Saturday April 1, 2023
President Signs Omnibus Spending Bill
On December 29, 2022, President Biden signed a $1.7 trillion spending bill. This bill needed to be signed by Friday, December 30, 2022 to avoid a government shutdown.
The Consolidated Appropriations Act of 2023 was passed by the House on a vote of 225–201. Earlier, the Senate passed the bill on a bipartisan vote of 68 to 29. The Consolidated Appropriations Act will fund the federal government until September 30, 2023. This eliminates the need to pass a continuing resolution to fund the government.
Many members of Congress had hoped that there would be a substantial tax title in the bill. Congress, however, was unable to build a bipartisan consensus on the expanded child tax credit and the research and development amortization rules. Therefore, the bill did not include a major tax title. In addition, many of the small tax extenders that had been in previous bills were not included.
A major portion of the bill was a bipartisan retirement plan titled "SECURE 2.0." This bill includes multiple provisions designed to increase retirement savings. One helpful change is that the required minimum distribution (RMD) age will increase to 73 in 2023 and 75 in 2033.
SECURE 2.0 initially was passed by the House with a cost of $37 billion. The Senate version increased to $44 billion and the final bill was scored at $53 billion. House Ways and Means Committee Chair Richard E. Neal (D-MA) indicated the increased cost was "fully offset" by various provisions.
One of the provisions requires that the catch-up contributions for individuals over age 50 who have incomes of $145,000 or more to use a Roth IRA plan. This accelerates the payment of taxes on the catch-up contributions and will raise substantial revenue.
Another revenue raiser is a provision to limit the tax benefits for syndicated conservation easement charitable deductions. These deductions will be limited to 2.5 times the basis of the investors. This provision is estimated to raise $6.4 billion over the next decade.
The bill funds the Defense Department with $858 billion. The non-defense spending is $800 billion. There is an allocation of $44.9 billion for military and humanitarian aid to Ukraine. The U.S. disaster relief fund received by $40.6 billion.
A contentious issue for the past decade has been projects earmarked for home states and districts of congress members. This bill included $15.3 billion for over 7,200 projects that were earmarked for specific states or districts. A lawmaker whose district receives an earmark must, however, publish their request online and certify that they have no financial interest in the project.
Business, Moving and Charitable Mileage Rates for 2023.
In IR-2022-234, the Internal Revenue Service (IRS) published the standard mileage rates for business, moving, medical and charitable travel for 2023.
Each year, the IRS hires an independent contractor to study the fixed and variable cost of operating an automobile. With the increased cost of gasoline this past year, it was expected there would be an increase in the standard mileage rates for business, medical and moving travel. Because the charitable mileage rate is fixed in the Internal Revenue Code, it does not change.
IRA to Gift Annuity or CRT Questions For JCT
The Consolidated Appropriations Act of 2023 included Division T, the SECURE 2.0 Act of 2022. Section 307 of the SECURE 2.0 Act permits a one-time election for a qualified charitable distribution (QCD) from a traditional IRA to a gift annuity, standard charitable remainder unitrust or charitable remainder annuity trust (CRT).
Following passage of major legislation, the Joint Committee on Taxation (JCT) publishes a guide that explains in detail the government position with respect to the provisions. The General Explanation of Tax Legislation is commonly called the JCT "Bluebook." Following the passage of the Consolidated Appropriations Act of 2023, JCT will eventually publish a Bluebook on the bill.
There are at least three significant Section 307 issues requiring guidance from JCT. These are whether the full $50,000 rollover will qualify for the required minimum distribution (RMD), whether it is possible to take both the $100,000 QCD for an outright gift and the one-time $50,000 QCD to a gift annuity or CRT in the same year and whether two spouses are permitted to each transfer $50,000 to a two-life unitrust.
Applicable Federal Rate of 4.6% for January -- Rev. Rul. 2023-1; 2023-2 IRB 1 (15 December 2022)
The IRS has announced the Applicable Federal Rate (AFR) for January of 2023. The AFR under Section 7520 for the month of January is 4.6%. The rates for December of 5.2% or November of 4.8% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2023, pooled income funds in existence less than three tax years must use a 2.2% deemed rate of return.
Published December 30, 2022
Secure Act 2.0 Enhances Retirement Benefits
IRA Required Minimum Distribution Deadline
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