Key Takeaways
- Potential second tax bill.
- Trump proposes removal of capital gains on home sales.
- Economic predictions of OBBBA.
- OBBBA revises GILTI rules.
- Opportunity Zone revamp under OBBBA.
- Barriers for new scholarship tax credit.
- IRS funding battle.
- National Vanilla Ice Cream Day!
Follow-Up Tax Bill
Johnson Starts Work on Follow-Up Tax Bill, Seeking Fall Passage - Jack Fitzpatrick, Bloomberg ($):
Johnson said four to five committees will be involved in the second tax bill, including the tax-writing Ways and Means Committee and the Energy and Commerce Committee. He also said Republicans would seek to redraft measures that were pulled from the tax law due to the Senate’s limitation — named after the late Senate Appropriations Committee Chairman Robert Byrd (D-W.Va.).
“There are some priorities that did not make it into ‘reconciliation one’ that are still priorities for people,” Johnson said. “A couple of things that didn’t survive the Byrd test, and we’re looking at other ways, other angles maybe to try to include that.”
The GOP priorities will broadly revolve around reduced spending and more efficient government, Johnson said, declining to talk about specific tax provisions.
“There are some priorities that did not make it into ‘reconciliation one’ that are still priorities for people,” Johnson said. “A couple of things that didn’t survive the Byrd test, and we’re looking at other ways, other angles maybe to try to include that.”
The GOP priorities will broadly revolve around reduced spending and more efficient government, Johnson said, declining to talk about specific tax provisions.
More from Washington
Trump Looking at Removing Capital Gains on House Sales - Richard Rubin, Wall Street Journal:
President Trump said Tuesday that the administration is exploring removing capital-gains taxes on home sales to spur the housing market amid high mortgage rates. That move would require an act of Congress and would benefit long-term homeowners and those in areas with rapidly growing property values.
Under current law, taxpayers selling their principal residences can exclude up to $250,000 of profits ($500,000 for married couples) from capital-gains taxes. Congress set those values in 1997 and hasn't tied them to inflation or touched them since, subjecting more homeowners to the tax over time.
Under current law, taxpayers selling their principal residences can exclude up to $250,000 of profits ($500,000 for married couples) from capital-gains taxes. Congress set those values in 1997 and hasn't tied them to inflation or touched them since, subjecting more homeowners to the tax over time.
3 major fights on the right to watch in Trump’s next 6 months - Emily Brooks, The Hill:
Tariff hikes versus free trade instincts. Republicans are bracing for Trump’s threatened tariff hikes on most countries — which he had paused for several months — ahead of another critical deadline on August 1.
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Government funding clashes. Further complicating that is government funding furor from deficit hawks on the GOP side who were disappointed by the “One Big Beautiful Bill” not doing more to cut spending. But with little work done on regular government funding bills ahead of the August recess, a stopgap measure is looking more and more likely — a proposal that will infuriate deficit hawks.
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Government funding clashes. Further complicating that is government funding furor from deficit hawks on the GOP side who were disappointed by the “One Big Beautiful Bill” not doing more to cut spending. But with little work done on regular government funding bills ahead of the August recess, a stopgap measure is looking more and more likely — a proposal that will infuriate deficit hawks.
Tariffs
Trump Says US Has Reached 'Exciting' Trade Deal With Japan - Hailey Konnath, Law 360 Tax Authority ($):
Trump made the announcement via a post on Truth Social, saying that Japan has agreed to invest $550 billion "into the United States, which will receive 90% of the profits." The deal will create "hundreds of thousands of jobs," and Japan will pay reciprocal tariffs to the U.S. of 15%, the president said.
"This is a very exciting time for the United States of America, and especially for the fact that we will continue to always have a great relationship with the country of Japan," Trump wrote.
"This is a very exciting time for the United States of America, and especially for the fact that we will continue to always have a great relationship with the country of Japan," Trump wrote.
OBBBA and the Economy
One Big Beautiful Bill Does Better with Permanence, but Is Still Full of Temporary Provisions - Alex Muresianu and Sam Cluggish, Tax Foundation:
Permanence for key provisions, like 100 percent bonus depreciation and R&D expensing, makes the final version of the bill more pro-growth. Tax Foundation modeling shows that the law will increase long-run GDP by 1.2 percent, as opposed to the House’s version, which would have only increased long-run GDP by 0.8 percent. However, even the final law includes plenty of temporary tax policy, some of which should be permanent and some of which should not be enacted at all.
These temporary tax provisions also mean the work of tax reform is not done. Several major new tax breaks are scheduled to expire at the end of 2028, setting the stage for another tax fight to either extend them or allow them to expire.
These temporary tax provisions also mean the work of tax reform is not done. Several major new tax breaks are scheduled to expire at the end of 2028, setting the stage for another tax fight to either extend them or allow them to expire.
The 2025 Budget Reconciliation Act Will Increase Debt While Modestly Boosting The Economy - Benjamin Page, Tax Vox:
Overall, TPC projects that GDP will be higher by about 0.7 percent in 2026 and 0.6 percent in 2027 under OBBBA compared to prior law, mostly due to increased after-tax incomes. Over time, those short-run effects will fade. The economic effects that remain will depend on the act’s impact on incentives that influence how people decide to work, save, invest, or innovate.
Breaking down the OBBBA
OBBBA Revises Existing GILTI Tax Rules For U.S. Shareholders Of CFCs - Matthew Roberts, Forbes:
The OBBBA makes several important revisions to the existing GILTI regime. As an initial matter, it eliminates the GILTI inclusion reduction for NDTIR and renames the GILTI inclusion “Net CFC Tested Income.” Because foreign corporations no longer receive a NDTIR for eligible depreciable assets, U.S. shareholders should be mindful of the potential tax increases in 2026 when the OBBBA provisions become effective.
3 Takeaways From Budget Law's Opportunity Zone Revamp - Asha Glover, Law 360 Tax Authority ($):
The new law offers greater incentives for investments in rural areas, including an increase in the basis step-up after five years. Investors who hold on to their interest in a rural opportunity zone fund for five years could see a 30% reduction to their deferred capital gains tax, rather than the 10% that applies to nonrural funds.
Under the law, a rural zone must hold at least 90% of its assets in rural areas, specifically cities and towns with less than 50,000 inhabitants and surrounding areas.
Under the law, a rural zone must hold at least 90% of its assets in rural areas, specifically cities and towns with less than 50,000 inhabitants and surrounding areas.
Mark your calendar for a free Eide Bailly Webinar "New Tax Legislation: Impacts on Opportunity Zones", scheduled for July 28th.
New Scholarship Tax Credit May Face Barriers From State Laws - Tyrah Burris, Tax Notes ($):
The One Big Beautiful Bill Act (P.L. 119-21), signed into law by President Trump on July Fourth, created new section 25F, which provides a dollar-for-dollar tax credit of up to $1,700 per individual who contributes to federally recognized nonprofits that are approved by the state and distribute scholarships to eligible students. The program will start January 1, 2027.
A state that chooses to participate in the program must provide a list of qualified scholarship-granting organizations to Treasury at the beginning of each year
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However, Mary Kusler of the National Education Association said that in many states it’s illegal to set up a scholarship-granting organization because state laws don’t always allow taxpayer dollars to go to private schools.
For example, the Kentucky Supreme Court in 2022 held unconstitutional a school choice law that created a tax credit scholarship fund to allow students to attend schools other than their local public schools. The court ruled that the state constitution required voter approval before public funds could be sent to private schools.
A state that chooses to participate in the program must provide a list of qualified scholarship-granting organizations to Treasury at the beginning of each year
...
However, Mary Kusler of the National Education Association said that in many states it’s illegal to set up a scholarship-granting organization because state laws don’t always allow taxpayer dollars to go to private schools.
For example, the Kentucky Supreme Court in 2022 held unconstitutional a school choice law that created a tax credit scholarship fund to allow students to attend schools other than their local public schools. The court ruled that the state constitution required voter approval before public funds could be sent to private schools.
IRS Funding
Democrats’ uphill IRS fight - Laura Weiss, Brendan Pedersen, and Samantha Handler, Punchbowl News:
Sen. Elizabeth Warren (D-Mass.) framed efforts to cut the IRS budget as aligned with Republicans’ focus in the One Big Beautiful Bill, which slashed spending on Medicaid and SNAP. Democrats are making those cuts a focus of their campaign strategy ahead of the midterms.
On how the IRS funding issue can be a winning one for his party, Sen. Ron Wyden (D-Ore.) said that Americans “understand the implications of following the money.”
On how the IRS funding issue can be a winning one for his party, Sen. Ron Wyden (D-Ore.) said that Americans “understand the implications of following the money.”
IRS Workforce Has Nosedived 25% Since February - Anna Scott Farrell, Law 360 Tax Authority ($):
One of the largest reductions in staff — 35% — occurred in the IRS unit that helps small businesses and self-employed taxpayers, according to the report. The agency's human resources office saw the next biggest cut, with a 28% reduction in staff. The information technology office and the office that helps tax-exempt agencies each saw 25% reductions, and the taxpayer services office was cut by 20%.
Nearly 6,000 contact representatives left the agency, a 23% reduction in employees in that role, according to the report. About 4,200 tax examiners — the people who process returns and calculate taxes and penalties — left, a 27% reduction. And more than 3,000 revenue agents, who examine returns, left the agency, creating a 26% reduction in workers in that role.
Nearly 6,000 contact representatives left the agency, a 23% reduction in employees in that role, according to the report. About 4,200 tax examiners — the people who process returns and calculate taxes and penalties — left, a 27% reduction. And more than 3,000 revenue agents, who examine returns, left the agency, creating a 26% reduction in workers in that role.
Blogs and Bits
IRS offers summer help for late filers - IRS:
Taxpayers can access tools on IRS.gov to:
- File your taxes.
- Check refund status with Where’s My Refund?.
- Make a payment or set up a payment plan.
- Create an IRS Online Account to access account information including balance, payments, tax records and more.
- File your taxes.
- Check refund status with Where’s My Refund?.
- Make a payment or set up a payment plan.
- Create an IRS Online Account to access account information including balance, payments, tax records and more.
Employer Shared Responsibility Payments: Updated for 2026 and Core Provisions - Ed Zollars, Current Federal Tax Developments:
Understanding these updated figures and the underlying mechanics of the ESRP is essential for CPAs and EAs in guiding their ALE clients toward compliance and avoiding potential penalties. These adjustments reflect the ongoing impact of the premium adjustment percentage on the cost of non-compliance with the ACA’s employer shared responsibility provisions.
Taxes need to be part of your divorce considerations - Kay Bell, Don't Mess with Taxes:
In case you missed it because you were happily married back when the Tax Cuts and Jobs Act (TCJA) of 2017 became law, this tax reform measure changed the treatment of alimony for both former spouses.
Before the TCJA changes, alimony payments were deductible for the person making the payments, and the recipient of the spousal support had to report it as income.
Now for divorces or separation agreements dated Jan. 1, 2019, or later, alimony payments generally are not tax deductible by the paying spouse, and the ex-spouse receiving the funds does not have to include the amount as taxable income.
Note, too, one crucial component of many divorces that tax reform didn't change. Child support is never deductible and isn't considered income.
Before the TCJA changes, alimony payments were deductible for the person making the payments, and the recipient of the spousal support had to report it as income.
Now for divorces or separation agreements dated Jan. 1, 2019, or later, alimony payments generally are not tax deductible by the paying spouse, and the ex-spouse receiving the funds does not have to include the amount as taxable income.
Note, too, one crucial component of many divorces that tax reform didn't change. Child support is never deductible and isn't considered income.
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