November 2021 / United States

November 18 2021

Biden Signs Bipartisan Infrastructure Legislation

US President Joe Biden signed into law the Infrastructure Investment and Jobs Act (H.R.3684) (the Act) on 15 November 2021. The Act, also known as the Bipartisan Infrastructure Legislation, will allow for a new federal investment of USD 550 billion in US infrastructure.

The White House issued a Statement, dated 15 November 2021, to announce the signing of the Act. The White House also issued related Remarks by President Biden.

The Act aims to finance the infrastructure investment by, among other measures, strengthening tax enforcement related to cryptocurrency. Specifically, the Act will require a party facilitating the transfer of cryptocurrency to file an information return as a broker with the US Internal Revenue Service (IRS). Brokers (mainly exchanges) will have to send IRS Form 1099-B (Proceeds from Broker and Barter Exchange Transactions) to both the IRS and their customer to report their sale and basis.

The Act will also require businesses that receive cryptocurrency worth more than USD 10,000 in a single transaction to report the transaction to the IRS. For this purpose, any person engaging in a trade or business that receives more than USD 10,000 in cryptocurrency will be required to file IRS Form 8300 (Report of Cash Payments Over $10,000 Received In a Trade or Business).

The provisions related to cryptocurrency reporting will go into effect after 31 December 2023. The Joint Committee on Taxation (JCT) estimates that the information reporting requirements will raise USD 28 billion over 10 years.

The Act also eliminates the employee retention credit (ERC) for the fourth quarter of 2021.

In addition, the Act renews the excise taxes on 42 chemicals under section 4661(c) of the US Internal Revenue Code, with modified tax amounts, from 1 July 2022 through 31 December 2031.

Further, the Act extends various highway-related excise taxes (under IRC sections 4041405140714081 and 4481), together with related exemptions (under IRC sections 4221 and 4483), for 6 years.

November 12 2021

Congressional Research Service Explains Tax Benefits for Small Businesses

The Congressional Research Service (CRS) of the US Library of Congress has issued a report with an overview of the main federal tax benefits for small firms.

The CRS report is entitled "Small Business Tax Benefits: Current Law" (RL32254-Version 22, 10 November 2021).

The CRS report summarizes tax preferences available only to small firms in a wide range of industries. As such, the CRS report does not include tax benefits targeted at small firms in specific industries. Nor does the CRS report address tax benefits that are available to firms of all sizes.

The small business tax benefits examined in the CRS report include:

  • expensing allowance for machinery and equipment under section 179 of the US Internal Revenue Code (IRC);
  • cash-basis accounting under IRC section 446;
  • tax credit for the start-up costs incurred by small firms in establishing qualified employee retirement plans under IRC section 45E;
  • tax credit for employers who offer or start a 401(k) plan or a Savings Incentive Match Plan for Employees (SIMPLE) that add automatic enrolment under IRC section 45T;
  • tax credit for the costs incurred by small firms in complying with the Americans with Disabilities Act under IRC section 44;
  • full exclusion from the capital gains tax on the sale or exchange of qualified small business stock under IRC section 1202;
  • exemption from the limitation on the deduction for business interest expenses under IRC section 163;
  • tax credit for small firms that offer qualified health insurance coverage to employees under IRC section 45R;
  • simplified dollar-value last-in-first-out accounting under IRC section 474;
  • deduction and amortization of business start-up expenses under IRC section 195;
  • ordinary income treatment of losses on the sale of eligible small business stock under IRC section 1244;
  • ordinary loss treatment for losses on the sale of Small Business Investment Company stock under IRC section 1242;
  • exemption from the uniform capitalization rule under IRC section 263A; and
  • use of excess research tax credit to reduce the payroll tax liability of qualified small firms under IRC section 41.

Note: The CRS is an agency within the US Library of Congress and serves the US Congress throughout the legislative process by providing legislative research and analysis for an informed national legislature.

November 24 2021

US Interest Rates on Tax Overpayments and Underpayments Remain Unchanged for Q1/2022

US Interest rates on tax overpayments (i.e. tax refunds) and tax underpayments (i.e. tax assessments and late tax payments) will remain the same for the first calendar quarter of 2022 (i.e. 1 January 2021 through 31 March 2022).

The US Internal Revenue Service (IRS) issued Revenue Ruling 2021-24 to announce the interest rates for the new quarter, together with an accompanying News Release (IR-2021-234), dated 23 November 2021.

The interest rates for the first quarter of 2022 are as follows:

  • 3% for non-corporate overpayments;
  • 2% for corporate overpayments up to USD 10,000;
  • 0.5% for the portion of corporate overpayments in excess of USD 10,000;
  • 3% for non-corporate and corporate underpayments (other than large corporate underpayments); and
  • 5% for large corporate underpayments (i.e. underpayments in excess of USD 100,000).

Revenue Ruling 2021-24 also includes:

  • interest factors for daily compound interest for an annual rate of 0.5% (Appendix A); and
  • tables including overpayment and underpayment interest rates for prior periods.

Revenue Ruling 2021-24 will be included in the Internal Revenue Bulletin (IRB) 2021-50, dated 13 December 2021.

November 29 2021

United States and India Reach Transition Agreement on Digital Services Tax

On 24 November 2021, the United States and India reached an agreement on the treatment of India's digital services tax (DST) during the interim period prior to full implementation of Pillar One of the OECD-G20 agreement.

The US Treasury Department issued a related Press Release dated 24 November 2021. The Office of the US Trade Representative (USTR) also issued a related Press Release of the same date.

The US-India agreement applies the same terms of the agreements that the United States reached with Austria, France, Italy, Spain and the United Kingdom on 21 October 2021 and with Turkey on 22 November 2021.

Accordingly, in defined circumstances, the liability from India's equalization levy on e-commerce supply of services that US companies accrue in India during the interim period will be creditable against future taxes accrued under Pillar One. The period during which the credit accrues will, however, be from 1 April 2022 until either the implementation of Pillar One or 31 March 2024 (whichever is earlier).

In return, the United States will terminate the currently suspended additional tariffs on goods of India that had been adopted in response to India's equalization levy.

In January 2021, the USTR issued a report concluding that India's equalization levy is unreasonable or discriminatory and burdens or restricts US commerce. On 2 June 2021, based on the findings, the USTR determined to impose additional tariffs on certain goods of India, while suspending the implementation of the tariffs for 180 days (ending on 29 November 2021).

With this agreement with India, the United States has now reached agreement regarding the treatment of DSTs during the interim period with all seven jurisdictions that the USTR concluded had adopted unreasonable or discriminatory DSTs (i.e. Austria, France, India, Italy, Spain, Turkey and the United Kingdom).