CBO updates economic outlook, downgrades growth projections. The Congressional Budget Office projects that the US economy will grow at 3.1 percent in 2018, down from its April estimate of 3.3 percent. The update forecasts that growth in real Gross Domestic Product will slow in the third and fourth quarters of this year.
Manafort’s tax fraud case goes to the jury. Lawyers for President Trump’s former campaign manager called no defense witnesses in the case. The government alleged that Paul Manafort failed to report to the IRS $30 million in income that he hid in foreign banks. He’s been charged with five counts of filing false tax returns as well as bank fraud. Each of the tax charges could bring up to three years in prison.
Senator Ron Wyden still wants details about donor reporting by tax-exempts. Following the Finance Committee’s consideration of Treasury’s Deputy Secretary nominee Justin Muzinich, the panel’s top Democrat put a hold on the nomination. He wants Treasury records going back to January 20, 2017 that pertain to its decision to end donor reporting requirements for most tax-exempt organizations. Said Wyden, “The political brazenness of this action shocks the conscience. Equally concerning is that this far-reaching change was made without public notice and comment.”
Did Treasury just make the TCJA’s pass-through deduction even more regressive? TPC’s Steve Rosenthal thinks so. Steve writes that proposed Treasury regs released last week “make it harder for moderate-income employees to lower their taxes by becoming a contractor while making it easier for many high-income owners of service businesses to shrink their tax bill.” The new guidance would expand the list of businesses eligible for the special 20 percent tax deduction when those businesses are owned by high income taxpayers.
The AICPA wants IRS guidance on S corporations. The American Institute of Certified Public Accountants sent a letter to the IRS and Treasury this week requesting immediate guidance on Tax Cuts and Jobs Act provisions relating to S corporations. “Taxpayers and practitioners need clarity on S corporation issues in order to comply with their 2018 tax obligations and to make informed decisions regarding cash-flow, entity structure, and tax planning issues,” wrote Annette Nellen, AICPA Tax Executive Committee chair.
The IRS has re-proposed regulations for partnership audits. The new rules reflect technical corrections to the TCJA passed in March. Donald B. Susswein of RSM US LLP told Tax Notes that he was pleased with the guidance but practitioners and taxpayers won’t be able to assess the rules’ true impact until they’ve been through a few audits.
North Dakota residents to vote on marijuana legalization. They’ll make the decision in November. The ballot initiative would allow “non-violent marijuana related activity” for those over 21, including the unlimited ability to grow and possess pot. The measure does not include a marijuana tax.
The TCJA’s “transition tax” may be painful for Canadian residents. The tax discourages US-based multinational corporations from keeping their money in their foreign subsidiaries to avoid paying US taxes. But Canadians with US or dual citizenship who have companies incorporated in Canada must pay the tax too, and new regulations may increase their tax hit. Said a partner in an accounting firm, "You have to almost empty out your company and pay a lot of Canadian tax to avoid the US tax.”
Tax havens and deforestation? There may be a link. A new study from Stockholm Resilience Centre shows that beef and soy producers in the Amazon received over $18 billion in foreign capital from tax haven jurisdictions. The Cayman Islands was the biggest haven noted in the report. Lead author Victor Galaz said “We need a better assessment of the environmental consequences of the uses of tax havens both legal and illegal.”
If you’d like to tell us about a new research paper or have any comments about the Daily Deduction, TPC’s summary of the day’s tax news, write Renu Zaretsky at [email protected]. You can sign up here to receive the Daily Deduction as an email newsletter every weekday morning (Mondays only when Congress is in recess) at 8:00 am.
