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I present here a critique of the arguments in favor of a carbon tax newly proposed by my colleagues Kyle Pomerleau and Shuting Pomerleau. This discussion is organized as follows. [...]

The Tax Cuts and Jobs Act (TCJA) of 2017 included some of the most far-reaching changes to the US income tax code in a generation. In addition to reducing statutory [...]

September 6, 2024 The U.S. Courts of Appeals for the thirteen 'circuits' issue thousands of precedential decisions each year. Because relatively few of these decisions are ultimately reviewed by the [...]

The federal courts issue hundreds of decisions every week in cases involving diverse legal disputes. This Sidebar series selects decisions from the past week that may be of particular interest [...]

Updated March 22, 2024 The 2017 tax revision (P.L. 115-97, also known as the Tax Cuts and Jobs Act or TCJA) created a temporary deduction for qualified pass-through business income [...]

Updated February 7, 2024 Contents IRC Section 179 Expensing Structure of the Expensing Allowance Qualified Assets Limitations on IRC Section 179 Expensing Claiming the Allowance IRC Section 168(k) Repealed Option [...]

Updated February 28, 2024 Contents Introduction Structure of the Deduction Economic Effects of the Deduction Use of the Deduction Investment Employment and Wages Tax Administration and Taxpayer Compliance Tax Administration [...]

Updated February 14, 2024 Contents Background Premium Tax Credit Eligibility File Federal Income Tax Returns Enroll in a Plan Through an Individual Exchange Have Annual Household Income at or Above [...]

Updated January 23, 2024 Contents Overview of the Section 199A Deduction Who Qualifies for the Deduction? What Is a Specified Service Trade or Business? What Income Qualifies for the Deduction? [...]

October 25, 2023 Entities that are 'churches' under Internal Revenue Code (IRC) Section 170(b)(1)(A)(i) also qualify as 'religious organizations' under IRC Section 501(c)(3), and thus are generally exempt from the [...]

September 11, 2023 On July 19, the Third Circuit held in Culp v. Commissioner that the filing deadline in 26 U.S.C. [section] 6213(a) is nonjurisdictional and can be extended under [...]

Updated August 18, 2023 Contents IRC Section 179 Expensing Structure of the Expensing Allowance Qualified Assets Limitations on IRC Section 179 Expensing Claiming the Allowance IRC Section 168(k) Repealed Option [...]

Key Points * We examine how the repeal of the state and local taxes (SALT) cap in 2021 would affect federal revenue and the tax liabilities of taxpayers in each of the 50 states. * Federal income tax liabilities would fall by approximately $91 billion, with wide variation in the distribution of benefits across states. * Over 50 percent of this reduction would accrue to taxpayers in just four states: California (25.1 percent), New York (16.8 percent), New Jersey (6.4 percent), and Illinois (4.2 percent). * At the national level, nearly 90 percent of the tax reduction would benefit taxpayers with adjusted gross incomes of $200,000 or more, and almost half of the tax reduction would go to taxpayers with incomes above $1 million., The Tax Cuts and Jobs Act of 2017 (TCJA) imposed a $10,000 cap on the itemized deduction for state and local taxes (SALT) from 2018 through 2025. This change has [...]

March 22, 2023 Starting in 2018, certain private colleges and universities with endowments valued at $500,000 or more became subject to a 1.4% excise tax on total net investment income [...]

Recent policy proposals using tax credits to help families with children have been flawed in two important respects. First, while we should always want to reduce hardship, reducing short-term poverty through unconditional cash transfers can come at the expense of expanding opportunity if those transfers incentivize behaviors that will impede children's upward mobility. Second, the extent to which financial constraints limit families' ability to have children and balance work and family has been overstated. This report proposes three reforms related to ongoing tax credit debates, intended to refocus the conversation toward expanding low-income children's opportunity and providing targeted support to working- and middle-class families. While the three reforms could be pursued individually, they are intended to complement each other. First, the earned income tax credit (EITC) would be made more generous for married parents, especially for a married couple's first child. This expansion would not come at the expense of single parents but would significantly increase the payoff to delaying childbearing until after marriage. Second, a compromise would be struck among the versions of the child tax credit (CTC) that existed before the Tax Cuts and Jobs Act (TCJA), between the enactment of that law and the American Rescue Plan Act (ARPA), and since the latter. The maximum CTC would be $3,000 (greater than under the TCJA but smaller than the benefit for younger children under ARPA). The ARPA extension of the credit to 17-year-olds would be retained. The phase-in that was replaced by ARPA's full refund-ability for lower-income families would be reinstated. And the limiting of the credit to working- and middle-class families that existed before the TCJA would be reinstated. These reforms would create a generous CTC that would be more targeted to working- and middle-class families than either the TCJA or ARPA versions are. Third, while lower-income families made newly eligible for the full CTC under ARPA would again face the work requirement and phase-in from the TCJA, their children would receive annual federal contributions to a 'success sequence savings account'--a baby bond--for $3,000 less their CTC. Young adults who have graduated from high school initially could use the funds for postsecondary education or training or toward a wedding. They could use the funds for other wealth-building purposes after accumulating a history of employment and of avoiding nonmarital parenting. Adults who do not achieve the thresholds could pass along some of their funds to their own children's accounts. By coupling baby bonds to the success sequence, the proposal would encourage parents and children to work toward pro-mobility life plans, provide them resources to pursue those plans, and target those resources to asset-building purposes that would advance them. These proposals would cost $850 billion over 10 years relative to current law and would be fully paid for by eliminating the state and local tax deduction and the Federal Pell Grant Program. Relative to extending the TCJA and ARPA expansions of the CTC and EITC, the proposal would save $650 billion. These estimates hinge on uncertain assumptions about the magnitude and timing of outlays for the baby bond program. The combined CTC and EITC reforms would cost $570 billion relative to current law and would save $930 billion relative to current policy. The baby bond program would constitute a true investment in American human capital that would pay off in the long run with greater tax revenue and reduced safety-net spending., The War on Poverty--especially poverty among children--should be never-ending. We should always want to reduce hardship below prevailing levels. However, there are better and worse ways to lower poverty. Policies [...]

The Joe Biden administration has proposed significant changes to the tax treatment of US multinational corporations aimed at raising revenue and curbing profit shifting and base erosion. The proposals would move the US corporate income tax closer to a 'worldwide' or residence-based tax and introduce new anti-base erosion protections. This report provides an overview of the tax treatment of multinational corporations under current law, the Biden administration's proposals, and some implications of the administration's approach., In 2017, Republican lawmakers passed and former President Donald Trump signed into law the Tax Cuts and Jobs Act (TCJA). Along with reducing the corporate income tax rate, this tax [...]

Updated February 10, 2023 Contents Overview of the Section 199A Deduction Who Qualifies for the Deduction? What Is a Specified Service Trade or Business? What Income Qualifies for the Deduction? [...]

Updated January 25, 2023 Contents Introduction How Does the Federal Tax Code Define a Small Business? Main Federal Tax Benefits for Small Business Summary of Current Federal Small Business Tax [...]

January 25, 2023 Contents What Is a Stock Repurchase? The Growth of Stock Repurchases Explanation of the New 1% Tax Repurchase Defined Application to Affiliates Netting Rule Tax Exceptions Regulations [...]

Updated January 19, 2023 Contents Taxable Versus Financial Income Taxable Income Financial Statement Income Adjustments to Financial Income to Determine Tax Liability Consolidated Returns Based on Tax Rules, Adjusted Adjustments [...]

Updated January 4, 2023 Federal Tax Gap The federal tax gap is a measure of taxpayer noncompliance. The Internal Revenue Service (IRS) provides two estimates of the gap: a gross [...]

Updated January 17, 2023 Contents Background Premium Tax Credit Eligibility File Federal Income Tax Returns Enroll in a Plan Through an Individual Exchange Have Annual Household Income at or Above [...]

Since 1917, tax filers with children have received ever-increasing federal income tax benefits. The tax benefits include deductions for each child or other dependent, lower tax brackets for head-of-household filers compared to single filers with similar incomes, and tax credits for children and childcare expenses. The tax credits have nonrefundable portions that are limited to tax liability and refundable portions that can be received in cash if they exceed tax liability. Recently, both Democrat and Republican lawmakers have advanced proposals to further expand the most prominent child tax benefit, the child tax credit (CTC). Created in 1997 as a $500 nonrefundable credit, the CTC was significantly expanded over the past two decades and is now the largest single tax benefit for households with children. In this report, we begin by detailing the origins of the tax benefits--including the CTC--afforded to filers with children. We discuss various methods and tax principles applicable in analyzing these benefits. We analyze the budgetary, distributional, and incentive effects of current-law child tax benefits. We frame the debate over expanding the CTC in the context of its growth and current budgetary impact. Finally, we evaluate recent proposals to further expand the CTC, including those in President Joe Biden's American Rescue Plan, recent legislation adopted by the House Committee on Ways and Means, and Sen. Mitt Romney's (R-UT) proposed Family Security Act., The federal tax code provides several benefits to households with children, which include deductions for each child or other dependent, lower tax brackets for head-of-household filers compared to single filers [...]

September 23, 2022 Contents The Concept of Tax Extenders Evaluating Expiring Tax Provisions Reasons for Temporary Tax Provisions Extenders as Tax Benefits Tax Provisions that Expired in 2021 Previous Tax [...]

Key Points * Using the Tax-Calculator (2.9.0) microsimulation model, we estimate that Joe Biden's proposals would raise federal revenue by $3.8 trillion over the next decade (2021-30). * Biden's proposals [...]

Despite decades of work, researchers have not accurately accounted for who is poor, what is the nature of the poor's predicament, what led to their situation, and what programs or [...]

Contents Introduction Economic Rationale for Government Intervention in the Market for New Knowledge and Know-How Federal R&D Tax Incentives IRC Section 174 Expensing Allowance for QREs IRC Section 41 Research [...]

June 10, 2022 High and rising prescription drug prices have long been a source of concern. For most years between 2000 and 2020, retail drug price inflation exceeded overall U.S. [...]

April 25, 2022 The federal courts issue hundreds of decisions every week in cases involving diverse legal disputes. This Sidebar series selects decisions from the past week that may be [...]

March 11, 2022 Companies are allowed to deduct the ordinary and necessary expenses they pay or incur in determining their taxable income. Under Section 162(a) of the federal tax code, [...]

This paper provides a distributional analysis of the Tax Cuts and Jobs Act that became law in December 2017, with implications for American households from changes in the individual tax provisions as well as in the corporate tax provisions. We model the impact on average tax rates as well as after-tax incomes for households, using tax records data from the 2011 IRS public use file, and the open-source Tax-Calculator microsimulation model. The IRS data has been matched to data from the Current Population Survey in order to obtain additional non-tax information. Modeling both the static as well as the dynamic distributional impact, we find that the effects of the TCJA vary tremendously across and within income deciles, depending upon family structure, the choice of equivalence scales, and also whether the impacts are short-term or long-term. In particular, we find that the expansion of the Child Tax Credit provided larger benefits to families with children. Since larger families tend to have higher incomes, this makes the TCJA appear regressive, but using an appropriate equivalence scale offsets part or all of this regressivity. In the longer-run, as almost all the individual income tax provisions expire in 2025, most households experience a tax hike. However, once we account for the dynamic corporate impacts, most households see an increase in after-tax incomes, with higher income households experiencing significantly larger increases in after-tax incomes, relative to lower income households., I. Introduction The passage of the Tax Cuts and Jobs Act (TCJA) in December 2017 has direct and indirect implications for American households. While many of the individual income tax [...]

December 16, 2021 With consideration of the Build Back Better Act (BBBA; H.R. 5376), congressional interest has focused on whether children who do not have Social Security numbers (SSNs) should [...]

Updated November 10, 2021 Contents Introduction How Does the Federal Tax Code Define a Small Business? Main Federal Tax Benefits for Small Business Overview of Current Federal Small Business Tax [...]

Contents Introduction The Corporate Tax as a Revenue Source Magnitude and Historical Pattern The Role of the Corporate Tax in Backstopping the Individual Tax Behavioral Responses and Revenue-Maximizing Tax Rate [...]

This paper analyses the impact of two new international tax provisions, GILTI and FDII, passed under the Tax Cuts and Jobs Act, on U.S. multinational corporations' location of new capital. We analyze whether these rules help retain internationally mobile rents within the U.S. tax base and the associated economic activity within the United States. Our analysis suggests that for a wide range of investment profiles (characterized in terms of scale and expected above-normal returns) for intangible capital, a U.S. MNC can do better by locating anew investment in the United States. Keywords: BEPS, FDII, GILTI, international tax, multinational investment, I. Introduction In this paper, we focus on two new provisions addressing the taxation of income from mobile capital, that were passed as part of Public Law 115-97 (popularly known [...]

July 28, 2021 The tax credit for carbon oxide sequestration (Internal Revenue Code [IRC] Section 45Q) is intended to incentivize investment in carbon capture and sequestration technologies (also known as [...]

May 24, 2021 Fifteen temporary business taxprovisions that expired in 2020 were extended or made permanent by the Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted as Division [...]

Updated April 16, 2021 The tax code contains a number of provisions that benefit the oil and gas sector. Some contend that these provisions should be eliminated, arguing that using [...]

Updated April 26, 2021 Contents Background Premium Tax Credit Eligibility File Federal Income Tax Returns Enroll in a Plan Through an Individual Exchange Have Annual Household Income at or Above [...]

Updated April 1, 2021 Beginning in April 2020, employers were entitled to payroll tax credits for paid leave required in response to the Coronavirus Disease 2019 (COVID-19) pandemic. For employers [...]

February 23, 2021 On December 1, 2020, the Supreme Court heard oral argument in CIC Services v. Commissioner, a case that could resolve conflicts resulting from the way courts have [...]

January 6, 2021 Contents Introduction Structure of the Deduction Economic Effects of the Deduction Investment Employment Tax Administration and Taxpayer Compliance Tax Administration Taxpayer Compliance Complexity Equity Effects Horizontal Equity [...]

Updated January 22, 2021 At the end of 2020, lawmakers included a second round of direct payments in the Consolidated Appropriations Act, 2021 (PL. 116-260). The payments equal $600 per [...]

Updated January 22, 2021 In response to the continued economic weakness from the COVID-19 pandemic, Congress passed a second round of direct payments as part of the Consolidated Appropriations Act, [...]

January 7, 2021 The March 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136) included an employee retention tax credit designed to help businesses retain employees during the [...]

December 3, 2020 Contents The Concept of Tax Extenders Evaluating Expiring Tax Provisions Reasons for Temporary Tax Provisions Extenders as Tax Benefits Tax Provisions Expiring in 2020 Individual Business Energy [...]

Updated October 19, 2020 Contents Tax Treatment of NOLs Permanent Law and Temporary CARES Act Revisions Proposed Heroes Act Changes Brief Legislative History An Example The Economics of NOLs Investment, [...]

Updated October 7, 2020 Contents Introduction Tax Benefits Versus Traditional Student Aid Brief Historical Perspective of Tax Benefits Summary and Cost of Current Benefits Tables Table 1. Overview of Education [...]

Contents Introduction Eligibility to Establish and Contribute to an HAS HSA-Qualified High-Deductible Health Plans Minimum Deductible Out-of-Pocket Limit Services Allowed to Be Provided Before the Deductible Has Been Met Disqualifying [...]

May 1, 2020 The tax code contains a number of provisions that benefit the oil and gas sector. Some contend that these provisions should be eliminated, arguing that using energy [...]