Welcome to Tax Court; the subscription model; new blog on the block; and other highlights from our favorite tax bloggers.

March madness

• Eide Bailly (https://www.eidebailly.com/taxblog): Favorite headline of the week: “Capitol Hill Recap: (Base)line in the Sand.” Congressional lawmakers are writing legislation to extend expiring provisions of the Tax Cuts and Jobs Act (passing that package is expected to take up much of the rest of the year). A big question concerns the “baseline” to estimate the cost of the legislation. 
• Tax Foundation (https://taxfoundation.org/blog): The Inflation Reduction Act introduced tax breaks, many of which seem to be more expensive than originally predicted. Repealing these subsidies is an option now, but repeal may prove, as House Speaker Johnson said, “somewhere between a scalpel and a sledgehammer.” Four possible paths for lawmakers.
• TaxProf Blog (http://taxprof.typepad.com/taxprof_blog/): A new paper examines the 16th Amendment’s long-time granting to Congress the authority to define and tax income. Some on the Supreme Court have started to revive the idea of limiting congressional power to determine what income is. Could this be a new era in constitutional tax jurisprudence?
• Tax Notes (https://www.taxnotes.com/procedurally-taxing): Nina Olson addresses how staffing cuts to the IRS could mean erosion of the right to a fair and just tax system. Several other recent developments concerning the Taxpayer Advocate Service also caught her eye “and portend no good for taxpayers of all types.”
• Institute on Taxation and Economic Policy (https://itep.org/category/blog/): As many state legislatures near the final buzzer, welcome to March Tax Policy Madness.
• Don’t Mess with Taxes (http://dontmesswithtaxes.typepad.com/): How a growing number of taxes might soon have to hit the roads.
• Taxing Subjects (https://www.drakesoftware.com/blog): Second nature to you isn’t necessarily second nature to them: Actionable steps to take now with clients given recent tax changes.
• Taxable Talk (http://www.taxabletalk.com/): “Bye, Bye, BOI.”

Act now

• Boyum & Barenscheer (https://www.myboyum.com/blog/): New IRS FAQs that address some problems with income taxes and the Employee Retention Credit are “looooong overdue, but they do provide some answers if you are inclined to take the FAQ from the IRS and act upon them.”
• TaxConnex (https://www.taxconnex.com/blog-): How your eBay-selling clients can simplify sales tax obligations.
• Palm Beach Accounting and Financial Services (https://www.pbafs.com/blog): Does your client need a will, a trust or both?
• The National Association of Tax Professionals (https://blog.natptax.com/): This “You Make the Call” looks at Jessica, who will purchase a new electric vehicle this year. She knows the federal clean vehicle tax credit but prefers to apply it directly at the dealership rather than waiting to claim it on her return. Can she do that?
• Avalara (https://www.avalara.com/blog/en/north-america.html): What to remind them about the Texas franchise tax (which does occur in Texas and is a tax but, unlike similar levies, has little to do with franchises).
• CLA (https://www.claconnect.com/en/resources?pageNum=0): What manufacturing clients need to know about budgeting and forecasting.
• Armanino (https://www.armanino.com/articles/): Being CFO of a family office is crazy even before banking reconciliations, tax compliance, payroll, bookkeeping and more. Can AI and robotic process automation help?
• Global Taxes (https://www.globaltaxes.com/blog.php): A recent federal court ruling could allow expats to use foreign tax credits to offset NIIT liability.
• Dean Dorton (https://deandorton.com/insights/): What should K-12 schools look for in an accounting system? 

Seamwork

New to us

• Beyond the Numbers (https://hauserjonesandsas.com/blog/) Hauser Jones & Sas in Bellevue, Washington, does a range of audit, tax and consulting services, and its blog offers an equally fine array of tax prep, accounting, legislative developments and more. Recent topics include credit union audit and governance, lending risks and underpayment penalties. Welcome!

The American Institute of CPAs is asking the Treasury Department and the Internal Revenue Service for greater clarity on their proposed regulations for the SECURE 2.0 Act of 2022.

SECURE 2.0, like the original SECURE (Setting Every Community Up for Retirement Enhancement) Act of 2019 includes a wide range of provisions related to retirement planning and tax-favored 401(k) and 403(b) plans. SECURE 2.0 generally requires newly created 401(k) and 403(b) plans to automatically enroll eligible employees starting with the 2025 plan year. 

The Treasury and the IRS issued the proposed regulations on auto enrollment and Roth IRA catchup contributions in January during the waning days of the Biden administration. Unless an employee opts out, a plan is required to automatically enroll the employee at an initial contribution rate of at least 3% of their pay and automatically increase that contribution rate by 1% each year until it reaches at least 10% of an employee’s pay. 

The requirement generally applies to 401(k) and 403(b) plans established after Dec. 29, 2022, which is the date when the SECURE 2.0 Act became law, but there are some exceptions for new and small businesses, church plans, and governmental plans.

Based on the recent proposed regulations, the AICPA made several recommendations in its comment letter, including that the Treasury and the IRS issue final regulations clarifying that the investment requirements for trustee-directed plans in Section 1.414A-1(c)(4) of the proposed regs would not apply to plans that don’t adopt participant direction of investment. 

In determining the employee count for small businesses, the AICPA recommended that the Treasury and the IRS issue final regulations stating that only employees of the plan sponsor are included in the count for purposes of determining status as a small business under Section 414A.

The AICPA also had a comment on the definition of “predecessor employer,” suggesting that the Treasury and the IRS issue final regulations that define the term by reference to Treas. Reg. Section 1.415(f)-1(c)(2) for purposes of Section 414A(c)(4)(A). 

“The purpose for our letter is to provide input to Treasury and the IRS in order to further clarify the rules and provide recommendations to help with the implementation of the auto-enrollment provision of the law,” said Kristin Esposito, AICPA director of tax policy and advocacy, in a statement Tuesday. 

The Public Company Accounting Oversight Board sanctioned James PAI CPA and its sole owner and partner Yu-Ching James Pai for audit failures.

The PCAOB found that Pai and his firm violated multiple PCAOB rules and standards in connection with two audits of one issuer client, that the firm violated quality control standards, and that Pai directly and substantially contributed to those violations. In the audits, the firm and Pai failed to perform risk assessments and obtain sufficient audit evidence in multiple areas, including revenue and related party transactions.

“Performing appropriate risk assessments and obtaining sufficient evidence are fundamental to an audit, and failure to meet these most basic requirements puts investors at risk,” PCAOB chair Erica Williams said in a statement.

The PCAOB also found that, in the audits, the firm failed to perform engagement quality reviews, obtain written representations from management, comply with requirements concerning critical audit matters and audit committee communications and documentation, and establish a system of quality control.

“Issuing an audit report stating that the audit was performed in accordance with PCAOB standards is a solemn commitment to the investing public, and serious consequences can follow when an auditor fails to meet that commitment,” Robert Rice, director of the PCAOB’s Division of Enforcement and Investigations said in a statement.

Without admitting or denying the findings, Pai and the firm consented to the PCAOB’s order, which:

• Censures Pai and the firm and imposes a $40,000 civil money penalty, jointly and severally, against them;
• Revokes the firm’s PCAOB registration with a right to reapply after three years;
• Bars Pai from being an associated person of a PCAOB-registered firm, with a right to petition the Board to terminate his bar after three years;
• Requires the firm to undertake remedial actions to improve its system of quality control and procedures before reapplying for registration; and,
• Requires Pai to complete 40 CPE hours before seeking to terminate his bar.