You're all in luck! I have the one last thing you can read before you start your Labor Day weekend.

The IRS has issued a goofy notice that I had to triple-check before I believed that it actually means what it says...

ntu.org/foundation/det…

1/
Here's the conclusion first, then I'll explain:

A small business that has a majority owner who works in the business (think, many family businesses) cannot take advantage of the COVID-relief Employee Retention Tax Credit (ERTC) if that person has any living relatives.

2/
Not living relatives that work in the business. If they have any living relatives.

Explanation:

3/
The Employee Retention Tax Credit (ERTC) was created by the CARES Act in 2020, the law that also created the Paycheck Protection Program (PPP) of forgivable loans. By the end of 2021, ~$36 billion will be claimed as ERTC, most by businesses with fewer than 100 employees.

4/
IRS Notice 2021-49 may upend all that. Here’s the operative language from pages 28-29:

irs.gov/pub/irs-drop/n…

5/
The IRS reasoning is laid out in a couple of steps.

First, the CARES Act did not create new eligibility rules for ERTC but instead uses the eligibility rules from the Work Opportunity Tax Credit (WOTC), a tax credit for hiring employees from specific disadvantaged groups.

6/
Second, these recycled WOTC rules disallow counting any wages paid to close relatives (children, siblings, parents, nieces and nephews, and aunts and uncles).

7/
Third, those rules also disallow any wages paid to any individual that controls more than 50 percent of the business, including by Section 267 of the Internal Revenue Code.

What's Section 267?

8/
Section 267 says a taxpayer can't shift shares to relatives to avoid being a majority shareholder, by assuming that any share of the company owned by a relative is actually a share owned by the taxpayer.

9/
Bringing it all together, bc CARES says to use WOTC rules, and bc WOTC rules say use Section 267, and bc Section 267 says a taxpayer’s relatives are the same as the taxpayer, then any majority owner of a business isn’t really a majority owner if they have relatives.

10/
That’s because, the IRS says, the relative is also a majority owner and the taxpayer a relative of them, and the wages of relatives are ineligible to be counted for the credit.

Therefore, the wages of a majority owner are ineligible for ERTC if they have immediate family.

11/
This ridiculous logic might be amusing if it were not about to cause significant and real harms.

First, the IRS is applying the notice retroactively to credits paid out for 2020 and so far in 2021.

12/
National Conference of CPA Practitioners says this would cost up to $66,000 for a small business and "may make the difference between closing the doors or enabling those businesses to remain open and continue employing their staff for years to come."

images.magnetmail.net/images/clients…

13/
Needless to say, the IRS and the Treasury Department didn’t need to do this. They could have:

-Only used direct WOTC rules
-Not applied it retroactively
-Flagged it as unintended and asked Congress to fix it

14/
Instead the IRS is proceeding directly to enforcement and any fix will have them as an adversary. Congress created the ERTC to keep small businesses open, and absent legislative intervention, IRS Notice 2021-49 will instead use that law to shut them down.

15/
One last point: Notice 2021-49, like most IRS pronouncements, was issued without the benefit of the notice-and-comment procedures that every federal agency is required to follow when issuing regulations.

The IRS says they don't have to follow those rules.

16/
The IRS resists calls from NTUF and others to follow the Administrative Procedure Act (APA), losing 9-0 in the U.S. Supreme Court earlier this year in their attempt to shield their rules from being challenged on that basis.

ntu.org/foundation/det…

17/
The IRS’s resistance to following APA procedures before issuing binding regulations and interpretations may add legal vulnerability to Notice 2021-49.

NTUF is going to do everything we can to help fix this absurd outcome for taxpayers!

18/18

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More from @jbhenchman

13 Sep
What's in the House Dem budget bill draft that's circulating in DC? (NEAL_032.XML)
Page 525:
Section 138101 returns the corporate income tax to a graduated rate:

18% on income up to $400,000
21% on income between $400,000 and $5 million
26.5% on income above $5 million

Surtax on corporations with taxable income above $10 million: lesser of 3% or $287,000.
That surtax effectively phases out the benefit of the graduated rate for corporations making over $10 million.

Page 526:
Personal services corporations - doctors, lawyers, engineers, architects, accountants, etc - are not eligible for graduated rates and pay 26.5% on all income.
Read 75 tweets
11 Sep
Never forget

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6:00 am – Mohammed Atta and Abdulaziz al-Omari fly from Portland, Maine to Boston Logan International Airport. They land at 6:45.

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6:52 am – Marwan al-Shehhi calls Atta from another terminal at Logan to confirm everything is set.

3/
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3 Sep
They've existed for some time - Moderna completed its Phase 2 trial of a Delta booster in May 2021 - but the FDA has been dragging its feet.
NYT article today mentions, as an aside, that the FDA is squabbling with Moderna about the right dosage for a booster and wants more studies

Health Officials Advise White House to Scale Back Booster Plan for Now nyti.ms/2WRCrAr
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Policy Qs not efficacy Qs.

wsj.com/articles/fda-w…
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14 Aug
On the afternoon of August 14, 1945, a D.C. police officer pulled over a car for making an illegal U-turn. After ten minutes, the driver was allowed to proceed.

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The driver was an RCA messenger, and he was delivering a radiogram to the Swiss Embassy containing Japan's acceptance of the Allied surrender terms.

2/
As that was happening, across the globe it was the night of August 14-15, 1945, which has been called Japan's longest night, as it agonized over whether to actually surrender to the Allies.

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Of the 6,000 to 8,000 cases appealed to the U.S. Supreme Court each year, fewer than a hundred are accepted. In nearly all the denials, the Court simply states the appeal has been denied with no further comment.

That didn't happen on June 28 with one obscure case.

1/
That day the Court denied 129 appeals that had been submitted to it. It is rare but not unusual for a justice to write a long statement taking their colleagues to task for declining to hear a case.

That's what Justice Thomas did that day in Standing Akimbo v. United States.

2/
The case had escaped the notice of most observers: no briefs were filed urging the Court to hear it, and the Court evidently wrestled with it since it appeared on the agenda of 13 successive private conferences of the justices before the denial was announced.

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Read 33 tweets
5 Jul
Good morning. In less than an hour, aircraft from here will join others from around the world. And you will be launching the largest aerial battle in this history of mankind.
Mankind -- that word should have new meaning for all of us today.
We can't be consumed by our petty differences anymore.
We will be united in our common interests.
Perhaps its fate that today is the 4th of July, and you will once again be fighting for our freedom, not from tyranny, oppression, or persecution -- but from annihilation.
We're fighting for our right to live, to exist.
And should we win the day, the 4th of July will no longer be known as an American holiday, but as the day when the world declared in one voice:
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