Tax News & Views Busy Congress Brownie Roundup

Congress Faces Packed Agenda and Little Time Before End of 2025 - Maeve Sheehey, Lillianna Byington, and Roxana Tiron, Bloomberg ($):

Tensions are high on Capitol Hill, and days are numbered before lawmakers leave for the holidays, but that isn’t tempering their ambition to get through a lengthy slate of work.

Enhanced Affordable Care Act premium tax credits that expire at the end of the year are driving much of the tension, with Republicans in both chambers miles apart on whether to extend them. Rank-and-file House lawmakers have released a slew of bipartisan proposals in a Hail Mary effort to secure an extension, but GOP leaders are digging in against the Covid-era subsidies.

While House and Senate leaders face minor rebellions from their restless members, they’re also sparring with each other. House Democratic Leader Hakeem Jeffries (N.Y.) said last week that his once-productive relationship with Speaker Mike Johnson (R-La.) has “evolved, and not necessarily in a constructive direction.” And lawmakers fear more resignations could be on the horizon after an infuriated Rep. Marjorie Taylor Greene (R-Ga.) announced she’s quitting early.

Two weeks left: NDAA and health care dominate the Hill - Andrew Desiderio, Jake Sherman, Briana Reilly, Anthony Adragna and Laura Weiss, Punchbowl News:

GOP senators who represent dueling ideological factions in the Republican Conference are teaming up on a plan to extend the Obamacare subsidies for two years with income caps and other reforms.

The new proposal from Republican Sens. Bernie Moreno (Ohio) and Susan Collins (Maine), outlined in this one-pager, would cap income eligibility and eliminate zero-premium plans by requiring a $25 minimum monthly payment.

Under the Moreno-led plan, the full tax credit would be available for households with income of up to 400% of the poverty level, and then gradually phase out so that households making over $200,000 would no longer benefit.

Johnson Recycles GOP Health Ideas Amid Gridlock Over Obamacare - Erik Wasson, Bloomberg ($):

Speaker Mike Johnson is pushing to unveil a Republican health care bill in the coming days for a vote by the end of the month, but the move is unlikely to resolve a congressional deadlock over expiring Obamacare subsidies.

The GOP plan is likely to include ideas the party has floated in the past to create less comprehensive plans to compete with Obamacare and to divert premium tax credits for the insurance policies toward tax-sheltered savings accounts individuals can use to cover non-premium out-of-pocket costs.

Capitol Hill Recap: Looking for Options on Healthcare Tax Credits - Alex Parker, Eide Bailly:

Putting together a major health care overhaul in the remaining weeks of 2025 is a tall order. In fact, simply extending the ACA credit enhancement will be more complicated than it may sound, as open enrollment on the Obamacare exchanges has already begun and many have already bought insurance for the upcoming year. The closer it is to 2026—and Congressional negotiations tend to go until the 11th hour—the harder it will be to find a fix. And Republican hopes of enacting some type of overhaul of the system will also face perhaps insurmountable challenges if they hope to do so before the 2026 premium hikes take effect.

President Trump, meanwhile, has been puzzling his own party with proclamations against any extension, as well as hints that he might consider one. The mixed messages likely aren’t helping matters.

Tariff Bailouts, Tariff Refunds, Trade Turmoil

Trump to Unveil $12 Billion Bailout for Farmers - Brian Schwartz, Natalie Andrews and Patrick Thomas, Wall Street Journal:

The Trump administration is planning to announce $12 billion in aid to U.S. farmers, according to administration officials, as the agriculture sector grapples with the fallout from President Trump’s far-reaching tariffs.

The aid package is expected to be unveiled at the White House on Monday afternoon, where Trump is holding a roundtable with farmers, the officials said. Top administration officials have been discussing the bailout behind the scenes for months.

Much of the aid—$11 billion—will be in the form of one-time payments through the Farmer Bridge Assistance program, which helps U.S. crop farmers. The remaining $1 billion will go toward commodities not covered under the bridge assistance program, the officials said. Bloomberg earlier reported the details of the bailout.

Why Costco is the only big retailer to challenge Trump on tariff refunds - Jaclyn Peiser, Washington Post:

For almost a year, most of the largest U.S. retailers have spoken openly about the impact tariffs are having on their margins as they justify price increases for customers. Executives have addressed the issue on earnings calls, in TV interviews and onstage at conferences.

But only one has made its dissent known in court: Costco.

...

While some analysts point to Costco’s lawsuit as a smart business decision to ensure it gets its money back, others note the chain is uniquely positioned to weather any backlash from Washington regardless. And that’s what’s setting it apart from retailers that are reluctant to make waves with the administration.

“They’re not alone in being impacted by tariffs,” said Michael Baker, a retail analyst at D.A. Davidson. “But Costco has the size and the clout with consumers, suppliers — and really everyone within the retail ecosystem — to potentially take action that won’t be viewed favorably by the administration.”

As Trump Threatens to Leave North American Deal, Supporters Urge Him to ‘Do No Harm’ - Ana Swanson, New York Times:

The Trump administration kicked off what could be a contentious process to rework the trade deal that governs North American business this week, as it began holding hearings about the U.S.-Mexico-Canada Agreement that President Trump signed into law in 2020 during his first term.

...

Mr. Trump’s antipathy toward the North American trade deal is longstanding. Ahead of the 2016 election, and even once in office, Mr. Trump repeatedly threatened to scrap NAFTA altogether.

He often described the 25-year-old agreement as “the worst trade deal ever made,” saying it allowed jobs and manufacturing to leave the United States for Canada and Mexico. In his first term, Mr. Trump came close on multiple occasions to withdrawing the United States from the agreement. As the negotiation neared an end, he threatened to jettison Canada and turn the agreement into a bilateral deal between the United States and Mexico.

IRS Staffing, Stimmy Logistics, Lawsuit Risks

Tariff Payments’ Cost and Possible IRS Burden Invites Scrutiny - Benjamin Valdez, Tax Notes ($):

The distribution of so-called tariff dividends to millions of taxpayers could be a job for the IRS, but observers are skeptical about saddling the already burdened agency with another responsibility.

President Trump, in a November 9 Truth Social post, announced that his administration plans to use revenue gained from tariffs to deliver “a dividend of at least $2,000 a person,” excluding high-income taxpayers.

While details surrounding the proposal have yet to be ironed out — and it would likely need to be approved by Congress first — tax policy watchers say it might be ill-advised to require the IRS to distribute the payments, given that the agency is working to implement the One Big Beautiful Bill Act (P.L. 119-21) and has seen a surge of employees resign this year.

IRS Faces Growing Backlog of Reasonable Accommodation Requests - Benjamin Valdez and Lauren Loricchio, Tax Notes ($):

“Currently, IRS has a backlog exceeding 5,800 [reasonable accommodations] requests, many of which are several months old and far exceed the [Equal Employment Opportunity Commission’s] processing timeframe and the Department’s own policy standard,” Snider Page, the office’s director, wrote to then-Treasury Deputy Secretary Michael Faulkender, who was also acting IRS commissioner at the time.

“These delays place the Department at substantial legal risk and jeopardize its compliance with federal disability nondiscrimination laws,” Page said.

The Rehabilitation Act of 1973 (29 U.S.C. 701) requires employers to provide reasonable accommodations to people with disabilities, except when an accommodation would cause an undue hardship to the employer.

Fleeing a High Tax State? Don't Look Back.

Moving States? Navigating State Residency to Avoid Double Taxation - Melissa Menter and Colette Sutton, Eide Bailly:

Bottom line, you can only have one domicile at a time, but you may be a resident of multiple states for tax purposes. Residency is easier to establish than domicile, and failing to abandon your old domicile can result in double taxation.

Can You Be Taxed By Multiple States?

Short answer, yes. Most states have the authority to tax all income earned by their residents—whether you’re domiciled there or meet residency requirements. This means if you’re domiciled in one state but considered a resident of another, both states can tax your entire income.

Rich New Yorkers Threaten to Leave. Then They Find Out How Hard That Is. - Matthew Haag, New York Times:

To avoid New York’s high state and city income taxes — which can climb to nearly 15 percent, the highest combined rate in the nation — it is not enough to simply file a change of address or spend more than 183 days of the year in another state, a common misconception. You really have to move — and a lot more.

Even then, a high earner filing a tax return from a new address could attract auditors’ attention, and just one misstep can cause an audit defense to fall apart or become a lot more challenging. Like when a wealthy man moved to Florida but returned to New York to go fly-fishing. Eager for a discount on his fishing license (which currently costs $50 for nonresidents and $25 for residents), he checked the box indicating he was a New York resident.

I can speak to this from experience. New York audited a client who was a life-long Iowa resident, but whose business required frequent trips to New York City - and who carefully reported income in New York for the days he was there. It took months, and reams of documentation - including Iowa grocery store receipts - to convince the New York revenuers that he really did live in that nice Iowa house.

Getting your Tax House in Order for Year-End

The Clock Is Ticking for IRA Inheritors to Take Distributions - Ashlea Ebeling, Wall Street Journal:

The Internal Revenue Service issued final guidance last year that requires many people who inherited IRAs in recent years to take their first required minimum distributions by Dec. 31. For taxpayers in their working years such as the Creightons, both 54, that can mean a big tax hit. Distributions from inherited traditional IRAs count as income, and can move people into a higher tax bracket.

Under the new rules, most people who inherited accounts in 2020 or later, other than spouses, have to take the money out within 10 years, starting the year after the original IRA owner’s death. Those who inherited from someone who was taking required payouts, such as Kathy Creighton, have to take annual minimum payouts in years one through nine, and empty the account in year 10.

The IRS had delayed enforcing the annual payouts—until this year.

Lower Your Taxes With These Five Often-Missed Credits - Lori Ioannou, Wall Street Journal:

1. Retirement savings contributions credit - Many people don’t know they may be able to take a nonrefundable tax credit for making eligible contributions to their individual retirement account, 401(k), 403(b) or other employer-sponsored retirement plans. ABLE savings accounts for eligible individuals with disabilities also qualify for this credit.

Blogs and Bits

Holiday ID theft scams can linger into tax season, leading to fake filings for fraudulent refunds - Kay Bell on Substack. "Sometimes it is simply bad tax advice on social media that misleads taxpayers about credit or refund eligibility. In the worst cases, online tax “experts” urge taxpayers to lie on tax forms or suggest the IRS is keeping a tax credit secret from filers. Social media posts also may put taxpayers in touch with scammers."

IRS Provides Initial Guidance on Trump Accounts - Parker Tax Pro Library: "The notice addresses certain initial questions about Trump accounts, including account creation, the $1,000 pilot program contribution, and employer contributions; the notice also provides that the election to establish a Trump account will be made on forthcoming Form 4547, Trump Account Election(s), and an online tool is expected to be available at trumpaccounts.gov in the middle of 2026. Notice 2025-68."

OBBBA Update: Qualified Tips and Overtime Compensation for Tax Year 2025 - Tax School Blog. "These provisions aim to provide relief for workers in tipped occupations and those earning federally required overtime pay, while creating new compliance considerations for tax professionals."

Anatomy Of An AI Hallucination - Peter Reilly, Your Tax Matters Partner. "Anyway I have read that there are problems with AI sycophancy, so I asked Grok what was wrong with the writing of Peter J Reilly on Forbes.com, Think Outside The Tax Box and this platform. Here is what I got."

Grok insisted to Peter Reilly that he had written an article that he didn't write. Things got awkward.

$1.8 Million ERC Fraud Gets 50 Months

Kingsport woman sentenced to prison for COVID-19 employment tax credit scheme - IRS (Defendant name omitted, emphasis added):

A Tennessee woman was sentenced today to 50 months in prison to conspiring to commit wire and mail fraud. According to court documents and statements made in court, Defendant, of Kingsport, Tennessee, conspired with others to file false tax returns seeking refunds based on the Employee Retention Credit and paid Sick and Family Leave Credit, both of which were created by Congress to aid struggling businesses during the COVID-19 global pandemic. Defendant and co-conspirators created phony businesses, which lacked any employees or operations, for the sole purpose of falsely claiming the credits. Defendant filed numerous false tax returns for those businesses and directed the tax refunds to be mailed to addresses she and co-conspirators controlled.

In total, the false returns claimed over $3.4 million in tax refunds, of which the IRS paid $1.8 million.

In addition to her prison sentence, U.S. District Court Judge Clifton Corker for the Eastern District of Tennessee ordered Defendant to serve three years of supervised release and to pay approximately $1,806,637 in restitution to the United States

The IRS release doesn't disclose the use made of the stolen $1.8 million, but I wouldn't count on that restitution being paid anytime soon.

What Day is it?

It's National Brownie Day! It's also National Lard Day, for you old-school pie crust connoisseurs, so plenty to celebrate for a Monday.

Tax News & Views Busy Congress Brownie Roundup

Make a habit of sustained success.

Joe B. Kristan, CPA