Congress is in recess. The Daily Deduction will be back next Monday and return to its regular schedule when Congress returns. Happy New Year!
An EITC ban now extends to other credits—but can the IRS administer it? The IRS can ban a taxpayer from claiming the Earned Income Tax Credit for two years if she improperly claims the credit because of reckless or intentional disregard of the rules, and bar her for 10 years for fraud. Now, the just-passed spending bill extends the same prohibition to the American Opportunity Tax Credit and the Child Tax Credit. Problem is, as Tax Notes reports (paywall), the ban is difficult to administer. The IRS questions returns by correspondence, but each year thousands of taxpayers do not respond for a host of issues, including fear, transience, or literacy.
Tesla made good on its tax deal with Nevada in the first year. Independent auditor Grant Thornton finds that the electric motor company met the state’s hiring and wage requirements and thus earned $9.6 million in transferable tax credits between October 17, 2014, through June 30, 2015. Tesla is building a $5 billion lithium battery factory east of Reno, thanks to state tax subsidies that could total $1.3 billion. In Year One, the firm hired 24 employees, and had 1,348 construction workers on its site. Two-thirds were Nevada residents, as required.
Maybe Aaron Sorkin would make a movie about this. Check out The New York Times’ lesser told tale of IRS agent Gary Alford—or “Agent 1” in this year’s federal complaint against drug lord Ross Ulbricht. Alford identified Ulbricht as the man behind the illegal online marketplace Silk Road—by searching Google. But it took Alford about three months to convince the FBI that his discovery was correct, due in part to organizational frictions between the IRS and FBI. “They don’t write movies about Frank Wilson building the tax case [against Al Capone],” noted Alford. “That’s just how it is.”
Will you ring in the new year with hard cider instead of champagne? In Pennsylvania, it may not be so easy. Just before leaving for the holidays, Congress exempted producers of alcoholic “hard” cider from the same $3.30-per-gallon tax paid by champagne producers. But there is a catch: That high-octane cider can’t be sold by beer distributors. It can be sold alongside wine, but that requires a different business license.
So many dubious tax ideas, so little time… In case you missed it last week, TaxVox handed out its Lump of Coal Awards, and TPC released its analysis of GOP presidential candidate Donald Trump’s tax plan.
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