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Treasury

Treasury Pushes Shopify-Inspired AI Policy After Trump Order – Erin Schilling & Erin Slowey, Bloomberg ($):

The Department of Treasury is requiring its information technology employees to practice “reflexive AI usage,” which will become part of their performance evaluations.

Samuel Corcos, Treasury chief information officer who has ties to the Department of Government Efficiency, said in an Aug. 19 memo seen by Bloomberg Tax that artificial intelligence “proficiency and proactive utilization are core requirements” for all IT employees. The memo is modeled after a similar directive to employees of Shopify Inc., a publicly traded e-commerce software giant.

The new AI requirements in the Treasury information technology offices intend to meet President Donald Trump’s January executive order to promote AI innovation and dominance. The memo comes as the IRS, the largest bureau in Treasury, promises to make up for massive workforce cuts through use of AI, especially in its enforcement arm.

Treasury Signals Plan to Merge Administrative Work Into One Unit – Erin Schilling, Bloomberg ($):

The Department of Treasury plans to pull some administrative employees from the IRS and other bureaus within the department into a centralized division called the Treasury Common Services Center.

That center would operate within the Office of Management and will bring together human resources processing, common information technology functions, and operations services like travel and acquisition, according to a Tuesday email to employees seen by Bloomberg Tax.

Tariffs

Trump Tariff Threats Put Countries with Digital Taxes in a Bind – Lauren Vella, Bloomberg ($):

Countries that have imposed digital taxes on tech giants like Amazon.com Inc. and Meta Platforms Inc. are again under threat of retaliatory tariffs from President Donald Trump, forcing them to decide whether to resist or give in to his demands.

Dropping the tax could stir political ire from their citizens and risk losing much-needed tax revenue, but keeping the tax in place would have damaging economic effects by exposing them to steep tariffs and restrictions on US-made chips.

EU to Propose Removing US Tariffs This Week to Meet Trump Demand – Suzanne Lynch & Alberto Nardelli, Bloomberg ($). “The European Union will seek to fast track legislation by the end of the week to remove all tariffs on US industrial goods, a demand made by President Donald Trump before the US will lower its duties on the bloc’s automobile exports.”

Full Weight of American Tariffs Slams Into Effect Against India – Alex Travelli, New York Times:

President Trump on Wednesday followed through on his threat to impose a 50 percent tariff on nearly all goods arriving from India, leveling one of his most punitive tariffs at a country with deep ties to the United States.

The 50 percent rate, half of which is punishment for India’s buying Russian oil, is expected to damage many Indian exporters that collectively employ millions of people. The move could rupture America’s expanding economic relationship with India, where two-thirds of the largest U.S. corporations have offshore operations. The tariff also undermines the stability of billions of dollars of foreign investment in India’s stock market, the world’s fourth largest.

Tax News & Views International Weekly: On Offense on Digital Taxes – Alex M. Parker, Eide Bailly:

After letting the issue quiet down for a bit, President Donald Trump thrust digital services taxes back into the spotlight Monday, threatening to impose harsh tariffs and other sanctions on the many countries which have enacted levies on online revenue.

With the ink barely dry on an agreement on the global minimum tax—and with many of its details still unknown—is there a chance for Trump to make another signature deal on the issue?

Federal Reserve

Behind Trump’s Bid for Fed Dominance Lies a Dangerous Debt Idea – Maria Eloisa Capurro, Bloomberg ($):

As Donald Trump ramps up efforts to control the Federal Reserve, investors worry he’ll use central bank tools to fix something that’s not supposed to be a central bank problem: America’s ballooning debt bills.

Trump said Tuesday he’s ready for a legal fight over his attempt to oust Fed Governor Lisa Cook, and looking forward to having a “majority” on the central bank’s board. That could advance the president’s campaign for lower interest rates, which he says will save the country “hundreds of billions.”

IRS

What’s Next for the IRS? Another Overhaul? – Doug Sword, Tax Notes ($):

Now that Democrats’ $79 billion plan for the IRS has more or less come undone, Republicans might be gearing up to put their own vision in place.

Ideas for the IRS include “everything from moving to the cloud to using cloud servers to being able to actually even use some commercial database matches” to improve fraud detection, according to House Ways and Means Committee member Rep. David Schweikert, R-Ariz., who chairs the Oversight Subcommittee, which has jurisdiction over the tax collector.

Rise in Audits of Employee Retention Credit Claims Sparks Worry – Trevor Sikes, Tax Notes ($):

A recent surge in audits of employee retention credit claims is a major concern for employers and tax professionals who fear that the IRS lacks the capacity to follow through on the process.

ERCs, offered as COVID-19 pandemic relief to businesses, have long been subject to scrutiny for potential fraud and abuse. However, a recent spike in audits of ERC claims has worried tax professionals who believe that claimants who are rightfully entitled to a refund and have experienced lengthy delays getting it may now have even more trouble.

Group Urges Caution in Implementation of Paperless Refunds – Benjamin Valdez, Tax Notes ($):

Treasury and the IRS should carefully consider the roughly 6 million taxpayers who receive their tax refunds via paper check while implementing a directive to disburse all government payments electronically, according to a tax policy group.

An executive order signed by President Trump in March requires the federal government to stop issuing and receiving paper checks, including for tax refunds, by September 30. Instead, all payments are to be received electronically.

Energy Credits

The OBBBA’s Effect on the Renewable Energy Tax Credit Transfer Market – Barry Sklar, Tax Notes ($). “The enactment of the One Big Beautiful Bill Act in July has resulted in significantly reduced 2025 federal tax estimates for certain large taxpayers. This is particularly evident in the renewable energy tax credit transfer market. This midyear tax cut is primarily a consequence of the OBBBA’s allowance of immediate deductions effective in the 2025 tax year for section 174 research and experimentation expenditures, including a catch-up deduction for previously unamortized expenses. To a lesser extent it also results from the reinstatement of 100 percent bonus depreciation and the relaxing of section 163(j) interest expense limitations. Taxpayers most likely to be affected are those with large amounts of R&E expenses (such as pharmaceutical and technology companies) and those with substantial capital expenditures. The effect of these deductions will be particularly acute for taxpayers with multinational operations subject to the base erosion and antiabuse tax regime, in which deductions and credits work together to erode any cushion between regular tax liability and the minimum tax imposed by the BEAT.”

Taxpayer Compliance

Taxpayer Compliance Costs the U.S. Billions, Group Says – Tyrah Burris, Tax Notes ($):

Tax code complexity is costing the United States more than $536 billion annually because of the time and money it takes to prepare tax returns, according to the Tax Foundation.

In an August 27 analysis of how the One Big Beautiful Bill Act (P.L. 119-21) affects certain aspects of the tax code, the Tax Foundation said the latest estimates from the Office of Management and Budget’s Office of Information and Regulatory Affairs show that taxpayers will spend almost 7.1 billion hours complying with IRS return filing and reporting requirements in 2025.

US Tax Compliance to Cost $536 Billion In 2025, Report Says – Kevin Pinner, Law360 ($):

U.S. taxpayers will spend about $536 billion this year complying with the tax code, largely in what economists call opportunity costs, an amount greater than federal revenues from corporate income tax, the Tax Foundation reported Wednesday.

Taxpayers will spend nearly three-quarters of time they take to comply with the U.S. tax code on three elements: reporting proceeds from broker and barter exchange transactions, individual income tax returns and corporate income tax returns, the right-leaning think tank said in its report. Time spent complying with Form 1099-B, where taxpayers report capital gains or losses, has tripled since 2022, when lawmakers added cryptocurrency transactions to the items brokers must report, according to the think tank.

In the Courts

Air Force Officer’s Retirement Payment Hit the Danger Zone – Nathan J. Richman, Tax Notes ($). “A former government employee waited too long to challenge the timing of a retirement payout or claim that another payment wasn’t income because it was from a private source, the Tax Court concluded.”

Co. Can't Challenge IRS Easement Penalties, Court Rules – Asha Glover, Law360 ($). “The Internal Revenue Service can assess civil penalties against a property company for a disallowed conservation easement deduction, a Louisiana federal court said, agreeing with the government that the company's challenge is barred under the Anti-Injunction Act.”

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