Tax News & Views Can't Quit Cookies or Tariffs Roundup

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Trump’s Tariffs Are Making Money. That May Make Them Hard to Quit. - Andrew Duehren, New York Times:

Some in Washington are already starting to think about how they could spend the tariff revenue. Mr. Trump recently floated the possibility of sending Americans a cash rebate for the tariffs, and Senator Josh Hawley, Republican of Missouri, recently introduced legislation to send $600 to many Americans. “We have so much money coming in, we’re thinking about a little rebate, but the big thing we want to do is pay down debt,” Mr. Trump said last month of the tariffs.

Democrats, once they return to power, may face a similar temptation to use the tariff revenue to fund a new social program, especially if raising taxes in Congress proves as challenging as it has in the past. As it is, Democrats have been divided over tariffs. Maintaining the status quo may be an easier political option than changing trade policy.

Trump Trade Official Says Tariff Court Loss Won’t Impact Plans - Erik Larson and Annmarie Hordern, Bloomberg via MSN:

A top administration official signaled confidence that President Donald Trump’s trade plans will survive even if the sweeping global tariffs that pushed other countries to the negotiating table are ultimately deemed illegal.

...

“I’m not going to go deep into our strategy here, mostly because we’re pretty confident on the current plan, but we will do whatever it takes to make sure that the president can continue to rectify the trade deficit and change the global trading system,” said Greer, a lawyer who served as chief of staff to ex-Trade Representative Robert Lighthizer during Trump’s first term.

What consumers can expect from import taxes as the US sets new tariff rates - Dee-Ann Durbin and Anne D'Innocenzio, Associated Press:

Tariffs are a tax, and U.S. consumers are likely to foot at least part of the bill. The Budget Lab estimated that prices will increase 1.8% in the short term as a result of the trade war the U.S. waged this year. That’s the equivalent of a $2,400 loss of income per U.S. household, the group said.

...

“Retailers have been able to hold the line on pricing so far, but the new tariffs will impact merchandise in the coming weeks,” David French, chief lobbyist for the National Retail Federation, the nation’s largest retail trade group, said Friday. “We have heard directly from small retailers who are concerned about their ability to stay in business in the face of these unsustainable tariff rates.”

Harm or Help? Why Companies Are Battling Tariffs Meant to Benefit Them. - Ana Swanson, New York Times:

Mr. Digre’s company has long manufactured speakers in Minnesota for export, including to a major customer in Canada. His firm relies on certain materials from China, the only place to get many small components needed for speakers. But Mr. Digre must now pay a 55 percent tariff on those Chinese imports. As a result, manufacturing for that customer from the United States no longer makes sense. So Mr. Digre has shifted speaker production to a factory in China, where he will export directly to Canada and bypass the United States entirely.

“We’re starting off with a 55 percent material cost disadvantage to our global competitors,” he said. Illogically, he said, the United States charges higher tariffs on speaker parts from China than finished speakers from either China or Vietnam, which also discourages U.S. manufacturing.

Employee Retention Credit Update

IRS Can’t Process ERC Claims After Companies Sue, Judge Says - Tristan Navera, Bloomberg ($):

Judge Curtis L. Collier of the US District Court for the Eastern District of Tennessee on Thursday denied a motion for partial summary judgment for Tennessee-based JPM Restaurant LLC. JPM sued last year for $338,100 in ERC refund claims for six quarters in 2020 and 2021 that the government hadn’t released to it.

A month after the lawsuit was filed, the government approved claims for four of the quarters, but stopped processing them because the case had been referred to the Department of Justice. So JPM argued it should be entitled to summary judgment with respect to those four quarters, saying the government “has no legitimate basis for withholding payment” in light of the IRS’ approval.

Not so, Collier said, as under IRC Section 7122 the IRS lost the authority to issue the claims when the suit was referred to the Department of Justice.

Think twice before heading to court.

US Defends Bulk Denial Of Worker Credits At 9th Circ. - Anna Scott Farrell, Law360 Tax Authority ($):

"Recognizing that the IRS cannot do a full examination of every return or refund claim that is submitted, the risk model allows the IRS to group large numbers of returns by risk scores, where a risk score is based on the likelihood a claim will meet or flunk various criteria for eligibility," the U.S. said.

The agency used the model to determine that 10% to 20% of the ERC claims were at the highest risk of being ineligible, and the agency sent disallowance letters for those claims, the brief said. Taxpayers could then challenge the disallowance, the U.S. said.

Tax Policy Monday

Cash Windfall From Trump’s Tax Law Is Starting to Show Up at Big Companies - Jonathan Weil, Wall Street Journal:

In short, changes like allowing upfront depreciation of assets and immediate expensing of research-and-development expenses will bring swift windfalls to American corporations but also lasting tailwinds. This in turn has provided incremental fuel to stock markets, a counterweight to risks from tariffs and other policy uncertainty.

The cash savings won’t affect reported earnings, which are calculated using different accounting rules than taxes. It won’t all ultimately end up in free cash flow either, because AT&T plans to reinvest much of the savings in new capital projects. But the change is still a positive for the company’s shareholders and valuation, all other things being equal.

Capitol Hill Recap: Constructive Debate on Credits - Alex Parker, Eide Bailly:

Not for the first time, President Donald Trump recently singled out on social media a member of his own party—in this case, Chuck Grassley, the 91-year-old Republican senator from Iowa.

Trump blasted the long-serving lawmaker for failing to speed up the process of confirming Trump's judiciary nominations.

But the two prominent Republicans also have a lower-profile dispute over the sunsetting of energy credits, as recently amended by the One Big Beautiful Bill Act. While not as flashy, it could end up determining whether millions of dollars in new energy projects go ahead, or are stopped in their tracks.

The Crazy Train of Indexing Capital Gains for Inflation - Lee Sheppard, Tax Notes ($):

Loper Bright says that agencies can’t expect deference for rug pulls. If Treasury suddenly decided that taxation of Fed-induced inflationary capital gains was unfair, reversing a long-standing interpretation, a reviewing court would be able to look at that long-standing interpretation, assess the copious reliance interests, and ask why it should defer to a new agency interpretation, especially given that previous asset price bubbles were allowed to inflate and pop without a response from the tax administrator.

...

Proponents of administrative indexing often argue that no taxpayer would challenge it or achieve standing to do so. The Constitution gives Congress broad power to tax and requires a nonspeculative injury in fact to sue. In theory, a taxpayer could argue that Treasury indexing or failure to index is unconstitutional. But Moore might preclude any constitutional arguments about realization. Courts did not question the standing of the taxpayer who unsuccessfully sued on the check-the-box rules.

Tax Administration

IRS Backtracks on Thousands of Customer Service Job Postings - Erin Schilling, Bloomberg ($):

Thousands of IRS customer service jobs posted on the federal hiring website have closed within days of being made public.

The IRS posted 4,500 contact representative positions at offices across the country, according to USAJOBS, the US Office of Personnel Management website for federal jobs. Contact representatives help taxpayers with administrative and technical problems either over the phone, in person, or through written correspondence.

Those jobs are now closed. A web link that led to 500 contact representative jobs and another that led to 3,000 contact representative jobs now both say “job canceled” in the overview. There are still 150 open tax examining technician positions and one position for strategic advisory counsel. Those jobs both say they close Aug. 7 and Aug. 6, respectively.

Blogs and Bits

OBBB increases reporting thresholds for 1099 forms K, MISC, and NEC - Kay Bell, Don't Mess With Taxes. "The amounts paid that trigger the issuance of forms 1099-NEC, 1099-MISC, and 1099-K will increase significantly on Jan. 1, 2026."

Tax Fraud And Denaturalization Risks: A Balanced View For Taxpayers - Virginia La Torre Jeker, Forbes. "Denaturalization and tax fraud or evasion are linked and clearly carry serious legal consequences. Those with concerns can take proactive steps to ascertain and mitigate their risks."

A February 17th Start to Tax Filing Next Year? - Russ Fox, Taxable Talk. "I’m not yet ready to call next year’s tax filing another 'Tax Season From Hell,' but it sure looks that way to me."

The fallout from Springfield’s disastrous pension decision - Conor Durkin and Richard Day, A City That Works:

We won’t bury the lede: this is a really bad outcome for Chicago. As a result of this change, the future liabilities of the police and fire pension funds have risen significantly. The city’s Department of Finance pegs the total liability increase at around $11 billion, while Ald. Bill Conway did some math estimating that the net-present value of the liability is somewhere around $3.9 billion. The result of that liability growth is that our funded rate falls from roughly 24% (already quite bad) to an abysmal 18%. It’s the fiscal equivalent of taking a long look at a swimmer struggling to keep their head above water, and then tossing them a cinderblock.

Pandemic Follies

Marietta man convicted of $9.6 million PPP loan fraud and $3.4 million tax fraud schemes - IRS (Defendant name omitted, emphasis added):

Following a weeklong trial, Defendant was convicted by a federal jury of bank fraud, wire fraud, and money laundering after obtaining a fraudulent $9.6 million Paycheck Protection Program (“PPP”) loan and filing fraudulent tax returns that generated a $3.4 million IRS refund.

“This defendant’s massive PPP fraud abused a valuable program intended to assist struggling Americans during a global pandemic. The defendant then compounded his harm by claiming a fraudulent $3.4 million tax refund,” said U.S. Attorney Theodore S. Hertzberg. “Defendant’s conviction signals my office’s relentless pursuit and prosecution of those engaged in fraud, waste, and abuse at the expense of honest taxpayers.”

...

On March 29, 2021, Defendant received approximately $9.6 million in PPP loan proceeds. Instead of using it for purposes consistent with the PPP, he commingled the funds with the fraudulently obtained $3.4 million tax refund and paid personal debts and expenses, including the following:

- $1,677,861.01 for his personal residence;
- $332,999.80 for a 2014 Lamborghini Aventador;
- $120,799.79 for a 2022 BMW M850xi;
- $90,520 for a 2021 Land Rover Range Rover Velar;
- $51,000 for the downpayment on a 72-foot yacht;
- over $1,000,000 for real estate, trucks, and trailers to start a new business; and
- more than $15,000 for plastic surgery.

On July 25, 2025, a jury convicted Defendant, of Marietta, Georgia, of bank fraud, wire fraud, and money laundering.

No luxury watches? No sports memorabilia? Maybe he needed to make room on the yacht first. The plastic surgery is a nice touch, as that's not something that the IRS can seize and auction.

What day is it?

It's National Chocolate Chip Cookie Day. Hold my calls.

Tax News & Views Can't Quit Cookies or Tariffs Roundup

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Joe B. Kristan, CPA