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TaxBuzz Top 5 - Congress Nears Child Tax Credit Deal, WA State Dems. Propose Ammo Tax, & More

TaxBuzz Top 5 - Congress Nears Child Tax Credit Deal, WA State Dems. Propose Ammo 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.

We weed through all of the week's stories to showcase the most important updates in the tax and accounting world.

1. Congress Nears Deal on Child Tax Credit

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Credit: Jordan Siemens/Getty Images

Congressional leaders are reportedly nearing the finalization of a $70 billion bipartisan deal to extend the immensely popular Child Tax Credit (CTC) and offer tax breaks for businesses until 2025. An expanded version of the credit was initiated during the COVID-19 pandemic but expired in 2022, despite efforts to renew.

Per NBC, this latest proposal, negotiated by the Senate Finance Committee and the House Ways and Means Committee, equally addresses Democrats’ focus on enhancing the Child Tax Credit, credited with reducing childhood poverty, and Republicans’ demand for new tax incentives for businesses. The potential deal aims for targeted relief to families and multi-child households, increasing refundable child tax credits and raising the cap on refundable credits.

The business incentives, reviving select Trump-era policies, include full expensing for domestic research, restoring pre-2017 interest deduction, extending bonus depreciation, and expanding small-business expensing. Despite nearing completion, negotiations involve Democratic pushes for housing provisions and Republican focuses on disaster-related tax issues. NBC noted that some progressives express concern that the deal overly benefits corporations. Despite divisions, the rare bipartisan effort aligns with Democrats’ child tax credit goals and Republicans’ desire to support businesses in an election year.

Following a Los Angeles Grand Jury investigation in November 2023, Hunter Biden has pleaded not guilty to nine tax-related charges. Per NBC, his arraignment, lasting around 30 minutes, occurred before U.S. District Judge Mark C. Scarsi. Despite the charges, Scarsi acknowledged Biden's compliance with previous release conditions amid his ongoing legal problems.

The judge proposed a potential trial date of June 20, shortly before the 2024 presidential election. The younger Biden's father, President Joe Biden (D), is currently running a re-election campaign. This latest indictment, brought by U.S. Attorney David Weiss, accuses Biden of failing to pay taxes and spending funds on various personal items, including drugs, escorts, luxury hotels, and cars, from 2016 through October 2020. 

As noted, the California case is just the latest in Biden's legal issues. In September, he sued the IRS three days after being indicted on three federal gun charges. This came after a tentative plea deal fell apart in July 2023. 

3. IRS Announces It Collected Additional $360 Million In Back Taxes From Wealthy Individuals

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Credit: Zach Gibson/Stringer/Getty Images

The IRS has announced that it collected an additional $360 million in overdue taxes from delinquent millionaires, bringing the total to nearly half a billion dollars recouped from wealthy tax cheats since the agency began focusing on this issue. IRS leaders highlighted their efforts to modernize the agency using funds from the Democrats' Inflation Reduction Act, signed into law in August 2022.

Despite impending funding cuts, IRS Commissioner Daniel Werfel emphasized their commitment to spending the allocated $60 billion over the next decade, aiming for maximum impact in helping taxpayers. According to ABC, Werfel said, "My hope is that as we demonstrate the positive impact that IRA funding is having for all taxpayers, that there will be a need and a desire amongst policymakers at that time to restore IRS funding so that we can continue the momentum that’s having a very positive impact."

Facing potential budget reductions from the White House and congressional Republicans, Werfel expressed hope that policymakers would recognize the positive impact of the Inflation Reduction Act funding and consider restoring IRS funding to sustain their momentum.

4. Arizona Experiences Budget Shortfall Following $2 Billion Surplus In May 2023

Arizona's budget surplus of $2 billion in May 2023 has turned into a $407 million deficit this fiscal year and an estimated $450 million deficit for the next, prompting lawmakers to revisit expenditures and brace for future cuts. Predictions for tax collections fell short as actual revenues for fiscal year 2024 declined 9.3% by November, with income and sales tax collections proving slower than expected, AZ Central reports.

The deficit is partly attributed to the impact of a 2021 tax cut signed by then-Governor Doug Ducey (R), with Pew Charitable Trusts indicating that policy decisions, including tax reductions and increased spending, were made based on the surplus of pandemic money. The deficit is also tied to expanded voucher programs. Despite challenges, if the current budget remains and cuts are implemented, Arizona's shortfall could transform into a surplus by 2027. Republican leaders argue the shortfall is manageable, emphasizing the need to make government more efficient while protecting essential areas like education, public safety, and transportation.

Current Governor Katie Hobbs (D) signed the state's bipartisan $17.8 billion balanced budget in May of last year following negotiations with Republican legislative leaders.

5. Washington State Democrats Propose New Ammunition Tax

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Credit: Natnan Srisuwan/Getty Images

Democrats in Washington State have proposed House Bill 2238, aiming to tax firearm ammunition, in a  move that has been criticized by conservatives as an assault on Second Amendment rights. The bill, referred to the state legislature's finance committee, seeks to impose a use and sales tax on all ammunition, covering projectiles, propelling charges, or primers for firearms, including shotgun shells and cartridges.

According to the Pulitzer Prize-winning Denver Gazette, the proposed tax, at 11% of the selling price, would be applied to each retail sale of ammunition in addition to existing federal, state, and local sales and use taxes. Exemptions would be made for sales to government entities supplying law enforcement. The revenue generated from the new tax would fund programs addressing gun violence prevention, suicide prevention, and reducing firearm-related domestic violence in the Democratic-controlled Evergreen State.

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Feature Image Credit: Marie Kazalia/EyeEm/Getty Images

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