Tax News & Views Senate Tax Talks and Popcorn Roundup

Tax Legislation

Trump to Meet With Senate Finance Panel as Tax Talks Heat Up - Erik Wasson, Bloomberg ($):

The meeting, scheduled for Thursday at the White House, will be the first sit-down between the Senate tax panel and Trump since he took office nearly two months ago. The House and Senate have made halting progress advancing the tax cut package with the two chambers at odds over how to pass the legislation.

Senate GOP’s Tax-Cut Wishlist Heads North of $5 Trillion - Richard Rubin, Wall Street Journal:

On the menu: Reviving lapsed business tax breaks, expanding the child tax credit, loosening the cap on the state and local tax deduction and incorporating Trump’s ideas for eliminating taxes on tips, overtime and Social Security benefits, said Finance Committee Chairman Mike Crapo (R., Idaho), who ticked through a list of ideas Wednesday that could easily top $5 trillion or more over a decade.

On top of that, Crapo said, senators have submitted about 200 additional tax ideas to him, such as an expanded low-income housing tax credit, changes to the Opportunity Zone program for investments in low-income areas and further cuts in the estate tax. The final bill won’t include all of those proposals, Crapo said, but some will get in.

Crapo Says Tax Package Will Be Bigger and Broader Than Expected - Doug Sword, Tax Notes ($):

But many Republicans in both the House and Senate are hoping this reconciliation bill will be the first to be scored on a current-policy baseline, which means the scored costs of extending the TCJA provisions would be zero. Even if Republicans win that argument, Crapo said that the new tax policy included in the bill, such as full R&D expensing and Trump’s proposals, would have to be offset to avoid being scored as increasing deficits.

Senate Finance Republicans to huddle with Trump on taxes - Jordain Carney, Benjamin Guggenheim, and Meredith Lee Hill, Politico:

Another Republican granted anonymity to discuss the agenda for a private meeting said one topic of the conversation will be whether to use the so-called current policy baseline to extend Trump's 2017 tax cuts. That accounting method would make it appear as though extending those tax cuts costs nothing.

Senate Republicans believe a current policy baseline would make it much easier to ensure Trump’s expiring tax cuts are made permanent. But it's a controversial tactic among fiscal conservatives who worry that leadership is using it to hide the cost of the party-line bill they want to pass through budget reconciliation — and reduce the need for steep spending cuts to finance that bill.

Tariffs

A Global Trade War Takes Off - Renu Zaretsky, Tax Policy Center:

The president says the 25 percent tariff on steel and aluminum imports will help bolster US manufacturers. But Trump’s move has sparked global trade tensions that could further raise costs for consumers. The European Union and Canada have announced retaliatory tariffs on $28 billion worth of US products, including bourbon and motorcycles. European leaders emphasize they would prefer to negotiate but are prepared for a prolonged trade dispute. President Trump has vowed to respond to the EU’s latest actions and accused Ireland of using its tax policies to lure US companies away.

Canada Announces Steel, Aluminum Retaliatory Tariffs On US - Dylan Moroses, Law 360 Tax Authority ($):

Canadian Finance Minister Dominic LeBlanc said the retaliatory tariffs will take effect beginning at midnight on Thursday, applying a 25% reciprocal rate on $29.8 billion worth of U.S. imports, including steel and aluminum.

IRS

The Revenue and Distributional Effects of IRS Funding - The Budget Lab at Yale:

The Budget Lab estimates that the expansion of funding ($80 billion) for the IRS in the Inflation Reduction Act (IRA) would have led to a net revenue increase of $637 billion over the full 10-year budget window. If the IRS shrinks by 50% (a workforce decrease of about 50,000 people), we estimate that this significant reduction in IRS staffing and resulting IRS capacity to collect revenues would result in $395 billion ($350 billion net) forgone revenue over the 10-year budget window. If the lack of IRS resources leads to a substantial increase in noncompliance, net forgone revenue could rise by $2.4 trillion over 10-years.

House GOP Blocks Oversight Of DOGE Taxpayer Info Access - Asha Glover, Law 360 Tax Authority ($):

The panel voted 25-18 to adversely report H.R. 127 to the full House of Representatives, indicating the committee's opposition to floor action on the resolution. The resolution would require Trump and Treasury Secretary Scott Bessent to give the House any document, record, audio recording, memorandum, call log, correspondence, activity logs, audit trails and logs, written agreements or other communications related to the access or usage of Treasury payment systems by DOGE or its head, Elon Musk. DOGE is an entity within the White House, not a Cabinet-level agency.

Ousted IRS Human Capital Officer Pushed Back on Firings, DOGE - Benjamin Valdez, Tax Notes ($):

DiMartini said that her office narrowed down a list of 17,000 probationary employees to about 6,700 after carving out staff in taxpayer services, the Taxpayer Advocate Service, and IT departments who are essential for the filing season.

Treasury and the IRS didn’t conduct any performance reviews ahead of the terminations, according to DiMartini, who was placed on administrative leave pending termination March 3 by acting IRS Commissioner Melanie Krause.

In the Courts

Taxpayers Filing Court Challenges to Attempt to Obtain Employee Retention Tax Credits - Ed Zollars, Current Federal Tax Developments:

In summary, the plaintiffs in both cases are seeking direct refunds of their claimed ERC amounts and are concurrently challenging the validity of IRS Notice 2021-20 on the grounds that it was issued in violation of the APA, is arbitrary and capricious, and exceeds the IRS’s statutory authority. They argue that the Notice unlawfully restricts ERC eligibility and credit calculations beyond what Congress intended in the CARES Act and subsequent legislation.

Blogs and Bits

Tax Time Guide: Use IRS electronic payment options for fast, safe service; avoid penalties and interest - IRS:

The Internal Revenue Service today encouraged taxpayers to file a tax return or pay taxes they owe using electronic options on IRS.gov by April 15. These digital tools can help taxpayers avoid owing late filing and interest fees.

This announcement is part of the Tax Time Guide, a resource to help taxpayers file an accurate tax return.

Understanding Education Tax Credits - Becca Stanek, Wall Street Journal:

The American Opportunity Tax Credit, or AOTC, is a credit for qualified education expenses for eligible students that applies to the first four years of higher education. The credit allows you to reduce your tax bill by as much as $2,500 per year per eligible student. So while not quite a student loan refund, it can put money back in your pocket.

Tax Policy

If Congress Makes Muni Bonds Taxable, What Could Happen To States And Cities? - Thomas Brosy, Tax Policy Center:

House Budget Committee Republicans have identified eliminating the federal tax exclusion for interest earned on municipal bonds, or “Muni” bonds, as a large potential revenue raiser as Congress considers whether to extend expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA). By one estimate, this could raise $250 billion over ten years.

...

There are some economic arguments against the exemption. It can be an inefficient subsidy, because the cost to the federal government is larger than the benefits received by state and localities. And the wealthiest investors enjoy a disproportionate amount of the benefits of the exemption—the wealthiest 0.5 percent had a 42 percent holding share in 2013. Lowering borrowing cost can also lead to a bias toward debt financing and overinvestment in some projects.

Extending the TCJA Could Increase U.S. GDP and Employment - Robert J. Carroll, Brandon M. Pizzola, and A.J. Mckeown, Tax Notes ($):

Permanently extending the TCJA would, on average, increase U.S. GDP by an estimated $216 billion and U.S. employment by 1.1 million jobs each year from 2025 to 2034 relative to the level in the current-law baseline. This is because of the expected positive effects on the U.S. labor supply and U.S. investment. Business leaders should thoroughly assess the potential effects of a permanent TCJA extension on their organizations to make informed, strategic decisions that will help shape their future operations.

Tax Trouble

Newport Beach man indicted for allegedly using sports gambling losses as business expenses to evade federal tax payments - IRS Newsroom (defendant name omitted):

From 2017 to 2020, Defendant allegedly used the company’s bank accounts to pay for personal expenses, including payments to bookmakers (names omitted) to cover sports gambling losses, and to purchase a 2021 Mercedes-Benz automobile.

The indictment further alleges that Defendant concealed these personal payments in the company’s business records, and in many cases directed to payments to be recorded as business expenses to reduce the company’s income.

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