Key Takeaways
- Social Security taxation.
- State tax impacts from OBBBA.
- More tax proposals on Capitol Hill.
- Trump announces 50% tariff on Brazilian products.
- Split-Dollar Life Insurance Taxation.
- National Kitten Day!
One Big Beautiful Bill Act
Correcting the Social Security Administration About The Big Budget Bill - Howard Gleckman, Tax Policy Center:
The budget measure includes a temporary $6,000 deduction for taxpayers over age 65, starting this year. But that tax reduction would benefit fewer than half of older adults, the Tax Policy Center estimates.
The biggest beneficiaries are seniors making between about $80,000 and $130,000 (the 60th to 80th percentile of income). Their average tax cut would be about $1,100 or roughly one percent of their after-tax income.
Despite the SSA claims, most would see their income taxes on Social Security benefits reduced, not eliminated.
The biggest beneficiaries are seniors making between about $80,000 and $130,000 (the 60th to 80th percentile of income). Their average tax cut would be about $1,100 or roughly one percent of their after-tax income.
Despite the SSA claims, most would see their income taxes on Social Security benefits reduced, not eliminated.
Tax News & Views International Weekly: The Tax Bill's Global Tax Review - Alex Parker, Eide Bailly:
One of the biggest changes the bill made in the international sphere was to repeal “qualified business asset investment” (QBAI). This was part of the calculation in how the tax on global intangible low-taxed income (GILTI) and the deduction for foreign-derived intangible income (FDII) was determined. Both, in theory, applied to intangible income, but used a formula based on unusually high profit returns on tangible assets. The logic behind this was that the more real, physical assets a company had in a jurisdiction, the more likely that profit was truly generated there. Profits that seemed out of proportion to the local physical presence implied that they had possibly been shifted from a different jurisdiction.
Related: What the New Law Means For You.
State Impacts of Tax Bill
Trump Tax Bill Brings State Funding Dilemmas, Conformity Choices - Paul Jones, Tax Notes ($):
Changes to the federal tax code will flow through to many states, requiring lawmakers to consider changes to IRC conformity to protect revenue.
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In addition to the fiscal implications of the federal funding cuts, the OBBBA's changes to federal tax rules will also affect many states’ tax regimes.
One major change is the increase in the federal cap on the state and local tax deduction from $10,000 to $40,000 for tax years 2025 through 2029, with annual adjustments and a phaseout for taxpayers with more than $500,000 in income. The cap returns to $10,000 in 2030.
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In addition to the fiscal implications of the federal funding cuts, the OBBBA's changes to federal tax rules will also affect many states’ tax regimes.
One major change is the increase in the federal cap on the state and local tax deduction from $10,000 to $40,000 for tax years 2025 through 2029, with annual adjustments and a phaseout for taxpayers with more than $500,000 in income. The cap returns to $10,000 in 2030.
California has an idea to counter Trump’s megabill: Roll back environmental laws - Alex Nieves, Politico:
California officials are scrambling to respond to congressional Republicans’ budget “megabill,” signed into law Friday, which demolishes Biden-era tax credits that incentivize construction of large-scale solar and wind projects, home energy efficiency improvements and electric vehicle purchasing — centerpieces of blue states’ strategies to wean themselves off fossil fuels.
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The discussion about where California goes next after the megabill isn’t all conflict. There’s a general agreement that the state should invest more in EV incentives after Republicans eliminated a $7,500 federal tax credit for car buyers. Newsom floated that idea in November, saying that he wanted revenues from the state’s cap-and-trade auctions to be spent on new EV incentives if the federal tax credit went away.
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The discussion about where California goes next after the megabill isn’t all conflict. There’s a general agreement that the state should invest more in EV incentives after Republicans eliminated a $7,500 federal tax credit for car buyers. Newsom floated that idea in November, saying that he wanted revenues from the state’s cap-and-trade auctions to be spent on new EV incentives if the federal tax credit went away.
State Implications of the GILTI to NCTI Conversion - Jared Walczak, Tax Foundation:
The One Big Beautiful Bill’s (OBBB) changes to the taxation of international income have surprising implications for state codes, yielding tax increases and a revised tax base that, through quirks of state incorporation, bears very little resemblance to the federal base and almost nothing of its purpose.
Whereas the conversion of the global intangible low-taxed income (GILTI) regime to the new net CFC-tested income (NCTI) regime contains both revenue raisers and tax savings that represent a net tax cut at the federal level, these provisions are haphazardly incorporated into the tax codes of states that have heretofore included GILTI.
Whereas the conversion of the global intangible low-taxed income (GILTI) regime to the new net CFC-tested income (NCTI) regime contains both revenue raisers and tax savings that represent a net tax cut at the federal level, these provisions are haphazardly incorporated into the tax codes of states that have heretofore included GILTI.
Related: Eide Bailly International Tax Services
More on Capitol Hill
Conservatives are asking Trump for another big tax cut - Jeff Stien, Washington Post:
Currently, an investor who bought stock for $1,000 in 1980 and sold it for $10,000 today would owe capital gains taxes on the increase in value of $9,000. But under the proposal pitched by Norquist and others, the calculation would start by adjusting up the value of the original purchase to account for inflation — which would reduce the amount of gain that’s taxable after selling the stock.
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In an interview, Norquist said he directly recommended to Trump in a recent phone call that he should implement the change by executive order after passage of the tax bill, reminding the president that he had explored this option during his first term. Norquist, who argues that the new policy will help open up the housing market, said he has also talked to Bessent about the proposal.
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In an interview, Norquist said he directly recommended to Trump in a recent phone call that he should implement the change by executive order after passage of the tax bill, reminding the president that he had explored this option during his first term. Norquist, who argues that the new policy will help open up the housing market, said he has also talked to Bessent about the proposal.
New Bill Would Reverse GOP Tax Law’s Reduced Gambling Deduction - Katie Lobosco, Tax Notes ($):
A bill that would reverse one of the provisions in the massive tax law signed by President Trump on July Fourth has already been introduced with bipartisan support.
Introduced by Rep. Dina Titus, D-Nev., the bill would restore the 100 percent deduction for gambling losses, which was lowered to 90 percent in the Republicans’ reconciliation package.
Introduced by Rep. Dina Titus, D-Nev., the bill would restore the 100 percent deduction for gambling losses, which was lowered to 90 percent in the Republicans’ reconciliation package.
Tariffs
Trump Slaps Brazil With 50% Tariff, Cites Bolsonaro Trial - Raw Ann Varona, Law 360 Tax Authority ($):
Trump said in a letter to Brazilian President Luiz Inácio Lula da Silva that the U.S. was imposing a 50% tariff on "any and all Brazilian products sent into the United States" starting on Aug. 1.
IRS
IRS Expands Filing Exceptions For Certain Pass-Throughs - Natalie Olivo, Law 360 Tax Authority ($):
The broadened exceptions will apply to domestic partnerships and S corporations — which both pass taxable income to their shareholders — beginning in the 2024 tax year, according to a brief update from the IRS' Large Business and International Division. Eligible filers will not need to complete information forms, known as Schedules K-2 and K-3, under certain conditions, the agency said.
Blogs and Bits
How Well Do You Know the New Tax Law? Take our quiz: - Ashlea Ebiling, The Wall Street Journal:
The law does far more than extend the individual tax cuts of President Trump’s 2017 tax law, which were set to expire at year-end. The new law makes some provisions of the 2017 version permanent, adds new tax cuts and eliminates others. Some of the changes are effective this year, so they will affect tax returns filed next spring.
Take the quiz.
It's no joke: Being nice is among this attorney's top ways to deal with the IRS - Martha Waggoner, The Tax Adviser:
Tax controversy attorney Melissa Wiley has long had three top ways of dealing with the IRS. One is knowing the Internal Revenue Manual (IRM), which contains internal guidelines for IRS personnel to follow, and another is taking advantage of any self-service options on the IRS website.
And the third one? “It’s going to sound like a joke, but it’s not,” Wiley, a partner at Kostelanetz LLP, said at an AICPA & CIMA ENGAGE 25 session on dealing with the IRS. “Be nice. Be really nice. Imagine the job that is, you sitting on the other end of a phone line in Ogden or Philadelphia or Cincinnati, and you’re working for the IRS. It is a hard job. People are not nice to those people.”
And the third one? “It’s going to sound like a joke, but it’s not,” Wiley, a partner at Kostelanetz LLP, said at an AICPA & CIMA ENGAGE 25 session on dealing with the IRS. “Be nice. Be really nice. Imagine the job that is, you sitting on the other end of a phone line in Ogden or Philadelphia or Cincinnati, and you’re working for the IRS. It is a hard job. People are not nice to those people.”
In the Courts
An Examination of McGowan v. United States: Unpacking Split-Dollar Life Insurance Taxation - Ed Zollars, Current Federal Tax Developments:
While the ultimate ruling for the government was an affirmation, the lingering effect of Machacek means that McGowan is due a refund reflecting the difference between ordinary income and capital gains tax rates, as the IRS had initially assessed him at ordinary income rates. This case serves as a critical reminder for tax professionals regarding the stringent requirements for deductibility of life insurance premiums in the corporate context and the broad reach of gross income definitions, even as the landscape of deference to agency interpretations continues to evolve.
What day is it?
It's National Kitten Day!