Tax News & Views Tax Cut Consequences with Cheesesteaks and Puppies Roundup

Tax Cut Consequences

CBO: Permanent Tax Cuts Could Lift Debt-GDP Ratio to 250 Percent – Katie Lobosco, Tax Notes ($):

Permanently extending Tax Cuts and Jobs Act provisions without paying for them would increase the U.S. debt-to-GDP ratio by 47 percentage points, to 214 percent by 2054, according to the Congressional Budget Office.

And if underlying interest rates rise 1 percentage point higher than previously expected, debt held by the public would exceed 250 percent of GDP by that time, the CBO said in an analysis released March 21.

Permanent Tax Cut Extension Leads to 250% Debt-to-GDP: CBO – Zach C. Cohen, Bloomberg ($):

Permanently extending trillions of dollars of the GOP 2017 law’s expiring tax cuts would hike the national debt to more than double gross domestic product over the next three decades, a new budget scorekeeper report says, fueling the debate over and to what extent to pay for renewal.

Debt held by the public would reach 214% of GDP by 2054, assuming no other changes to fiscal policy or interest rates, shattering previous records for the US. Adding the additional borrowing costs would swell that figure to more than 250%, said the Congressional Budget Office, which didn’t account for resulting “macroeconomic effects.”

Tax Legislation

Trump’s Tax Bill Takes Center Stage as GOP Debates Scope of Cuts – Erik Wasson, Bloomberg ($):

Congressional Republicans returning to Washington on Monday will tackle their toughest test yet, negotiating a massive tax bill package to deliver President Donald Trump a signature legislative victory.

Efforts to renew Trump’s landmark 2017 tax cuts and secure additional reductions he’s promised were temporarily sidelined while lawmakers worked to narrowly avert a government shutdown earlier this month.

The party can now shift its attention to the undertaking, aimed at cutting tax bills by trillions of dollars. The scope of that effort will require some difficult decisions and near unanimity as Republicans navigate narrow majorities in both chambers.

After Recess, Republicans Enter Crucial Period on Reconciliation – Cady Stanton & Katie Lobosco, Tax Notes ($):

Republican taxwriters are gearing up for an important stretch of work to resolve big-picture questions on advancing President Trump's agenda before details on specific tax provisions can be decided.

With fiscal 2025 government funding taken care of with the March 14 passage of a continuing resolution – and with early April elections that could improve House Republicans’ thin margins – lawmakers in the House and Senate have the runway to work out their chambers’ differences on reconciliation. Congress enters into a three-week work period March 24 before a two-week recess in April.

Turmoil at IRS

Tax revenue could drop by 10 percent amid turmoil at IRS – Jacob Bogage, Washington Post:

Senior tax officials are bracing for a sharp drop in revenue collected this spring, as an increasing number of individuals and businesses spurn filing their taxes or attempt to skip paying balances owed to the Internal Revenue Service, according to three people with knowledge of tax projections.

Treasury Department and IRS officials are predicting a decrease of more than 10 percent in tax receipts by the April 15 deadline compared with 2024, said the people, who spoke on the condition of anonymity to share nonpublic data. That would amount to more than $500 billion in lost federal revenue; the IRS collected $5.1 trillion last year. For context, the U.S. government spent $825 billion on the Defense Department in fiscal 2024.

IRS and Immigration

I.R.S. Prepares to Help Find Immigrants Targeted for Deportation– Andrew Duehren & Eileen Sullivan, New York Times:

The Internal Revenue Service is preparing to help homeland security officials locate immigrants they are trying to deport, according to three officials familiar with the matter, in a shift toward using protected taxpayer information to help President Trump’s mass deportation push.

Under a draft of an agreement between the I.R.S. and the Immigration and Customs Enforcement, the tax agency would verify whether immigration officials had the right home address for people who have been ordered to leave the United States, according to a copy of the document viewed by The New York Times.

IRS Nears Deal to Share Data for Immigration Enforcement – Richard Rubin & Michelle Hackman, Wall Street Journal:

The Internal Revenue Service and immigration officials are nearing an agreement under which the tax agency would share limited taxpayer data with border-security authorities, according to people familiar with the discussions.

Under the potential agreement, the top officials of Immigration and Customs Enforcement or the Department of Homeland Security could provide the IRS with names and addresses of people suspected of criminal violations, ask whether that matches tax records and get a yes-or-no answer.

Corporate Transparency Act

Corporate Transparency Act Rules Rollback Issued by Treasury – Michael Rapoport, Bloomberg ($):

The Treasury Department issued interim final regulations that limit the companies that must report information about their ownership to foreign reporting companies only.

The regulations (RIN 1506-AB49), released late Friday, scale back the companies responsible for reporting their beneficial ownership information under the Corporate Transparency Act and set new deadlines for reporting.

Muni Tax Breaks

Trump Adviser Calls to End Muni Tax Break in Threat to Market – Zach C. Cohen & Amanda Albright, Bloomberg ($):

Stephen Moore, an informal economic adviser to President Donald Trump, floated eliminating the federal tax subsidy for municipal bonds, a concerning sign for the market where states and cities raise debt.

Local governments, as well as bankers and investors, have been worried that the key feature of the public finance market could be at risk as Republicans search for ways to raise money to extend 2017 tax cuts. Muni bonds pay interest that’s exempt from federal taxes, costing the government roughly $40 billion each year. The subsidy is one of the top federal tax expenditures, according to the Bipartisan Policy Center.

Federal Workers

Fourth Circuit Rejects Government Stay Motion on Fired Employees – Kristen A. Parillo, Tax Notes ($). “The Fourth Circuit denied a government motion to stay a Maryland federal court order requiring the IRS and other agencies to reinstate probationary employees, although one circuit judge expressed concerns over the order’s scope.”

Trump Loses Second Bid to Pause Fired Worker Reinstatements – Courtney Rozen & Parker Purifoy, Bloomberg ($):

The Trump administration failed to convince another federal appeals court to immediately suspend the rehiring of thousands of terminated federal workers, this time at 18 agencies.

The US Court of Appeals for the Fourth Circuit on Friday denied the government’s motion to stay a Maryland federal judge’s temporary reinstatement of new hires known as probationary employees. Judge James Bredar of the US District Court for the District of Maryland is slated to hold a hearing March 26 about whether to require agencies to reinstate the employees for longer.

Taxpayer Data

Judge Halts DOGE’s ‘Fishing Expedition’ for Taxpayer Info – Mary Katherine Browne, Tax Notes ($):

A district court judge has blocked the intragovernmental Department of Government Efficiency (DOGE) from accessing millions of taxpayers’ personally identifiable information, saying the organization’s access to records violated the law.

In a March 21 memorandum opinion in AFSCME v. SSA, Judge Ellen Lipton Hollander of the U.S. District Court for the District of Maryland issued a temporary restraining order to block the Social Security Administration from handing over personal taxpayer information to DOGE. Along with DOGE officials, her order also blocks White House adviser Elon Musk.

Groups Can Probe Treasury's Cooperation with DOGE – Emily Brill, Law360 ($):

A Washington, D.C., federal judge let two unions and a retirees group look into any steps the U.S. Secretary of the Treasury took to give the Department of Government Efficiency access to Treasury's computer systems, saying she needs the information to evaluate the action's lawfulness

In an order issued Thursday, U.S. District Judge Colleen Kollar-Kotelly granted a motion for expedited discovery filed by the American Federation of Government Employees, the Service Employees International Union and the Alliance for Retired Americans

The motion, filed March 17, sought access to information about how Treasury Secretary Scott Bessent coordinated with DOGE personnel to give them access to Treasury software, records and information technology systems in response to a January executive order. The executive order drew outcry from groups concerned about data privacy and prompted several suits.

Tariffs

Business Groups' Gentle Message for Trump: VATs Aren't Tariffs – Michael Rapoport, Bloomberg ($):

Business groups are pushing back, albeit cautiously, against President Donald Trump’s proposal to use other countries’ value-added taxes as a reason to slam them with US tariffs.

Trump said in February that his administration would look at imposing reciprocal tariffs based not only on the tariffs that nations charge on US goods but also on their non-tariff measures. That includes VATs, consumption taxes that many countries levy on the sale of goods and services and that Trump regards as discriminatory toward US companies.

But several major business-advocacy groups and trade associations have tried to steer Trump away from that stance. In comment letters to the US Trade Representative, the groups say VATs aren’t equivalent to tariffs, as Trump contends, and that the US shouldn’t impose tariffs on the basis of those taxes. The groups echo economists and other experts who have said Trump and his advisers misunderstand how VATs work.

In the Courts

Fed. Circ. Backs Actavis' $12M Patent Suit Cost Deduction – Anna Scott Farrell, Law360 ($):

Drugmaker Actavis can take a $12 million tax deduction for money it spent fending off lawsuits while securing approval to sell generic birth control and other drugs, the Federal Circuit ruled Friday, affirming the U.S. Court of Federal Claims' decision that the costs were deductible as ordinary business expenses.

In a precedential opinion, a three-judge panel rejected the Internal Revenue Service's claim that the litigation expenses were nondeductible capital expenditures because Actavis had spent the money, in the agency's view, as part of the process of pursuing an intangible capital asset in the form of approval by the U.S. Food and Drug Administration

.IRS Loses Appeal on Deductibility of Patent Litigation Fees – Kristen A. Parillo, Tax Notes ($). “The Federal Circuit affirmed that patent litigation defense fees incurred by a drugmaker during the approval process for generic drugs are immediately deductible, rejecting the IRS’s position that they must be capitalized.”

Ex-UBS North America CEO Agrees To $4.9M FBAR Judgment – Aaron Keller, Law360 ($). “The former North American CEO for Swiss bank UBS on Friday agreed to a $4.9 million judgment to end claims that he failed to file timely or accurate foreign bank account reports with the Internal Revenue Service between 2003 and 2013.”

'Not Mistake-Proof': College Can Try to Recoup Tax Penalties – Anna Scott Farrell, Law360 ($). “A community college can proceed with its suit seeking a refund of tax penalties for failing to file wage statements for nearly all its employees, a Michigan federal judge ruled Friday, saying the school didn't have to meet a "mistake-proof" standard to argue it should be excused from the fines.”

Fla. Tax Preparer Sentenced to Prison For $20M Fraud – David Minsky, Law360 ($). “A Miami-area tax preparer was sentenced to nearly five years in prison Friday after admitting to filing thousands of individual tax returns wrongly claiming energy credits, resulting in a $20 million loss for the Internal Revenue Service, according to the U.S. Attorney's Office for the Southern District of Florida.”

What Day is it?

Hooray, its National Cheesesteak Day! Also, a special shoutout to my four-legged best friend as yesterday was National Puppy Day!

Tax News & Views Tax Cut Consequences with Cheesesteaks and Puppies Roundup

We're Here to Help

Trina Pinneau