More States Welcome Cannabis Business Tax Deductions

The GOP's 2017 tax law—the biggest change in the US tax code in three decades—left a mammoth task for the IRS and Treasury Department. It resulted in the Treasury and a severely underfunded IRS creating the blueprint for taxpayers and tax practitioners trying to follow the law, releasing over 200 pieces of formal guidance and more than 300 pieces of informal guidance. Many of these provisions are set to expire next year and face an uncertain fate as the November election approaches with control of the House and Senate in play. Dave Kautter, a partner at RSM US LLP, spoke with Bloomberg Tax reporter Erin Slowey on his time as the Department of Treasury's assistant secretary for tax policy and acting IRS commissioner during that major tax code overhaul. He also spoke about the agencies' role in policy making and how they can prepare for changes in 2025—if at all. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

Rep. Brad Schneider (D-Ill.) likes to be prepared. Schneider and fellow House Democrats are getting behind-the-scenes briefings that started this summer to bone up on their tax policy knowledge ahead of what's likely to become a big battle in 2025. The Illinois Democrat is a member of the tax-writing Ways and Means Committee and he's running to lead the influential New Democrat Coalition. The hope, he said, is to find agreement on tax policy that will be permanent so lawmakers don't once again find themselves addressing provisions such as pieces of the 2017 GOP-led tax law that expire next year. Schneider, a critic of the state and local tax deduction cap, said he's optimistic that lawmakers can come together on policy areas ranging from global tax to the child tax credit. On this edition of Talking Tax podcast, Bloomberg Tax reporter Chris Cioffi talks with Schneider about the upcoming talks over expiring provisions in that 2017 tax overhaul and other priorities. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

Lawmakers return to Washington next week for the final sprint of legislating before the November elections, on the heels of a failed tax bill vote, and with an appropriations deadline fast approaching. Congress will be under pressure in the next few weeks to reach a deal on government funding to avoid a shutdown on Sept. 30. The Democratic-controlled Senate is set to clash with the GOP House over whether to slash IRS funds or keep them steady, though with so little time left in session lawmakers will likely use a short-term continuing resolution to punt the fight. Also up in the air is whether tax writers will come back to the negotiation table on the $78 billion bipartisan tax package that failed to clear a procedural vote in the Senate just before the August recess. Some lawmakers already are attempting to peel off parts of that tax package—including disaster tax relief and an expansion to the low-income housing tax credit—and it's unclear if those efforts will heat up in September or the lame-duck session. On this episode of Talking Tax, Bloomberg Tax congressional reporters Chris Cioffi and Samantha Handler discuss the weeks ahead in Congress, and how lawmakers are preparing for the 2025 tax cliff. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

The market for clean energy tax credits has been booming, with demand and supply skyrocketing since the 2022 tax-and-climate law established new credits and launched a way for energy developers to easily sell those credits to investors. A midyear report by the energy tax marketplace Crux forecasts that energy tax credit transfer deals could total between $20 billion and $25 billion this year, while financial services firm Evercore ISI estimates that more than $100 billion in transferable credits will be generated annually by 2030. Still, risks remain around certain energy tax credits that have yet to see final rules from the Treasury Department, and 2025 will bring additional changes, including the launch of so-called "tech-neutral" credits that aren't tied to any one piece of technology. On this episode of Talking Tax, Bloomberg Tax reporter Caleb Harshberger talks to Crux CEO Alfred Johnson and Hannah Hawkins, principal at KPMG, about how the new market for these credits is developing and what uncertainty remains. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

When Microsoft Corp. won a $94 million income tax refund from the California Office of Tax Appeals in February, it was considered one of the biggest victories for corporate taxpayers ever in California. Now it’s unclear if Microsoft will get that refund, or if other multinationals with similar claims will either. A law passed in June reversed the ruling upholding Microsoft’s refund, and the first two lawsuits challenging the reversal landed last week. The intent of the new law (S.B. 167) is to avoid $1.3 billion in refunds to companies with similar claims pending for past tax years and $200 million a year in refunds going forward. The law does this by declaring that the California Franchise Tax Board’s position in Microsoft’s case pertaining to the tax treatment of income repatriated from abroad has been law since it issued a legal notice on the subject in 2006. The newly filed lawsuits from the California Taxpayers Association and National Taxpayers Union make it unclear when the dust will settle. On this episode of Talking Tax, Bloomberg Tax senior correspondent Laura Mahoney talks to Gina Rodriquez and Josh Booth, principals in the Sacramento office of global tax services firm Ryan LLC, about what the tax changes mean for other multinationals and for California. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

Ernst & Young LLP is developing a generative AI tool for tax professionals that's meant to automate repetitive data work and make tax planning more efficient. The Big Four company is investing $1.4 billion into gen AI globally. Other Big Four firms have made similar pledges. The investments are in part a bet that the technology can fill in some gaps from the longstanding accounting shortage. But implementing the technology in tax departments is difficult, in part because of how often policies change and the vast amount of data. Daren Campbell, leader of EY Americas Tax Technology and Transformation team, gave Bloomberg Tax an inside look at how his team seeks to overcome these challenges, where the technology is today, and what's next. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

Nearly 75% of cannabis businesses operate at a loss, and many in the industry point to a feature of the Internal Revenue Code as the reason why. Cannabis companies are prohibited from deducting ordinary business expenses—like rent or payroll—from their federal taxes as long as marijuana remains under the most restrictive portion of the Controlled Substances Act. That could change if marijuana is moved from Schedule I to Schedule III of the act, as the Biden administration has proposed. But in the meantime, 22 states plus Washington, D.C., have allowed medical or recreational cannabis businesses to take some deductions on their state returns, by decoupling their tax codes from Section 280E of the Internal Revenue Code, which imposes the federal ban. Pennsylvania was the most recent to make that change with a state budget adopted last month. In this episode of Talking Tax, Bloomberg Tax reporters Angélica Serrano-Román and Owen Racer talk about their recent look into how states are increasingly decoupling their tax from 280E at the state level. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

Italian economist Pasquale Tridico, newly elected chair of the European Parliament's Subcommittee on Tax Matters, has some fresh ideas to curb tax avoidance, which he says will be one of his top priorities. His committee can't propose legislation or substantially alter it in any way. But the panel has gained influence and exposure over time. Set up soon after the Panama Papers leaks, the committee has become a forum for politicians, companies, researchers, and activists to share opinions and research. And increasingly, policymakers are tuning in. That's the momentum Tridico wants to maintain. He proposes a European registry of assets to limit tax avoidance and to help improve the effectiveness of the global minimum corporate tax rules. Tridico says such a ledger could help ensure the minimum tax rules have more bite. Bloomberg reporter Saim Saeed spoke with Tridico about these plans for the subcommittee, and how they can impact European tax policy. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

The corporate tax rate is coming up in nearly "every conversation" House Ways and Means Committee Rep. Carol Miller (R-W.Va.) has been at recently. Miller is leading one of the ten House Ways and Means GOP tax teams, created to collect information and prepare for tax discussions in 2025, when much of the 2017 tax law expires. Miller's "Supply Chains" team is focusing on energy tax credits and the corporate tax rate, among other issues. This week members met with former Ways and Means Chair Kevin Brady (R-Texas) to discuss the 2017 tax law. Brady and lawmakers reviewed why certain decisions were made in drafting the law, and what provisions may be worth looking into, Miller told Bloomberg Tax. While the 21% corporate tax rate set by Republicans in 2017 does not sunset at the end of 2025, it's set to be a sticking point in negotiations no matter which party wins out in November. Some Republicans have floated raising the rate, and former President Donald Trump has proposed lowering it even further. Bloomberg Tax reporter Samantha Handler spoke with Miller about discussions surrounding the corporate rate and other priorities of her tax team heading into 2025. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

The state tax gap—the difference between the true tax liabilities owed to a state and the amount voluntarily submitted to revenue agencies—is possibly the most stubborn and perplexing problem facing tax administrators. For decades, revenue commissioners have tried to close the gap through audits and enforcement sweeps, but the process is slow, costly, and uncertain. Janette Lohman, a former director of the Missouri Department of Revenue, believes there is a way to collect more delinquent taxes faster, cheaper, and with less hostility: a strategy she describes as “prospective voluntary disclosure.” The states generally allow delinquent businesses to voluntarily come forward and pay their back taxes plus interest for a specified look-back period, but Lohman has proposed a process that allows delinquent taxpayers to submit their taxes on a going-forward basis without paying any back taxes or penalties. On this episode of Talking Tax, Bloomberg Tax senior reporter Michael J. Bologna caught up with Lohman to discuss her efforts in Missouri to boost compliance using prospective voluntary disclosure. Lohman, a tax partner in the St. Louis office of Thompson Coburn LLP, recently presented her strategy during the annual meeting of the Federation of Tax Administrators. Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.