Tax News & Views Root Beer Float Roundup

Programming Note: Tune in to our upcoming webinar, "Helping Clients Navigate the Employee Retention Credit Mess" scheduled for Thursday, August 7th at 1:00 p.m. CST. The webinar is free and 1 hour of CPE is available. Register here.

Technical Corrections to Come

Get Ready for a Parade of Technical Corrections on Tax Bill - Doug Sword, Tax Notes ($):

Observers aren’t sure whether the new bill’s corrections will rival the 90-page proposed technical corrections to the TCJA, but they are certain there will be more than a handful. And they’ll likely amount to more than the less expansive Inflation Reduction Act’s 15 or the more targeted Setting Every Community Up for Retirement Enhancement (SECURE) Act’s dozen.

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The errors can take a long time to discover and even longer to fix. It took the JCT a year to publish its TCJA bluebook, which included descriptions of technical corrections. One of those errors, the glitch with the interest deduction for travel trailer and camper floor plans, wasn’t fixed for nearly eight years until the OBBBA added campers and trailers to the definition of floor plan financing that is exempt from interest expensing limits.

OBBBA Messaging

A $715 billion tax cut turns into a $4.5 trillion sales job - Brian Faler, Politico:

Marc Goldwein of the Committee for a Responsible Federal Budget said he doesn’t have a problem if those GOP lawmakers tell voters they cut taxes by $4.5 trillion. The issue, he said, is when Republicans claim the tax cuts were small when they’re talking about the impact on the government’s debt but say they’re big when talking about the benefits to voters.

“You can’t jump back and forth,” said Goldwein. “The problem is the inconsistency.”

Effects of OBBBA on SSA

SSA Estimates OBBBA Will Step Up Trust Fund Depletion - Tax Analysts, Tax Notes ($):

The One Big Beautiful Bill Act (P.L. 119-21) will result in combined estimated depletion dates of Social Security trust funds moving up from the third quarter of 2034 to the first quarter of 2034, Social Security Administration Chief Actuary Karen P. Glenn said in an August 5 letter to Senate Finance Committee ranking member Ron Wyden, D-Ore.

Further Unpacking the OBBBA

How the One Big Beautiful Bill Changes Green Energy Tax Credits - Alex Muresianu, Tax Foundation:

The OBBBA repeals several tax provisions related to electric vehicles and buildings. Repealing the electric vehicle and refueling property tax credits raises almost $200 billion over the next decade, while repealing the other residential-related tax breaks brings the total for this category of provisions to $267 billion, according to Tax Foundation estimates.

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The OBBBA’s approach to electric power credits is much more complicated. The law makes wind and solar projects ineligible for the IRA’s flagship tax credits (the clean electricity investment tax credit [ITC] and production tax credit [PTC]) unless they either enter service before December 31, 2027, or begin construction within 12 months of the law’s passage.

The Budget Law’s Tax Cuts For Overtime And Tips Are Popular, But Few Will Benefit - Howard Gleckman, Tax Policy Center:

The overtime law comes with its own limits. A worker can deduct no more than $12,500 in overtime pay ($25,000 if married). The deduction applies only to the portion that exceeds their regular pay. In other words, if a worker gets time-and-a-half pay, they can only deduct the extra “half.”

The work must meet the Fair Labor Standards Act definition of overtime. And like the tips provision, the OT deduction phases out for taxpayers starting at $150,000 ($300,000 for joint filers). Even with the phase-out, the biggest beneficiaries of the OT deduction are those making between about $217,000 and $460,000. Their taxes will be reduced by $500-$600, or about 0.2 percent of their after-tax income.

IRS Spending

IRS Has Spent Nearly $5B Of Funding Boost In 2025 - Asha Glover, Law 360 Tax Authority ($):

The IRS spent $2.1 billion on operations support from the beginning of fiscal year 2025 through March 31, TIGTA said in a report dated Friday. The agency also spent $1 billion on enforcement, nearly $956 billion on taxpayer services, almost $635 million for business systems modernization and $4.5 million on energy security, according to TIGTA, the agency's watchdog.

IRS Spent Billions of IRA Funding to Pay Staff, Watchdog Says - Tyrah Burris, Tax Notes ($):

The IRS has spent almost $14 billion of Inflation Reduction Act funding that was provided to the agency in 2022 to improve taxpayer services and modernize technology, but most of it was spent on employee compensation, according to an agency watchdog.

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The watchdog also found that as of April 21, the IRS has canceled 93 contracts involving IRA projects that totaled approximately $408 million. The projects included support for the Office of Digital Assets Initiative, business accounts, the integrated data retrieval system, and cybersecurity architecture.

Entity Classification

Proposed Regs Would Update Classification for Line of Business - Trevor Sikes, Tax Notes ($):

Currently, an employer’s line of business for those tax exclusions is classified according to the long-outdated Enterprise Standard Industrial Classification (ESIC) manual, which provides a four-digit classification for businesses.

However, as Treasury and the IRS point out, the manual was last updated in 1974 — over 50 years ago. The continued use of the ESIC manual for those purposes has garnered criticism because of the rapid changes to the U.S. and international economies since then.

IRS Floats Update To System For Fringe Benefits - Anna Scott Farrell, Law 360 Tax Authority ($):

The agency said the switch would make it easier for employees to apply income exclusions they may be eligible for under Internal Revenue Code Section 132. The law allows workers to exclude from their gross income any fringe benefit that qualifies as a "no-additional-cost service" or an employee discount.

Blogs and Bits

Understanding Passthrough Losses and Bankruptcy in Field Attorney Advice 20253101F - Ed Zollars, Current Federal Tax Developments:

While the FSH S-Corp bankruptcy proceedings do not affect the release of a requested refund to the taxpayers, the correct application of I.R.C. § 1366(a)(1) does impact their refund request. The taxpayers cannot claim the passthrough loss from FSH S-Corp’s fiscal year ending September 30, 2022, on their 2021 Form 1040, and therefore cannot carry back that specific NOL passthrough amount to their 2016 taxable year.

Newest travel trend: special, higher fees on international tourists - Kay Bell, Don't Mess With Taxes:

Earlier this year, Hawaii took enacted the United States’ first tourist tax explicitly tied to the climate crisis.

Known as the Green Fee, the bill adds an additional 0.75 percent on top of existing accommodation taxes. The fee is expected to raise $100 million annually, starting in 2026, for wildfire recovery, reef restoration.

AICPA Pushes For Guidance On Renewed R&D Tax Break - Asha Glover, Law 360 Tax Authority ($):

Treasury needs to act quickly because many taxpayers have not filed their 2024 income tax returns and they are uncertain about whether they can deduct 2024 research costs on their originally filed return, according to the letter. The lack of clarity can lead to unnecessary administrative burdens and compliance risks, AICPA said.

Tax Trouble

NY Atty Found Guilty Of Duping Lender Who Backed Lien Biz - Pete Brush and Stewart Bishop, Law 360 Tax Authority (defendant name omitted):

A Manhattan federal jury on Monday convicted a former compliance lawyer of pilfering from a $20 million line of credit extended to his tax-lien business by a subsidiary of Emigrant Bank.

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Prosecutors said that, starting in about 2017, Defendant tricked Emigrant Business Credit Corp. — a commercial finance unit of Emigrant Bank — into lending his Ebury Street Capital LLC business $20 million in part by providing misleading data that purported to show healthy portfolios of tax-lien assets.

Defendant, a New York-admitted lawyer who formerly served as head of compliance for brokerage OTA Management LLC, started Ebury in about 2011 to buy tax-lien assets and profit from collecting the taxes or otherwise disposing of them.

The government alleged, among other things, that Defendant used millions of dollars of EBCC's money to repay earlier investors who lost confidence in the defendant before the lender did.

What day is it?

It's National Root Beer Float Day!