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TaxBuzz Top 5 - CA Continues to Test New "Road Charge" System, UK Scraps "Non-Dom" Regime & More

by
Rebekah Barton
on
3/8/2024
TaxBuzz Top 5 - CA Continues to Test New "Road Charge" System, UK Scraps "Non-Dom" Regime & More

Each Friday, TaxBuzz brings you the top five tax and accounting headlines you need to know from the workweek. We know life can get busy and you don't always have time to scroll through your news feed to stay informed.

We weed through all of the week's stories to showcase the most important updates in the tax and accounting world.

1. California Continues to Test New "Road Charge" System 

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Credit: Andreas Kuehn/Getty Images

The California Department of Transportation's Road Charge pilot program, originally launched with 5,000 volunteers in 2016, gave regular drivers a chance to test five different systems for tracking — and paying for — miles driven. This initiative comes as a response to the dire state of California's infrastructure, where poorly maintained roads cost the average Californian $762 yearly in repairs.

With California facing a $60 billion shortfall for road maintenance, the traditional gas tax revenue model is no longer sustainable. LAist previously reported that the Road Charge program proposes a shift towards fees based on miles driven rather than gallons of fuel used, aiming to generate funds for much-needed infrastructure repairs.

Privacy concerns are addressed in the pilot, ensuring that at least one monitoring alternative doesn't rely on electronic vehicle location data. This move emphasizes the importance of data privacy while still gathering necessary information to understand miles driven.

The state is on track to launch a second pilot program, according to a 2023 report from Planetizen. Ultimately, data will be analyzed and presented to the California Legislature for a vote on whether to replace the gas tax with a road charge. 

2. IRS Cautions Consumers on Health Savings Account Eligibility

Recent concerns have arisen over companies issuing "letters of medical necessity" for unconventional health and wellness items, prompting the IRS to question their validity. These letters, often resembling doctor's notes, have been used to justify purchases ranging from gym memberships to dietary supplements. However, per a Yahoo! News report, the IRS has reiterated that such letters must stem from face-to-face interactions between patients and doctors, not from online questionnaires.

In response to the controversy, IRS Commissioner Danny Werfel noted the importance of adhering to IRS guidelines. He stated, "Legitimate medical expenses have an important place in the tax law... Taxpayers should be careful to follow the rules amid some aggressive marketing."

While supplements and fitness memberships may qualify as medical expenses under certain circumstances, they must be recommended by a medical practitioner in-person, and must be required to treat specific conditions. The IRS remains committed to clarifying misconceptions surrounding HSA and FSA eligibility.

3. President Proposes New Homebuyer Tax Credits

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Credit: Richard Newstead/Getty Images

President Biden presented new housing initiatives during his State of the Union address on March 7, including tax credits to offset high mortgage rates for first-time buyers and incentives for homeowners to sell starter homes. The plan aims to provide middle-class, first-time buyers with $5,000 per year for two years, equivalent to lowering mortgage rates by over 1.5 percentage points. Additionally, a proposed one-year credit of up to $10,000 for families selling their starter homes below the county's median price seeks to stimulate housing supply.

In a Washington Post report, David Dworkin, President of the National Housing Conference, hailed the proposals as groundbreaking, emphasizing their potential to address the housing crisis. However, concerns have been raised about the potential impact of increased demand on housing prices.

In parallel, unilateral actions are being pursued to assist home buyers and renters, including efforts to reduce closing costs and address misleading fees in rental agreements. Lindsay Owens, Executive Director of the Groundwork Collaborative, asserted that housing affordability is a critical priority for Americans.

4. Maryland Faces Historic Tax Revenue Problems

Maryland's fiscal woes deepened as tax revenues missed estimates for the fifth consecutive time post-pandemic, fueling debates among Democrats over tax hikes' timing.

Democrats, normally united in the Maryland Legislature, grapple with funding policies driving billion-dollar deficits unseen since the Great Recession. Lackluster income tax receipts, trailing projections by $255 million, signal ongoing economic fragility despite record-low unemployment, the Washington Post reports.

Debate intensifies on raising taxes to cover an education program, climate initiatives, and transportation projects, driving projected deficits of $3.4 billion in three years.

“There are ways to deal with it other than revenues, right?” Senate Budget Committee Chair Guy Guzzone (D-Howard) said in the Post's article. “You could turn back on the way you feel about some of these issues, right? Or you could slow the pace of how those issues are rolled out financially. But at the end of the day, it seems very likely that we’re going to have to do something.”

“In particular with regard to education, we’ve made this commitment, and I think the legislature’s leadership is all intent on living up to the commitment here,” he said.

Republican leaders oppose tax hikes amid economic uncertainties, citing declining revenues. 

5. Chancellor Hunt Ends UK's "Non-Dom" Tax Regime

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Credit: Jeremy Walker/Getty Images

Chancellor Jeremy Hunt's move to scrap the "non-dom" -- short for "non-domicile" -- tax regime has sparked outrage among wealthy foreigners. The centuries-old system allowed these indivdiuals to avoid UK tax on foreign income. Under the new rules, the tax benefits will now last only four years instead of 15. The decision, effective from April 2025, has left non-doms scrambling to assess the impact.

Some feel blindsided, lamenting the abrupt change. Advisors report clients exploring relocation options, with Italy emerging as an attractive alternative. Despite projections of increased tax revenue, uncertainties linger over the long-term implications.

While some predict an exodus, others believe London's allure will endure, per a Financial Times article about the situation. Transitional rules offer a tax advantage for repatriating overseas wealth. Amidst the upheaval, concerns mount about the potential loss of skills and investment. As the dust settles, the debate highlights the delicate balance between tax policy and global competitiveness.

Which headline this week most interests you?

Feature Image Credit: Getty Images

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Rebekah Barton

Rebekah Barton

Rebekah's search engine optimization career began completely by accident as a college student. Over the course of her career so far, she has "grown up" with the SEO industry, from writing content while juggling classes to managing her own teams of writers and overseeing SEO strategy in subsequent roles. She is excited to bring her passion for high-quality content to CountingWorks, Inc.

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