Key Takeaways
- Illinois considers surprise 4.95% annual tax on billionaire unrealized gains.
- Broad language would cover non-marketable assets and assets owned by others.
- Senators question propriety of IRS "CEO" position.
- Grassley questions Gates Foundation tax-exempt status.
- Senate votes against Brazil tariffs.
- National Oatmeal Day.
Illinois House Democrats introduce new transit funding plan, eye billionaire and entertainment taxes - Jeremy Gorner, Olivia Olander and Talia Soglin, Chicago Tribune:
The text of the bill is here. It would need to be passed by the end of the legislature's "veto session" tomorrow. It would apply to unrealized gains on (my emphasis):
1. Property owned by the taxpayer;
2. Property owned by the taxpayer’s spouse, minor children, or any trust or estate of which the taxpayer is a beneficiary;
3. Property contributed by the taxpayer, the taxpayer’s spouse, minor children, or any trust or estate of which the taxpayer is a beneficiary, to any private foundation, donor-advised fund, or any other entity described in Section 501(c) or Section 527 of the Internal Revenue Code, where the taxpayer or the taxpayer’s spouse, minor children, or any trust or estate of which the taxpayer is a beneficiary is a substantial contributor;
4. Without duplication, all gifts and donations made within the past 5 years by the taxpayer, the taxpayer’s spouse, minor children, or any trust or estate of which the taxpayer is a beneficiary, as if such gifts or donations were still owned by the taxpayer.
It is an incredibly aggressive and complex tax to be imposed on two day's notice. It is likely unconstitutional, and certainly unworkable. That doesn't mean it won't pass, of course, considering the disastrous "pension sweetener" they enacted earlier this year. It would be effective starting next year. Stay tuned.
Related: Eide Bailly State and Local Tax Services.
Shutdown Tax Administration: Filing Season Concerns; Layoffs Blocked; Tax Court Stops Holding Trials.
Shutdown Raises Concerns About IRS Reg Timing, 2026 Filing - Asha Glover, Law360 Tax Authority ($):
,,,
While the IRS may be prioritizing customer service functions in the short term, that function could suffer in the longer term as a result of the shutdown. With only two months before the start of 2026, it's likely that planning for the upcoming tax filing season has been disrupted, said Alex Muresianu, a senior policy analyst at the Tax Foundation.
"There are certain basic preparations for the tax season that are essential and still going on," Muresianu said, but "it makes sense to expect some marginal impact in terms of longer-term preparation for the tax filing season."
Trump’s Shutdown-Linked Layoffs Blocked by Federal Judge - Isaiah Poritz and Ian Kullgren, Bloomberg ($):
Judge Susan Illston of the US District Court for the Northern District of California at a Tuesday hearing granted unions’ request for a preliminary injunction. Illston said the unions would likely succeed in proving that the administration’s reductions in force during the ongoing shutdown were illegal.
Illston, a Clinton appointee, said the layoffs “are intended for the purpose of political retribution.”
Tax Court Trial Cancellations Continue as Shutdown Stretches On - Mary Katherine Browne, Tax Notes ($):
On October 27 the court announced the cancellation of all trial sessions for the week of November 3. The decision affected trial sessions scheduled to be held in Las Vegas, Los Angeles, Philadelphia, and Seattle.
This is the second time the Tax Court has canceled trial sessions since the government shutdown started on October 1. The previous announcement canceled two weeks of trial sessions.
Senators Questions Legitimacy of IRS Having a "CEO" Instead of a Commissioner
Senators Question Legality of IRS CEO Position - Benjamin Valdez, Tax Notes ($):
Bessent, who is also acting commissioner of the IRS, announced Bisignano’s new role on October 6. Bisignano answers directly to Bessent and is overseeing all day-to-day operations at the IRS, allowing the Treasury secretary to delegate leadership of the agency until a commissioner is confirmed by the Senate.
But in their letter, the senators argue that section 7803 requires Senate confirmation of anyone chosen to lead the IRS and that Bisignano’s dual responsibilities will lead to service shortcomings at both agencies. “This split role will only exacerbate the customer service crisis at the SSA, and the IRS needs a full-time Commissioner just months before the 2026 filing season,” they wrote.
Shutdown Politics
Republicans hold firm on shutdown position - Burgess Everett and Eleanor Mueller, Semafor. "Despite proposals to mitigate painful effects from the shutdown on SNAP or air traffic controllers, top Republicans in the House, Senate, and White House are sticking with the same strategy: pressuring Democrats to support a clean stopgap bill to reopen the government."
Key Democrat Says SNAP Cliff Alone Isn’t Enough to End Shutdown - Lillianna Byington, Bloomberg ($). "Sen. Sheldon Whitehouse said Republicans are 'dreaming' if they expect Democrats to fold under the pressure of the weekend’s food assistance benefits deadline — but said there’s bipartisan appetite for a quick fix."
Johnson Rules Out House Return to Pass SNAP Fix Ahead of Cliff - Maeve Sheehey, Bloomberg ($). "Johnson (R-La.) said he wouldn’t call the House back to vote on piecemeal bills to pay essential workers or fund nutrition benefit programs, and placed blame for any disruptions on Senate Democrats."
Tax Exempts and Politics
Grassley Demands Nonprofits Address China Funding Allegations - Kelsey Brooks, Tax Notes ($):
...
Grassley claims the Gates Foundation “provided approximately $23 million in funding to over 20 different Chinese entities, some of which were labeled as ‘foreign governments,’” according the foundation’s fiscal 2022 Form 990-PF, “Return of Private Foundation.”
Grassley asked the organizations to respond to allegations that they funded projects related to China’s “Belt and Road Initiative.” According to a 2023 report by the Council on Foreign Relations, the initiative “is a massive China-led infrastructure project that aims to stretch around the globe” and is also referred to as “the New Silk Road.”
The Gates Foundation insists that it complies with the rules for tax-exempt entities, according to the article.
Related: Eide Bailly Exempt Organization Tax Services.
Tariffs: Senate Votes Down Tariffs; China; Supreme Court.
Senate Rebukes Trump on Brazil Tariffs - Anvee Bhutani, Wall Street Journal:
Five GOP senators voted in favor of the resolution: Lisa Murkowski of Alaska; Susan Collins of Maine; Rand Paul and Mitch McConnell of Kentucky; and Thom Tillis of North Carolina. All Democrats voted in favor. The Brazil resolution now moves to the House, where GOP leaders have tightened procedural rules to block floor votes on tariff challenges until next March.
Donald Trump says he will cut fentanyl tariffs imposed on China - Christian Davies and Demetri Sevastopulo, Financial Times. "Speaking on Air Force One on Wednesday, Trump said he would lower the 20 per cent tariff he imposed early in his term. The levy was designed to put pressure on Beijing to curb the export of precursor chemicals used to make the synthetic opioid, which has triggered an epidemic in the US."
What You Should Know About the Trump Tariffs Being Challenged at the Supreme Court - Erica York and Alex Durante, Tax Policy Blog:
...
On May 28, a panel of judges at the US International Court of Trade unanimously ruled that the IEEPA tariffs were illegal, a decision that was upheld by the US Court of Appeals on August 29. The tariffs remain in effect while the administration prepares its appeal to the Supreme Court. The Supreme Court will hear oral arguments on November 5.
Trump Hopes To Bully SCOTUS Into Upholding His Tariffs - Damon Root, Reason. "Trump seems to recognize that the legal arguments in the tariffs case may not go his way. So he is openly pressuring the justices to tip the scales in his favor for political reasons."
New Tax Law Update
Finance Giants Await Treasury Details on GOP’s ‘Trump Accounts’ - Chris Cioffi, Bloomberg ($):
But after a slick rollout before the law was signed, with President Donald Trump touting the accounts at an event with corporate leaders and Dell’s CEO pledging to provide matching funds for employees, details have been sparse.
The financial services industry and advocates await guidance from the Treasury Department on whether children will be auto-enrolled, how contributions to accounts will be taxed, and what the tax treatment is for accounts after children gain access when they turn 18. They also await information on how Treasury will define key terms concerning how funds in the accounts can be invested.
Blogs and Bits
Has the Dodgers’ use of deferred compensation broken baseball? - Kay Bell on Substack. "But is the Dodgers’ financial finagling good for the game? Or has the team broken baseball?"
2026 FICA Max set at $184,500 - Bailey Finney, Eide Bailly. "The maximum amount of earnings subject to Social Security Tax is $184,500 for 2026. The maximum FICA tax imposed will be $11,439 ($184,500 x 6.2%), and there is no cap on the 1.45% Medicare tax. Self-employed taxpayers pay both the employer and employee portion. In 2025, the FICA max was $176,100 and the maximum FICA tax imposed was $10,918"
The Case Against Property Taxes - Vince Ginn, Liberty Taxed. "Property taxes distort markets, destroy mobility, and erode liberty. More fundamentally, they violate the natural right to ownership—the right to control one’s property free from perpetual government claim."
What is a Specified Service Trade or Business? Thomas Gorczynki, Tom Talks Taxes. "Under the One Big Beautiful Bill Act (OB3 Act), correctly determining whether a trade or business is a §199A specified service trade or business (SSTB) is more important than ever, as it also impacts a taxpayer’s ability to claim the new §224 tips deduction."
When Fear Fades: Rethinking Tax Enforcement - Joshua Smeltzer, Forbes. "Although some may believe that a smaller IRS less focused on enforcement is a positive, that fails to account for those who affirmatively need the help of the IRS to resolve disputes."
Paying the Client's Taxes For Them
Baltimore Atty Found Personally Liable For Entity's Taxes - Kat Lucero, Law360 Tax Authority ($, taxpayer name omitted):
As director, president and treasurer of Lehcim Holdings Co., [the attorney] is accountable because he transferred the company's assets knowing there was still an outstanding tax debt, which the Internal Revenue Service assessed after it disallowed the entity's loan interest deductions, U.S. Magistrate Judge Erin Aslan said in a memorandum decision Thursday.
The moral? If you help take the assets out of an entity that owes taxes, you might also be taking on the tax liability.
What day is it?
It's National Oatmeal Day! I prefer my oatmeal in cookie form.
Make a habit of sustained success.
