Key Takeaways
- Tax Cut Consequences
- Tax Legislation
- Turmoil at IRS
- IRS and Immigration
- Corporate Transparency Act
- Muni Tax Breaks
- Federal Workers
- Taxpayer Data
- Tariffs
- In the Courts
- Cheesesteaks and Puppies
Tax Cut Consequences
CBO: Permanent Tax Cuts Could Lift Debt-GDP Ratio to 250 Percent – Katie Lobosco, Tax Notes ($):
And if underlying interest rates rise 1 percentage point higher than previously expected, debt held by the public would exceed 250 percent of GDP by that time, the CBO said in an analysis released March 21.
Permanent Tax Cut Extension Leads to 250% Debt-to-GDP: CBO – Zach C. Cohen, Bloomberg ($):
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 ($):
Efforts to renew Trump’s landmark 2017 tax cuts and secure additional reductions he’s promised were temporarily sidelined while lawmakers worked to narrowly avert a government shutdown earlier this month.
The party can now shift its attention to the undertaking, aimed at cutting tax bills by trillions of dollars. The scope of that effort will require some difficult decisions and near unanimity as Republicans navigate narrow majorities in both chambers.
After Recess, Republicans Enter Crucial Period on Reconciliation – Cady Stanton & Katie Lobosco, Tax Notes ($):
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:
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 $825 billion on the Defense Department in fiscal 2024.
IRS and Immigration
I.R.S. Prepares to Help Find Immigrants Targeted for Deportation– Andrew Duehren & Eileen Sullivan, New York Times:
Under a draft of an agreement between the I.R.S. and the Immigration and Customs Enforcement, the tax agency would verify whether immigration officials had the right home address for people who have been ordered to leave the United States, according to a copy of the document viewed by The New York Times.
IRS Nears Deal to Share Data for Immigration Enforcement – Richard Rubin & Michelle Hackman, Wall Street Journal:
Under the potential agreement, the top officials of Immigration and Customs Enforcement or the Department of Homeland Security could provide the IRS with names and addresses of people suspected of criminal violations, ask whether that matches tax records and get a yes-or-no answer.
Corporate Transparency Act
Corporate Transparency Act Rules Rollback Issued by Treasury – Michael Rapoport, Bloomberg ($):
The 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 ($):
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 ($):
The US Court of Appeals for the Fourth Circuit on Friday denied the government’s motion to stay a Maryland federal judge’s temporary reinstatement of new hires known as probationary employees. Judge James Bredar of the US District Court for the District of Maryland is slated to hold a hearing March 26 about whether to require agencies to reinstate the employees for longer.
Taxpayer Data
Judge Halts DOGE’s ‘Fishing Expedition’ for Taxpayer Info – Mary Katherine Browne, Tax Notes ($):
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 ($):
In an order issued Thursday, U.S. District Judge Colleen Kollar-Kotelly granted a motion for expedited discovery filed by the American Federation of Government Employees, the Service Employees International Union and the Alliance for Retired Americans
The motion, filed March 17, sought access to information about how Treasury Secretary Scott Bessent coordinated with DOGE personnel to give them access to Treasury software, records and information technology systems in response to a January executive order. The executive order drew outcry from groups concerned about data privacy and prompted several suits.
Tariffs
Business Groups' Gentle Message for Trump: VATs Aren't Tariffs – Michael Rapoport, Bloomberg ($):
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' $12M Patent Suit Cost Deduction – Anna Scott Farrell, Law360 ($):
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!
