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TaxBuzz Top 5 - CA Seizes Pot Shop Paraphernalia, G20 Considers Global Minimum Billionaire Tax & More

by
Rebekah Barton
on
3/1/2024
TaxBuzz Top 5 - CA Seizes Pot Shop Paraphernalia, G20 Considers Global Minimum Billionaire Tax & More

Each Friday, TaxBuzz brings you the top five tax and accounting headlines you need to know from the workweek. We know life can get busy and you don't always have time to scroll through your news feed to stay informed.

1. CA Seizes Paraphernalia From Pot Shops For Unpaid Taxes

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Photographer: Juanma Hache/Getty Images

California officials announced that 10 Los Angeles marijuana dispensaries faced a hefty unpaid tax bill of $14.4 million. In an attempt to recoup these fees, a public auction was conducted using paraphernalia seized from the businesses. However, the outcome fell far short of expectations, with only $2,075 collected, according to the Los Angeles Times.

The dispensaries, nine of which were operating illegally, and one owing back taxes, were the targets. This marked the California Department of Tax and Fee Administration's inaugural auction of seized goods to reclaim state dues. Partnering with the California Highway Patrol, the agency auctioned off items like glass pipes, bongs, and furniture. Director Nick Maduros emphasized the auction as a means to discourage illicit activities and level the playing field for compliant businesses.

Maduros said the state's intent behind auctions like this is to "discourage unlicensed cannabis activities and to help level the playing field for legitimate businesses paying their taxes."

In 2022, $90 million in assets were seized from businesses, reflecting efforts to enforce tax compliance in the cannabis industry.

2. IRS Launches New Initiative Targeting High-Income Tax Evaders

As part of the Internal Revenue Service's (IRS) ongoing efforts to bring high net worth tax evaders to justice, the agency announced a new initiative targeting high-income taxpayers who have neglected to file federal income tax returns, totaling over 125,000 instances since 2017. This endeavor, funded by the Inflation Reduction Act, kicks off with the dispatch of compliance letters to these non-filers. More than 125,000 cases, spanning tax years 2017 to 2021, have been targeted, with over 25,000 letters aimed at those earning above $1 million and 100,000 for incomes between $400,000 and $1 million.

These efforts stem from third-party information indicating unreported income, highlighting the need for enhanced tax compliance measures. In an official release about the initiative, IRS Commissioner Danny Werfel said, “If someone hasn’t filed a tax return for previous years, this is the time to review their situation and make it right."

He continued, "For those who owe, the risk will just grow over time as will the potential for penalties and interest. These non-filers should review information on IRS.gov that can help and consider talking to a trusted tax professional as soon as possible.”

Failure to respond to these notices may result in further enforcement actions, including audits, collection measures, and potential criminal prosecution.

3. G20 Considers Global Minimum Billionaire Tax

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Credit: Tom Sowerby/Getty Images

G20 finance ministers and central bank governors are currently meeting in São Paulo for a key meeting. The group is considering implementing a global minimum tax on the world’s billionaires, aiming to curb tax avoidance practices that have allowed the ultra-wealthy to pay less taxes than the average population. Led by Brazil's finance minister Fernando Haddad and supported by France's Bruno Le Maire, the initiative seeks to address disparities in taxation and prevent tax optimization strategies.

Prior to the gathering, Le Maire told Reuters, “Currently the richest people can avoid paying the same level of tax as other people who are less rich. We want to avoid such tax optimization."

According to a report in Britain's The Guardian newspaper, economist Gabriel Zucman has been enlisted to initiate discussions on the proposal, which advocates for a 2% annual wealth levy on the world's 3,000 billionaires, potentially generating $250 billion annually. While some countries remain hesitant, citing political challenges and concerns over cooperation, proponents emphasize the need for global solidarity in tackling wealth inequality and ensuring fair taxation.

Despite the uncertain timeline for implementation, the talks signal a pivotal moment in the global tax policy landscape, with growing recognition of the imperative for international collaboration in the face of unprecedented capital mobility.

4. New Royals Stadium Could Result In Demolition of Properties Worth $33 Million

If approved by Jackson County voters on April 2, the proposed new Kansas City Royals ballpark in the East Crossroads could result in the demolition of properties valued at nearly $33 million, consequently removing them from the tax rolls. The potential financial impact on local taxing districts, particularly Kansas City Public Schools (KCPS), has raised concerns. According to real estate records, the owners of these properties paid close to $1 million in real estate taxes last year, with over half benefiting KCPS.

As the Kansas City Star explains, with the stadium expected to be built on tax-exempt county-owned land, the district faces a significant loss in revenue. Moreover, properties benefiting from tax abatements and exemptions could further exacerbate the financial impact on KCPS. District officials emphasize the need for assurances that current and future revenues will be safeguarded. In response, the Royals have expressed commitment to supporting urban education initiatives, highlighting their longstanding partnership with KCPS through various educational programs and scholarships.

In a statement shared by the Star, school system officials said, "KCPS has had contact with leadership from the Royals and plan to continue negotiations with the expectation that an agreement be in place before the vote in April. In considering the site location of the East Crossroads, Kansas City Public Schools must be held harmless on current and future potential revenues in the downtown baseball stadium footprint."

5. PNC, PPG, & More Are Paying Less Than Federal Income Tax Rate

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Credit: Fly View Productions/Getty Images

The Pittsburgh Post-Gazette is sharing details of an Institute on Taxation and Economic Policy report that revealed over a dozen Pennsylvania companies, including local giants like PNC Financial Services Group and PPG Industries, paid less than the 21% federal corporate income tax rate between 2018 and 2022. According to Matt Gardner, a senior fellow at the institute, many of America's largest corporations exploit an array of special-interest tax breaks, resulting in effective tax rates far below the legal rate.

Some conservative tax policy advocates argue that businesses are simply leveraging available deductions and credits within the laws enacted by Congress. The study highlighted Pittsburgh-based companies such as PNC, which paid an effective tax rate of 11.5%, and PPG Industries, which paid 13%. However, some companies like Howmet Aerospace and Wabtec paid rates as low as 3.4% and -1.2%, respectively, due to significant tax breaks, often specifically related to research and development (R&D).

Despite this, the Tax Foundation suggests that such tax practices are normal features of the U.S. tax code and are intended to encourage or penalize certain activities, contrasting financial accounting's aim to report financial health to shareholders. 

“The tax code and accounting rules are not the same,” asserted Garret Watson, senior policy analyst at the Tax Foundation. “Rather, tax law is designed to raise revenue and encourage or penalize certain activity, while financial accounting is meant to report financial health to shareholders.”

Feature Image Credit: Nathan Griffith/Getty Images

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Rebekah Barton

Rebekah Barton

Rebekah's search engine optimization career began completely by accident as a college student. Over the course of her career so far, she has "grown up" with the SEO industry, from writing content while juggling classes to managing her own teams of writers and overseeing SEO strategy in subsequent roles. She is excited to bring her passion for high-quality content to CountingWorks, Inc.

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