News: Prepping for Jan. 20 — A possible stimulus check increase

Monday, January 11, 2021

Prepping for Jan. 20 — A possible stimulus check increase —The first 100 days

Jan 11, 2021

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SO NOW WHAT? With Washington still reeling from last week's storming of the Capitol, tax policy might not be top of mind for many. But the fallout – including the possibility of an impeachment trial — could imperil key elements of President-elect Joe Biden's agenda during his early days in office.

That's something Democrats are wrangling with, even as they struggle to get on the same page about things like a second round of stimulus payments.

For starters: Biden said last week that he would roll out his plan for further pandemic relief on Thursday, stressing that he remained committed to delivering the $2,000 direct payments that Democrats have made a calling card in recent weeks. The former vice president tweeted about larger checks again on Sunday — so in other words, most every indicator suggests this isn't just talk for Democratic leaders.

But on Sunday, Sen. Joe Manchin (D-W.Va.) — who will hold a lot of sway in the new 50-50 Senate — continued to sound skeptical about the idea of sending out more relief payments on top of the maximum $600 versions the IRS is currently delivering.

Or at the very least, Manchin wants to refine the idea: "I am on board by helping people that need help, people that really can't make it," he said on CNN's "State of the Union."

"Sending checks to people that basically already have a check and aren't going to be able to spend that or are not going to spend it, usually are putting it in their savings account right now, that's not who we are," he added.

IT'S TIME FOR ANOTHER WEEK, and the Morning Tax daughters have started asking their dad whether he has better use for his time than being a Chicago Bears fan.

Sounds like more fun: Today marks 71 years since one of the most famous snowfalls that has ever hit Los Angeles — when a massive one-third of an inch fell from the sky, prompting a Los Angeles Times headline of "That's Right, Junior, It's Really Snow."

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FROM A TAX PERSPECTIVE...: The most interesting part about whether the new Congress and president follow through on more payments is what it means for the IRS, which is expected to open up its new filing season in about a couple weeks.

The IRS and private tax prep outfits like TurboTax and H&R Block did just fix one big snafu in getting people their $600 payments, as Pro Tax's Aaron Lorenzo noted on Friday.

The government originally had sent the money to temporary bank accounts linked to the professional preparers, but the IRS and the companies were able to clear up the issue within a couple days.

And the speed with which the IRS and the companies solved that problem also suggests that both the private and public sector are getting even more efficient at handling the direct payments, after a similar problem developed during last year's first round of rebates.

Earlier in the week, the IRS had noted that, by law, payments sent to the wrong account had to be returned to the agency, and that people who didn't receive their money by Friday's deadline for rebates to be issued should claim them on their upcoming tax return.

So in essence, it looks like the two sides decided to press through and get the payments in the right accounts before the deadline, according to congressional aides monitoring the situation.

REGULATION TIME: Another question for the incoming administration — how much can it fit in that first 100 days or so?

For instance, it's not clear how much interest the Biden administration will have in using the Congressional Review Act to sweep away Trump-era regulations. Among other things, the CRA allows for Congress to basically scrap a rule within 60 legislative days of it being sent to lawmakers.

That sets up something of a scramble for the Biden team if it wants to take advantage of that law. (Republicans used it to strike down rules 16 times during the Trump years — 14 times between February and May of 2017.)

But here's another thing to keep in mind: Is the CRA a good tool to use specifically against tax rules?

George Callas, who was top tax counsel to then-House Speaker Paul Ryan, says no, arguing that targeting tax rules runs counter to the spirit in which Republicans enacted the CRA — to offer a tool against rules that looked too much like legislation.

"The vast majority of tax regulations are interpretative, not legislative. They don't just impose new burdens that otherwise wouldn't exist," said Callas, now at Steptoe and Johnson.

Another reason taxes are different, he added: People have to file their taxes every year, so there's more of a need for certainty — which can't really happen with a CRA process that wipes away a regulation without a replacement. And without those rules, Callas said, "taxpayers and the IRS are all over the place and no one is sure how to comply with the law."

The opposite view: Brian Galle, a Georgetown law professor who has written about how Biden can use the regulatory process to go on offense on taxes, countered that any extra ambiguity from using the CRA on taxes shouldn't be too much of a concern.

To be sure, taxpayers who had already taken actions because of the existing rule would have reason to be peeved, Galle said, and the CRA process doesn't come with the transition rules that usually come with big pieces of legislation.

But still: "Taxpayers would have to plan just as they do when there is any new legislation lacking interpretive guidance," Galle said. "I imagine Treasury would, as it often does in cases of new legislation, issue interim guidance, potentially identifying some safe harbors, while it worked on replacement regs."

Also worth noting: Tax Notes' Andrew Velarde and Jonathan Curry noted that Biden will be freezing rules in the pipeline when he takes office, but there are some interesting wrinkles there, too, when it comes to taxes.

Around the World

HOLD, HOLD, HOLD: Rishi Sunak, the British chancellor of the exchequer, is likely to push back any tax hikes in the upcoming March budget, The Times reported over the weekend. Sunak is worried that the U.K.'s economy remains in too precarious a position because of the coronavirus to handle higher taxes these days. Top government officials have yet to make any final decisions, and the March budget could still include proposals for higher taxes — but those would be postponed until at least the fall. Still, Sunak seems to have resisted pressure to extend a holiday in the stamp duty, or the tax paid on buying a home or other property. The chancellor also just rolled out a new support package for businesses, costing some 4.6 billion pounds (more than $6 billion).

Around the Nation

SPIKE THE BOOZE TAX! Maryland officials are exploring whether to hike the state sales tax on alcohol to help pay for more robust health care in rural or low-income areas, The Baltimore Sun reports. The proposed legislation would increase the alcohol tax from 9 percent to 10 percent, and would provide incentives for health care providers to offer more assistance in underserved areas. No one in the state is taking much issue with the measure's aims, but even the bill's sponsors acknowledge that the state's alcohol lobby will make it quite hard to pass the proposed offset. And in fact, a top official at the Maryland State Licensed Beverage Association said that indeed the group doesn't think it should be paying for the expanded health care services, especially given the tough economy that businesses are facing. The higher alcohol tax would only apply to restaurants and bars for an initial two years, and will only hit products sold in liquor stores after that.

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