Week in Insights: Keeping Tax Prep Competitive Is a Balancing Act

Curated by Daniel Xu

Intuit Inc., maker of TurboTax, stepped up its lobbying game ahead of the tax season—spending $3.8 million in 2023. Similarly, H&R Block spent more than $3 million on lobbying last year. The tax prep company boogeyman everyone is lobbying against is the IRS Direct File program, which went live for 12 states this year.

Intuit sought $94 million in research and development tax credits in 2022, which means taxpayer funds are being used to lobby against a taxpayer service. This situation illustrates a broader debate about the role of private companies in public services—especially in areas as critical as tax preparation. Competition in a service space is good, but it’s a difficult policy tightrope to walk.

Ideally, the strengths of private companies could be used to innovate and improve public services while safeguarding the public interest and ensuring equitable access to services.

The eventual compromise may be stricter regulations on how government uses public funds in contexts where private companies offer services parallel to public alternatives. Reform may be needed to prevent companies from enjoying significant public subsidies or tax incentives, lobbying, and providing private alternatives to public service options.

IRS Direct File is far from its final form, and tax prep companies have shown they won’t go away without a fight. As such, the interplay between private and public services in the tax preparation space is still unfolding.

At Bloomberg Tax, we’ll continue to follow along closely. We remain committed to providing insightful analysis on these developments, helping our readers navigate the implications for both taxpayers and the broader tax system.

The Exchange—It’s where great ideas intersect.

—Andrew Leahey

Look for Leahey’s column on Bloomberg Tax, and follow him on Mastodon at @andrew@esq.social

The TurboTax logo on a smartphone in an arranged photograph in Hastings-on-Hudson, N.Y., on Sept. 3, 2021.

Photographer: Tiffany Hagler-Geard/Bloomberg via Getty Images

State Insights

KPMG’s Shirley Sicilian previewed a California court hearing centering on a federal law involving state taxation of interstate businesses in the era of online commerce.

Cherry Bekaert’s Catherine Shaw says states and Congress should act to maintain Public 86-272’s protections and ease compliance costs for small and medium-sized businesses.

Federal Insights

Plante Moran’s Brett Bissonnette says that tax practitioners and taxpayers should stay the course while the IRS adapts to several new systems and changes.

Alston & Bird’s Anna Saraie and Martha Doty analyze pre-hire personality testing, including the legal and practical considerations for employers incorporating such testing into their application processes.

Greenberg Glusker’s Zachary Nolan, Skip Kessler, and Daniel Cousineau explain how S corporations can use IRS guidance to navigate opportunities for issuing qualified small business stock.

Porter Wright’s Brad Hughes examines new opportunities for engagement and new litigation strategies that may help regulated businesses if the Supreme Court ends Chevron deference to federal agencies.

EisnerAmper’s Alyssa Rausch shares tips for tax practitioners advising clients who may be affected by changes in the bipartisan tax bill pending in the Senate.

Global Insights

Skadden’s David Farhat and Eman Cuyler explain how OECD Pillar Two rules can lead to multilateral disputes and what US multinationals can do to prepare.

Annemarie Wilmore, Kathryn Bertram, and Don Spirason of Johnson Winter Slattery discuss recent Australian tax guidance on software royalties and intangible assets that has significant implications for multinationals with Australian subsidiaries.

Columnist Corner

A Supreme Court move to overturn Chevron deference to agency statutory interpretation would disrupt tax law and transfer pricing, Andrew Leahey says in his Technically Speaking column. In a post-Chevron scenario, the IRS and Treasury may need to issue “guidance that stands up to judicial scrutiny without significant deference” and consult more with industry experts on regulations.

Career Moves

Elinor Ramey has joined Lowenstein Sandler as a partner in the private client services and tax groups in Washington, D.C.

Nicola Lemay has joined Hogan Lovells as a partner in the corporate and finance practice in the Boston office.

Frank Angeleri has joined Centri Business Consulting as a senior director in the tax advisory practice.

If you’re changing jobs or being promoted, email your submission to TaxMoves@bloombergindustry.com for consideration.

News Roundup

It’s been another busy week in tax news from state capitals to Washington. Here are some stories you might have missed from our Bloomberg Tax news team (login required).

• The acting chief of the IRS watchdog agency steps in at a critical moment for IRS oversight as the agency begins to spend its tens of billions of dollars from the 2022 tax-and-climate law.
• Indiana and Utah could soon join a growing number of states trying to ease the sales tax compliance burden on remote vendors under bills lawmakers are considering.
• Chances for a bill to double the state-and-local tax deduction cap for joint filers faded after a test vote failed in the House.
• The IRS is still receiving thousands of employee retention tax credit claims, even after an agency moratorium on the pandemic-era program that’s been beset by fraud and pending legislation that would disrupt the deadline for making claims.

Train tracks run past hotels in downtown Indianapolis, on Dec. 2, 2021.

Photographer: Cheney Orr/Bloomberg via Getty Images

Tax Journals

(Bloomberg Tax login required)

Tax Management International Journal

Multinational enterprises navigating complex transfer pricing audits in Nigeria should ensure they have robust documentation and internal audit support teams, KPMG’s Barbara Mbaebie and Onyenyeonwu Okechukwu Felix say.

Grant Thornton’s Cory Perry, Mary Xu, and Mike Del Medico say multinational enterprises should no longer wait to begin preparations to implement Pillar Two.

Our Team

We talk about tax a lot. But you would hear much more if you popped into one of our Teams meetings. Here’s a quick look at what some of us are watching, reading, and listening to this week.

Watching
Jessie Kamens (Editor-at-Large): “Past Lives,” a film about love, growing up, and the immigrant experience. It surprises for clocking in at under two hours—a miracle in this age of epically long movies—and for showing deep respect for the characters it skillfully develops.

Reading
Andrew Leahey (Columnist): I’ve been making my way through some existentialist writing and have arrived at Jean-Paul Sartre. I’m currently soaking in his “Existentialism Is a Humanism” lecture in transcript form. I make no claims to understand any of it yet.

Listening
Rebecca Baker (Editor-at-Large): The John Oliver episode of “WTF with Marc Maron.” The two veteran comics trade barbs and wisdom in one of the funniest WTFs I’ve heard in a long time.

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