No Budget in California Budget Situation

I return home from my vacation and it’s as if I’ve never left. There’s no progress in the California budget situation. There have been no talks, and there’s nothing scheduled.

The Democrats did unveil a new budget plan last week. Governor Schwarzenegger called the plan “DOA.”

The only other news that came out last week is that Controller John Chiang warned that IOUs would begin to be issued in August rather than September if a budget isn’t passed this month. That seems a certainty at this point.

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1099 Repeal?

Before I head out the door, I just saw a short article that a repeal of the new requirement on issuance of 1099s (part of the health care fiasco) was introduced by Democrats today. The measure was an amendment to a bill on health care benefits on 9/11 respondents. The overall measure failed on a procedural vote (it needed a two-thirds vote to pass).

However, the fact that Democrats introduced the measure indicates that it is very likely that the burdensome 1099 requirement will be repealed before the implementation date (2012).

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Vacation

It’s time for my annual vacation. I’ll be back on Tuesday, August 10th. Should California have a budget resolution during the next ten days I’ll take time off from my vacation to post about that. Otherwise, you can get your tax fix from the bloggers listed in the blogroll on the right.

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Furloughs Return to California; Are IOUs (Registered Warrants) Coming in September?

Governor Schwarzenegger announced yesterday that he has reimposed mandatory furloughs on state workers. Beginning in August there will be three furlough days a month for most state employees. These days are without pay and are a means of helping to close the budget gap.

Of course, the problem is that there is no budget. The reason is simple: Democrats in Sacramento don’t want to cut programs and/or employees of their major constituencies. Regardless of Democratic politicians’ desires, those cuts are coming; the easy “low-hanging fruit” is all gone.

Meanwhile, State Controller John Chiang is warning that unless there’s a budget by September he may be forced to issue Registered Warrants (aka IOUs). There are no budget talks currently scheduled.

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HR 2267: Much Ado About Nothing

Online poker players and the Poker Players Alliance are celebrating the markup and passage of HR 2267 in the House Financial Services Committee. The measure passed the committee on a vote of 41 yes, 22 no, with one Congresscritter voting “Present.” The measure can now be taken up by the full House of Representatives.

The good news is that Congress is actually considering licensing and regulation of online gambling (primarily online poker). That said, this measure has almost no chance of becoming law in this session of Congress.

First, in order for it to be voted on in the House the Speaker of the House, Nancy Pelosi (D-CA), would have to allow it to come up for a vote. She’s opposed to the measure so that in itself likely dooms it. Additionally, there is a companion measure (HR 4976, previously HR 2268) must pass the House Ways and Means Committee. No hearing or markup on that bill has been scheduled.

Even if HR 2267 somehow comes up for a vote in the House and passes, it would still have to pass the Senate. It’s far tougher for the measure to pass in the Senate given the rules of the Senate: Any Senator can place a ‘hold’ on legislation. Given that Senator Jon Kyl (R-AZ) is vehemently opposed to the measure, that’s likely. There’s additional opposition from Democrats, too, including both of California’s Democratic Senators (Barbara Boxer and Dianne Feinstein).

We are getting closer to having legal online gambling in the US, though. I’ve been telling friends that we were at least five to ten years away from legalization and regulation in the US. Now, I think we’re about five to ten years away from passage. It will likely take that long for a measure to get through both houses of Congress and signed by the President. It took nearly ten years for a measure inhibiting online gambling to pass Congress (the Unlawful Internet Gambling Enforcement Act of 2006). It will probably take just as long for a measure authorizing online gambling to pass Congress. Still, this is progress.

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Rangel Hit With 13 Counts of Ethics Violations

Congressman Charlie Rangel (D-NY), the former chairman of the tax writing House Ways and Means Committee, has been charged with 13 ethics violations. The charges include failing to report the rental income on property in the Dominican Republic on his tax return, not disclosing all of his assets on his financial disclosure forms, violating a ban on gifts, and soliciting funds from from an individual who might be impacted by the performance of his duties. A trial on these charges will likely be held in September.

Of course, this is, according to Speaker of the House Nancy Pelosi, “The most ethical Congress in history.” Yeah, right.

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As the Budget Churns (2010 Edition)

California’s constitution required a budget be enacted by June 30th. Californians ought to ask June 30th of what year as there are no negotiations in Sacramento right now. Meanwhile, there was some news from Governor Schwarzenegger. He told reporters today, “If I do not get all of the things that we need … I will not sign a budget, and it could actually drag out until the next governor gets into office.” Democrats’ response is that the Governor threatens children and public education.

What does Governor Schwarzenegger want? He is demanding changes to public pensions, and to California’s budgeting and taxation systems. He opposes Proposition 25 (on the November ballot); that ballot measure would eliminate the two-thirds voting requirement in the legislature for passing a budget and replace it with a simple majority. To no one’s surprise, labor unions and Democrats are in favor of Proposition 25 and the California Chamber of Commerce opposes it.

Meanwhile, Californians are caught in the middle. There is a cost for not having a budget. Instead of making the budget cuts today that are going to happen, those cuts will be made sometime in the future…and those cuts will have to be larger in order to have a balanced budget. It appears that Democrats in Sacramento are more than willing to wait it out.

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She Can’t Take It With Her

I thought I’d seen most of the methods of hiding cash from the taxman, but this short story is a new one. It seems that a British businessman decided that his aunt needed £140,000 to accompany her to the hereafter. Well, the businessman owed £50,000 to Her Majesty’s Revenue and Customs (formerly Inland Revenue, the British equivalent to the IRS).

His aunt couldn’t take it with her…and neither was the businessman successful in burying his cash.

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Relief for Non-Profits

I don’t do much work for non-profits, but there was a deadline just weeks ago and important news today. All non-profits are now required to file a version of Form 990. The deadline was May 17th, and non-profits that ignored this deadline were theoretically no longer a non-profit.

The IRS announced that they are providing relief for some non-profits. Those non-profits with gross receipts of $25,000 or less can file the e-postcard Form 990-N by October 15th. Non-profits with revenues of less than $500,000 and assets of under $1.25 million and who have three or fewer delinquent returns can file Form 990-EZ and all required schedules by October 15th. These non-profits will be required to pay a small fee of between $100 and $500 but they won’t lose their non-profit status (assuming they file).

However, non-profits that must file Form 990 and private foundations that file Form 990-PF are not eligible for relief.

On the IRS webpage linked to (above) are links to non-profits that the IRS believes still need to file a version of Form 990.

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Trading a Cellphone to a Porsche

Recently, I saw a short blurb on the local news regarding a teenager who bartered his way from a cellphone to a Porsche. There’s an issue with this, of course, taxes. When you barter goods, you’re supposed to send a Form 1099-B to the other person (to represent the difference in the value of goods).

So let’s say I trade my worthless cellphone (valued at $10) for your worthless headset (valued at $10). No big deal. However, say I trade a worthless cellphone for an iPad (worth $300). The other person is supposed to send me a Form 1099-B showing $290 value of bartered goods.

It turns out that the teenager made 14 trades to go from a cellphone to a Porsche. Clearly, he should have received a few 1099-B’s en route. Perhaps he did, but I suspect otherwise.

In any case, just a reminder that if you barter your cellphone for a $9,000 used Porsche, you should expect to pay taxes on the difference in value.

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