Tax Refund

On the Senate agenda: Twelve appropriations bills. The chamber’s is hoping to pass the bills advanced by the Senate Appropriations Committee by September 30. But given a likely clash with the House over IRS funding and tax legislation, Tax Notes reports (paywall) on the more likely scenario: an agreement with the House to buy more time to avoid a partial government shutdown. The House returns Sept. 12.

TIGTA: 496 IRS employees received income from private firms. Following a request by Sen. Elizabeth Warren (D-MA) and Rep. Pramila Jayapal (D-WA), the Treasury Inspector General for Tax Administration (TIGTA) found that employees from various IRS’s offices and divisions had earned income from a large accounting firm or corporation “either prior to joining, during their time at, or after leaving the IRS.” TIGTA added, “Processes are in place to identify and address potential conflicts of interest in large corporate tax administration.” The IRS said it requires the expertise of private-sector tax professionals to effectively conduct IRS audits of large corporations. 

Big tax implications if marijuana gets a new federal classification. The US Department of Health and Human Services has recommended that marijuana be classified as a Schedule III drug (similar to Tylenol with codeine) under the federal list of drugs. It currently shares Schedule I classification with drugs like heroin. If marijuana is reclassified, the cannabis industry could save billions in federal taxes each year, since producers could be allowed to deduct business expenses.

For states, there’s no such thing as a free bet. TPC’s Richard Auxier delves into states’ tax treatments of “free bets” offered by sports betting apps. Some states allow the sports book to deduct from its taxable revenue by the full or partial amount offered in free bets. During major promotional periods (like the Super Bowl), “these deductions can account for more than 100 percent of a state’s gross game revenue, meaning the state collects no tax from the betting operators,” Richard writes. Given some disappointing revenue reports, some states are now clawing back those deductions or nixing them altogether.

Next week: “Transforming Tax Administration: Toward an Effective, Trusted & Inclusive IRS.” On September 13 the Center for Taxpayer Rights will hold an in-person and live-streamed conference featuring IRS Commissioner Daniel Werfel as a keynote speaker. Panel topics include the IRS budget and performance measures, rule-making and public participation, the IRS research agenda, and digitalization and the digital divide. Learn more and register here

September 21: How Moore v. United States could alter the tax landscape. The US Supreme Court will soon hear a case challenging the constitutionality of a one-time tax imposed by the 2017 Tax Cuts and Jobs Act on about $3 trillion in undistributed corporate earnings that had accumulated overseas. At issue is whether the 16th Amendment authorizes Congress to tax unrealized sums. TPC and the Tax Law Center at NYU Law will host an event with leading tax policy and legal experts to review the history and context of the 16th Amendment and examine the case’s potential fiscal, economic, and administrative consequences. Register here for the virtual afternoon event.  


The Daily Deduction will resume its regular schedule on Sept. 11.

For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at [email protected].

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