Tom Talks Taxes - September 3, 2021

Analysis of the tax provisions of H.R. 3684, the bipartisan infrastructure bill

I usually do not analyze legislation until it is on the verge of becoming law.

The Senate passed H.R. 3684, the Infrastructure Investment and Jobs Act (also known as the bipartisan infrastructure bill), by a 69-30 vote on August 10th. Speaker Pelosi has committed to bringing it to a vote in the House by late September, in conjunction with a wide-ranging reconciliation bill that will likely have significant tax changes akin to the Tax Cuts and Jobs Act (TCJA).

Since there is a strong likelihood that the bipartisan infrastructure bill will pass as-is in September, I wanted to write about the tax provisions in that bill. The tax provisions are not the focus of the bill, but there are several important ones.

If you are a glutton for punishment, you can read the full text here.

Sec. 80501 - Automatic Postponement Modifications

§7508A permits the IRS to postpone various tax actions due to a Presidentially declared disaster or a terroristic or military action.

§7508A(d), which Congress added at the end of 2019, provides for an automatic 60-day postponement for individuals or businesses that have certain relationships to a Federally declared disaster area. Treasury issued final regulations related to this provision during 2021.

The bill makes some relatively minor technical edits to this subsection:

  • The automatic postponement ends 60 days after the later of the earliest incident date described or the date the disaster declaration is issued.

  • The provision clarifies that the automatic postponement only applies to actions listed in §7508(a)(1)(A) through (F).

  • The definition of a disaster area is changed to an area in which a major disaster for which the President provides financial assistance under section 408 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. §5174) occurs.

  • If an area is subject to multiple disaster declarations within a 60-day period, then there is a separate postponement period for each declaration.

This provision applies to federally declared disasters declared after the date of enactment.

Sec. 80502 - Combat Zone Postponement Modifications

§7508 provides for the automatic postponement of various tax actions for taxpayers in the Armed Forces serving in either a combat zone or contingency operation.

The bill makes two clarifying changes by expanding the statutory postponement to:

  1. All Tax Court petitions, not just deficiency petitions as the provision currently states, and

  2. Bringing suit against the United States in respect of an erroneous refund.

This provision applies to any period for performing an act which has not expired before the date of enactment.

Sec. 80503 - Tax Court Petition Deadline Tolling

The bill adds new §7451(b) to provide that the time period for filing a Tax Court petition is tolled if a filing location is inaccessible or unavailable on the date a petition is due for any reason, including a government shutdown. The period for filing the Tax Court petition is tolled for the number of days within the period of inaccessibility plus 14 days.

A filing location is either the office of the clerk of the Tax Court or any online portal made available by the Tax Court for the electronic filing of petitions.

The tolling appears to apply even if the taxpayer could file the petition by other means (i.e. the Tax Court online portal is shut-down, but the clerk’s office is open).

Example. John’s last day to timely file a Tax Court petition is October 4, 2021. On October 4 and 5, 2021, the office of clerk of the Tax Court is closed due to a general government shutdown. The clerk’s office reopens on October 6, 2021. John has until October 20, 2021 to timely file a Tax Court petition.

This provision applies to Tax Court petitions required to be timely filed, without regard to the tolling provided by this section, after the date of enactment.

Sec. 80504 - Postponements Due to Significant Fires

This provision adds a “significant fire” as an allowable event for which the IRS can postpone various tax actions under §7508A.

A significant fire means any fire with respect to which assistance is provided under section 420 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act.

Therefore, certain fire events will not need to rise to the level of a Presidentially declared disaster in order to get postponement relief from the IRS.

This provision applies to fires for which assistance is provided after the date of the enactment.

Sec. 80601 - Corporation Capital Contribution Modification

§118 provides that capital contributions to corporations are excluded from the corporation’s gross income.

The bill adds certain amounts given to regulated public utilities which provide water or sewerage disposal services as falling under the corporation capital contribution income exclusion.

This provision applies to contributions made after December 31, 2020.

Sec. 80603 - Cryptocurrency Information Reporting

The bill amends §6045, which relates to information reporting by brokers, in three key ways:

  1. It adds to the definition of broker “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.’’

  2. Digital assets are subject to the same information reporting as specified securities, such as stock and bonds. In addition, certain transfers of digital assets to non-brokers may be subject to additional information reporting.

  3. A digital asset is defined as “any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary.”

This provision applies to returns required to be filed, and statements required to be furnished, after December 31, 2023.

Sec. 80604 - Termination of COVID-19 Employee Retention Credit

This provision eliminates the COVID-19 employee retention credit for the 4th quarter of 2021 unless the employer is a recovery startup business (RSB), which I discussed in-depth in a previous edition.

In addition, it removes the requirement that the employer fail both the suspended operations and gross receipts tests to qualify as a RSB for the 4th quarter of 2021.

This provision applies to calendar quarters beginning after September 30, 2021.

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