Key Takeaways
- Washington passes 35% estate tax rate, 9.9% gain rate.
- Montana tax overhaul signed.
- Automakers get relief from tariff "stacking."
- Ways and Means to markup tax bill next week.
- Ken Kies nomination for tax policy post clears committee.
- International Jazz Day.
Washington Lawmakers Pass $8.7 Billion in Tax Increases as Session Ends - Paul Jones, Tax Notes ($):
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S.B. 5813 would create a new tier for the state capital gains tax. The tax — currently 7 percent for taxable long-term capital gains income over $250,000 with various deductions and exemptions — would increase to 9.9 percent on a taxpayer’s capital gains income that exceeds $1 million, effective for the 2025 tax year. According to the bill’s fiscal note, roughly 900 Washingtonians would be affected.
The bill would also set a new estate tax structure for decedents dying after July 1, increasing the exclusion amount to $3 million and setting a new tax rate schedule. The rates would range from 10 percent on the first $1 million in taxable value, the same as the current rate for that amount, to a rate of 35 percent for estates' taxable values over $9 million — well over the current 20 percent rate for that level.
The federal estate tax is 40%. Most states have no estate or inheritance tax. The highest rate in any other state as of 2024 is 20%.
Kansas to Switch to Single-Sales-Factor Apportionment - Emily Hollingsworth, Tax Notes ($).
The changes will take effect for tax years beginning on or after January 1, 2027.
Montana Governor Signs Income Tax Overhaul - Kennedy Wahrmund, Tax Notes ($). "H.B. 337, sponsored by Rep. Brandon Ler (R), was passed by the Senate April 22 after clearing the House April 2. Gov. Greg Gianforte (R) approved it on April 28. The new law will cut Montana’s top marginal income tax rate from 5.9 percent to 5.65 percent in 2026 and to 5.4 percent in 2027."
Related: Eide Bailly State and Local Tax Services
Tariff Update
Trump Grants Carmakers Some Relief From His Punishing Tariffs - Ana Swanson and Jack Ewing, New York Times:
The changes will modify Mr. Trump’s tariffs so carmakers that pay a 25 percent tariff on auto imports are not subject to other levies, for example on steel and aluminum, or on certain imports from Canada and Mexico, according to the orders. However, the rules do not appear to protect automakers from tariffs on steel and aluminum that their suppliers pay and pass on.
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The order said carmakers paying a 25 percent tariff to bring in cars and car parts would not be subject to tariffs that Mr. Trump had placed on steel and aluminum or on imports from Canada and Mexico.
Amazon Rules Out Displaying Tariff Impact After White House Attack - Sebastian Herrera, Wall Street Journal:
The e-commerce giant said Tuesday it had considered displaying how much import charges would increase prices on its ultracheap shopping website Haul, but said the idea “was never approved and is not going to happen.”
Tariffs hit home for small US businesses that rely on Chinese imports - Taylor Nicole Rogers and Patrick Temple-West, Financial Times:
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Chelsey Brown, founder of New York-based home goods brand Curio Blvd, decided to temporarily shutter her business and lay off her two employees next month after the tariffs made the cost of importing her keepsake boxes unsustainable. Brown said she took out a $50,000 loan to pay the levies on inventory customers pre-ordered for the Mother’s Day shopping rush, and could not afford to import other products that were already manufactured.
US factories did not have the necessary equipment to manufacture her $180 oak storage boxes, she said, adding that she was quoted a production cost of $250 per unit that would be made of lower quality wood.
Trump's Tariffs Usurp the Legislature's Tax Power - Jacob Sullum, Reason. "There are good reasons for that. The IEEPA mentions restrictions on transactions involving foreign-owned assets, but it never refers to taxes, tariffs, or any of their synonyms."
Congress Tax Negotiation Update
Ways and Means Markup of Tax Bill Likely Week of May 5 - Katie Lobosco and Doug Sword, Tax Notes ($):
If lawmakers stick to that timeline, it’s possible that the Senate will send the bill to President Trump’s desk by July 4, which Treasury Secretary Scott Bessent set as a target on April 28.
Republicans’ ‘Big Six’ kick off new round of tax talks - Kim Dixon, Bloomberg ($):
Thune later told reporters the July Fourth deadline was “aspirational.”
SALT Republicans to huddle with Johnson on key Trump agenda sticking point - Mychael Schnell, The Hill:
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On the other end of the ideological spectrum, however, are deficit hawks who are not keen on offering such relief for Democratic-led states. Rep. Chip Roy (R-Texas), a member of the conservative House Freedom Caucus, voiced his opposition to such a move on Tuesday, arguing that expanding the deduction cap would make it more difficult for the package to be deficit-neutral, which hardliners are demanding.
“Maybe it’s just because I don’t want to subsidize high-tax, blue-state jurisdictions,” he said when asked why he is opposed to increasing the cap. “Maybe it’s because I can do math… If you lift the cap to $100,000 that’ll be how much? Over a trillion dollars. So the same folks are gonna say well, we gotta make sure we extend the tax cuts and make them permanent, but we can’t touch Medicaid, but we need to lift our SALT cap. And I’m like okay, come in there and show me the arithmetic on the board.”
House Transportation proposes to include $20 per vehicle fee in GOP megabill -Chris Marquette, Sam Ogozalek and Oriana Pawlyk, Politico. "The new fee is intended to move the country away from the 18.4 cents-per-gallon federal gasoline tax, which has not been raised since 1993 and has had its buying power steadily eroded even as infrastructure spending has increased. But raising it, at least on the federal level, has been a political non-starter."
House Republicans may be souring on closing the 'carried interest loophole' - Benjamin Guggenheim and Meredith Lee Hill, PoliticoPro ($). "The tax writing Ways and Means Committee has privately indicated it’s not inclined to close the so-called carried interest loophole in the GOP’s sweeping tax package, though conversations are still ongoing, according to a House Republican and another person familiar with the private conversations."
Tax Administration
Senate Finance Advances Treasury Tax Nominee Kies - Cady Stanton, Tax Notes ($):
Kies addressed the Sec. 199A "pass-through deduction" in committee hearings:
“Section 199A was enacted to help ensure greater parity between passthrough businesses and C corporations following the reduction in the corporate tax rate,” Kies said. “It plays an important role in supporting small- and medium-sized businesses, many of which are family-owned and operate in capital-intensive sectors.”
Aggressive IRS Auditing Dampens Appetite for Captive Insurance - John Woolley, Bloomberg ($). "In all micro-captive cases litigated to date, the US Tax Court has sided with the IRS and found the captives at issue not to qualify as bona fide insurance for tax purposes. A micro-captive can fail to pass muster in court if it isn’t adequately capitalized, its premium prices weren’t set at arm’s length, or it failed to shift and distribute risk."
Related: Eide Bailly IRS Dispute Resolution and Collection Services.
Nixon Gave USDA Access to Tax Returns; Farmers Decried ‘Snooping’ - Joseph Thorndike, Tax Notes Tax History Project. "USDA officials defended their new authority, calling it necessary for the department’s statistical programs. But farmers — and their elected representatives — were unconvinced, as press reports made abundantly clear. Newspapers around the country published hundreds of articles on the tax data sharing, including hostile editorials denouncing the USDA’s interest in 'tax snooping.'"
Blogs and Bits
TIGTA investigating DOGE and White House incursion into IRS - Kay Bell, Don't Mess With Taxes. "Pro Publica reports that a Treasury Department inspector general is probing efforts by Donald Trump and Elon Musk’s DOGE to obtain private taxpayer data and other sensitive information."
Taxing Tuesday: Trump Tax 2025 Roundup - Mary Pat Campbell, STUMP. Another tax roundup! Includes this an the SALT deduction:
It’s a lonely place to be.
Taxes Still Affect Economic Growth, Contrary to Findings of Flawed IPS Study - Jared Walczak, Tax Foundation. "Incomes rose everywhere in recent years—in low- and high-tax states alike—buoyed by a booming stock market and aided by robust federal pandemic relief programs that spiked incomes and increased profits. Observing that incomes rose in Massachusetts between 2018 and 2022 (which doesn’t even cover any years in which the new tax was in effect) is meaningless in the absence of a comparison to other states’ performance."
Dealers Auto Auction of Southwest LLC v. Commissioner: A Case Study on Reasonable Cause for Information Return Penalties - Ed Zollars, Current Federal Tax Developments. "This ruling serves as a reminder that the mere purchase and use of software do not automatically absolve taxpayers of their information reporting responsibilities."
Deduction for Funds Seized in Criminal Forfeiture Disallowed on Public Policy Grounds - Parker Tax Pro Library. "The Tax Court disallowed on public policy grounds an $855,882 passthrough deduction claimed by a taxpayer who pleaded guilty to charges of bribery, fraud, and money laundering, and whose wholly owned S corporation was ordered to forfeit $2.2 million. The court rejected the taxpayer's argument that the deduction should be allowed because the S corporation was never charged with wrongdoing, reasoning that allowing the loss simply by interposing the S corporation between the taxpayer and the seized assets would violate the public policy doctrine."
CPAs Have Survived Another Tax Season—And Frankly, They Deserve A Parade - Darren Case, Forbes. "Let us take a moment to thank these unsung heroes of April now that many of them have returned to their office following a two week vacation."
Thanks, but I think most of us would prefer donuts.
Accountants Breaking Bad
Accountant pleads guilty to $8m tax fraud - IRS (defendant name omitted, emphasis added):
According to court documents and statements made in court, Defendant owned and managed a Colorado-based accounting firm. Along with co-defendant. Defendant provided accounting and tax preparation services for Client and his entities. Defendant conspired with Client, Codefendant, and others to hide approximately $20 million in income. He did this through various fraudulent accounting practices, such as fabricating shareholder loans and “bad debt” deductions. Defendant also filed tax returns which he knew underreported taxable income by over $20 million between 2016 and 2018. Defendant’s fraud caused a loss to the United States of over $8 million.
Not all "bad debt" deductions deserve scare quotes. Fake ones do.
What day is it?
It's International Jazz Day, where it works to make it up as you go along.
