Tax Shelters, Tax Status, and State Revenues
Tomorrow on Capitol Hill. The Senate Budget Committee will hold a hearing with Congressional Budget Office (CBO) Director Phillip Swagel on CBO’s updated budget outlook for 2024-2034.
After Moore, the Supreme Court may have to officiate the Whack-a-Tax-Shelter game. TPC’s Gene Steuerle takes a look at the endless game of whack-a-mole that Congress and Treasury have played in their efforts to prevent the abuse of tax shelters that protect capital income. In a future ruling, if the Supreme Court determines that the “realization” of income is a Constitutional requirement for taxation, the courts could play a more active role. “[T]he Court needs to understand how open-ended this game can be, the tax arbitrage and shelter opportunities their decisions could easily create, and the consequences for tax equity and the economy itself,” he writes.
Is it too easy for a small group to become a tax-exempt 501(c)(3) organization? TPC’s Tax Hound reviews why and how a group with income under $50,000 might apply for tax-exempt status as a nonprofit public charity. The application process and annual reporting is quite simple for small organizations. Is it too simple?
How can states more accurately forecast revenues after the pandemic? In a new report, TPC’s Lucy Dadayan uses state revenue forecasts, revenue collections, and state revenue forecasting official surveys to examine how state revenue projections fared since the pandemic and draw lessons for the future.
Speaking of state revenues… TPC’s State and Local Finance Initiative released its Monthly State Revenue Highlights for May 2024. State tax revenues declined in the median state by 2.3 percent in real terms. From July 2023 through May 2024, total state tax collections increased by 0.1 percent in real terms compared to the same period a year ago.
More tax cuts might be on the horizon in West Virginia. Republican Gov. Jim Justice said last week that state revenue collections came in $826 million above estimates and may trigger a 3 to 4 percent state income tax reduction in January 2025. Justice signed a 21.25 percent tax rate reduction last year. If the state collects higher than anticipated revenues, a formula triggers additional state income tax cuts of up to 10 percent.
Streaming services group asks Canadian court to stop broadcasters’ tax on streaming revenue. The Motion Picture Association-Canada (MPAC) has asked Canada’s Federal Court of Appeal to stop the Canadian Radio-Television and Telecommunications Commission from imposing a 5 percent tax on streaming sales in Canada. The tax supports local broadcast news and other domestic content. The MPAC argues the tax exceeds the Commission’s authority, since MPAC members’ streaming services do not produce local news and do not have the same legal privileges and protections as Canadian news broadcasters.
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