The President wants to “destroy” the Johnson Amendment. The law precludes churches and other nonprofit organizations from endorsing political candidates in order to maintain their tax-exempt status. At the National Prayer Breakfast yesterday, Trump said the law was one indication that freedom of a religion is “under threat.” But, as the Tax Hound explained last year, “The claim that the IRS stifles religious free speech seems overblown at best… Trump seems to be selling… a solution that could cause even more problems.”
Trump’s OMB pick clears two committees. The Senate’s Homeland Security and Government Affairs and Budget Committees each approved along party lines South Carolina Rep. Mick Mulvaney’s nomination. Off to the Senate floor.
Tax reform prospects? Dim and dimmer. So worries TPC’s Howard Gleckman. He reviews what’s happened to reform in just the past few days and concludes that while “it is far too soon to declare it dead… it looks like Congress will settle for a big tax cut and abandon reform.”
Hatch to Trump: Congress does trade policy, too. Democratic and Republican leaders of the Finance and Ways & Means committees met with the President today to talk trade. Finance chair Orrin Hatch has a gentle reminder: “Ultimately, major shifts in policy are decisions that should be made with the consultation of Congress which, under the U.S. Constitution, has authority over tariffs.”
At a minimum, tax reform will require the President to get busy, says Thorndike. Tax historian Joe Thorndike of Tax Analysts says, “The only way to make tax reform happen – even when the political winds are at the back of would-be reformers – is to fight hard for it. House leaders, including Speaker Paul Ryan, seem ready to go to the mat. But if the past is any guide, it will take more presidential leadership, too.”
Tax preparers get help from artificial intelligence. This tax season, IBM’s Watson will assist tax prep giant H&R Block and its 70,000 tax preparers at branch offices around the nation. Watson spent the last several months “learning” from “74,000 pages of the federal tax code and thousands of tax-related questions culled from H&R Block’s data, accumulated over six decades of preparing tax returns,” reports The New York Times.
Facebook enjoys a windfall. Thanks to an accounting rule change, companies can now recognize a tax deduction for stock options exercised by their employees on their income statements, rather than as shareholder equity. The change boosted Facebook’s book earnings by $934 million for 2016. Facebook’s Chief Financial Officer David Wehner clarifies that it’s “purely an accounting convention change and doesn't change the cash taxes we pay.” Companies like Microsoft and Alphabet (Google) are enjoying similar windfalls, at least on paper.
Watch out for a dangerous growing phishing scam. The IRS, state tax agencies and the tax industry issued an urgent alert today to all employers that the Form W-2 email phishing scam has evolved beyond the corporate world and is spreading to other sectors, including school districts, tribal organizations, and nonprofits. “This is one of the most dangerous email phishing scams we’ve seen in a long time. It can result in the large-scale theft of sensitive data that criminals can use to commit various crimes, including filing fraudulent tax returns. We need everyone’s help to turn the tide against this scheme,’’ said IRS Commissioner John Koskinen.
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- © Urban Institute, Brookings Institution, and individual authors, 2016.