Clock is ticking on IRS top spot

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Sep 12, 2022 View in browser   By Bernie Becker HOW QUICK CAN YOU GO? Here's perhaps an under-the-radar question about the implementation of the Democrats' new tax-and-climate bill — how soon can they get a new IRS commissioner into place? The current IRS chief, Chuck Rettig, sees his five-year term expire in exactly two months. Now, the tax collector isn't exactly a stranger to having an interim commissioner for a sixth to even a fifth of those five-year periods, at least in recent history. For instance, the Senate confirmed Rettig 10 months after the departure of his predecessor, John Koskinen. But former agency officials and close watchers of the agency say it's particularly pressing for President Joe Biden to pick an IRS chief, and for the Senate to confirm that choice, now that Democrats just gave the service an extra $80 billion to boost enforcement, technology and taxpayer services. Treasury Secretary Janet Yellen has also tasked the IRS to come up with a battle plan by February for how the agency will implement its new windfall, which is set to be delivered over a decade. "With all the planning and hiring to be done, an interim commissioner will be constrained in making any significant changes," said Koskinen. "Even if someone is nominated soon, the confirmation process can take months, so it's not clear there's an easy answer," added Koskinen, who was confirmed by the Senate more than four months after he was nominated. MORE ON THIS IN A BIT. But first: What exactly happens to the squirrel that " got between a circuit breaker and a transformer causing a power surge?" Decent weather for running today, to be honest: Today marks 2,512 years since what's at least one widely accepted date for the Battle of Marathon, in which Athens turned aside a Persian invasion. (Look, it was two and half millennia ago, so it's tough to narrow down for sure. Plus, Pheidippides probably didn't run 26 miles after the battle, either.) Help us bust some myths. Send your best tips and feedback. Email: bbecker@politico.com, bfaler@politico.com and teckert@politico.com. You can also reach us on Twitter at @berniebecker3, @tobyeckert, @brian_faler, @POLITICOPro and @Morning_Tax.   HAPPENING 9/29 - POLITICO'S AI & TECH SUMMIT : Technology is constantly evolving and so are the politics and policies shaping and regulating it. Join POLITICO for the 2022 AI & Tech summit to get an insider look at the pressing policy and political issues shaping tech, and how Washington interacts with the tech sector. The summit will bring together lawmakers, federal regulators, tech executives, tech policy experts and consumer advocates to dig into the intersection of tech, politics, regulation and innovation, and identify opportunities, risks and challenges ahead. REGISTER FOR THE SUMMIT HERE.     Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You'll also receive daily policy news and other intelligence you need to act on the day's biggest stories. SO NOW WHAT? To be fair, it's not like Biden's team has just been sitting on its hands when it comes to finding a new commissioner. Morning Tax reported back in June that the administration had started interviewing candidates for commissioner, back when the chances for the Democrats scoring a new funding infusion for the IRS seemed spotty at best. Those candidates were known as management specialists, the kind of experience that was common for the last several IRS chiefs before Rettig, a veteran tax lawyer. There had also been some chatter about the White House thinking about nominating Rettig for another five-year term. But Bloomberg reported last week that the administration was weeding out potential contenders, and had told Rettig that it would be putting someone new in the commissioner's chair. Who exactly? That seems to be a rather closely guarded secret. Bloomberg also noted that Democrats on the Hill appear interested in someone with bipartisan credentials. But whomever it is, November 12 — Rettig's scheduled final day — is going to be here before you know it. Congress still has to get the government funded by the end of the month, and lawmakers will of course be mostly focused on the midterms over these next eight weeks. And then there's something else to consider: Republicans could easily take over the Senate in November, which would add another potential complication and consideration for getting an IRS chief in place. SINCE WE'RE TALKING IRS…: Republicans certainly have been trying to make some political hay out of this new $80 billion in IRS funding, particularly trying to drive home the point that more middle-class taxpayers will be hit with more audits — despite Democrats' claims to the contrary. The latest push there from the GOP: Sen. Mike Crapo of Idaho, the top Republican on the Finance Committee, is releasing a bill today that would bar any of the new IRS funds for being used to audit anyone making below $400,000 a year. Crapo rolled out that same proposal during the Senate consideration of the Democrats' big fiscal package, and all his GOP colleagues on the Finance Committee have joined on to the bill. Yellen repeatedly has said that the audit rates for people making under that $400,000 figure won't rise above what they've been in recent years — a statement with at least a little ambiguity to it. "The best way to protect those taxpayers is to turn that promise into law," Crapo says about his new bill, while also asserting that "Democrats cannot achieve their desired tax revenue goals" without getting more from those taxpayers. DON'T FORGET THOSE STATE TAXES: Anyone who benefits from Biden's plan to wipe away up to $20,000 in student loan debt won't owe anything extra in federal taxes because of that announcement. Now state taxes? That's another story. Some states will automatically follow the federal government's lead, and not classify the forgiven loan debt amount as taxable income. But it's already become quite clear that won't be the case in all 50 states. Indiana definitely will be taxing that loan forgiveness, and that could also be the case in very big and very liberal California, though leading Democrats there have said they'll do whatever it takes to make sure that doesn't actually happen. Other states to keep an eye on, as laid out to Weekly Tax by Jared Walczak of the Tax Foundation: Arkansas, Minnesota, Mississippi, North Carolina and Wisconsin all at least appear on track to tax forgiven student loan amounts, unless state legislatures and governors decide otherwise. Around the World NOT EXACTLY SWIMMING IN EUROS: Italy has only booked around 2 billion euros from a windfall tax on energy companies, Reuters reports — or not even a quarter of what the government had estimated. Prime Minister Mario Draghi had set aside some 52 billion euros in all from the tax, to help Italians struggling with higher gas and electricity prices. About 10 billion to 11 billion of those euros are supposed to come from the 25 percent windfall tax on energy companies. But here's one of the big problems: Thousands of companies just haven't paid the tax, at least when a down payment was due at the end of June. The government levied the windfall tax on energy companies, because those businesses have seen higher profits with the rise in oil and gas prices. But those companies say the volatility in energy prices has actually been a problem for their business. Close to a third of the revenues raised by the windfall tax have come from Eni, a major multinational firm which the Italian government essentially controls. Around the Nation THE RUSH BEGINS: Tesla is among the companies trying to take advantage of a Texas tax break program before it expires, the Texas Tribune reports. The electric car maker, now based in Austin, is looking to build a new lithium refinery in the state, and has applied to get help through the Chapter 313 program — an initiative that offers companies a decade-long break on their property taxes. That program is now set to expire at the end of this year, due to efforts from state lawmakers in both parties. Those officials insist that the program essentially showers incentives on many companies that would have ended up in Texas anyway, and also suffers from poor oversight. (Supporters disagree, saying Chapter 131 has helped Texas lure new businesses.) In any event, state officials said they expected the end-of-the-year deadline to spark a rush of new Chapter 131 applications — but that the flurry of interest has even surpassed those expectations. Quick Links Insider: " King Charles doesn't have to pay inheritance tax on the Queen's private estate worth more than $750 million." NYT: "Rise in Deaths Spurs Effort to Raise Alcohol Taxes." WSJ: "Municipal Bonds Suddenly Look Cheap. Some Are Tax Traps." On the calendar No, actually. Let Morning Tax know about your future events: taxcalendar@politicopro.com. Did you know? Squirrels can run up to 20 miles per hour. (The sprinter Usain Bolt once reached 27 miles per hour.)   Join POLITICO Live on Tuesday, Sept. 20 to dive into how federal regulators, members of Congress, and the White House are seeking to write the rules on digital currencies, including stablecoins. The panel will also cover the tax implications of crypto, which could be an impediment to broader adoption and the geopolitical factors that the U.S. is considering as it begins to draw regulatory frameworks for crypto. REGISTER HERE.       Follow us on Twitter Toby Eckert @tobyeckert Bernie Becker @berniebecker3 Brian Faler @brian_faler   Follow us

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