Tax News & Views Feel-Good Furloughs Roundup

Fraught Furloughs

IRS Furloughs Could Crimp GOP Tax Law Guidance, Rules Rollout – Chris Cioffi, Zach C. Cohen, and Kim Dixon, Bloomberg ($):

IRS employees implementing the GOP July tax law are largely exempt from staff furloughs amid the government shutdown, but the shutdown’s impact could still have a ripple effect on the rollout of regulations and guidance to taxpayers.

Just under 40,000 agency staff will remain working as the shutdown drags into its tenth day and lawmakers failed yet again to reach agreement to restart government funding.

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“Even with the best efforts and designating people ‘essential,’ there is going to be a natural slowdown on how quickly they can get guidance out,” said Miller and Chevalier’s tax policy practice lead Marc Gerson. “It’s definitely going to have a negative impact on the guidance.”

IRS Casts Doubt on Back Pay for Furloughed Staff – Benjamin Valdez, Tax Notes ($):

The IRS walked back an earlier memo stating that furloughed employees were entitled to back pay, deferring to the Office of Management and Budget for further guidance.

“An earlier memo circulated on furlough guidance incorrectly stated the nature of the Government Employee Fair Treatment Act of 2019 as it relates to compensation for non-pay and non-duty status,” the IRS said in an update to its employee emergency news site October 9. “The Office of Management and Budget will provide further guidance on this issue, and you will be updated accordingly.”

IRS Cautions Furloughed Agency Workers Back Pay Not Guaranteed – Zach C. Cohen, Bloomberg ($). “Workers at the IRS sent home during the ongoing government shutdown should await further clarity from the Office of Management and Budget on whether they will get back pay after the standoff ends, the agency said Thursday.”

Leadership in Legislation

Two Top Democrats Spurn One-Year Premium Credit Extension Idea – Cady Stanton, Tax Notes ($):

A pair of Democratic leaders in the House doubled down on the time frame for extending the enhanced Affordable Care Act premium tax credits, pushing for a permanent solution rather than a 12-month extension.

The stalemate on how to address expiring healthcare insurance marketplace tax credits continued October 9, more than a week into the shutdown of the government, and neither political party appears fully aligned within its own ranks on an acceptable compromise to reopen it.

GOP Sen. Joins Dems On Bill To Nix Trump's Global Tariffs – Dylan Moroses, Law 360 ($). “Several Senate Democrats and one Republican introduced legislation Thursday to eliminate the national emergency associated with President Donald Trump's so-called reciprocal tariff regime.”

Shutdown Stalemate

Trump Renews Threats With Congress Mired in a Shutdown Brawl – Steven T. Dennis, Erik Wasson, and Catherine Lucey, Bloomberg ($):

Congressional leaders continued to blame the other party for the US government shutdown as President Donald Trump doubled down on his threats to use the stalemate, now in its ninth day, to make sweeping cuts to Democratic priorities and the federal bureaucracy.

There was no sign of progress as government workers and military personnel prepare for missed paychecks and the general public begins to feel the effects of the closure on everything from taxpayer services to air travel.

Why the Shutdown Could End Without ACA Tax Credit Extension – Katie Lobosco, Tax Notes ($):

It’s becoming a real possibility that the government will reopen without an extension of an expiring healthcare tax credit, despite congressional Democrats’ demand to address the subsidies in exchange for their votes for a stopgap funding measure.

As the shutdown drags into its second week, other pressure points — like troop pay and flight delays — are emerging that could sway some Democrats to flip their votes before a deal is reached on healthcare.

There’s some support in both parties for extending the COVID-era enhanced premium tax credit, which subsidizes the cost of insurance bought through the Affordable Care Act exchange. But Republican leaders continue to refuse to negotiate on the topic until a handful of Democrats join them in voting for a stopgap measure that would fund the government through November 21.

Budget Briefing

Tariffs Are Way Up. Interest on Debt Tops $1 Trillion. And DOGE Didn’t Do Much. – Richard Rubin & Anthony DeBarros, Wall Street Journal. “Control of the White House changed in fiscal year 2025, but the U.S. budget picture didn’t. It remains grim. Despite a historic rise in tariff revenue, the deficit was the same in the year ended Sept. 30, 2025, as the previous year. That is largely because the main drivers of spending kept rising: social programs, including Social Security and Medicare, and interest on the public debt, which topped $1 trillion by one measure for the first time.”

Bessent Boasts

Bessent Touts Drop in Deficit-to-GDP Ratio, Sees Tax-Refund Wave – Daniel Flatley, Bloomberg ($):

Treasury Secretary Scott Bessent touted a drop in a key US fiscal ratio as evidence that President Donald Trump’s economic policies are working without causing a recession.

“The deficit-to-GDP now has a five in front of it,” Bessent said at a community bank conference hosted by the Federal Reserve Thursday. That’s down from a 2024 ratio “which was the highest when we weren’t at war or weren’t in a recession in US history.”

Tumultuous Tariffs

Trump’s Wood Tariffs Are Coming. Who’s Hit Hardest: QuickTake – Ilena Peng, Bloomberg ($):

President Donald Trump unveiled sweeping tariffs on imported lumber and wood products that his administration says are needed to protect the US economy and boost domestic manufacturing. Starting Oct. 14, softwood lumber will face 10% duties, while kitchen cabinets, bathroom vanities, and other finished wood goods will be hit with 25% tariffs that rise further in January.

The biggest blow will fall on Canada, the US’s top lumber supplier, whose lumber exports are already subject to separate duties totaling 35.19%. The two countries have been locked in a decades-long dispute over US claims that Canada unfairly subsidizes its lumber industry and sells the commodity below market rates.

Levi Warns of Tariff Impact, Blunting Higher Sales Outlook – Lily Meier, Bloomberg ($):

Levi Strauss & Co. raised its full-year outlook, but warned that tariffs are starting to bite.

“We have started feeling the impact of tariffs” in the third quarter, Chief Financial Officer Harmit Singh said in an interview. Despite this, Levi’s profitability, as measured by gross margin, improved.

US Auto Sector Needs Trade Deal to Compete, Carney Says – Geoffrey Morgan, Bloomberg ($):

Canadian Prime Minister Mark Carney pushed back against US President Donald Trump’s protectionism in the auto industry, saying North America’s interwoven supply chain makes US manufacturers more competitive on costs.

Carney, fresh from a trip to meet with Trump in Washington, told a crowd of business executives on Wednesday evening that the US-Mexico-Canada Agreement strengthens the US industry.

Bracket Bonanza

The 2026 Tax Brackets Are Here. See Where You Land. – Ashlea Ebeling, Wall Street Journal:

The income brackets that determine how much Americans pay in taxes each year are moving up for 2026, with a bigger bump for the lowest brackets because of this year’s new tax law.

It will take more income to reach each higher tax bracket after a 4% inflation adjustment for the lowest two brackets and a 2.3% increase for the higher brackets, the Internal Revenue Service said Thursday. The annual adjustments are based on formulas tied to inflation. The adjustments are for returns filed in early 2027.

School Selections

Blue States Urged to Accept Trump’s $1,700 Private School Credit – Erin Hudson, Bloomberg ($):

A controversial new law championed by President Donald Trump to funnel federal dollars into private schools is fueling a campaign to get Democratic governors to opt in to the first national school choice program in the US.

Part of Trump’s sweeping budget package, the program allows individual taxpayers to receive a federal tax credit for donating to nonprofits that grant scholarships to students to pay for education expenses such as text books, tutoring and tuition at private and religious schools. Republicans laud the program as a victory in their decades-long campaign for school choice. Democrats and labor unions call it another harmful blow to struggling public schools.

EV Exhortations End

GM Backs Off Controversial EV Tax Credit Move – Christopher Otts & Richard Rubin, Wall Street Journal:

General Motors is backing off a controversial plan to use its in-house auto finance company to effectively extend the federal $7,500 electric-vehicle tax credit beyond its Sept. 30 expiration, the company said.

Late last month, GM and crosstown rival Ford used their finance companies to make down payments on many EVs in dealer inventory, hoping to claim the $7,500 credit and pass it onto customers later in the form of lower lease payments.

“After further consideration, we have decided not to claim the tax credit,” a GM spokesman said Wednesday.

AMT Flexibility Frightens

Early Reviews Are in for New Corporate AMT Interim Guidance – Chandra Wallace, Tax Notes ($):

New guidance modifying the application of the corporate alternative minimum tax gives taxpayers more flexibility, but with those new options come more decisions, according to initial reactions.

The guidance (Notice 2025-46, 2025-43 IRB 1; Notice 2025-49, 2025-44 IRB 1) issued September 30 by the IRS and Treasury has been described as mostly taxpayer favorable by tax advisers, who noted that the government has incorporated changes requested by stakeholders.

In the Courts

Crypto Investor Known as ‘Bitcoin Jesus’ Reaches Deal With Prosecutors – Kenneth P. Vogel & David Yaffe-Bellany, New York Times. “[Redacted], a prominent cryptocurrency investor, has reached a tentative agreement with the Justice Department to table a criminal tax fraud case that federal prosecutors brought against him last year, according to two people with knowledge of the matter.”

Hospice Co. Can't Get $450K In Deductions, Tax Court Affirms – Anna Scott Farrell, Law 360 ($). “A California-based hospice company was correctly denied $450,000 in tax deductions, the U.S. Tax Court decided Thursday, saying most of the tax breaks were not substantiated as required.”

Hospice Nabs Partial Tax Court Win Despite ‘Bizarre’ Records – Tristan Navera, Bloomberg ($):

A California hospice business won a minor victory in a US Tax Court challenge to an IRS audit, despite keeping “bizarre” records.

The IRS may have overestimated [redacted]'s income in the audit, and the company and its principals—Armond Graibyan, his brother Arsen, and his wife Ani—don’t have to pay tax penalties, the court said in an opinion by Judge Mark V. Holmes.

ERC Voluntary Disclosure Sinks Taxpayer Suit Against Promoters – Nathan J. Richman, Tax Notes ($). “A taxpayer that came out ahead after returning most of an employee retention credit claim and paying a contingency fee lacked standing to sue those who helped it apply for the incentive, a federal court concluded.”

What Day is it?

Its World Mental Health Day, a day we should celebrate all year long. And while we’re doing that, lets also celebrate National Cake Decorating Day!

Tax News & Views Feel-Good Furloughs Roundup

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Trina Pinneau