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Key Takeaways
- Cost of Republican's tax cut agenda.
- Uncertain future for clean energy credits.
- SALT Cap Workaround challenged in court.
- Future of IRS Direct File.
- Taxes on sports betting.
- Tax trouble in Vancouver.
- National flower day!
Tax Legislation
The Size of the Tax Cut - Andrew Duehren, New York Times:
There’s a long list of taxes they want to cut. But they can’t cut them all, because House Republicans have set a $4.5 trillion limit on the amount of money the federal budget can lose over the next 10 years to tax cuts.
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But Trump wants to do more than just extend the tax cuts from his first term. During the presidential campaign, he outlined several new ideas, many of which call for exempting different types of income from taxation. These will be expensive. The Committee for a Responsible Federal Budget, a nonpartisan group, has estimated their costs over 10 years:
- At least $100 billion not to tax tips
- At least $250 billion not to tax overtime
- At least $550 billion to lower taxes on Social Security benefits
- At least $200 billion to increase the deduction for state and local taxes
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But Trump wants to do more than just extend the tax cuts from his first term. During the presidential campaign, he outlined several new ideas, many of which call for exempting different types of income from taxation. These will be expensive. The Committee for a Responsible Federal Budget, a nonpartisan group, has estimated their costs over 10 years:
- At least $100 billion not to tax tips
- At least $250 billion not to tax overtime
- At least $550 billion to lower taxes on Social Security benefits
- At least $200 billion to increase the deduction for state and local taxes
Energy Credits and Incentives
The Man Behind the Republican Case for Clean Energy - David Gelles, New York Times:
Garbarino and 20 other Republican representatives last week sent a letter defending the tax credits to Representative Jason Smith of Missouri, the chairman of the Ways and Means Committee.
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“The president wants us to be an energy dominant country, and solar and wind has to be part of that discussion,” he said. “It takes 10 years to build a natural gas plant. We don’t have the technology right now for nuclear or geothermal to work on a large scale. We need energy now, and solar and wind are the quickest things to get online.”
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“The president wants us to be an energy dominant country, and solar and wind has to be part of that discussion,” he said. “It takes 10 years to build a natural gas plant. We don’t have the technology right now for nuclear or geothermal to work on a large scale. We need energy now, and solar and wind are the quickest things to get online.”
Toronto excludes Tesla from EV incentive due to US trade war - Wa Lone, Reuters:
Toronto is no longer providing financial incentives for Tesla vehicles purchased as taxis or ride shares due to trade tensions with the United States, the city's mayor, Olivia Chow, said on Monday. The city is promoting the adoption of electric vehicles purchased as vehicles for hire by giving drivers and owners a reduction in licensing fees and renewal fees until the end of 2029, to help it lower emissions.
The cost of killing EV tax credits - Arianna Skibell, Politico:
A downturn in the EV market would threaten the billions of dollars major companies have already invested, along with tens of thousands of new factory jobs in largely Southern and Midwestern states. Removing just one tax credit — the $7,500 consumer incentive for North American-made EVs — could mean 8.3 million fewer EVs on the road by 2030, according to a recent study from Princeton University.
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Unwinding the EV tax credit would save the federal government $168 billion over a decade, according to another new study from Harvard University. Republicans want to use that money to help pay for tax cuts Trump has promised, which independent analysts have said will largely benefit wealthy citizens.
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Unwinding the EV tax credit would save the federal government $168 billion over a decade, according to another new study from Harvard University. Republicans want to use that money to help pay for tax cuts Trump has promised, which independent analysts have said will largely benefit wealthy citizens.
Related: IRA Credits Remain in Place Despite Mixed Signals.
DOGE
Judge Calls for Clarity on DOGE Payment System Access Policy - Nathan J. Richman, Tax Notes ($):
Three entities affiliated with the AFL-CIO sued the government, challenging the decision to grant DOGE personnel access to Treasury’s Bureau of the Fiscal Service (BFS) systems.
The parties initially agreed to an order restricting DOGE special government employees Tom Krause and Marko Elez to “read only” access to BFS records, although Elez left the DOGE Treasury team in early February. Kollar-Kotelly conducted a February 24 hearing concerning the plaintiffs’ request for a preliminary injunction.
The parties initially agreed to an order restricting DOGE special government employees Tom Krause and Marko Elez to “read only” access to BFS records, although Elez left the DOGE Treasury team in early February. Kollar-Kotelly conducted a February 24 hearing concerning the plaintiffs’ request for a preliminary injunction.
In the Courts
An Analysis of the Domestic Production Activities Deduction for PBM Software: Loper Bright’s Impact - ED Zollars, Current Federal Tax Developments ($):
The Express Scripts case underscores the critical distinction between the sale or licensing of software and the provision of services that utilize software for tax purposes under the former Section 199. Tax practitioners should carefully analyze the terms of agreements, the nature of customer access to software, and the fee structures involved when evaluating a client’s eligibility for the DPAD related to software. The court’s emphasis on the contractual language explicitly defining the nature of the transaction (service versus license) and the lack of direct customer access or separate fees for software usage provides valuable guidance in this area. This case serves as a reminder that the mere use of sophisticated software in the provision of a service does not automatically qualify the service provider for the DPAD as if they had disposed of the software itself.
IRS SALT Cap Workaround Rule Unlawful, 2nd Circ. Told - Maria Koklanaris, Law 360 Tax Authority ($):
Arguing for Scarsdale, Daniel Rosen of Baker McKenzie told the panel that in addition to reversing itself, the IRS exceeded its authority. The agency and the U.S. Department of the Treasury overreached when deciding that the state tax credit programs but not certain deductions are disallowed under a doctrine of quid pro quo: If an individual is making a true charitable contribution, the agencies said, the individual should have no expectation of getting something in return.
Blogs and Bits
Four Tax Tips I Tell My Children—When They’ll Listen - Laura Saunders, Wall Street Journal:
Keep good records. Many tax cases have been lost because taxpayers couldn’t prove they did what they said they did. Keeping good records is basic tax hygiene, like brushing your teeth, whether they are for business expenses, charitable gifts, home repairs or something else.
This rule extends to IRS correspondence. If using the U.S. Postal Service, always send by certified mail and keep the sticker. It can solve a world of problems.
This rule extends to IRS correspondence. If using the U.S. Postal Service, always send by certified mail and keep the sticker. It can solve a world of problems.
People love the IRS’s free tax filing website. Its future is unclear. - Shira Ovide, Washington Post:
Advocates of a smaller government and tax prep companies say Direct File wastes money by duplicating commercial tax services, and that it’s a conflict for the tax authority to operate a tax filing system.
Those concerns reflect decades of distrust of the IRS, mostly from Republicans. Now, though, people on the left are wary of government agencies under the Trump administration, said Code for America CEO Amanda Renteria. She expects the concern to reduce use of Direct File and other government services.
If you’re worried about giving more information to the government, experts say there’s no difference in the amount of personal financial information in the IRS’s hands whether you file your return with Direct File, TurboTax, an accountant or on paper tax forms.
Those concerns reflect decades of distrust of the IRS, mostly from Republicans. Now, though, people on the left are wary of government agencies under the Trump administration, said Code for America CEO Amanda Renteria. She expects the concern to reduce use of Direct File and other government services.
If you’re worried about giving more information to the government, experts say there’s no difference in the amount of personal financial information in the IRS’s hands whether you file your return with Direct File, TurboTax, an accountant or on paper tax forms.
Haven’t filed your 2021 tax return? You might be missing out on a COVID stimulus check - Susan Haigh and Adriana Morga, AP News:
Earlier this year, the IRS announced that it’s distributing about $2.4 billion to taxpayers who didn’t receive their COVID stimulus payments. The agency said it’s distributing these payments to taxpayers who failed to claim a Recovery Rebate Credit on their 2021 tax returns. The Recovery Rebate Credit is a refundable credit for individuals who did not receive one or more Economic Impact Payments (EIP), also known as stimulus payments.
FBAR Due Date: Triggers And Key Compliance Rules For U.S. Taxpayers - Virginia La Torre Jeker, J.D., Forbes:
U.S. person must file an FBAR if they have “a financial interest in or signature authority over” one or more foreign financial accounts and if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year. Understanding financial interest and signature authority is key to determining whether a filing obligation exists.
Tax Policy
As states mull tax hikes, sportsbooks insist they’re paying their fair share - Danny Funt, Washington Post:
The opportunity to tax sports betting has been the primary rationale for legalizing it. But vastly different rates across the country — from 6.75 percent in Iowa to 51 percent in New York and New Hampshire — reveal persistent, fundamental disagreements over how the industry ought to take shape.
Some lawmakers from both parties view steep taxes as an appropriate mechanism to rein in gambling, while sportsbooks say they deserve the freedom to flourish like any other business. Customers are being asked to choose sides. And as revenue from sports betting exceeds expectations, so does the demand for problem-gambling services, yet advocates say many states aren’t diverting enough tax revenue to adequately address public health harms.
Some lawmakers from both parties view steep taxes as an appropriate mechanism to rein in gambling, while sportsbooks say they deserve the freedom to flourish like any other business. Customers are being asked to choose sides. And as revenue from sports betting exceeds expectations, so does the demand for problem-gambling services, yet advocates say many states aren’t diverting enough tax revenue to adequately address public health harms.
Tax Trouble
Vancouver, Washington, high-volume tax preparer indicted for aiding and assisting false tax returns - IRS (defendant name omitted):
A high-volume tax preparer in Vancouver, Washington was indicted last week for sixteen counts of aiding and assisting in the preparation of false and fraudulent returns, announced Acting U.S. Attorney Teal Luthy Miller.
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Between 2017 and 2021, Defendant prepared at least 12,000 tax returns. The grand jury alleges that his false entries on customer tax returns cost the U.S. Treasury more than $5 million in tax loss.
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Between 2017 and 2021, Defendant prepared at least 12,000 tax returns. The grand jury alleges that his false entries on customer tax returns cost the U.S. Treasury more than $5 million in tax loss.
What day is it?
Spring is in the air, it's National Flower Day!