Talking Tax

The new 15% global minimum tax that took effect this year is turning out to be compliance beast. The tax, which is part of an international tax deal agreed to by more than 140 countries in 2021, contains a slew of new technical terms, complex rules, and hundreds of pages of administrative guidance. Now, some of the largest accounting firms in the world have been tasked with interpreting these rules, educating their clients, and building complex data systems to help multinational companies calculate their global minimum tax bills. In this week's episode of "Talking Tax," reporter Lauren Vella sits down with Danyle Ordway, principal of tax technology and data analytics at Ernst & Young LLP, to talk about how the firm is helping clients adapt to the new levy. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

A looming decision from the US Supreme Court on federal agency rulemaking power is fueling chatter on just how much it could upend the regulatory process at these agencies. Justices in January heard two cases, Relentless v. Dept. of Commerce and Loper Bright Enterprises v. Raimondo, which challenge the decades-old landmark administrative principle known as the Chevron doctrine saying that federal courts should defer to agency interpretation when a law is vague. Bloomberg Tax reporter Erin Slowey spoke with Kristin Hickman, a University of Minnesota law professor who specializes in tax and administrative issues, on the background of Chevron in the tax context and how the Treasury Department and the IRS are expected to be largely insulated from the ruling, no matter the outcome. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

A seven-year-old lawsuit aimed at forcing overhaul of New York City's complicated property tax system has gotten a new life, after the state's high court ruled last month it could move forward. Tax Equity Now New York, a broad housing coalition, sued the city and the state in 2017, arguing that the city's method for collecting property taxes favors wealthy, white homeowners at the expense of owners and tenants in lower-income neighborhoods. But the suit was dealt a blow in 2020, when a mid-level state appeals court dismissed it. But in March, the Court of Appeals, the state's top court, revived two causes of action against the city under the state property tax law and the federal Fair Housing Act, sending the lawsuit back to Manhattan trial court for further proceedings. It held that claims against the state and constitutional claims against the city were properly dismissed. On this episode of Talking Tax, reporter Danielle Muoio Dunn spoke with Martha Stark, the policy director of TENNY and a former New York City finance commissioner, about the court's findings and how the current tax structure impacts homeowners and renters in different parts of the city. Stark said the ruling not only allows the case to proceed, but shows that "the city can act on its own" to create a fairer property tax system without a rewrite of the state's property tax law. Nicholas Paolucci, a spokesperson for the New York City Law Department, said the department is "carefully reviewing the court ruling and evaluating next steps." Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

While senators quibble over the $78 billion bipartisan tax package, the House is turning to next year, when a swath of tax cuts from the Republicans' 2017 law expire. Congress returns next week, and it's unclear if the full Senate will vote on the tax bill, which is stalled over GOP objections despite getting an overwhelmingly bipartisan House vote in January. The fate of the package of tax breaks for families and businesses likely has ramifications for 2025 tax talks, as Senate Finance Committee Chair Ron Wyden (D-Ore.) has said retroactivity for the business breaks would be too challenging to do next year. But Senate Republicans—such as Finance Committee Ranking Member Mike Crapo (R-Idaho) and John Cornyn (R-Texas), who's running to replace Minority Leader Mitch McConnell (R-Ky.)—say the GOP may be able to get a better deal in 2025, if they gain control of the White House or the Senate. Bloomberg Tax reporter Samantha Handler talks with former House Ways and Means Committee Chair Dave Camp (R-Mich.) and Todd Metcalf, former Democratic chief tax counsel for the Senate Finance Committee, about what's next for the deal, how what happens with the legislation now may affect 2025 negotiations, and what the tax committees are already doing to prepare for next year. Camp and Metcalf are both now at PwC's Washington National Tax practice. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

The corporate jet industry is the latest to be targeted by the government's efforts to make the rich pay the taxes they owe. The IRS began an audit campaign in February to clamp down on executives abusing corporate jet tax breaks for personal use. President Joe Biden's proposed budget would tighten depreciation rules and increase the tax rate on private jet fuel, and Senate Democrats sent a letter urging the Treasury Department and Internal Revenue Service to change how corporate jet owners deduct certain costs. Bloomberg Tax reporter Erin Schilling spoke with Michael Kaercher, a senior attorney adviser at the Tax Law Center at New York University, about a regulatory change the IRS could pair with its enforcement efforts and why the industry has landed in the spotlight for tax reform. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

Coming soon to corporate financial statements: a lot more tax transparency. After seven years and three rounds of proposals, the Financial Accounting Standards Board in December published new rules requiring companies to shed light on the income taxes they pay to federal, international, and state governments. The disclosure rules, which kick in as early as 2025, are a response to years of complaints that current financial reporting rules offer too few details about tax obligations. Soon, companies will have to separately list any jurisdiction that accounts for more than 5% of their total tax obligations. Publicly traded companies will have to further break down how they calculated their effective tax rate, so investors and other financial statement readers can contrast it with their statutory rate. Bloomberg Tax reporter Nicola M. White spoke with David Gonzales, a vice president at Moody's Investors Service, about what kind of details companies will have to provide and how investors and analysts could use them. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

Many taxpayers with relatively simple returns can now electronically file their returns directly with the IRS for free for the first time. The IRS, after months of preparing its government-run free e-filing pilot tool, launched the program to the wider public Tuesday. The Treasury Department expects about 100,000 of the millions eligible to use it. Democrats’ Inflation Reduction Act set aside $15 million for the IRS to issue a report on the feasibility of creating a direct e-filing tax return system. The pilot comes after years of controversy and pushback from Republicans and tax-prep software companies saying the IRS shouldn't be a preparer, collector, and enforcer. Bloomberg Tax reporter Erin Slowey spoke with Bridget Roberts, chief of Direct File at the IRS, about how the rollout is going, who is eligible, and the fate of a permanent agency-run option. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

Australian authorities continue to crack down on multinational companies it believes are trying to avoid Australian taxes—and a recent court ruling against PepsiCo Inc. gives them a tough weapon. A judge ruled in November that sales of beverage concentrate from a Singapore Pepsi affiliate to an Australian Pepsi bottler also effectively included royalties for the use of Pepsi trademarks and intellectual property that the company should have been taxed on. But for the first time, the judge also blessed the use of Australia’s “diverted profits tax,” or DPT, which slams companies with a 40% tax rate if they’re orchestrating their transactions to obtain tax benefits. PepsiCo, which is appealing the ruling, didn’t have to pay the DPT itself, since the judge ruled that royalty withholding taxes apply to it instead. But the harsh tax could be used against other big multinationals that rely on trademarks, patents, and other intellectual property as a key part of their business, like pharmaceutical and technology companies. Bloomberg Tax senior reporter Michael Rapoport spoke with Angela Wood, a partner at Clayton Utz in Melbourne, about the PepsiCo ruling, its potential effects, and what companies should do to cope with it. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

Sports team owners for decades have seen enormous tax benefits from their team purchases, dispatching squads of accountants to find write-offs on things from equipment and player salaries to TV rights and more. Now the IRS is looking to make sure all of those savings were above board. The IRS's Large Business and International Division announced the audit campaign last month, making sure the income and deductions taken by sports-related partnerships with large losses are reported in compliance with the tax code. The campaign comes as sports deals continue to reach new heights and the volume of deals remains hot, Robert Raiola, director of the Sports and Entertainment Group at PKF O’Connor Davies, told Bloomberg Tax, adding that rising values are attracting wealthy buyers and investment firms are getting in on the action. On this episode of Talking Tax, Bloomberg Tax reporter Caleb Harshberger spoke with Raiola about how owners have made the most of tax benefits for team ownership and what the new audits could mean for the world of sports. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

For more than a decade, states have had to grapple with the challenge of taxing the digital economy. Peering into cyberspace, tax administrators were often left with more questions than answers. What online products and services should be taxed? How does a state source a virtual creation to a specific jurisdiction? Can states even tax digital products and services in the face of federal limits on discriminatory taxes on electronic commerce? State tax authorities now have to answer these questions without Gil Brewer, who retired at the end of January from his position as assistant director of tax policy at the Washington State Department of Revenue and stepped down as chairman of the Multistate Tax Commission’s digital products work group. Brewer assisted with Washington’s pioneering efforts to equitably and efficiently tax digital goods and services dating back to 2009. He lobbied the tax commission in 2021 to launch an ambitious project aimed at uniform digital economy tax policies across the states. On this episode of Talking Tax, Bloomberg Tax senior reporter Michael J. Bologna caught up with Brewer to discuss his career in tax, his views on state taxation of digital products, and the risks the states and taxpayers face if they fail to develop thoughtful and legally defensible policies taxing digital products and services. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

State film tax credit programs are increasingly financing advertisements for some of the world’s largest consumer product companies, some of which subsequently sell the credits to other companies looking to reduce their state tax liabilities. Twenty-eight states and Puerto Rico allow such incentives for production of commercials. Major companies, including McDonald’s Corp., Kellanova, and AbbVie Inc., receive these to promote products such as burgers, cereal, and prescription drugs. Tax credits are sometimes obtained by ad agencies or production companies, while in other cases the brands obtain them directly. And productions aren't always required to be filmed entirely within the jurisdiction offering the credit. Some states allow recipients with minimal or no tax obligations to sell the credits for cash, enabling major corporations like Walmart Inc., Apple Inc., and Bank of America Corp. to buy them up and lower their state tax bills, despite having no involvement in the productions. In this episode of Talking Tax, host David Schultz spoke with Bloomberg Tax reporter Angélica Serrano-Román about her recent deep dive into state film tax incentive programs, the companies receiving these benefits, and the buying and selling of credits. Data obtained from Georgia, Illinois, New Jersey, and Puerto Rico, which provided insight for the Feb. 5 story, is now available on GitHub. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

More than 146 million individual tax returns are expected to be filed before the end of the 2024 tax filing season. The IRS, with the help of the tens of billions of dollars in supplemental cash from the Democrats' 2022 tax-and-climate law, built up its call centers, expanded its online options, and is now offering more hours at its taxpayer assistance centers to help make a smoother tax filing season for taxpayers and tax professionals. It also launched a controversial free agency-run filing tool for low- and moderate-income taxpayers filing simple returns, though access to the tool won't be more widely available to the general public until mid-March. Bloomberg Tax reporter Erin Slowey spoke with Tom O'Saben, director of tax content and government relations at the National Association of Tax Professionals, about what's different this tax filing season, what's happening in Congress, and why taxpayers shouldn't rush to file once the season opens. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

For decades, states’ authorities to tax the earnings of multinational corporations have ended abruptly at the “water’s edge.” Frustration with this limitation, however, has grown in recent years as large, sophisticated businesses employ accounting techniques and asset transactions to shift their domestic earnings offshore. Mandatory worldwide combined reporting—an apportionment method requiring the calculation of taxes based on global income attributable to a particular jurisdiction—is one possible solution gaining attention in state capitals. Lawmakers in Minnesota came close to enacting a worldwide system last year and the New Hampshire House debated, but failed to approve, the calculation method earlier this month. Legislators in other states have also discussed this tax calculation method. On this episode of Talking Tax, Bloomberg Tax senior reporter Michael J. Bologna discusses worldwide combined reporting with two Democratic state lawmakers committed to reforms that would limit income shifting by multinationals. Minnesota Rep. Aisha Gomez is chair of the state's House Taxes Committee and Rep. Emilie Kornheiser is chair of the Vermont House Ways and Means Committee. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

Michael Plowgian, who in December left his role as deputy assistant secretary for international affairs at the Treasury Department, had an eventful stint at the department. The former top OECD negotiator for the US started at Treasury in October 2021 as a counselor right around the time over 140 countries agreed to the global tax deal. Since then, Plowgian has been a part of large steps in the deal's progression—from tranches of Pillar Two rules to the release of a draft multilateral treaty text that would reallocate large multinational companies' residual profits to market jurisdictions. The international tax pact consists of two parts: a reallocation of large multinational companies' residual profits, known as Pillar One, and a 15% global minimum tax, known as Pillar Two. The work at the Organization for Economic Cooperation and Development, and therefore the Treasury, isn't done. Plowgian talked to Bloomberg Tax reporter Lauren Vella about what's next for the deal, how the multilateral treaty might fare in Congress, and what red lines the US won't cross in further negotiations with other countries. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

Leaders of the House and Senate tax-writing committees unveiled a bipartisan framework this week that pairs business breaks with an expansion of the child tax credit, but a path toward passage remains rocky. Despite having the blessing of Senate Finance Chair Ron Wyden (D-Ore.) and Ways and Means Chair Jason Smith (R-Mo.), the panels' ranking members aren't yet sold. And while the framework has support from Senate Majority Leader Charles Schumer (D-N.Y.), it's not certain whether Speaker Mike Johnson (R-La.) will back the deal, too. The agreement—paid for by ending the troubled employee retention tax credit program after a public notice—evenly splits roughly $80 billion between the business tax benefits and an enhanced child credit. It also includes the extension of a tax deduction for disaster victims and expansion of a low-income housing tax break for developers. Reporter Chris Cioffi talks through what's in the deal and the political dynamics with Anna Taylor, deputy managing principal of Deloitte LLP's Tax Policy Group in Washington. Taylor spent nearly two decades working on the Hill, leaving her post as Schumer's tax and economic policy principal adviser to join the firm in 2023. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

In a Congress where lawmakers are divided on an overwhelming set of issues, helping to alleviate double taxation for businesses operating in both the US and Taiwan is one with rare bipartisan unity. House Ways and Means Committee members voted in unison to send a bill to the House floor aimed at providing treaty-like benefits to the island democracy. Leaders of both the House and Senate tax-writing committees gave the bill their bipartisan blessing and say they're pushing for speedy passage. A way to provide tax benefits to Taipei without angering China is seen as integral to the US goal of boosting semiconductor manufacturing and research in the US. "This is about expanding and accelerating inbound investment into the United States in critical areas, particularly the semiconductor space in the context of the Chips and Science Act and what the Trump and Biden administrations have been doing since 2017 on the semiconductor front," said Rupert Hammond-Chambers, president of the US Taiwan Business Council. Hammond-Chambers talks with Bloomberg Tax's Chris Cioffi about where the two countries go from here. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

Over the past six months, the OECD has released multiple documents with more details on parts of the international tax deal agreed to by over 140 countries in 2021. But even with the additional clarity from the Organization for Economic Cooperation and Development, there are still fundamental questions about key parts of the deal—such as a simplified transfer pricing method, known as Amount B—that remain. The tax agreement comprises two parts: a reallocation of large multinationals' residual profits, known as Pillar One, and a 15% global minimum tax, known as Pillar Two. Alan McLean, chair of Business at OECD's tax committee, talked to Bloomberg Tax's Lauren Vella about how the deal's developments impact some of the world's largest multinational corporations, and what's most concerning to companies as the world moves forward with parts of the tax pact in 2024. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

The union that represents about 65,000 IRS employees is teaming up with the agency to help attract new talent amid a hiring spree. The Democrats' tax-and-climate law gave the IRS tens of billions to dollars to modernize and go after taxpayers who haven't been paying what they owe. To do that, the IRS needs to build up its workforce, but it is competing with the more-lucrative private sector. That's where the National Treasury Employees Union is stepping in. Bloomberg Tax reporter Erin Slowey spoke with NTEU National President Doreen Greenwald about what the union is doing to negotiate benefits and flexibilities that make it more attractive to come work at the IRS, and why it's important to have a fully funded agency. She also warned about what a possible shutdown in early 2024 would do to the current and prospective workforce. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

More of the supply chain that helps create semiconductor chips wants in on a lucrative new tax credit aimed at boosting US competitiveness against China. As of now under IRS proposed rules, companies that manufacture materials or chemicals supplied to the manufacturing of semiconductors or equipment don't qualify for the 25% tax credit from the 2022 CHIPS Act. Bloomberg Tax’s Erin Slowey speaks with Tymon Daniels, vice president of tax for Corning Inc., a US materials science company that is the parent company of Hemlock Semiconductor, about the congressional intent of who should be able to qualify and the importance of have the direct pay option— where the industry can get cash in lieu of the tax credit. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

African countries face several challenges in negotiating the global tax deal involving more than 140 countries at the Organization for Economic Cooperation and Development. The agreement includes reallocation of the residual profits of large multinational companies to market jurisdictions, known as Pillar One, and a 15% global minimum tax, known as Pillar Two. On this week’s episode of Talking Tax, Bloomberg Tax senior reporter Danish Mehboob speaks with Logan Wort, executive secretary at the African Tax Administration Forum, about why developing countries feel they don't have a seat at the table for these negotiations and why some would prefer to have the project play out at the United Nations rather than the OECD. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.