ABOUT THAT BACKLOG: There has been some pressure from the Hill on the IRS to more quickly process what the agency believes to be low-risk ERC claims. But the truth is that, even though the bipartisan tax bill hasn’t moved in months, the prevailing view among lawmakers (and many tax experts) is that the Employee Retention Credit has served its purpose and should be ended or severely curtailed before more improper claims get into the system. Or put it this way: The vast majority of House members voted to kill the program as part of the bipartisan tax bill. And while some GOP senators have complained about using savings from the ERC to pay for that tax measure, it’s not exactly atop the list of objections from Republicans in the chamber. At the same time: Those pushing for the IRS to process the likely above-board ERC claims are getting support from, at the very least, some intriguing quarters. Former IRS chief Chuck Rettig recently told Bloomberg Tax that he believed the IRS was overestimating how many ERC claims were risky, before the agency released its most recent figures. In essence, the IRS found that about 10 percent to 20 percent of claims were either low risk or show unmistakable signs of being improper. The middle bucket, around 60 percent to 70 percent, have what the IRS termed an “unacceptable level of risk.” Rettig told Weekly Tax in a statement that the IRS’s risk-management work on the ERC claims should be applauded. But he also made it clear that he disagreed with the agency’s decision to “judiciously” process the lower-risk claims, which would lead to initial payments being distributed later in the summer. “The already identified low risk ERC claims, submitted by struggling small businesses, should be approved and paid immediately,” Rettig said. Looking further ahead: There has been some renewed discussion about whether Senate Majority Leader Chuck Schumer should bring the bipartisan tax bill, negotiated by Senate Finance Chair Ron Wyden (D-Ore.) and House Ways and Means Chair Jason Smith (R-Mo.), up for a floor vote. But it’s worth asking whether there will be any other efforts to essentially end the ERC if that measure doesn’t become law. It would seem unlikely that such a move would gain any momentum before the lame-duck session after November’s elections. (Keep in mind that Wyden has opposed bringing up a House-passed disaster relief tax bill, because he didn’t want to start splitting off portions of his bipartisan measure.) There could easily be efforts to pass some kind of tax bill between the elections and the start of the new Congress next year. But there’s also the question of whether lawmakers would want to make sure that they can use any savings from curtailing the ERC for other purposes, instead of merely earmarking them for deficit reduction. (Another thing to keep in mind: Lawmakers in both parties have talked up an interest in finding ways to pay for at least some of a tax package spurred by the expiration of temporary provisions from the GOP’s 2017 tax law at the end of next year.) “Any time there’s something that looks juicy as an offset, one worries about games that could get played in how it gets packaged or deployed,” said Andrew Moylan of Arnold Ventures, who is among those pushing to bring the ERC to a close. TURNABOUT, AS THEY SAY … : The Treasury Department announced on Friday that it was suspending parts of America’s tax treaty with Russia in August, in the latest U.S. response to Moscow’s invasion of Ukraine. President Vladimir Putin previously had suspended the tax treaty from Russia’s end, leading a bipartisan pair of senators to urge the Biden administration to strike back and remove double-taxation protections for Russian investors in the U.S. The U.S. and Russia agreed on a tax treaty three decades ago, as part of the increasing economic ties between the two countries following the collapse of the Soviet Union. Sens. Catherine Cortez Masto (D-Nev.) and John Cornyn (R-Texas) applauded Treasury for taking that step, with Cortez Masto saying that the treaty suspension would help ensure that Russia continues to face consequences for the war in Ukraine. “There is zero reason for the U.S. to give any preferential tax treatment to Putin’s authoritarian regime,” Cornyn added.
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