Rescissions, Harm, And Charitable Giving Alternatives
IRA’s IRS funding may face another clawback this summer. TaxNotes reports (paywall) that House Appropriations Chair Rep. Tom Cole (R-OK) supports efforts to rescind the rest of IRS funding—about $67 billion—made possible through the Inflation Reduction Act (IRA). Congressional Republicans may renew those efforts this summer. The IRS annual discretionary budget for fiscal year 2024 is $12.3 billion, and it is requesting $12.3 billion for fiscal year 2025. The agency includes a mandatory funding proposal of $104 billion over 10 years to account for IRA appropriations.
Does the government need to face “irreparable harm” in order to collect taxes? The US District Court for the Northern District of Indiana denied an injunction against a tax-dodging couple who owed over $300,000 to the IRS. The court held that the government wouldn’t face irreparable harm (become insolvent) if the couple didn’t pay their back taxes, so there was no legal ground to force them to do so. The Seventh Circuit reversed that ruling because “the national government’s solvency does not depend on tax payments from any one person or business, even the largest…. judges should not interpret statutes in a way that makes them ineffectual.”
Is there a better way to subsidize charitable giving? TPC’s Robert McClelland considers an alternative to charitable contribution deductions (available to taxpayers who itemize their deductions): A federal matching grant system. In a matching grant system, qualified charities would report donations to the federal government and receive matching funds in return. Substantial evidence shows that people give more in response to matches than to equivalent rebates, like a tax deduction.
Speaking of charitable contribution plans: Don’t ever follow this one. A Florida attorney and certified public accountant has been sentenced to eight years in prison for his fraudulent charitable contribution tax scheme that he called “The Ultimate Tax Plan.” Using boilerplate paperwork, Michael L. Meyer helped his clients look like they donated valuable properties to charities Meyer controlled. In reality, clients—advised by Meyer—accessed their assets through tax-free loans and bought back their donations at a discounted rate. Meyer backdated documents so clients could claim donations on their prior years’ tax returns. He collected over $10 million selling the Ultimate Tax Plan, purchasing a multi-million-dollar estate and a luxury vehicle collection.
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