Key Takeaways
- EU tariff deal.
- Cracks in Japan deal?
- IRS announces simplified exam process.
- Gambling bill reversal pushed.
- R&D expense changes.
- Mayo Clinic wins UBIT refund case.
- There is no tax fairy.
- National Milk Chocolate Day.
Tune in today for New Tax Legislation: Impacts on Opportunity Zones, an Eide Bailly Webinar, at 1:00 p.m. Central. Register here. Free; one hour CPE offered.
US and EU reach tariff agreement to avert trade war - Henry Foy, Aime Williams and Andy Bounds, Financial Times:
As part of the deal the EU has agreed to spend hundreds of billions of dollars on US energy products and weapons, and accepted a broad 15 per cent levy that covers many key European exports, including cars.
Another Way to See It - Adam Wren and Dasha Burns, Politico:
Cracks widen in Japan and US’s interpretation of tariff trade deal - Harry Dempsey, Aime William and Demetri Sevastopulu, Financial Times:
Japanese officials said there was no written agreement with Washington — and no legally binding one would be drawn up — after Trump administration officials claimed Tokyo would back investments in the US from which American taxpayers would reap nine-tenths of the profits.
Trump Trade Deals Do Little To Ease Importers' Concerns - Dylan Moroses, Law360 Tax Authority ($). "The realization that the new tariff environment is here to stay — and potentially ramp up further on the first of next month — is sobering for many importers, effectively upending some companies' supply chains, it is a phenomenon many can adapt to, Murphy said."
Quotable: Phil Magness on X/Twitter: "The EU is slightly better off for reducing its already-low trade restrictions on the US. The US is worse off because it raised tariffs on itself, and will incur most of that burden...but only if those tariffs survive in court."
In the IRS
IRS Issues Guidance to Speed Up Exam Process for Large Companies - Erin Slowey, Bloomberg ($):
The changes to how the IRS examines some of the largest companies comes as its Large Business and International division will lose roughly 20% of its workers this year, according to a National Taxpayer Advocate report, amid the Trump administration’s push to shrink the government.
IRS issues interim guidance to improve Large Business & International examination process - IRS:
- Phasing out Acknowledgement of Facts (AOF) Information Document Request process in examinations by 2026 –The AOF Information Document Request process will be eliminated due to concerns over limited value and extended timelines. Until Dec. 31, 2025, taxpayers may choose whether to use AOF. This proposed phase out approach builds in an opportunity for stakeholder feedback before any permanent changes.
- Expanding Use of Accelerated Issue Resolution (AIR) to Large Corporate Cases – The memo clarifies that AIR applies to Large Corporate Cases (formerly under the Coordinated Examination Program). AIR closing agreements allow resolved issues to apply across all filed return years in the current audit cycle.
- Stronger review of Fast Track Settlement (FTS) denials –To support broader use of the FTS process, the IRS now requires additional internal reviews and approvals before denying a taxpayer’s request.
White House Plan Could Prompt IRS to Expand Use of AI - Lauren Loricchio, Tax Notes ($):
The plan, unveiled July 23, outlines policy actions that the Trump administration will take in the coming weeks and months to help the United States develop “the most powerful AI systems in the world.” It was required under an executive order issued January 23.
The article notes practitioner concerns:
...
“I worry about Taxpayer Bill of Rights violations,” Agostino said. “The right to quality service is inconsistent with using the U.S. taxpayer as the beta tester for the new IRS programs.”
IRS Failed to Update Its Employee Training System, Watchdog Says - Tyrah Burris, Tax Notes ($):
The Treasury Inspector General for Tax Administration, in a report released July 25, said that the tax agency’s employee training strategy, enacted under the Taxpayer First Act in 2019, is inefficient and remains about the same as it was before its principal training source — IRS University — was created. Under the TFA, the IRS was required to submit a comprehensive training strategy to Congress.
Congress summer work
House GOP Begins Organized Effort for Second ‘Beautiful’ Bill - Doug Sword, Tax Notes ($). "The House Republicans’ dominant caucus says it is launching a working group focused on a 'One Big Beautiful Sequel' to the giant tax and spending cut package that became law earlier this month."
Gambling Deduction Cap Could Be Reversed This Year, Smith Says - Katie Lobosco, Tax Notes ($):
The One Big Beautiful Bill Act (P.L. 119-21) caps the deduction for gambling losses at 90 percent after December 31.
Figuring out the last tax bill
Tax Law’s R&D Change Helps Tech, Drug Giants That Lobbied for It - Michael Rapoport, Bloomberg ($):
The immediate expensing applies only to domestic R&D—foreign R&D still must be amortized over 15 years—so it amounts to an incentive for companies to spend on R&D in the US.
Learn more at our August 1 webinar "New Tax Legislation: Changes to the R&D Tax Credit and Capitalization of R&D Expenses under Section 174." No charge, one hour CPE available.
Did the OB3 Act Make Coffee and Snacks Provided to Employees Nondeductible? - Thomas Gorczynski, Tom Talks Taxes. "Break rooms with free snacks, coffee stations, or free snack stations are neither employer-operated eating facilities nor excluded from income under §119; therefore, these expenses generally continue to be §132(e)(1) de minimis fringe benefits that are excluded from the employee’s income and 50% deductible to the employer." Legislation: Changes to the R&D Tax Credit and Capitalization of R&D Expenses under Section 174
Non-profit news
Mayo Clinic's $11.5M Tax Refund Affirmed By 8th Circ. - Maria Koklanaris, Law360 Tax Authority ($):
In an opinion, the federal appellate panel held that the hospital's patient care is so connected with its teaching mission that it is not disqualified from the tax exemption, given for certain business income under Internal Revenue Code Section 170(b)(1)(A)(ii).
In this case, Mayo paid the unrelated business income tax on debt-financed real property income. Exemption of such income under the IRC is under limited circumstances, one being that a group must be an educational organization to receive it.
Related: Eide Bailly Exempt Organization Tax Services.
Blogs and Bits
2026 filing season could be problematic due to cuts in IRS funding and staff - Kay Bell, Don't Mess With Taxes. "Start practicing your meditation or other patience promoting techniques now."
IRS advises of Tuesday deadline to maintain Business Tax Account access - Martha Waggoner, The Tax Adviser. Business Tax Account (BTA) designated officials must revalidate their accounts by Tuesday if they want to maintain access, the IRS said in a fact sheet posted Wednesday.
Link: Fact Sheet.
Taxes On Lawsuit Settlements Are Tricky, Even More So After Verdict - Robert Wood, Forbes. "Do plaintiffs in personal physical injury cases need to worry about the tax treatment of legal fees? It depends."
The End Of ‘Smelly’ Arguments? Tax Court Targets Conservation Easement Abuses - Peter Reilly, Forbes. "When I first heard about the idea of buying land and then selling it to people who would take deduction for donated conservation easements, I thought it was one of the stupidest ideas I had ever heard."
Wishful tax thinking, legal division.
CPA Charged With $5M Fraud Involving 2 Law Firms - Anna Scott Farrell, Law360 Tax Authority ($):
The article says the indictment asserts that the defendant
"In truth and in fact, as he well knew, the clients' payments would not be and were not used for any of those purposes," federal prosecutors said in the indictment.
If the indictment holds up, it's interesting that two law firms fell for a ridiculous scam. There is no Tax Fairy, but according the indictment, they paid good money for one anyway.
What day is it?
It's National Milk Chocolate Day! Back up the truck!
