On this episode of Practical Tax, Congressman Jared Huffman joins us to discuss green tax initiatives and Chris Westfall joins us to discuss side husltles for businesses.

Episode Transcript

Intro:

Welcome to the Practical Tax podcast, with tax attorney Steve Moskowitz. The Practical Tax podcast is brought to you by Moskowitz, LLP, a tax law firm.

Disclaimer:

The information contained in this podcast is based upon information available as of date of recording and will not be updated for changes in law regulation. Any information is not to be considered tax advice or legal advice and does not form an attorney/client relationship. Further, this podcast may be construed as attorney advertising. You should see professional consultation for your individual tax and legal situation.

Chip Franklin:

Hello and welcome again to another edition of Practical Tax with tax attorney, Steve Moskowitz. Steve, hope all is well.

Steve Moskowitz:

All is well and there is so much going on in the tax world. It just keeps us happy because we're getting back so much money for our clients. For example, this ERC program, employee retention credits where the federal government is giving away their grants, they're not loans, up to $26,000 for every employee that you have that qualified is tremendous and is helping out so many small businesses.

Chip Franklin:

We have been talking about this for four years, right? That's been going on for a while.

Steve Moskowitz:

It hasn't been that long. It may seem that long, but it hasn't. And the bottom line is that... The important part is you have to know, and there are some real differences of opinion, who qualifies and who doesn't. There are two tests. One test is a certain drop in gross revenue. That's easy. It's math, either above or below a certain number. But there's a second test called full or partial closure. And that's really a facts and circumstances test. For example, even an essential business like Safeway could only use 25% of the inside of their business, as was mandated by the state of California for all businesses from the beginning of the pandemic until 6/15/21. That may qualify them supply chain disruptions and so on. But it takes some work to figure that out and a lot of firms are ignoring that. If you don't meet the math, they say no ERC for you, that's wrong because the test is either/or.

On the other hand, the IRS is warning that there are a bunch of fraudulent firms just making stuff up and like anything else in your tax, obviously, you want to take everything to which you're legally entitled, no more and no less. You'd never want to put anything on any tax return or anything you give to the government is fraudulent, yet some companies are doing that. And there are these popup companies, they just came into existence to file ERC and then they're going to be gone when the IRS is asking questions whereas we're a law firm and we've been around for over 30 years.

Chip Franklin:

Well, all of these trails lead to Washington DC eventually, right? I mean-

Steve Moskowitz:

Yes, they do.

Chip Franklin:

... [inaudible 00:02:28]. And we're nice enough to be joined today by US representative from California, Second Congressional district since back in 2013, Congressman Jared Huffman. Congressman, good to have you here.

Jared Huffman:

Good to be with you.

Chip Franklin:

I understand-

Steve Moskowitz:

Congressman, thanks so much for joining us.

Jared Huffman:

Thank you, Steve.

Chip Franklin:

And you're in the neighborhood just a little north of us and enjoying again, California. Whenever I hear about people saying, "Oh, we're moving to Texas." I'm like, "Don't let the door hit you on the way out." I love it here, right?

Jared Huffman:

Yeah. Yeah. California is still going strong despite the detractors out there who don't wish us well.

Steve Moskowitz:

You know there are always detractors for everything. You can have the greatest product in the world and somebody is saying it's horrible. But I live in California, the weather is great, it's so much physical beauty, there is so much here, and I know the taxes are high.

However, as a tax attorney and one of the things that you do in Washington, I tell everybody that when we talk about the tax code, there are two purposes. One everybody knows is to collect money from us to run the government. But the other thing is, in a democracy, the government can't order us to do something, even if it's good for the economy and the government wants it. So how does the government get us to do something that they can't order us to do? They pay us and they give us tax incentives. And that's what tax planning is all about. When you see sometimes the Fortune 500, they're making billions with a B in profit and not paying taxes because they're doing something else that's worthwhile for the country through the form of tax incentives and that's why I went to law school. I was a CPA first and I said, "Hey, I want to be able to do those secret things that I see the Fortune 500 is doing." And that just fascinates me.

Chip Franklin:

So Congressman, your district goes essentially almost right up the coast to Oregon and it's a unique environment here in California. Some of the most beautiful shoreline in the world, I would argue. But to Steve's point about incentives, I know that you're a big supporter, if not of legislation, but in general towards green initiatives, which like anything, whether it's the early parts of DARPA where we were trying to inspire companies to build or to create things that would help the entire nation and then lead the world, which I think we have an opportunity now to do because climate change is a real thing. There are real obstacles we face because of that. We have the kind of people and brain power here in California within 15 miles where we sit right now to really make that sort of change.

How does Congress look at this and are we moving toward really rewarding those minds, many of them here in California, that want to create; are we helping them with tax incentives?

Jared Huffman:

I think so, Chip, and it has been a busy two years in that regard. We have put some really powerful incentives on the table for all sorts of clean energy and domestic manufacturing. I believe we are finally beginning to reimagine what a decarbonized economy should look like and to put things on the table that match the scale of this climate crisis. We got a lot more work to do, but the work we have done in the last couple years is way more than anything we have ever seen before.

Steve Moskowitz:

And Congressman, you've done so many good things like with the new credits in the new inflation act where you're saying, "Hey, be more efficient with energy in your new building and we'll reward you." That's terrific.

Jared Huffman:

Or buy an electric vehicle, including a used electric vehicle. It's great to now have a tax credit available for working class folks to liberate them from the tyranny of the pump. We have got incentives to decarbonize your own home with heat pumps and other electric appliances, incentives at the industrial policy level to try to drive the investments in grid modernization and battery storage and other things. It's a really thoughtful package that kind of covers all parts of this challenge.

Chip Franklin:

Congressman, but the truth is, without the rest of the world, we can't even begin to get our hands around climate change. And I get back to my original point, I think that we have to become industrial leaders in this new technology. And to do that, it kind of pushes against... And I'm more left than these days, but it kind of pushes against the left. Always saying, "Oh, you're giving these companies these big breaks." Some of these companies, the right companies, are the ones that are going to make this happen that are going to change the world. How do you make that argument? How do you differentiate that?

Jared Huffman:

Well, I don't ever want to just light money on fire and give it to people who don't need it. But I think we can do things like loan guarantees that leverage private capital and direct it in the right way to invest in the right kind of technologies and there's an awful lot of that in this batch. The tax incentives though, or the other ones, Steve knows how these work far better than me. But what I know is that we heard from the folks who develop renewables and clean technology and they told us that these are the incentives that will have the greatest impact. And so I'm hoping that plays out and that it works well. But if it does, we're going to see massive amounts of private capital flood into this space. We're going to see innovation, we're going to see breakthroughs, and hopefully we will preserve a livable planet for our kids and grandkids. That's what this is all about.

Chip Franklin:

Yeah, obviously, I know that China wants to change. I know the young people there... I read a lot of the blogs that come from around Beijing where you can't even breathe on a midday. But it's not just there. Obviously, as we see developing nations in Africa and South America, we want them to do it right. We want to be those leaders. Al Gore was talking about it 40 years ago and even though we didn't know what it was going to look like, and it's still hard to tell what the immediate future is going to be like, we do know here in the North County about fires. We know that these wildfires wiped out a town. They threaten it every year. Knock on wood, we didn't have it this year is bad. Yeah, right?

I mean, what can we do before we get to that point that might be 20, 30 years away? What can the federal government do to help Northern California stem the wildfire issue?

Jared Huffman:

Well, look, it has been decades of mismanagement that have put us in this catch up mode on fuel load reduction and healthy forests and other things.