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Cryptocurrency is still in its infancy and non-fungible tokens (NFTs) are an even newer asset class, only coming to mainstream notice in 2017 with the launch of CryptoPunks. So it’s no surprise that historic policies and laws are still catching up to the new realities of digital asset ownership.

Case in point: Last week, the U.S. Internal Revenue Service (IRS) published a document requesting comment and proposing new guidance on the tax treatment of NFTs. The statement, Notice 2023-27, questions whether NFTs should be classified the same as traditionally accepted collectibles like stamps, physical artworks and fine wine. It also leaves open to interpretation whether digital art can be included in the category of collectibles, or whether it needs a new category of its own.

Deciphering the current IRS guidance on NFTs

Historically, IRC Section 408 includes only five categories of assets categorized as collectibles: art, rugs or antiques, metals or gems, stamps or coins and alcoholic beverages. Section 408 gives the IRS authority to define new collectibles, but it specifically notes these must be “tangible personal property.” Miles Fuller, head of government at crypto tax firm Tax Bit and former IRS chief of counsel, calls this predicament a “legal rub.”

“The IRS actually can’t, at a regulatory level, say they’re categorizing all NFTs as collectibles because NFTs aren’t tangible,” Fuller explains.

Nonetheless, he considers Notice 2023-27 a promising step towards increased clarity regarding the tax liabilities of NFT collectors. In particular, the IRS intends to treat NFT as collectibles if they are associated with a physical item, an interpretation described in the document as a “look-through analysis.”

There are a few specific cases where this look-through analysis will come in handy already. For instance, the fractionalized NFT platform Otis sells NFTs linked to physical assets like rare books and trading cards, or companies like the BlockBar, a Web3 company focused on NFTs linked to real-life rare wines and liquor. In these scenarios, an NFT may serve a similar purpose as a title or property deed, explains Fuller. The IRS is not necessarily interested in taxing the NFT as an asset in and of itself, when really it’s the token’s tie to a physical asset that makes it valuable.

Story continues

“The IRS is not trying to tax the technology,” Fuller said. “It’s just trying to tax the economic unit that the technology gives rise to. The tax code is all about taxing the actual economic property.”

The notice also appears to question whether the look-through analysis applies to digital art files themselves and whether digital art can be classified as a collectible like its physical counterparts. Justin Macari, a New York-based certified public accountant, predicts the IRS will look closely at intellectual property (IP) rights when determining whether a digital asset has collector value. In the notice, the IRS lists both topics in the list of requested feedback, asking:

1. How might the potential for the owner of an NFT to receive additional rights or assets (such as additional NFTs) due to ownership of the NFT (even in the absence of a specific contractual right under the NFT) be treated?

2. What factors might be relevant if the NFT’s associated right is less than full ownership of an asset (for example, if the associated right is simply personal use of a digital file).

“I think it’s going to come down to IP use,” Macari told CoinDesk. “I’m going to be writing to the IRS to give comments here because there’s so much to be said.”

Macari cited the example of Snoop Dogg, who owns Bored Ape #6723. Bored Ape owners have rights to the IP associated with their NFTs. As Macari argues, if owning the NFT attached to a particular profile picture (PFP) or 1-of-1 NFT gives someone the right to create physical merch and profit-generating franchises, this could be a clear identifier of long-term collector value. In contrast, NFTs that simply represent digital assets, such as metaverse land, more closely resemble the IRS’ definition of normal capital assets and would be taxed accordingly.

See Also: How AI Is Changing Artistic Creation and Challenging IP Laws

Normal capital assets are taxed at a rate ranging from 0% to 20% based on a person’s income level, whereas collectible assets are taxed at a 28% rate. Despite the potential increase in tax rate for NFT collectors, both Fuller and Macari believe increased clarity is a net positive.

“I see this [notice] as a good thing because it gives way more legitimacy to NFTs as a whole,” Macari said.

How to submit comments to the IRS

If you have thoughts on the matter, you can submit comments in writing on or before June 19, 2023. Make sure you should include a reference to Notice 2023-27.

The easiest way to have your comment considered is electronically via the Federal eRulemaking Portal at www.regulations.gov (type “Notice 2023-27” in the search field on the Regulations.gov home page to find this notice and submit comments).

Learn more about mailed-in comments and what questions the IRS needs input on by reading the full notice.

See Also: Do You Owe Taxes On Your NFT?

Originally Appeared Here

TOPEKA — Kansas could have a perfect romance with a wide-ranging tax proposal, Rep. Stephanie Sawyer-Clayton said, comparing her tax bill amendment to dating a dreamboat of a man. 

“Right now, this bill is like a really nice guy,” Sawyer-Clayton, an Overland Park Democrat, said. “It’s really nice, but it’s not our dream date.” 

Her amendment to the bill was rejected, but fellow Democrats also stood in support of a Republican-engineered tax proposal that would change the landscape of income, property and food sales taxes across Kansas.  Sawyer-Clayton’s amendment would have done away with time limitations for a property tax proposal. 

Kansas currently operates on a tiered income tax system. The bill would get rid of this system and implement one rate for all individuals above a certain threshold, an idea originally panned by critics who said a flat tax proposal would benefit the wealthiest Kansans while not offering much to the state’s lowest income earners. 

The House Substitute for Senate Bill 169  would implement a 5.25% income tax rate for Kansas filers, beginning in tax year 2024. The tax would apply to single filers making more than $6,150 and $12,300 for married individuals filing jointly.

The flat tax plan would also reduce taxes for corporations and financial institutions starting in tax year 2024, reducing the corporation tax rate to 3%. The current tax rate is 4% for corporations, though the tax rate is scheduled to be reduced to 3.5% in 2024 due to a business incentive program. 

Rep. Tom Sawyer, a Wichita Democrat, said the income tax portion of the bill initially gave him “heartburn” because he would prefer more of a tiered system, but he supported homeowner tax relief. 

“I’m not king; we have to compromise,” Sawyer said. 

Sawyer successfully added an amendment on residential property taxes. Under his amendment, residential property valued up to $80,000 would be exempt from a statewide property tax beginning in tax year 2023. Currently residential properties valued up to $40,000 are exempt. 

“I think it’s important that we give our homeowners a little more tax relief,” Sawyer said. “I don’t think this does break the budget.” 

House Minority Leader Rep. Vic Miller, a Topeka Democrat, also spoke in support of the amendment. 

“It’s something, and I stand in strong support of it,” Miller said of the property tax provision. 

Under the bill, banks would have their tax rate reduced from 2.25% to 1.625%. percent. Other corporations, such as savings and loan associations, would have taxes reduced from 2.25% to 1.61% starting in tax year 2025. 

Another bill provision would eliminate state sales tax on food this year, instead of following the current plan of phasing out the tax by 2025.  

Other provisions include an income tax exemption expansion for Social Security benefits, and an increased exemption of residential property from the statewide mill school finance levy. 

The State Highway Fund would also receive 18% of sales tax revenue beginning in July, instead of the currently planned increase, which would provide the 18% beginning in January 2025. 

A Senate version of the bill passed 22-17 as a 4.75% flat tax income rate. The tax plan was carried on the floor by Sen. Caryn Tyson, R-Parker, who chairs the Senate Assessment and Taxation Committee, and has been championed by Senate President Ty Masterson, R-Andover. The Senate flat tax proposal would cost the state $568.5 million in the first full fiscal year after it takes effect, according to the state’s estimate.

Rep. Adam Smith, a Weskan Republican and Chair of the House Taxation Committee, introduced the bill. Smith said the bill was focused on sustainability and the will of Kansans. 

“This bill is going to provide a lot of tax relief across a wide area,” Smith said. “We wanted to focus the tax cuts on the broadest number of Kansans that we could.” 

Lawmakers voted to advance the bill, with a final vote on the proposal expected soon.

Originally Appeared Here

About two years ago, on July 3, 2021, this column’s subject was that accountants in New Jersey had simple advice for their clients about improving their financial position: Get out of Dodge or, more accurately, New Jersey.

A portion of the column about New Jersey accountants’ head-for-the-(Southern)-hills recommendation was as follows: “Said CNBC on July 11, 2021: ‘Certified public accountants have a message for New Jersey-based clients: It’s time to move to a lower-cost state. That’s according to a recent survey from the New Jersey Society of CPAs, which found that 70% of professionals surveyed who have clients in the state have advised them to move due to the high cost of living.’”

Tennessee, though not seeing a stream of moving vans from the Garden State to the Volunteer State, has about five times more New Jersey residents moving here than Tennesseans moving to New Jersey.

New Jersey is among the high-tax, high-cost states that are losing population, along with California, New York, Illinois and some others. At the close of 2022, NJ Spotlight News cited U.S. Census Bureau figures that showed New Jersey lost population in 2022: the state’s population has declined three of the last four years. NJ Spotlight News in 2022 also highlighted another problem New Jersey shares with high-cost states: high property taxes, in New Jersey’s case, the nation’s highest: “the average New Jersey property-tax bill has risen to nearly $9,300,” the publication reported.

More evidence: A Hertz rental truck to accommodate a three-to-four-bedroom home to move from Knoxville to Newark would at present cost $644; to move from Newark to Knoxville, it’s $2,494.

A fairly straightforward principle of economics is that when things become too expensive, people find alternatives. Businesses understand this very well, expanding or contracting depending upon numerous factors, with cost to consumers a leading issue. Government is often much slower to respond. Government typically resists downsizing; therefore, when people and businesses move away from a city, county or state, there are fewer taxpayers left to pay the bills. When taxes are raised to make up for this decline (as well as for inflation and other concerns) it motivates more people to leave, and the cycle repeats itself.

Businesses, to survive in whatever the economic conditions, want to keep existing customers and attract new ones. Raising prices is rarely the first action taken. New Jersey Gov. Paul Murphy has proposed a budget for the coming year that seems to acknowledge an understanding that government sometimes has to act like a business.

Among Murphy’s proposals is agreeing to end this year a “temporary” 2.5% corporate business tax surcharge that began in 2018, a surcharge that was supposed to have declined annually until disappearing in 2021. However, the legislature kept extending the surcharge; with it in place, at 11.5%, New Jersey had the nation’s highest state corporate business tax. Nine percent is still high, but New Jersey business associations are signaling approval of the governor’s proposal.

Murphy takes a different tack with property taxes. He wants a second year of a property tax rebate that would provide $450 in renters assistance to families making up to $150,000 per year; property tax rebates of $1,500 to households making up to $150,000; and $1,000 in rebates to families making between $150,000 and $250,000. But that’s not a tax decrease; it’s giving back to people a portion of their own money, and property taxes are still high.

New Jersey isn’t the only northeastern state grappling with how to make itself more affordable, as the Wall Street Journal reported on Feb. 28: “The Northeast has seen a spate of proposals … Massachusetts Gov. Maura Healey, a Democrat, this week said her coming budget proposal will include a reduction in the state’s capital-gains tax as well as a new $600 tax credit for dependent children and seniors. Ned Lamont, the Democratic governor in Connecticut, recently proposed the first income-tax rate cut for that state in almost 30 years.”

What’s underlying this? Competition. Northern states are in competition with low-cost, no-income-tax states like Tennessee, Texas and Florida, and other financially attractive states that may have state income taxes but not the same overall tax burden.

Whether the exodus from New Jersey and northeastern states to Tennessee and other Southern states will be stemmed by these acts is unlikely. It will probably take more. But what it shows at a minimum is that Tennessee – and states like it – have been right all along.

Jimmy Rodefer is CEO of Rodefer Moss & Co., headquartered in Knoxville, and with offices in Tennessee and Virginia. Contact him at www.rodefermoss.com/Knoxville.

Originally Appeared Here

03.22.23

Senator Murray emphasized Treasury’s role in supporting and safeguarding the economic wellbeing of Main Street while also highlighting the important role the agency plays in advancing key national security imperatives

 

ICYMI: Senator Murray Statement on the President’s Budget Request – MORE HERE

 

***WATCH: Senator Murray Discusses Treasury Budget with Secretary Yellen***

 

(Washington, D.C.) – Today, at a hearing with Treasury Secretary Janet Yellen on the President’s FY24 budget request, U.S. Senator Patty Murray (D-WA), Chair of the Senate Appropriations Committee, underscored the importance of investing in the Treasury to help ensure the economic prosperity of Main Street, not just Wall Street. Senator Murray went on to emphasize that she would be working closely with Vice Chair Collins to write a bipartisan spending bill that provides Treasury with the resources it needs to safeguard and promote the American economy while also advancing key national security interests like enforcement of sanctions against American adversaries. Senator Murray also made clear, once again, that Congress should waste no time in raising the debt limit in a bipartisan way to avoid a needless and unforced economic catastrophe.

 

“This hearing is really an important reminder that when it comes to keeping our nation strong, secure, and competitive, it is not just about how much we spend on defense, which is important, it is also about how strong our economy is—and I mean on Main Street, not just Wall Street,” said Senator Murray. “The collapse of Silicon Valley Bank and Signature Bank have been a really stark reminder of the important role Treasury does play regulating our banks, ensuring our economy is sound, and protecting American workers and savers from paying the price for Wall Street’s mistakes.”

 

“Strong funding for Treasury means strong enforcement of our sanctions against Russia, Iran, drug cartels, and other dangerous actors. It also means when my constituents call the IRS with a question about their taxes, they can actually get a real person on the other end of the line,” continued Senator Murray. “We need a modern IRS, and that won’t just mean fewer tax cheats stiffing working families when it comes to paying their fair share, it means that Americans’ personal financial information is safer from cyberattacks or nefarious actors—and it will mean we can put more money back in families’ pockets when it comes to the tax refunds and relief that they are entitled to, like the child tax credit President Biden proposes reinstating in this budget.”

 

During the hearing, Senator Murray reiterated to Secretary Yellen that she expects to see Treasury’s spend plan for the Inflation Reduction Act funding provided for the Internal Revenue Service (IRS)—and that she expected the Secretary to keep her closely apprised of the Treasury’s response to the recent bank failures at Silicon Valley Bank and Signature Bank.

 

“Secretary Yellen, I asked you about the IRS’s spend plan for the IRA funding in our call when we talked last month,” said Senator Murray. “Congress still doesn’t have it, and I want to join Chair Van Hollen in saying the Department has had enough time to produce it, and we expect to see it.”

 

Senator Murray went on to ask Secretary Yellen what resources would be needed to implement the Murray-negotiated SECURE 2.0. As Chair of the Health, Education, Labor, and Pensions (HELP) Committee in the last Congress, Senator Murray secured provisions in the legislation to bolster savings by allowing employers to offer emergency savings accounts; expand access to employer-sponsored retirement plans through multiple employer plans and through increased access to plans for part-time workers; improve communications to retirement plan participants and transparency around lump-sum buyout offers for pension plan participants; ensure people get clear information about fee disclosures regarding their retirement plans; and more.

 

“Last year, I was able to help pass a sweeping bipartisan retirement bill in our SECURE 2.0 Act that will increase families’ financial resiliency, help more families save for a dignified retirement, and make it easier for businesses to offer retirement plans,” asked Senator Murray. “Can you tell us what resources Treasury will need to implement all of SECURE’s directives in a timely manner?”

 

Senator Murray also asked Secretary Yellen, a former chair of the Federal Reserve, to outline how the President’s budget would strengthen the American economy and provided her with an opportunity to rebut false Republican talking points that wrongly suggest the President’s budget would have any meaningful effect on inflation.

 

“President Biden’s ’24 budget is rightly called ‘a blue-collar blueprint to rebuild America.’ And that blueprint would not only help families with lower health care costs, but also invest in quality child care, ensure giant corporations and billionaires pay their fair share, and a lot more,” said Senator Murray. “Do you think that the President’s budget would increase inflation or put us on a path to ‘fiscal ruin’ as some of our colleagues have suggested?”

 

“No I don’t. It does invest in America, in our people, in our economy in ways that will make it more productive—but it proposes ways to pay for that, and in fact, over ten years, it involves deficit reduction amounting to $3 trillion,” replied Secretary Yellen. “So it puts us on a more secure and prudent fiscal path.”

 

###

Originally Appeared Here

JEFFERSON CITY, Mo. — Missouri is one of just 13 states that levy a sales tax on grocery food items.

Citing the hefty burden on low-income shoppers and rising cost of food, several other states have moved to reduce the burden of the grocery sales tax. Kansas began phasing it out this year, and Illinois suspended the tax for one year.

But in Missouri, renewed bipartisan efforts to eliminate the sales tax on take-home grocery food this session appear stalled.

A standalone bill to eliminate the state portion of the grocery sales tax, sponsored by Sen. Mary Elizabeth Coleman, R-Arnold, was approved by committee last month but has yet to be placed on the Senate’s debate calendar.

“I’m not as confident that that will have a path forward,” Coleman said in an interview last week with the Independent. She added that typically, bills that haven’t reached the other chamber at this point in the legislative session “have a harder time” ultimately passing, although she is “not pessimistic” because it is a bipartisan issue other states have tackled.

Six bills in the House have been filed to eliminate the grocery sales tax but none has been assigned to a committee.

Proponents successfully added the grocery tax proposal as an amendment to an unrelated bill two weeks ago in the Senate. But last week, after the estimated cost of eliminating the tax was determined, the bill’s sponsor demanded it be removed, effectively derailing both measures.

Coleman said she did not support the removal of the grocery tax provision last week.

“I was really disappointed to see that we were stripping that off,” she said.

By the numbers

The fiscal note for the grocery tax loss estimates that the state would lose over $1.3 billion in local funds and $200 million in state funds each year beginning in fiscal year 2025. Coleman’s standalone bill included only the state tax repeal.

Sen. Lincoln Hough, R-Springfield, raised concerns about the price tag, arguing during the Senate debate that the Legislature’s income tax cuts negotiated last year would provide similar help to low-income families.

“This is going to be an interesting litmus test as to whether or not the majority of the (Senate) still continues to believe that we need to be lessening the tax burden more holistically, or if we’re starting to say maybe enough is enough,” Hough said, adding that “a number of reductions to the individual income tax … will continue to decrease the burden on individuals.”

Coleman, who proposed similar legislation in the House last year, said taxing essential items like food poses an inordinate cost to the lowest-income consumers.

“I don’t think that the taxpayer is wanting us to tax food,” she said. “I really don’t believe that.”

The lowest-income U.S. households spent over 30% of their incomes on food in 2021, according to federal data released last month, while middle-income families spent just 12%.

The price of at-home food nationally soared by around 11% in 2022 compared with 2021.

Take-home grocery food items in Missouri are taxed by the state at a rate of 1.225%, which goes mainly to a fund for public schools. Localities levy additional grocery sales taxes at varying rates that can add up to 8%.

“I would argue that food is a necessity,” Coleman said in February during a Senate committee hearing. “I find taxes that are (on) essential items are some of the most regressive, harming the poor and not the way to fund our state government.”

Coleman’s bill would eliminate the 1% state sales tax but not the local taxes. She said during Senate debate last week that local governments “were pretty concerned about the impact this might have on their budgets.”

Eliminating the state sales tax, she said, would save a family of four around $87 per year on groceries.

But it isn’t clear what funding sources would backfill the lost revenue to education — a challenge several states face as they attempt to eliminate the tax, according to a Pew Trusts report earlier this year.

“My question is your bill doesn’t address the shortfall. So we’re dependent upon other bills,” said Sen. Doug Beck, D-Affton.

“I would prefer that that would be in one bill, that we could see that both things pass at one time,” Beck added.

Tied to education

Mallory Rusch, executive director of the anti-poverty organization Empower Missouri, who testified in favor of the bill in February, said that “we’ve been put in a little bit of a bind” by Missouri because the tax is tied to education.

“We believe that it is really important to fully fund education,” Rusch said, “but we don’t feel like that education funding should come on the backs of those who have the least across the state of Missouri.”

Education entities raised resistance last year to a similar House bill because of concern around funding.

The fiscal note estimated the school district trust fund would lose over $115 million next fiscal year if the state sales tax were removed.

Rusch also said that local sales taxes can be “far more burdensome” than state ones.

Coleman said they could replace the funds with surplus revenue, or through other legislation, such as by passing a proposal to legalize video lottery games.

Senate Minority Leader John Rizzo, D-Independence, during debate last week pointed to the state’s large budget surplus.

“I’m not opposed to tax cuts,” Rizzo said. “If we are going to do that, I’d rather it affect a single mom, I’d rather affect a family that’s trying to make ends meet.”

Originally Appeared Here

March 16,2023

Urges Administration to engage in bipartisan negotiations over debt ceiling

Washington,
D.C.–At a U.S. Senate
Finance Committee hearing on President Biden’s FY2024 budget, Ranking Member
Mike Crapo (R-Idaho) said that after two years of economic mismanagement that
contributed to record-high inflation and excessive deficit spending, the Biden
Administration is doubling down with more of the same in its budget. 
Noting that Americans want Congress to exercise fiscal restraint, Crapo urged
Treasury Secretary Janet Yellen to engage in bipartisan discussions regarding
the debt ceiling.    

Click here to watch.

On debt
ceiling negotiations:  

We are in
agreement that we need to protect the full faith and credit of the United
States.  Frankly, the problem that we see, on the Republican side, is that
it’s all tax and all spending increases in terms of the Administration’s
approach to this.  And while you and the Chairman just discussed a number
of concerns you have with Republican ideas with regard to how to deal with
this, the bottom line is we must stop trying to solve this problem with
massive new spending and massive new taxes.   

At this
point, the President has refused to negotiate with Republicans on fiscal
restraint policies that they believe need to be put into place with a new
extension of the debt ceiling.  We must engage in negotiations to get
over some of these disagreements and this new debt ceiling resolution must
include fiscal restraint.  We have got to get some kind of attention
to this.  I think the American public is crying out for Congress to pay
attention to this issue and put fiscal restraint in place.  Can you
commit, at least, to negotiate with Republicans as we try to work forward on
some aspects of fiscal restraint to put into the debt ceiling discussion? 

I interpret
your answer to be that you are very willing to discuss the President’s budget
tax increases and increased spending–but with regard to the debt ceiling
discussion, you’re not willing to discuss any actual fiscal restraint in terms
of spending control in the United States.  If I interpreted that wrong,
I’m sorry, but we have got to get negotiating on more than just whether the
President’s budget is the right approach; there are other ideas and we engaged
in that.  I just hope you will take that message back to the
President.   

Click here to watch.

In his opening
remarks, Crapo compared the economic mismanagement of the last two years
against the strong economy that existed under Republican leadership.  He
also highlighted the $43.2 billion funding request for the Internal Revenue
Service (IRS) in the President’s budget, which is in addition to the
already-approved $80 billion awarded the agency in the partisan Inflation
Reduction Act.  

On the
President’s failed economic policies:  

The
President’s budget demonstrates the Administration has not learned from its
mistakes.  After two years of policies that contributed to record-high
inflation and excessive deficit spending, this Administration is doubling down
with more of the same.  The spending binge must stop.  We must
address our growing deficits in order to put the United States’ finances on a
sustainable path, and pro-growth tax policy should be part of the solution. 

The Tax
Cuts & Jobs Act led to one of the strongest economies in generations.  TCJA introduced competitive tax
rates while broadening the base, including by enacting the first global minimum
tax of its kind, and putting an end to corporate inversions.  It also
contributed to record-high corporate tax receipts, both nominally and as a
share of gross domestic product.  But instead of considering bipartisan,
pro-growth policies, the President’s budget includes a whopping $4.7
trillion of new and increased taxes on American job creators, which
ultimately means fewer jobs and lower wages. 

On the $43.2
billion funding request for the IRS:  

The
Administration continues to hide its true intentions for transforming the
IRS.  The budget doubles-down on the $80 billion already given to the IRS,
including two additional years of plus-up funding totaling $29.1 billion solely
for “enforcement and compliance initiatives,” in addition to $14.1 billion more
of yearly funding.  That’s another $43 billion!   

Secretary
Yellen, I agree with you that having a funding plan for an agency budget that
dwarves many others is “critical.”  In the meantime, the IRS has embarked
on a “spend first, plan later” approach that is not transparent or
responsible, and is a surefire recipe for error, waste and mismanagement. 

While we may
not have all the details, we do know that only six percent of the existing
plus-up funding is for modernization, while over 62 percent is solely for
hiring–more than 93 percent of which is enforcement hiring. These new
funds are not going to replace retiring IRS agents, as annual appropriations
already provide that funding, and the Administration has not requested any
reductions in IRS annual funding to account for replacing retirees with plus-up
funding.

Previous Article

Originally Appeared Here

By Representative David Gomberg, House District 10

3/13/2023

Hello Neighbors and Friends,

If your household is anything like the Gomberg household, you are working on your 2022 tax filings.

For the second year in a row, taxpayers will have a few extra days to file their federal income tax returns.

The deadline to submit tax returns for 2022, and pay any taxes owed, will be Tuesday, April 18, 2023. The usual deadline of April 15 falls on a Saturday. When Tax Day falls on a weekend, the IRS traditionally pushes the deadline to the next business day. This year a holiday recognized in Washington, D.C. will push things back a day further to Tuesday.

If you are ahead of schedule, the Oregon Department of Revenue has begun issuing refunds to taxpayers who have filed their 2022 tax returns.

To check the status of a refund, taxpayers can use the Where’s My Refund Tool on Revenue Online. They will need their:

• Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN);
• Filing status; and
• The exact refund amount shown on:
• • Line 46 of their Form OR-40, or
  • Line 71 of their Form OR-40-N, or
  • Line 70 of their Form OR-40-P

Here are common reasons refunds may take longer and what to do about it.

• Filing a paper return. Paper returns take longer to process and, as a result, it takes longer to issue related refunds. File electronically instead.
• Filing electronically and requesting to receive a refund via a check takes longer. Request direct deposit instead.
• Filing more than once. Sending a paper return through the mail after e-filing will delay a refund. Taxpayers should file just once.
• Filing during peak filing periods. Refunds are also issued slower during peak filing periods, like the last few weeks before the April 18 deadline. Filing well ahead of the deadline will help taxpayers get their refunds sooner.
• Refunds may be delayed when errors are identified on returns. Taxpayers who receive a letter requesting additional information are urged to respond promptly through Revenue Online to speed the processing of their return.
• Taxpayers who check Where’s My Refund one week after they file and receive a message saying their return is being manually processed should watch their mailbox for correspondence from the department. If it has been 12 weeks or more since they filed their return and they haven’t received a letter from the department, taxpayers should call (503) 378-4988 or (800) 356-4222 to speak with a customer service representative.

Even for many do-it-yourselfers, paying a bundle for tax prep software has become a familiar part of tax season. But filers reporting less than $73,000 in income — a group that includes most Oregonians, as the state’s median household income is just $71,600 — it doesn’t have to be that way. Certain tax prep companies offer free filing as part of an agreement though the IRS. Go to the IRS’s Free File program webpage and navigate to a tax preparer from there.

Oregon’s tax system ranks 24th overall on the 2023 State Business Tax Climate Index. Oregon has a graduated individual income tax, with rates ranging from 4.75 percent to 9.90 percent. There are also jurisdictions that collect local income taxes. Oregon has a 6.60 percent to 7.60 percent corporate income tax rate and levies a gross receipts tax. Oregon does not have a state sales tax and does not levy local sales taxes.

People living near Oregon’s biggest cities earn nearly twice as much as those living in remote, sparsely populated areas. That’s according to a new report from the Oregon Employment Department.

For example, Washington County residents earned $71,500 per capita during 2021. That’s the most of any county in Oregon and well above the statewide personal income level of $62,000 per capita. Contrast that with Malheur County, which had Oregon’s lowest per capita income at $38,900.

You can check an interesting map showing income by county here.

The most recent economic and revenue forecast released last week now projects that Oregon’s unique kicker law will kick by a record amount at the end of the current 2021-23 biennium. The forecast now expects the personal kicker to be $3.9 billion. Remember – this kicker will apply next year when you file your 2023 taxes.

The kicker has been triggered 13 times in the 21 budget periods since it was passed in 1980. It applies when revenues exceed the amount that economists predicted. You aren’t paying more than usual, but more people than expected are paying.

Every taxpayer receives the same credit percentage on their taxes. The more you earn, the larger your kicker will be.

About two-thirds (68%) of this biennium’s $4 billion kicker will be spent on the top 20% of taxpayers, and about a quarter of the funds, close to $1 billion, will go to the top 1% of earners, those earning more than a half million dollars a year. The typical or median-income taxpayer will get about $785, while those in the top 1% will on average get $42,000.

To use even one cent of that critical unanticipated revenue, two-thirds of our state lawmakers in both the House and the Senate must vote to suspend a law. There are some proposals to make changes this year but I don’t anticipate much movement.

The exact kicker amount will be finalized and certified this fall. The kicker will be paid out as a credit on Oregonian tax returns during the spring 2024 tax filing season a year from now.

 

Oregon tax revenues are reliant on people paying taxes. When we have fewer people, we have less money.

We’ve talked a lot in recent years about how deaths in Oregon now outnumber births and will continue to do so for decades to come. In the chart below you can see how Oregon’s fertility rate has both declined, particularly among younger Oregonians, and also shifted outward a bit, where birthrates are now higher among 30- and 40-somethings than a few decades ago.

Already we are seeing the demographic impacts in the labor force where we know retirements have increased as the Baby Boomers are now mostly in their 60s and increasingly their 70s, and the younger generations are smaller in places like Oregon. For businesses, it will be hard to find workers for the foreseeable future. Additionally, we are also seeing K-12 school enrollment declines. These changes will require a rethink of how we approach growth, our expectations for the future, and the need to adjust public policies.

There has been no bigger economic shift in the past three years than working from home (WFH), primarily for white collar type employees, and the impact on urban cores nationwide.

In 2021, working from home has become more common than it was pre-pandemic. The share of workers that WFH increased from around 6% nationwide in 2019 to 18% in 2021. So while WFH increased, it was and is still a minority of the workforce because most of us need to go into a place of work to cook a meal, give care, or swing a hammer.

At a metro level, Portland’s increases from 2019 to 2021 ranked 11th largest among all metro areas nationwide. Among the Portland suburbs the largest increases were seen in Washington County, then Clark County, followed by Clackamas. The next biggest gains overall were in medium-sized metro areas, and finally rural economies.

 

This is an opportunity for rural and coastal communities. If wages are currently higher in our cities, and more people work from home, why not work from a home overlooking the ocean, mountains, or a river rather than overlooking your neighbors nearby yard?

Population shifts and declining birth rates will affect our schools. But that doesn’t mean we can spend less on schools. Oregon’s K-12 spending lags behind the national average and well behind neighboring Washington state.

The current Recommended Budget reflects a fairly significant increase in general fund and lottery fund investment, including $9.9 billion for the State School Fund. That marks an overall $600 million increase in K-12 spending for the biennium and would average out to about $9,682 per student in 2023-24 and roughly $10,000 per student in 2024-25, according to preliminary estimates from the Oregon Department of Education.

I understand that some critics might suggest $10.3 billion to be a more palatable number, but please keep in mind that we have limited funds and that this is the starting point for budget negotiations this legislative session and not the final result. Other budgets are being reduced while school spending is increasing.

The state’s per-pupil spending did tick up nearly 3% from the previous year — and Oregon’s per-student spending is expected to rise significantly in the future because schools began receiving money from the state’s 2019 Student Success Act in the 2020-2021 school year. That money is aimed at paying for smaller class sizes, more mental health support in schools, and more help for historically underserved students, including children of color.

As a member of the Ways and Means budget-writing committee, you can be sure that I will be a consistent advocate for increased support for our public education system and increased accountability on how those dollars are sent as the process unfolds.

On Friday, March 17, at 8 a.m. I’ll be offering a legislative update together with Senator Dick Anderson. This is a live video Town Hall hosted by Oregon Coast Community College and the Small Business Development Center.

The link to the town hall is https://oregoncoast.zoom.us/j/98576145519, or https://bit.ly/coasttownhall.

Both the Senator and I serve on the Ways & Means Committee, which is scheduled to meet later that morning in Salem. So the Town Hall will end by 9 a.m. If the Ways & Means Committee meeting is canceled on March 17, I’ll plan to attend this forum in person, at Oregon Coast Community College’s North County Center, 3788 SE High School Drive in Lincoln City.

Throughout every full-length legislative term for almost the last decade, we’ve offered these live video conferences in an effort to reach everyone across our large district. Bring your comments and concerns and we’ll hear from as many of you as we can.

 

email: Rep.DavidGomberg@oregonlegislature.gov
phone: 503-986-1410
address: 900 Court St NE, H-480, Salem, OR, 97301
website: http://www.oregonlegislature.gov/gomberg

Originally Appeared Here

The 95th Academy Awards, also known as the Oscars, will be held on Sunday, March 12, at the Dolby Theatre in Los Angeles. 

This year’s top acting and directing nominees will be gifted swag bags filled with goodies that are valued at nearly $126,000. But online searches show that many people are wondering if these gift bags are taxable. 

THE QUESTION 

Are Oscar gift bags taxable? 

THE SOURCES 

THE ANSWER 

Yes, Oscar gift bags are taxable. 

WHAT WE FOUND

Oscar nominees who accept gift bags have to claim them on their federal income taxes. That’s because the IRS treats these swag bags as income, and says they don’t meet the definition of gifts. 

“These gift bags are not gifts for federal income tax purposes because the organizations and merchants who participate in giving the gift bags do not do so solely out of affection, respect or similar impulses for the recipients of the gift bags,” the IRS says on its website. 

In the early 1970s, the Academy of Motion Picture Arts and Sciences established its gift basket program as a way to say thank you to presenters and performers at the Oscars. The gift baskets often included luxurious trips, expensive jewelry and other fancy gadgets. However, in April 2006, the Academy said it would no longer give out gift baskets after facing backlash from the IRS because the agency said that movie stars hadn’t been paying taxes on the gifts they received. 

By Aug. 17, 2006, the IRS and the Academy reached an agreement to resolve the tax issues in relation to the gift baskets that were given away at the Oscars through 2005. The agreement let any person who received an Oscar gift basket prior to 2006 off the hook for paying taxes on the gifts. 

“There’s no special red-carpet tax loophole for the stars. Whether you’re popping the popcorn, sitting in the audience or starring on the big screen, you need to respect the law and pay your taxes,” former IRS Commissioner Mark Everson said in a statement.

According to the IRS, any person who accepts a gift bag at an awards show “has received taxable income equal to the fair market value of the bag and its contents and must report that amount on his or her federal income tax return.” If a person redeems a non-transferable gift certificate, a voucher for a trip or a personal service that was found in the gift bag, they must also report it on their taxes. 

Gift bag recipients are allowed to donate the gifts to charity, and may be able to receive a tax deduction. But the IRS says they still have to claim the gifts as income on their tax return. 

Distinctive Assets, a Los Angeles-based entertainment marketing company that is not affiliated with the Academy, has been distributing gift bags to the top acting and directing nominees at the Oscars for over 20 years. Their 2023 “Everyone Wins” nominee gift bag is valued at nearly $126,000. It includes skincare products, fragrances, trip vouchers, and even cosmetic surgery procedures.  

In an email, Distinctive Assets founder Lash Fary told VERIFY the gift bags his company gives out are considered business gifts by the IRS.  

“All business gifts are taxable. The IRS bases any applicable tax on the fair market value of a business gift,” Fary said. “However, the vast majority of our gift bag’s value is comprised of gift vouchers or invitations to partake in services. That means that unless a nominee uses a particular gift certificate the fair market value of that gift is zero (with no tax consequence whatsoever).” 

The Associated Press contributed to this report.

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Originally Appeared Here

Mental Health America of West Central Indiana Inc. faces a $1 million funding gap on a $14.7 million project to construct a community-based justice diversion center and build a low-income housing project named Mullen Flats.

The gap is a result of higher construction prices, higher loan interest costs and higher environmental remediation costs said Myra Wilkey, chief executive officer.

The non-profit is seeking $750,000 from the Vigo County Council to help plug that gap. That includes $500,000 for the diversion center, proposed to be funded from the county’s local income tax public safety fund, and $250,000 for the housing project to come from the county’s American Rescue Plan Act (ARPA) funds.

“We have a $1 million gap. If we were to build the diversion center outside of building it with Mullen Flats, the cost of that six months ago was $1 million,” Wilkey said after the council’s Tuesday non-voting information meeting.

“The general contractor and the sub [contractors] said if we can roll [the two projects together] you could have a potential savings of $500,000,” Wilkey said. In addition to higher construction costs, environmental remediation cost $300,000 for the Mullen Flats project.

“Costs have significantly increased since we started the project in 2020,” Wilkey said. “We got delayed because of the [COVID-19] pandemic and then the cost has skyrocketed. We thought if we waited [to move forward] it would be better. It is not because the interest rates are going up,” Wilkey said, adding interest rates on loans to start the project have created an unanticipated $350,000 funding gap.

Mullen Flats, to be built on land at 2750 Elm St., west of Mental Health America’s Liberty Village, is a 44,000-square-foot, three-story project with a 5,500-square-foot justice diversion center on the ground floor. The project includes 42 one-bedroom, low-income permanent supportive housing units on the top two floors.

Mental Health America has been awarded $13.9 million for the project, with $1.5 million from the Indiana Housing Trust Fund and $12.4 million in Low Income Housing Tax Credits from Indiana Housing and Community Development Authority.

However, the project is now facing declines due to housing tax credits, with a land purchase agreement with the city slated to expire April 7. Mental Health intends to close on financing for the property prior to that, on April 3. Construction is slated to take 16 months, with the project slated for completion in August 2024, then another six months to lease out the apartments. 

Wilkey told the Vigo County Council that Terre Haute City Council is slated to vote on a resolution to commit an additional $250,000 from ARPA funds for the diversion center. That money will complete the $1 million funding gap.

Councilman Aaron Loudermilk questioned why the county is paying a larger portion of the funding gap and why it is not equally divided with the city.

Commissioner Chris Switzer said commissioners were contacted about the issue three months ago.

“We did have a meeting with the mayor [of Terre Haute] who made it clear we [the county] did receive the biggest substantial chunk of public safety [income tax money] and we should pay for the diversion aspect as the city is providing the property, cleanup and matching $250,000,” Switzer said.

Loudermilk said that while he supports the project, “you could have countered and said the city received more in ARPA funds than the county.” Switzer said “he did that.”

The timing and sudden need of the funds annoyed Council President R. Todd Thacker.

“If this conversation all happened three months ago and we just now hear it and it is crunch time, then you come to us,” Thacker said, “I don’t like that.”

“I understand,” Wilkey said. “I don’t like it either,” she said adding some commitments were not met.

“We all need to work together so we can get there,” Wilkey said.

“That’s what we always hear,” Thacker said. “We all need to work together but you [County Council] just happened to be the last one invited.”

Councilwoman Marie Theisz said the county “has got to do something to get people to not end up in our jail. Our jail numbers are high. I am with you, I don’t like the [cost] split [with the city], but at the same time, I feel like we have to do something,” Theisz said. “Having a variety of options for the judges, for law enforcement, for the citizens of Terre Haute and Vigo County, I think is going down the right path. I want to continue moving forward on that.”

Thacker said the council “has a decision to make next week… I don’t necessarily like the split [of costs] but I don’t know that it will hang me up on it individually,” Thacker said of the funding request.

The County Council will vote on the funding request at its 5 p.m. March 14 meeting at the Vigo County Government Center.

Originally Appeared Here

The IRS recently announced that the deadline for residents of 51 of California’s 58 counties, including the entire Bay Area, would be extended until Oct. 16 because of this winter’s storm disaster declarations.

The decision by the Internal Revenue Service to delay the income tax filing deadline until October for 97% of California’s population is ridiculous policy that has serious negative consequences for the already-troubled state budget.

The IRS recently announced that it was exercising its discretion to extend the filing deadline for residents and businesses of 51 of California’s 58 counties, including the entire Bay Area, until Oct. 16 because of this winter’s storm-disaster declarations.

It’s using a chain saw when a paring knife would have been more appropriate. There is no question that some people suffered tremendous loss from the onslaught of landslides, flooding and surging ocean waves. But for the vast majority of state residents, that crisis has come and gone.

It would make sense to offer tax-filing delays for just those who suffered damage. But the IRS does not distinguish within disaster areas between people and businesses that endured harm and the rest of us. If it decides to offer tax-filing delays, it automatically does so for every resident and business within the counties designated by the Federal Emergency Management Agency as disaster areas.

The decision by the federal taxing agency backed California’s Franchise Tax Board, which collects state income taxes, into a corner. When the IRS announcement was issued Feb. 24, the state was left no realistic choice but to follow suit, which it did Thursday.

There was no practical or political way for California to stick with its original deadline of April 18, nor the first extension the IRS and state had previously announced of May 15. Most tax filers must start with preparing their federal returns and then make adjustments to that to calculate the state amount. If the state had failed to follow the lead of the IRS, it would have created chaos.

But the delay to Oct. 16 means a cash-flow slowdown for the federal and state governments. It’s unclear what the effect of that will be for the feds. But for state government, the consequences are real.

While the delay will not affect employer payments from payroll withholding, it will affect estimated quarterly tax payments and funds that come in with tax returns, according to an expert with the state Legislative Analyst’s Office.

The state Department of Finance estimates that $35 billion out of about $168 billion of personal and corporate income tax revenue originally expected in the current fiscal year, which ends June 30, will now be deferred to next fiscal year.

The state is expected to be able to internally borrow to cover that shortfall. But it will mean less money to invest and hence less return on that investment. Our back-of-the-envelope calculation puts that loss at about $500 million; the state Treasurer’s Office did not respond to our inquiry to confirm.

The biggest effect will be the uncertainty during upcoming budget negotiations. Gov. Newsom must prepare by mid-May his revised proposal for next year, and the Legislature is required to approve a spending plan by mid-June.

Normally, the estimates of state tax return revenues would be known by mid-May. This year, however, state lawmakers will have to work without complete information as they navigate budget negotiations that are already likely to be contentious, with shortfalls for the next fiscal year already projected at $22 billion-$25 billion.

The revenue delays, investment return losses and budget uncertainty were avoidable. The tax extension should have only been offered to those few who truly needed it.

Rather than granting eligibility to everyone in 51 counties, surely the IRS, which has a form for everything else, could devise one in which needy filers declare that they are legitimately impacted by a disaster. They deserve an extension; the rest of us do not.

Originally Appeared Here