Key Takeaways
- Senate Majority Leader files cloture on Billy Long for IRS Commissioner.
- House warns Senate against tax bill changes.
- "Passthrough" deduction changes and their cost.
- Energy credits on the block.
- Whither New Market credits?
- Paper tax refund check theft indictments.
- National Ballpoint Pen Day.
Thune Files Motion on IRS Nominee; Vote Could Come This Week - Cady Stanton, Tax Notes ($):
The Senate could hold a procedural vote on the nomination as soon as June 11, which would set up a final vote by the end of the week. The move means Long, a former Republican House lawmaker from Missouri, is likely to have a final confirmation vote by the end of the Senate’s current work period — scheduled for June 27 — at the latest.
During his nomination hearing, Long came under scrutiny by Democrats for his association with White River Energy Corp., a company that has been criticized for selling so-called tribal tax credits to investors. The IRS has said the credits don’t exist.
All Senate Finance Committee Republicans voted to advance Long's nomination, which indicates that full Senate approval is likely.
IRS budget request cuts 20% of employees in 2026, increases phone help - Martha Waggoner, The Tax Adviser:
The number of employees would drop to 77,728 in fiscal year 2026, compared with 96,700 in the operating plan for fiscal year 2025, Treasury said in the report, released May 30. The last time the number of IRS workers fell below 80,000 was before the COVID-19 pandemic, when about 74,000 worked for the agency in 2019.
The report proposed a total budget of $14.2 billion for fiscal year 2026, down from $22.5 billion in the current-year operating plan.
Tax Bill Process
GOP eyes cuts to Trump’s tax promises - Politico:
The rub is this: The House version of the megabill would restore tax incentives for research and development, business equipment and debt interest through 2029, which Trump has indicated he supports. But Senate Republicans are dead-set on making them permanent, a proposition that would likely add hundreds of billions in more red ink to the legislation.
To offset that cost, GOP senators are looking to water down other tax provisions they believe aren’t as “pro-growth.” Those policies include “no taxes on tips,” “no taxes on overtime” and tax relief for seniors — all proposals Trump touted on the campaign trail and collectively boast a price tag of roughly $230 billion, according to the Joint Committee on Taxation.
Johnson Urges Senate to Minimize Changes to $40,000 SALT Deal - Skylar Woodhouse and Jennifer Dlouhy, Bloomberg ($):
...
Johnson is seeking to preserve a deal he struck with those members last month to increase the SALT cap to $40,000, up from $10,000 in current law. That plan was critical to passing Trump’s tax bill out of the House last month.
But as the Senate has begun negotiating the legislation, SALT has fallen off the agenda as a priority issue. No Republican senator hails from a state where SALT is a big political issue.
Debt limit hangs over megabill deadline - Burgess Everett, Semafor:
Tax Bill Jenga Pieces
The Passthrough Deduction Gets a Facelift - Marie Sapirie, Tax Notes ($):
The section 199A deduction is slated to expire for tax years beginning after December 31. The largest cost savings would come from simply allowing it to expire, but that’s a political nonstarter. Instead, the budget bill increases the deduction from 20 percent to 23 percent and makes it permanent...
What does this mean for the handoff from the House to the Senate in 2025? Twenty-nine current Republican senators were in office in 2017 and voted for the TCJA’s passage. If they are all still largely content with how section 199A works, then the House’s proposal may have a head start on avoiding major changes.
States Warned Of Budget Bill's Push To Broaden PL 86-272 - Maria Koklanaris, Law360 Tax Authority ($):
That federal law, P.L. 86-272, formally known as the Interstate Income Tax Act of 1959, shields businesses from a state's tax on net income when their only business activities in that state are soliciting orders of tangible personal property. But an amendment seeks to further limit states' authority to tax businesses by broadening the definition of protected activities, the tax professionals noted. They spoke on panels at the Federation of Tax Administrators' annual meeting in Chicago.
State tax authorities hate PL 86-272 and have greatly reduced its protections using aggressive regulatory policies.
Related: Eide Bailly State and Local Tax Services.
Tech Industry Fights to Save Clean-Energy Tax Credits - Amrith Ramkumar and Jennifer Hiller, Wall Street Journal:
The bill is fueling industry concerns about rising prices and power shortages if planned investments don’t materialize. But garnering enough Republican support to preserve the tax credits could prove difficult because of the party’s slim majorities in both chambers.
Will GOP senators save Biden’s energy tax credits? - Arianna Skibell, Politico:
Conservatives were quick to respond.
“You backslide one inch on those [Inflation Reduction Act] subsidies, and I’m voting against this bill,” said Rep. Chip Roy (R-Texas), one of the far-right House Freedom Caucus’ most vocal members. That could be fatal for the bill when it returns to the House, where the vote last time was 215-214.
Push to Renew New Markets Tax Credit Escalates After House Snub - Erin Schilling, Bloomberg ($):
Despite the program’s bipartisan support and decades-long tenure, the House left the credits out of the bill it narrowly passed in late May, sending lobbyists into overdrive. If the credits don’t hitch a ride on the package now before the Senate, preventing the expiration of the program is unlikely, advocates said.
Small colleges pursue endowment tax carveouts - Juan Perez Jr., Politico:
Grinnell (endowment: $2.6 billion or so) has an enrollment of around 1,750.
Related: Eide Bailey Exempt Organization Tax Services.
Big Beautiful Bill Big Picture
GOP bill could worsen inflation and lead to financial crisis, economists warn - Abha Bhattarai, Washington Post:
The massive tax and budget proposal, which Congress’s nonpartisan bookkeeper says would add more than $3 trillion to the national debt in the next decade, combined with the president’s trade war, would put the U.S. economy on “the foothills of stagflation and possible financial crisis,” Summers told The Washington Post. The bill, which narrowly passed the House of Representatives last month, is in the Senate for debate.
Tariff Tuesday
The Canned-Food Aisle Is Getting Squeezed by Rising Steel Tariffs - Bob Tita, Wall Street Journal:
The Trump administration’s new 50% duty on imported steel could increase store prices for items in steel cans by 9% to 15%, according to the Consumer Brands Association, a trade group whose members include Campbell’s, Hormel Foods and Del Monte Foods. At that rate, the price of a can of vegetables costing $2 could increase by 18 cents to 30 cents.
State Things
Iowa Allows Clawback of Credits for Entities Making Mass Layoffs - Emily Hollingsworth, Tax Notes ($):
Gov. Kim Reynolds (R) signed S.F. 657 on June 6, which amends and eliminates several tax credits and incentives, including cutting the aggregate credit cap for business development tax credit programs from $170 million to $110 million and ending the state’s High Quality Jobs program and employer child care tax credit program beginning in 2026.
Newsom Gets Film Tax Boost, SALT Extension in Budget Agreement - Laura Mahoney, Bloomberg ($):
- Increase funding from $330 million to $750 million a year for the film and TV tax credit program;
- Switch from requiring financial institutions to compare property, payroll, and sales in California to those factors elsewhere when calculating California income tax to mandating a single-sales factor formula, which would increase revenue by $330 million in 2025-26;
-Extend the pass-through entity elective tax to allow some business entities to get around the federal SALT deduction limit from 2026 through 2030 if Congress extends the cap.
Related: Eide Bailly State and Local Tax Credits and Incentives Practice.
Blogs and Bits
It’s not too late to act if you missed Tax Day - Kay Bell, Don't Mess With Taxes. "You best move is to at least file a Form 1040. Submitting your return electronically is the fasted way option. Once Uncle Sam gets your filing, the non-payment portion of the charges will stop."
Tax Breaks: The Commit To Your Small Business Edition - Kelly Phillips Erb, Forbes. "To be deductible, a meal must be directly related to business, meaning there must be a clear link between the meal and a business activity or purpose. That would apply, for example, to a meeting where you discuss business with a valued client or potential lead."
The Transfer Pricing Functional Analysis: What's in it for Your Business? - Chad Martin, Eide Bailly. "If your Functional Analysis doesn't teach something new or illustrate how your transfer pricing policies align with your business model, it may be time for a change."
The New Retaliation Tax, Section 899 - Adam Michel, Liberty Taxed. "The Trump administration has already signaled its willingness to wield delegated tax and trade authority with impunity, often stretching the bounds of its statutory powers. Establishing a new taxing authority with open-ended definitions would heighten global investment uncertainty and further erode trust in the US market."
The Remittances Tax: High Paperwork, Low Payoff - Alan Cole and Patrick Dunn, Tax Policy Blog. "The bottom line: this is a small tax base with a big compliance burden. Its primary impact will be far more paperwork, not more revenue."
One Reason Treasury is Ending Paper Checks
Eight charged in federal crackdown on Treasury check fraud - IRS (emphasis added):
According to the charging documents eight defendants in communities throughout Eastern Massachusetts have allegedly been involved in the theft of tax refund checks, totaling more than $8.8 million in 2023 and 2024. As alleged, each of the U.S. Treasury checks the defendants stole represented a tax refund or tax credit due to a bona fide taxpayer but had been altered to be payable to shell companies the defendants controlled. Each defendant allegedly deposited one or more fraudulent checks at banks or credit unions in and around Metro Boston.
If you worry about the security of electronic payments, I have bad news for you about paper checks.
What day is it?
It's National Ballpoint Pen Day! If you have never ruined a shirt trying to replace a fountain pen cartridge, thank László and György Bíró.
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