Key Takeaways
- Tax bill updates.
- Proposed IRC 899.
- Form 3520 penalties in the courts.
- IRS fiscal year data.
- Sources of US tax revenue by tax type.
- National Creativity Day!
Leader Look: Long, hot summer for one big, beautiful battle - Jake Sherman and John Bresnahan, Punchbowl News:
There are three other dynamics to keep an eye on:
– The White House is expected to send up a package of DOGE-generated cuts to the Hill for a vote. Johnson is under no statutory obligation to bring this rescission proposal to the floor. But he’ll be under heavy internal pressure to do so.
Congress must act within 45 days once it receives the presidential message on the long-awaited rescissions package or the funding will be spent as directed. There’s no Senate filibuster, and it doesn’t have to go through any committees in either chamber.
The proposal is expected to total at least $9 billion (funding that’s already being withheld, which is questionable legally, but OK). The cuts will mainly focus on the already shuttered USAID, but there will also be proposed cuts to NPR and PBS.
– The White House is expected to send up a package of DOGE-generated cuts to the Hill for a vote. Johnson is under no statutory obligation to bring this rescission proposal to the floor. But he’ll be under heavy internal pressure to do so.
Congress must act within 45 days once it receives the presidential message on the long-awaited rescissions package or the funding will be spent as directed. There’s no Senate filibuster, and it doesn’t have to go through any committees in either chamber.
The proposal is expected to total at least $9 billion (funding that’s already being withheld, which is questionable legally, but OK). The cuts will mainly focus on the already shuttered USAID, but there will also be proposed cuts to NPR and PBS.
House Bill Targets SALT And PTET Deductions For Traders, Professionals - Robert Green, Forbes:
At the same time, the House bill raises the SALT deduction cap to $40,000—but then phases it out for high earners. The phase-out begins at $250,000 of income for single filers and $500,000 for joint filers, and the deduction eventually drops back to $10,000 for the highest earners. The result: high-income professionals, especially in high-tax states, would see little or no SALT relief.
Johnson defends reconciliation bill from Musk’s criticism: ‘It can be big and beautiful’ - Ali Bianco, Politico:
Johnson’s rebuttal comes hours after Musk announced his exit from the administration, following months of a slash-and-burn approach to the federal government with DOGE and his butting heads with key members of the administration.
Musk said earlier this week he was disappointed in the massive reconciliation proposal in an interview with CBS News. In a rare criticism of President Donald Trump’s key policies, Musk said that the proposed bill “undermines the work” that DOGE had done.
Musk said earlier this week he was disappointed in the massive reconciliation proposal in an interview with CBS News. In a rare criticism of President Donald Trump’s key policies, Musk said that the proposed bill “undermines the work” that DOGE had done.
Section 899
Section 899 Backs Up U.S. Negotiating Position, Burch Says - Stephanie Soong, Tax Notes ($):
A proposed new IRC section that would allow the United States to retaliate against countries with discriminatory taxes will bolster the U.S. position in multilateral tax negotiations, according to a top Treasury official.
Section 899, a key feature of the House-passed tax bill, reflects House Republicans’ dissatisfaction with the trajectory of the OECD’s pillar 2 global minimum tax framework, Rebecca Burch, Treasury deputy assistant secretary for international tax affairs, said May 29. The proposed provision also mirrors Republicans’ view that the agreements that have been made under pillar 2 “usurp the United States of its tax sovereignty,” she added. Burch spoke at a Federal Bar Association conference in Washington.
Section 899, a key feature of the House-passed tax bill, reflects House Republicans’ dissatisfaction with the trajectory of the OECD’s pillar 2 global minimum tax framework, Rebecca Burch, Treasury deputy assistant secretary for international tax affairs, said May 29. The proposed provision also mirrors Republicans’ view that the agreements that have been made under pillar 2 “usurp the United States of its tax sovereignty,” she added. Burch spoke at a Federal Bar Association conference in Washington.
Global Investors Suddenly Have a New Concern: A U.S. 'Revenge Tax' - Chelsey Dulaney, Wall Street Journal:
This consists of amendments to the U.S. tax code giving the White House power to levy a new tax of up to 20% on foreigners who have U.S. investments. It is one part of the 1,000-page bill, squeezed through the House this month, that would extend Trump’s expiring 2017 tax cuts. The bill still has to pass the Senate.
The U.S. would impose the tax on investors from countries that it believes unfairly tax American businesses. That could include countries that impose digital-services taxes on U.S. tech companies, such as European Union members and the U.K.
The U.S. would impose the tax on investors from countries that it believes unfairly tax American businesses. That could include countries that impose digital-services taxes on U.S. tech companies, such as European Union members and the U.K.
In the Courts
District Court Addresses Form 3520 Penalties, Reasonable Cause, and IRS Authority in Huang v. United States: A TurboTax Defense Not Dismissed Out of Hand - Ed Zollars, Current Federal Tax Developments:
In conclusion, the court denied the government’s motion to dismiss only with respect to Plaintiff’s first claim, the reasonable cause determination for her late-filed Forms 3520. This claim, which includes the argument that reliance on tax software like TurboTax under these circumstances could constitute reasonable cause, will proceed to the merits. The court granted the motion to dismiss on the other three claims: arbitrary and capricious administration (found moot due to correction of the error), lack of statutory authority (not raised with the agency and contrary to persuasive D.C. Circuit precedent), and failure to comply with Section 6751(b) (evidence of approval exists and not raised with the agency).
Blogs and Bits
IRS releases fiscal year 2024 Data Book describing agency’s activities - IRS:
For the first time, revenue collected exceeded $5 trillion dollars, totaling $5.1 trillion, an increase of almost 9% compared to the prior fiscal year total of $4.7 trillion. Revenue collected by the IRS accounts for about 96% of all government funding.
Sources of US Tax Revenue by Tax Type, 2025 - Cristina Enache, Tax Foundation:
In the United States, individual income taxes (federal, state, and local) were the primary source of tax revenue in 2023, at 39.9 percent of total tax revenue. Social insurance taxes (including payroll taxes for Social Security and Medicare) made up the second-largest share at 24 percent, followed by consumption taxes at 16.8 percent, and property taxes at 11 percent. Corporate income taxes accounted for 8.3 percent of total US tax revenue in 2023.
What day is it?