Two Circuits Now Give Priority Status to Obamacare’s Individual Mandate Penalty
The Affordable Care Act’s ‘individual mandate’ was a tax measured by income, thus giving the IRS a priority tax claim.
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Sixth Circuit BAP Gives Priority Status to Obamacare’s Individual Mandate Penalty
A question may be headed to the Sixth Circuit, where debtors hope to create a circuit split.
Circuit Split Widens Sovereign Immunity for Section 544(b) Claims
The circuits are now split 2/1 on the waiver of sovereign immunity under Section 544(b) for lawsuits by a trustee based on claims that could have been made by an actual creditor.
Child Tax Credit Expansion Creates Refund Roller Coaster
Democrats’ expansion of the Child Tax Credit may have expired, but it’s not gone completely. More than 40 million Americans now must contend with it on their annual tax returns, and it’s proving a curveball for many, Politico reported. People who received the monthly Child Tax Credit checks lawmakers created last year may be surprised to see those payments are now reducing or even eliminating their tax refunds. Some divorced people could be upset to learn they weren’t actually eligible for checks they received and now have to pay the money back. At the same time, some will see fatter refunds, particularly the several million who opted out of the monthly payments. So too will people who’ve had babies in the past year. And thanks to a loophole in the law, it’s possible for some to claim bigger child credits than lawmakers intended. The effects on refunds could be a touchy issue for Democrats, potentially putting them on the defensive over one of the biggest achievements of the Biden administration. People love refunds, relying on them as an important part of their budgets, and notice if their payments are smaller than expected or if they suddenly owe the IRS. Some interpret the size of their refunds as an indication of how well they’re faring under the tax system, even though the payments are really just the difference between what is owed and what was withheld from their paychecks. Most people received tax cuts under legislation Democrats approved last year in response to the coronavirus outbreak. The situation for Democrats is reminiscent of the position Republicans were in during the first filing season after their 2017 tax overhaul, when they came under fire because the size of refunds initially dropped before later rebounding to roughly historic levels.
States Consider Gas Tax Pauses as Prices Spike
Governors and state legislators are considering moves to suspend state gas taxes as the cost of fuel continues to soar to record levels, a bipartisan effort that comes as high prices hammer household budgets across the nation, The Hill reported. Maryland legislators have fast-tracked a bill to suspend the state gas tax for 30 days. In Georgia, a state House of Representatives that has spent months bitterly divided over everything from voting rights to gun policy and tax reform came together to unanimously approve a gas tax suspension through the end of May. Gov. Brian Kemp (R) said he was pushing the legislature to get a bill to his desk. Florida legislators last week voted to suspend the state’s gas tax for a month — but not until October, when tourism is at its lowest ebb of the year. And Michigan Gov. Gretchen Whitmer (D) said she was in negotiations with the Republican-controlled state legislature, which planned to pass a bill creating a gas tax holiday for six months. California Gov. Gavin Newsom (D) used his State of the State address to pledge what advisers said would eventually be billions of dollars in relief money for those paying higher prices at the pump, though without offering specifics. Newsom and Virginia Gov. Glenn Youngkin (R) have pushed their legislatures to delay gas tax increases. Legislators or governors in Alaska, Colorado, Idaho, Illinois, Maine, Minnesota, Missouri, New Jersey, New York, Ohio, Pennsylvania and Rhode Island have all floated proposals or introduced legislation related to gas taxes in recent days. Most states tax gasoline at a higher rate than the federal rate of 18.4 cents per gallon. Suspending the local gas tax in those states would go farther to reduce the price of an average gallon than a federal suspension. But even then, eliminating the tax that most states charge would put only a small dent in the cost of fuel.
Debtor Can’t Avoid and Preserve a Lien for Tax Penalties for the Debtor’s Benefit
A trustee can avoid and preserve a tax lien for the benefit of unsecured creditors, but a debtor can’t if the debtor hasn’t paid the taxes, the Ninth Circuit says.