2016-07-13 02:10


Amazon: How the World's Largest Retailer Keeps Tax Collectors at Bay
Newly revealed documents seen by Newsweek from a landmark court case in Seattle between Amazon and the IRS reveal how the company has attained global dominance over competitors in part by moving its global headquarters to the small, landlocked state ...

and more »
Categories: Tax news

Brazil customs' workers to strike ahead of Olympics

Yahoo Tax - Tue, 2016-07-12 15:44
Brazilian customs workers will start an indefinite strike on Thursday over wage increases, their union said on Tuesday, just three weeks ahead of the Olympics when thousands of tourists are expected to flock the South American country. The Sindifisco union of federal tax auditors, who are in charge of customs and other tax monitoring duties, voted on Friday for the strike to pressure the government to honor its promise to raise their wages by 5.5 percent starting in August, union President Claudio Damasceno said in an interview. A crippling political and economic crisis as well as the spread of the mosquito-borne Zika virus have raised questions about Brazil's ability to successfully host the world's biggest sporting event for the first time ever in South America.
Categories: Tax news

Lunch Links: France vs. Britain on Corporate Taxes; Alaska Governor Proposes Sales Tax; DC Postpones Paid Leave Bill

Tax Foundation - Tue, 2016-07-12 08:30

Today is July 12, the date in 1934 when Louisiana Gov. Huey Long pushed through a 2 percent gross receipts tax on newspapers with a circulation of more than 20,000, what he termed a “tax on lying” but what everyone else understood was an attack on critical press coverage. The 13 largest newspapers sued, and it went all the way to the U.S. Supreme Court. There, on February 10, 1936, the tax was struck down in Grosjean v. American Press Co., with Justice George Sutherland writing a masterful defense of freedom of the press.

On the tax, he wrote for the Court: “The tax here involved is bad not because it takes money from the pockets of the appellees. If that were all, a wholly different question would be presented. It is bad because, in the light of its history and of its present setting, it is seen to be a deliberate and calculated device in the guise of a tax to limit the circulation of information to which the public is entitled in virtue of the constitutional guaranties. A free press stands as one of the great interpreters between the government and the people. To allow it to be fettered is to fetter ourselves.”

Here are some interesting links I came across:

France Trolls Britain on Corporate Tax Cut: While Britain considers lowering its corporate tax rate to help it stay competitive after it leaves the European Union, France’s Finance Minister says such a tax cut just might jeopardize negotiations over Britain’s access to clients in the EU. (Reuters) Clinton Doesn’t Support Carbon Tax: While the Democratic party platform includes a call for pricing greenhouse gases, Hillary Clinton’s energy advisor says the candidate does not support it. (Associated Press) Alaska Governor Proposes Sales Tax: Alaska is one of five states with no statewide sales tax (I remember with the acronym NOMAD—New Hampshire, Oregon, Montana, Alaska, Delaware), but not if Gov. Bill Walker (I) gets his way. He wants a 3 percent state sales tax as part of his efforts to raise revenue after the drop in oil prices. He had earlier proposed a state income tax but that went nowhere. (Alaska Dispatch News) California Launches Vehicle Mileage Tax Test: 5,000 volunteers will report their driving miles to the state and pay a 1.8 cent per mile mileage tax instead of the gasoline tax. Different methods are being tried: unlimited use pass, buying a block of miles, a plug-in device that records actual use, and taking a photo of odometers. After growing steadily since forever, total miles driven in the U.S. has been essentially flat since 2004, and better gasoline mileage means there has been a real-terms drop in gasoline tax revenues. (Sacramento Bee / State Smart Transportation Initiative) DC Postpones Paid Leave Bill Until Fall: Councilmembers will have time to find the balance between costs of the program with keeping the District competitive with neighboring Virginia and Maryland. The original concept was 16 weeks of paid leave funded by a 1 percent payroll tax, but that would have produced a gap of several hundred million dollars. (Washington City Paper) Corporate Tax Event on Thursday: The Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, is hosting an all-day event on corporate tax reform this Thursday starting at 9 a.m. (Tax Policy Center)
Categories: Tax news

Switzerland Illustrates Potential Drawbacks of Wealth Taxation

Tax Foundation - Mon, 2016-07-11 13:45

The surge in inequality over the past few decades has led some economists, notably Thomas Piketty, to advocate the taxation of wealth. However, the impact of wealth taxes on wealth accumulation has not been widely studied. Using data from households in Switzerland, a group of economists recently found that wealth taxes substantially reduce reported wealth holdings. Financial assets in particular were more responsive to taxation than non-financial assets, such as real estate. The results of this study imply that these taxes would generate little revenue with a considerable cost to the economy.  

Many countries in the OECD impose estate or inheritance taxes, two kinds of wealth taxes, on their citizens. Estate and inheritance taxes are levied on the money and property of the deceased and paid by the beneficiaries. However, only a few of these countries tax personal wealth holdings on a yearly basis. Switzerland imposes the largest of these taxes, which generates 3.3% of its total revenues. The country’s wealth taxes are all raised at the canton and municipality level. Exemption levels are fairly low, exposing many upper-middle class households to the tax.

The variation of the wealth tax by canton, and the large number of households that pay the tax, make Switzerland an ideal candidate for this study. The authors find that a one percentage point increase in the wealth tax rate would reduce declared wealth holdings by a staggering 34.5%.  While some of this decline could simply be attributed to a reduction in the reporting of wealth, rather than a real change in wealth accumulation, the authors argue that Switzerland’s 35% withholding tax limits this possibility. All financial assets are subject to this withholding tax, and these payments are returned to the taxpayer in full after taxes have been filed. The purpose of this tax is to ensure that all interest and dividends received by the taxpayer are included in taxable income. For filers whose wealth tax bills amount to less than 35% of their asset returns, this withholding tax provides an incentive to accurately report financial assets, otherwise they would not be eligible for a refund. 

Some cantons structure their tax schedules differently, which alters the taxpayer response to wealth taxation. In the canton of Bern, taxpayers with wealth above a certain threshold must pay the tax on their entire wealth holdings. This creates a kink in the tax schedule, and provides an incentive for taxpayers to reduce wealth holdings to just below this threshold. This is in fact precisely what the authors found. For each percentage point increase in the wealth tax, 40% of wealth holders report assets below the threshold.

Surprisingly, the study did not find any significant impacts of wealth taxation on mobility. That is, there was no indication that taxpayers would relocate to another municipality in response to a change in the wealth tax rate. The authors hypothesized that higher rates of social welfare spending in high tax municipalities might motivate taxpayers to stay instead of relocating. However, they were unable to find any evidence that supported this conclusion.

Overall, this study provides compelling evidence that wealth taxes reduce wealth accumulation. For some proponents of wealth taxes, this is a feature, not a bug. However, capital accumulation is an essential ingredient for economic growth. Moreover, to the extent that wealth is earned through entrepreneurial risk-taking, rather than through cronyism, wealth inequality does not harm the economy. Policymakers should therefore be wary of adopting wealth taxation to combat inequality. 

Categories: Tax news

Lunch Links: New York City Gives Tax Credits to the Dead; Why New Jersey is Out of Road Money; Nebraska Taxreformus Pokemon

Tax Foundation - Mon, 2016-07-11 07:00

Today is July 11, the date in 1804 of the famous duel between Vice President Aaron Burr and former Treasury Secretary Alexander Hamilton. The animosity between the two was built on the differing economic philosophies of their political parties, and years of personal animosity built on top of that. Hamilton died and Burr’s political future was wrecked.

Here are some interesting links I came across:

Florida Congresswoman Indicted for Tax Obstruction and Charity Fraud: Rep. Corrine Brown (D) and her chief of staff were charged Friday with 24 criminal counts relating to their solicitation of donations for the charitable organization One Door for Education, which donors were told was a tax-exempt charity giving money for college scholarships and school computers. Much of the money went to Brown’s bank account and to pay for her expenses. Brown also took fictional donations to the organization and to others as a tax deduction. (U.S. Justice Department) Democratic Platform Includes Tax Proposals: My colleague Scott Greenberg reviews what’s in, both on payroll and business taxes and individual taxes. (Tax Foundation) NYC Giving Tax Credits to the Dead: New York City’s comptroller Scott Stringer has discovered that New York City provided tax credits to 3,200 deceased individuals, and several hundred more who were otherwise ineligible. New Jersey Woman Finds Lottery Ticket While Doing Her Taxes: Yokasta Boyer found a lottery ticket while pulling together papers for her taxes, checked the numbers on the lottery’s website, and found it was worth $472,271. She filed her claim on April 1; the deadline was April 14. (Forbes) Why New Jersey Transportation Fund is Bust: We previously covered the ongoing negotiations over fixing New Jersey’s transportation funding, but why are things so bad? Since 1998, the state has borrowed to pay for new projects and now 100 percent of fuel tax revenues goes for paying down debt on past projects. (Tax Foundation / Transport for America) Higher Philadelphia Cigarette Tax Increase Way Off Projection: Philadelphia hoped a $2 per pack cigarette tax would raise $77.5 million, but it only brought in $59 million. (Commonwealth Foundation) New Hampshire Business Tax Cut on Track: New Hampshire will see a modest cut in its high business taxes, triggered by a good revenue outlook. (Tax Foundation) Reforming Nebraska’s Tax System: Nebraska’s Platte Institute says you can catch the rare Taxreformus Pokemon on August 17, when they have an all-day event on the topic. My colleagues Scott Drenkard and Jared Walczak will be presenting. (Platte Institute)
Categories: Tax news

Corporate Tax Inversion and Treasury’s New Debt-Equity Regulation

Tax Foundation - Fri, 2016-07-08 12:00

This past April, the Treasury Department announced its intention to expand regulations on activities of corporations in order to make earnings stripping more difficult. Although the regulations under section 385 of the IRS code are not expected to be finalized until the fall, the business community has already expressed its opposition to the rule, due to its complexity, cost, and effect on the operations that the companies have known.  The current version of the rule, despite addressing the issue of earnings stripping clearly, is costly and does not get to the root of the problems with the U.S. corporate tax.

It is important to understand why the rule was proposed and what it is attempting to target. Multinational corporations create subsidiaries – firms that the corporation fully owns — in foreign countries in order to earn income abroad, as a company with headquarters in one country (the parent company) would not be allowed to operate in another country without opening a subsidiary firm there. When a parent company pays a subsidiary for a good or service, it is generally allowed to deduct the expense – including royalties, service fees, and interest. All of the deducted expenses are then included in the taxable income of the subsidiary.

As a result, firms sometimes have opportunities to allocate their income from one country to another in order to have a lower tax burden. Indeed, if a multinational can deduct a certain amount of money from a company that is taxed at 20% and transfer the money towards a company that is taxed at 10% in a different country, the total income of the multinational corporation would be taxed at a lower rate than previously. This practice is known as earnings stripping.

The Treasury is convinced that the practice of earnings stripping is prevalent. Specifically, the recent regulations address the concern that companies domiciled in the U.S. (which has a high corporate tax rate) receive loans from their foreign affiliates and pay interest on that debt out of their domestic income, shifting the tax burden on these payments away from the parent in the U.S. and to a subsidiary company in a low-tax country.

The proposed Treasury rule, as it stands, would treat some interest payments (debt), which are deductible, as dividends (equity), which are not deductible. It would allow the IRS to scrutinize all debt instruments among affiliates and check whether they have the following conditions: “a legally binding obligation to pay, creditors' rights to enforce the obligation, a reasonable expectation of repayment at the time the interest is created, and an ongoing relationship during the life of the interest consistent with arms-length relationships between unrelated debtors and creditors.” In other words, the IRS will obligate corporations to provide documentation for all of their debt instruments, ensuring that companies would only be allowed to deduct interest payments to a subsidiary if the relationship between the parent and the subsidiary is that of a debtor and a creditor.

These regulations, of course, come with a cost. The IRS estimates that the new regulations will cost approximately $15 million annually, mostly due to the increased paperwork burden. Furthermore, the U.S. Council for International Business claimed in its public comment that the IRS has significantly underestimated the costs and the burden of the proposed regulation. Business operations are going to be significantly affected by the rule, making the compliance quite costly, possibly outweighing the potential benefit from the reduction of corporate inversion.

In addition, the United States already is doing a fair amount to prevent corporate tax avoidance relative to the rest of the world. For example, the U.S. has relatively strict thin capitalization rules, compared to the rest of the OECD. Thin capitalization rules are restrictions on how much a corporation can fund capital through debt relative to equity. In the United States, debt payments are no longer deductible after the debt-equity ratio is more than 150%. Most countries have much higher ratio requirements, if at all. Additionally, there are transfer pricing rules, under which companies have to charge their affiliates market prices for deductible business expenses, under the so-called “arm’s length” standard. Often, this concept applies to deductibility of interest as well, disallowing absurdly high interest rates between a parent and a subsidiary.

Finally, the new Treasury regulations will not target a central cause of corporate avoidance: the complex and uncompetitive corporate tax code in the United States. For instance, if Congress removed the U.S. tax code’s bias towards debt over equity, the regulations would be extraneous. If we had a more competitive corporate tax rate, earnings stripping and inversions would also be much less of an issue.

The rules are, of course, not yet finalized. The IRS is set to have a public hearing on the proposed rules on July 14th, with more clarification expected on the details of the final version of the rule or the potential changes that may arise.

Categories: Tax news

Tax Proposals in the 2016 Democratic Platform, Explained (Part 2)

Tax Foundation - Fri, 2016-07-08 08:15

(Click here for Part 1)

Last week, the Democratic platform committee released a draft of the 2016 Democratic Party platform, which contains a great number of tax policy proposals. While party platforms are usually symbolic documents, there is reason to believe that this year’s platform may be an important signal of the future policy direction of the Democratic Party.

Earlier this week, we discussed six out of the 18 tax policy proposals listed in the platform. Today, we’ll go through six more, commenting on how each proposal might work and how each relates to proposals that Hillary Clinton and Bernie Sanders made during the campaign:

1.      “We will… use the revenue raised from fixing the corporate tax code to reinvest in rebuilding America and ensuring economic growth that will lead to millions of good-paying jobs.”

There is an important tax policy nugget buried in this quote: the authors of the Democratic platform are calling for a set of business tax changes that raises additional revenue. This is a somewhat unusual position in the tax policy world; for instance, President Obama has repeatedly called for “revenue-neutral business tax reform” – a set of tax changes that would not raise any additional revenue.

However, throughout the Democratic primary, both Bernie Sanders and Hillary Clinton distanced themselves from the idea of revenue-neutral business tax reform. Sanders has been consistently adamant that corporations should pay higher taxes overall, while Clinton suggested at one point that her administration would raise an additional $275 billion from reforming the business tax code.

The 2016 Democratic platform adopts Sanders’ and Clinton’s approach, and commits to raising taxes on U.S. businesses. This is a major policy shift for the Democratic Party: as recently as 2012, the party platform promised “to reform the corporate tax code to lower tax rates for companies in the United States.”

2.      “We will ask those at the top to contribute to our country’s future by establishing a multimillionaire surtax to ensure millionaires and billionaires pay their fair share.”

Raising taxes on high-income individuals has long been a priority for Democratic policymakers, so it is unsurprising that this year’s platform continues to call for tax increases on the wealthy.

During the campaign, Clinton and Sanders both proposed measures that would raise taxes on Americans making more than $1 million. Clinton would impose a 4 percent surtax on all income above $5 million, leading to a top tax rate of 43.6 percent. Sanders would go further, imposing a set of tax rates ranging between 43 percent and 52 percent on all income above $500,000.

Interestingly, this year’s Democratic platform does not specifically call for higher taxes on anyone besides “millionaires and billionaires.” To contrast, Clinton’s tax plan would raise taxes on households making above $250,000, and Sanders’ tax plan would raise taxes on taxpayers at every income level.

3.      “In addition, we will shut down the 'private tax system' for those at the top…”

This line in the Democratic platform is a reference to a widely shared New York Times article from last December, which claimed that high-income Americans have “used their influence to steadily whittle away the government’s ability to tax them.” The article argued that high-income Americans take advantage of the complexity in the U.S. tax code and the limited enforcement capacity of the IRS.

Shortly after The Times article was published, the Clinton campaign released a policy plan that promised to “end the private tax system for the wealthiest.” The plan included changes to the treatment of foreign reinsurance, Roth IRAs, and several other tax provisions. Sanders has also consistently railed against “loopholes that benefit the wealthy,” though he does not usually use the term “private tax system.”

It is unclear exactly what shutting down the “private tax system” would entail, but based on Clinton's and Sanders’ proposals, it would probably consist of eliminating provisions that allow high-income Americans to lower their tax bills. It is possible that this platform proposal would also entail increased funding for the IRS, although neither candidate has called for this.

4.      “…immediately close egregious loopholes like those enjoyed by hedge fund managers…”

The taxation of investment managers has been a matter of considerable controversy since 2007, when a law journal article introduced the term “carried interest” into the public consciousness. Carried interest refers to a compensation arrangement in which investment managers receive a share of the returns on an investment. Under the current U.S. tax code, carried interest is considered a capital gain and is taxed at a 23.8 percent rate. However, many argue that carried interest is really a form of wage income, and should be taxed at a rate of 39.6 percent.

During the Democratic primary, both Sanders and Clinton decried the current treatment of carried interest, with Clinton going so far as to promise to change the taxation of carried interest through executive action. Even some Republicans have jumped on the bandwagon for higher taxes on carried interest, including both Jeb Bush and Donald Trump.

In practice, the treatment of carried interest is a relatively insignificant feature of the tax code; taxing carried interest as ordinary income would only raise around $1.5 billion a year. However, the issue has become symbolic of a larger push for tax fairness, which is why it received special attention in the Democratic platform.

5.      “…restore fair taxation on multimillion dollar estates…”

Over the past 15 years, the federal estate tax has shrunk considerably in size and scope. In 2001, the estate tax was levied at a rate of 55 percent on assets above $675,000. By 2009, the estate tax rate had fallen to 45 percent and the exclusion had risen to $3.5 million. Today, the estate tax is levied at a 40 percent rate on assets above $5.45 million.

When the Democratic platform promises to “restore” fair taxation on estates, it is probably talking about expanding the estate tax by returning to past parameters. This was the approach of both candidates in the Democratic primary. Clinton pledged to restore the estate tax to 2009 parameters, with an exclusion of $3.5 million and a rate of 45 percent. Sanders would also decrease the estate tax exclusion to $3.5 million, but would raise the top rate to 55 percent.

6.      “…and ensure millionaires can no longer pay a lower rate than their secretaries.”

This line in the Democratic platform likely refers to the Buffett Rule, a tax policy proposal that has been popular in progressive circles since President Obama proposed it in his 2012 State of the Union Address. The proposal is named after Warren Buffett, who once famously claimed that his secretary paid a higher tax rate than him.

The Buffett Rule is essentially a new minimum tax of 30 percent on taxpayers with income above $1 million. It is a central feature of Clinton’s tax plan, accounting for about a third of the gross revenue in her plan. On the other hand, Sanders’ tax plan does not create any new minimum taxes on high-income individuals (and actually repeals the existing alternative minimum tax).

As far as I can tell, the Buffett Rule is the only tax policy proposal that appeared in both the 2016 and 2012 Democratic platforms. The 2012 platform read, “We are committed to reforming our tax code so that it is fairer and simpler, creating a tax code that lives up to the Buffett Rule so no millionaire pays a smaller share of his or her income in taxes than middle-class families do.” While the Democratic Party has shifted on other tax policy issues in the past four years, the Buffett Rule is a point of continuity.

Categories: Tax news

Lunch Links: Massachusetts Marijuana Initiative Gets Clarification; Alabama Starts Tax Amnesty; Why Arizona Sales Tax is High

Tax Foundation - Fri, 2016-07-08 07:00

Today is July 8, the 58th birthday of actor Kevin Bacon, the center of the “Six Degrees of Kevin Bacon” parlor game. In 2009, IRS tax examiner John Snyder was convicted of abusing his power to look up tax records of 200 prominent celebrities and professional athletes. Perhaps because of the Six Degrees game, Kevin Bacon was the first-listed of Snyder’s victims.

Here are some interesting links I came across:

National Taxpayer Advocate Releases Objectives Report: The official IRS watchdog praises the IRS for reducing taxpayer service phone wait times this year, but criticizes them for overly relying on enforcement and for treating international withholding provisions as guilty until proven innocent. (National Taxpayer Advocate) Alabama Begins Two-Month Tax Amnesty: The state is offering to waive penalties on owed individual income, corporate income, privilege, sales, excise, and withholding taxes, through August 30. However, it’s flawed in that potential amnesty takers have to disclose their details prior to negotiating the deal, unlike the two-step process used in other states. (Alabama Department of Revenue / State Tax Notes) Massachusetts Court Orders Rewrite of Marijuana Initiative: The title “Marijuana Legalization” will now read “Legalization, Regulation, and Taxation of Marijuana” and the description language will clarify what’s being taxed. The proposed ballot initiative would impose a 3.75 percent excise tax on marijuana in addition to the state sales tax, plus allow local taxes of up to 2 percent. (Massachusetts Supreme Judicial Court / Bloomberg BNA) Arizona Sales Tax is High – Why?: Experts weigh in on why Arizona has a high sales tax. Short answer: it has a low income tax and relies on the sales tax a lot, although the sales tax is still lower than California. (Arizona Republic) Oklahoma to Review Tax Credits: The new Oklahoma Incentive Evaluation Commission has selected 11 tax incentives to review for effectiveness: a five-year ad valorem tax exemption for some new and expanding manufacturers, research and development companies, computer services and data processing companies with significant out-of-state sales, aircraft repair companies, oil refineries, and wind power generators. (State Tax Notes) New York Governor Defends Tax Break Program: Gov. Andrew Cuomo (D) told reporters that the START-UP NY program, which waives 10 years of taxes for new businesses near state universities, has cost the state nothing. His remarks react to recent news that the state has spent $53 million on ads promoting the program along with questions about how many jobs it really has created. (Poughkeepsie Journal / State Tax Notes / WGRZ) Stop Dreamin’: The Economist is not bullish on state tax reform in California. (The Economist)
Categories: Tax news

U.S. tax agency investigates Facebook's Ireland asset transfer

Yahoo Tax - Fri, 2016-07-08 02:13

The U.S. Internal Revenue Service (IRS) said Facebook Inc may have understated the value of intellectual property it transferred to Ireland by "billions of dollars", unfairly cutting its tax bill in the process, according to court papers. The U.S. Justice Department filed a lawsuit on Wednesday in federal court in San Francisco seeking to enforce IRS summonses served on Facebook and to force the world's largest social network to produce various documents as part of the probe. The tax authority is examining whether Facebook understated its U.S. income by selling rights to an Irish subsidiary too cheaply.

Categories: Tax news

IRS probes Facebook over Ireland asset transfer

Yahoo Tax - Thu, 2016-07-07 13:33

The U.S. Justice Department filed a lawsuit on Wednesday in federal court in San Francisco seeking to enforce IRS summonses served on Facebook and to force the world's largest social network to produce various documents as part of the probe. The lawsuit said the documents relate to an IRS examination of the company's tax liability for 2010, when Facebook's tax return reported royalty income from transfers of intangible property to Facebook Ireland Holdings Unlimited.

Categories: Tax news

US tax authorities query Facebook on Ireland dealings

Yahoo Tax - Thu, 2016-07-07 12:17

US tax authorities are asking Facebook to turn over documents for an investigation into the social networking giant's dealings with its Irish subsidiary, court documents show. In a petition filed in federal court in San Francisco, the Internal Revenue Service said it is "conducting an examination of the federal income tax liability" for Facebook in 2010. Some of the firms have taken advantage of tax breaks offered from Ireland, Belgium and Luxembourg.

Categories: Tax news

IRS is investigating Facebook over its assets in Ireland - The Verge

Google IRS Federal Income Tax - Thu, 2016-07-07 11:20

The Verge

IRS is investigating Facebook over its assets in Ireland
The Verge
The investigation is part of an examination of Facebook's federal income tax liability in 2010. According to, the IRS says that Facebook's outside accountants valued the company's various intangibles (such as its user base and online platform ...
IRS investigating Facebook's Ireland asset transferUSA TODAY
IRS Investigating Facebook Over Ireland Asset (subscription)
Facebook faces US tax exam over Ireland asset tranfer: lawsuitCNBC
Phys.Org -Financial Times
all 21 news articles »
Categories: Tax news

New Hampshire On Track for Triggered Tax Cuts

Tax Foundation - Thu, 2016-07-07 09:15

When the New Hampshire legislature presented Governor Maggie Hassan (D) with a program of modest reductions to the state’s business profits tax (a corporate income tax) and business enterprise tax (essentially a value-added tax), she initially rejected the proposal, arguing that the reductions would “create a more than $90 million budget hole.” Eventually, however, the governor acquiesced on the tax reductions—with a further round of cuts subject to revenue triggers—and, six months in, the revenue outlook is highly encouraging.

For starters, that $90 million hole is currently a $100 million surplus.

Business tax receipts are 13.2 percent above projection, following a reduction in the business profits tax rate from 8.5 to 8.2 percent, and the business enterprise tax from 0.75 to 0.72 percent. Should current revenue trends hold for another year, further tax relief can be expected.

This next round of reductions relies on a tax trigger, proceeding only if biennial general and education revenues exceed $4.6 billion. One year into the biennium, revenues stand at $2.4 billion, putting the state more than on track to trigger a reduction in the business profits tax rate to 7.9 percent, while cutting the business enterprise tax rate to 0.675 percent.

New Hampshire is not the only state to make the implementation of tax reform contingent, in whole or in part, on meeting revenue benchmarks. Four other states and the District of Columbia are currently leaning on tax triggers to phase in rate reductions and other tax changes. Well-designed tax triggers can help states phase in tax reform while ensuring revenue stability, and can be a valuable tool in tax reform efforts. And in New Hampshire’s case, at least, tax triggers formed the basis of a compromise that appears poised to bring further tax relief in 2018. 

Categories: Tax news

Lunch Links: Louisiana to Analyze Film Credit Program; Treasury Reg Comments Due; New Jersey Transportation Options

Tax Foundation - Thu, 2016-07-07 08:45

Today is July 7, the date in 1846 when a U.S. force landed in Monterey, California, and proclaimed California’s annexation to the United States. The settler-proclaimed California Republic would formally come to end two days later, after lasting 25 days. Check out California’s tax system here.

Here are some interesting links I came across:

Treasury International Tax Regulation Comments Due Today: The proposed overhaul of section 385 remains a top topic, with more entities filing comments calling the proposed regulations overbroad and likely to harm legitimate transactions. (Politico) Mexico Junk Food Tax Cuts Purchases A Bit: “Mexico’s 8 percent tax on high-calorie snacks has been successful in reducing junk food purchases, but only by a small amount and only among poor and middle-class households, a study said Tuesday.” (The New York Times) Puerto Rico Downgraded: Fitch now rates the island’s general obligation bonds at D. Louisiana Governor Begins Review of Film Tax Credit Program: The state will conduct an independent examination of the program’s economic impact in Louisiana. Every independent analysis of state film tax credits has found that their costs exceed their benefits, although industry-sponsored studies have found net benefits. The state pays out up to $180 million a year to film studios to cover their costs, and is one of the handful of remaining states spending large sums on such a program. (The Times-Picayune) New Jersey Can Achieve Something Out of Transportation Impasse: My colleague Matthew Crumb reviews where New Jersey is at with transportation funding and what it could do. (Tax Foundation) Illinois Appeals Court Rejects Taxpayer Claim, Saying Pizza Not Necessity: To challenge a tax in Illinois, you have to pay it under protest and then sue. If you don’t pay under protest, you have to show you either didn’t know you were supposed to protest or that the payment was so necessary that it amounted to duress. The Illinois Appellate Court, Fifth District, rejected an argument that the sale of pizza was necessary because pizza is food, although they previously held that feminine hygiene products are necessary and qualifies for the exemption. They should just let the taxpayers make their case about the tax. (State Tax Notes)
Categories: Tax news

Plea deals possible in tax case against restaurant owners - Milwaukee Journal Sentinel

Google IRS Federal Income Tax - Thu, 2016-07-07 08:34

Plea deals possible in tax case against restaurant owners
Milwaukee Journal Sentinel
His son-in-law is charged with filing falsified personal income tax returns. ... Federal prosecutors say they skimmed $100,000 a month from the businesses, while telling their bank that they were barely getting by. ... An affidavit from IRS Special ...

Categories: Tax news
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