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Tag: Tax refunds

  • IRS says many state rebates aren’t taxable at the federal level. Some may face filing struggle, tax pros warn

    IRS says many state rebates aren’t taxable at the federal level. Some may face filing struggle, tax pros warn

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    The IRS on Friday issued federal tax guidance for millions of Americans who received state rebates or payments in 2022.

    The announcement came about a week after the agency had urged those taxpayers to hold off on filing while it determined if the funds are taxable on federal returns.

    “The IRS has determined that in the interest of sound tax administration and other factors, taxpayers in many states will not need to report these payments on their 2022 tax returns,” the agency said in a statement.

    The agency said taxpayers in California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island won’t need to report these payments on their federal tax returns. Some Alaska taxpayers may also avoid federal levies on certain payments.

    Taxpayers in Georgia, Massachusetts, South Carolina and Virginia may also skip federal tax reporting for some payments. But eligibility may hinge on factors from your previous tax filings.  

    More from Smart Tax Planning:

    Here’s a look at more tax-planning news.

    Californians may still face filing challenges

    “The state of California really did everyone a disservice by issuing 1099-MISC [forms],” said Dan Herron, a San Luis Obispo, California-based certified financial planner at Elemental Wealth Advisors. He is also a certified public accountant.

    If the state doesn’t amend and reissue those forms to the IRS, it may cause a mismatch when California taxpayers file their federal returns, he said.

    Typically, a mismatch between tax forms and returns triggers automated notices, which may delay refunds or require taxpayers to contact the IRS to resolve.

    “I don’t know how the IRS system is going to handle that,” Herron added.

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  • Fidelity Charitable launches NFT raffle amid crypto downturn

    Fidelity Charitable launches NFT raffle amid crypto downturn

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    NEW YORK — Fidelity Charitable is getting into NFTs, the digital images that are registered on the blockchain, despite a torrent of bad news from the adjacent world of cryptocurrencies.

    The nation’s largest grantmaker is sponsoring a raffle that ends Tuesday, where participants can claim one of the NFTs, which stands for nonfungible token, and 50 will win $1,000 to donate through a donor advised fund at Fidelity.

    “The reason we’re doing this is we really believe there’s a whole new generation of givers and philanthropists out there,” said Amy Pirozzolo, head of donor engagement for Fidelity Charitable. “We want to be where they are and the channels they use and the formats they use and further encourage their generosity.”

    Around 16% of Americans say they invested in cryptocurrencies, according to a poll from Pew Research Center last year. The demographic most likely to invest were men between the ages of 18 and 29, with 43% reporting that they had invested.

    The blockchain is the technology that underlies the trading of cryptocurrencies, but it can also record the ownership of digital items like images, videos or Tweets. Fidelity said that 50,000 different wallets, potentially representing that many individuals, have already registered to create an NFT and potentially win the money to donate.

    Contributions in cryptocurrency to donor advised funds at Fidelity exploded last year, growing from the equivalent of $28 million in 2020 to $331 million in 2021, Fidelity has said.

    Speaking of the NFT project, Jacob Pruitt, president of Fidelity Charitable, said, “I think it’ll be a unique way to engage with next gen investors. It’s another way that I think Fidelity is innovating and leaning into a new space.”

    Donor advised funds allow donors to claim a tax credit for charitable donations, but do not require them to give those funds away within any specific timeframe. Organizations that host DAFs, like Fidelity Charitable, also handle more complex donations, which includes exchanging the assets for cash and producing receipts for donors for tax purposes.

    “Many of the nonprofits either can’t take on these assets or they have to hire outside counsel or people to staff to do it,” Pirozzolo said.

    One reason for the jump in cryptocurrency donations is that until recently, their value had appreciated significantly. The cryptocurrency market saw a huge boom in 2021 with the price of Bitcoin, the first cryptocurrency, rising to an all time high of around $68,000 in November last year.

    But the meltdown of Terra — a stablecoin, or a type of cryptocurrency that tries to peg its value to an asset like the U.S. dollar — in May brought down a series of major cryptocurrency businesses. Then, earlier this month, one of the largest cryptocurrency exchanges, FTX and related entities, suddenly filed for bankruptcy leaving both American and international users unable to access assets they held on the exchange.

    James Lawrence, co-founder and CEO of Engiven, which facilitates cryptocurrency to nonprofits, including Christian ministries, observed that many people giving cryptocurrencies are making major gifts and that often those happen in the last quarter of the year. That means it’s too early to say how the cryptocurrency market’s fluctuations may impact donations this year. He said he doesn’t see people donating cryptocurrencies as that different from other donors.

    “They just have a different asset to give and they’re going to give the most appreciated asset they can,” Lawrence said.

    Of the more than 1.5 million nonprofits registered with the Internal Revenue Service in the U.S., Lawrence estimated that only four or five thousand could receive cryptocurrency donations directly.

    “That’s a huge market that still doesn’t,” he said. He also has observed that many giving large donations in cryptocurrency (they facilitated one donation of $10 million in cryptocurrency assets) are the same types of people who give large donations in general, and not necessarily the younger demographics that are more likely to invest in cryptocurrency.

    “Many of the largest gifts we’ve processed have been from an older demographic who have a tradition of giving large gifts in multiple asset classes,” he said.

    Another organization, Endaoment, also facilitates cryptocurrency donations to nonprofit organizations as well as hosting pooled funds to benefit certain types of nonprofits. Robbie Heeger, the organization’s president and CEO, said besides that fact that nonprofits may receive donations from cryptocurrency donors that they wouldn’t otherwise, cryptocurrency proponents are also eager to draw in new users.

    “This is a leapfrog opportunity for nonprofit organizations to move from paper checks” to cryptocurrency Heeger said. “And the crypto space is very focused on adoption flywheels, on ways to incentivize or encourage the traditional economy to migrate into the crypto economy.”

    He encouraged newcomers to the cryptocurrency space to carefully research projects they might get involved with and to look for ones that have gotten outside audits from professional auditors.

    Pirozzolo argued that the Fidelity Charitable promotion using NFTs is separate from the cryptocurrency ecosystem.

    “This is really about the blockchain and having a fun way to celebrate with digital art the generosity of giving,” she said.

    The company is paying for the cost of creating the NFTs, which includes a “gas” fee that pays for the creation and registration of the item, and also said that it has compensated the artists who made the images.

    People who claim the NFTs will need to sign up for a cryptocurrency wallet that has access to the Polygon blockchain. The Fidelity Charitable NFTs will be hosted on the platform OpenSea.

    Participants will see the NFT in their wallet when they sign up, but the art itself and the winners of the $1,000 tickets won’t be revealed until Giving Tuesday, Nov, 29.

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    Associated Press coverage of philanthropy and nonprofits receives support through the AP’s collaboration with The Conversation US, with funding from Lilly Endowment Inc. The AP is solely responsible for this content. For all of AP’s philanthropy coverage, visit https://apnews.com/hub/philanthropy.

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  • US to climate summit: American big steps won’t be repealed

    US to climate summit: American big steps won’t be repealed

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    SHARM EL-SHEIKH, Egypt — U.S. President Joe Biden is coming to international climate talks in Egypt this week with a message that historic American action to fight climate change won’t shift into reverse, as happened twice before when Democrats lost power.

    Current and former Biden top climate officials said the vast majority of the summer’s incentive-laden $375 billion climate-and-health spending package — by far the biggest law passed by Congress to fight global warming — was crafted in a way that will make it hard and unpalatable for future Republican Congresses or presidents to reverse it.

    Outside experts agree, but say other parts of the Biden climate agenda can be stalled by a Republican Congress and courts.

    Twice in the 30-year history of climate negotiations, Democratic administrations helped forged an international agreement, but when they lost the White House, their Republican successors pulled out of those pacts.

    And after decades of American promises at past climate summits but little congressional action, the United States for the first time has actual legislation to point to. The climate and health law, known as the Inflation Reduction Act, was approved without a single Republican vote, prompting some advocates to worry it may not withstand GOP attacks if Republicans gain control of the House or Senate.

    Then Tuesday’s election happened, with a razor-thin contest for control of Congress.

    Results are still not quite known, but Democrats showed surprising strength. Sierra Club President Ramon Cruz at the climate summit Wednesday claimed a victory of sorts, saying, “We see in a way that people in the U.S. actually do understand and do support climate action.”

    If Republicans grab control of Congress, they won’t have a veto-proof majority, and even if a Republican takes over the White House in the next few years the tax credits will be in place and spur industry, said Samantha Gross, head of climate and energy studies at the centrist Brookings Institution.

    “It’s a lot of tax credits and goodies that make it hard to repeal,” Gross said.

    At the climate negotiations in Egypt, where Biden arrives Friday, his special climate envoy John Kerry said, “Most of what we’re doing cannot be changed by anyone else who comes to Washington because most of what we do is in the private sector. The marketplace has made its decision to do what we need to do.”

    It’s all by design, said Gina McCarthy, who until recently was Biden’s domestic climate czar.

    “About 70% of the benefits of the Inflation Reduction Act are about (tax) credits that directly benefit” industries, McCarthy said in an interview with The Associated Press at the climate negotiations.

    She said it will be difficult for Republicans to “change the dynamic” to significantly undermine the act. “It is passed, is beneficial. We have Republicans all throughout the country actually doing ribbon cuttings.”

    Studies show most of the money, new jobs, are going into Republican states, said climate policy analyst Alden Meyer of the E3G think-tank. McCarthy and Kerry are “largely correct” in claiming the law can’t be rolled back, he said, and Gross agreed.

    Several analyses, inside and outside the government, said the law would cut U.S. emissions by 40% by 2030, compared to 2005 levels, which is not quite the official U.S. goal of 50% to 52% cuts by that time.

    But McCarthy is saying, wait, there’s more. She said that upcoming but not yet announced carbon pollution regulations and advances by private industries, states and cities will allow the United States to achieve and even exceed that goal, something outside experts are far more skeptical about.

    Republicans are likely to push for a sharp increase in oversight of Biden administration policies, including incentives for electric vehicles and loans for clean energy projects such as battery manufacturers, wind and solar farms and production of “clean” hydrogen.

    “Republicans are looking for the next Solyndra,’’ said Joseph Brazauskas, a former Trump-era Environmental Protection Agency official, referring to a California solar company that failed soon after receiving more than $500 million in federal aid under the Obama administration.

    “Certainly, congressional oversight is likely to ramp up considerably’’ under a GOP-led House or Senate, said Brazauskas, who led the Trump EPA’s congressional relations office and now is a principal with the Bracewell LLP law firm.

    Republicans support many of the tax credits approved under the climate law. But they complain Biden is moving too fast to replace gas-engine cars with electric vehicles and say he hasn’t done enough to counter China’s influence in the renewable energy supply chain.

    Republicans also are likely to probe EPA actions on climate change, air quality and wetlands, citing a Supreme Court ruling last summer that curbed the EPA’s authority to address climate change, Brazauskas said. The decision, known as West Virginia v. EPA, “has really opened a window for regulatory scrutiny at the agency,” he said.

    Democrats say they learned important lessons from the Solyndra episode and don’t intend to repeat past mistakes. The loan program that helped Solyndra turned a profit and generates an estimated $500 million in interest income for the federal government every year.

    Even with a Democratic Congress, the Biden Administration couldn’t dramatically increase climate aid to poor nations. The rich countries of the world in 2009 promised $100 billion a year to help poorer nations switch to green energy sources and adapt to a warmer world. T hey haven’t fulfilled that promise, with the United States donating far less than Europe.

    That money doesn’t include the hottest topic at the Egyptian climate talks: Loss and damage, meaning reparations for climate-related disasters. The United States is historically the No. 1 carbon polluter, while poorer nations with small carbon emissions bear the brunt of climate disasters, like Pakistan, where devastating flooding submerged a third of the nation and displaced millions of people.

    Dozens of protesters called for reparations at a demonstration on Wednesday.

    “I think the regulatory agenda is tougher and the international climate finance landscape will be very, very bleak,” Meyer said.

    The U.S. government also released a new draft report about what climate change is doing to America, determining that over the past 50 years, the United States has warmed 68% faster than the planet as a whole. Since 1970, the continental U.S. has experienced 2.5 degrees Fahrenheit of warming, well above the average for the planet, according to a draft of the National Climate Assessment, which is the U.S. government’s definitive report on the effects of climate change and represents a range of federal agencies.

    The changes in the U.S. reflect a broader global pattern in which land areas and higher latitudes warm faster than the ocean and lower latitudes, the report says.

    The effects of human-caused climate change on the United States “are already far-reaching and worsening,’’ the draft report says, but every added amount of warming that can be avoided or delayed will reduce harmful impacts.

    The congressionally mandated assessment was last issued under the Trump administration in 2018 and the Biden administration put out a draft of the newer version this week, seeking public comment and peer review. The final report is expected next year.

    Risks from accelerating temperatures and precipitation, sea-level rise, climate-fueled extreme weather and other impacts increase as the planet warms, the report says.

    “The things Americans value most are at risk,’’ the report says.

    ———

    Daly reported from Washington.

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  • Mexican company to build $200M, 295-worker bakery in Georgia

    Mexican company to build $200M, 295-worker bakery in Georgia

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    VALDOSTA, Ga. — A Mexican bakery will be turning out more bread in south Georgia, announcing a larger bakery to go with a smaller one that it’s already building.

    Mexico City-based Grupo Bimbo said Friday that it will spend $200 million on a new bakery in Valdosta and hire 295 workers.

    The company originally announced a $25 million bakery projected to hire 76 workers in 2021. That bakery is under construction and will start operating in December, said Andrea Schruijer, executive director of the Valdosta-Lowndes County Development Authority.

    The project announced Friday will begin work in December in the same industrial park and is expected to open in December 2025.

    The first bakery will make sandwich buns for restaurants across the Southeast. It’s unclear what the bakery announced Friday will make.

    Schruijer told the Valdosta Daily Times that workers’ wages will start between $19 and $25 an hour.

    The company will get an undisclosed amount of job training assistance from the state. Schruijer said local officials approved a 12-year graduated property tax break. She said she was unable to give a specific value for how much the city and county were forgoing in taxes.

    Grupo Bimbo will also qualify for a Georgia tax credit allowing it to annually deduct $3,500 per job from state income taxes, up to $5.2 million over five years, as long as workers make at least $31,300 a year. If Grupo Bimbo doesn’t owe that much income tax, it will be able to recover the rest of the credit from state income tax payments made by workers.

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