Key Takeaways
- California mulls wealth tax as election spending skyrockets.
- Data centers flummox governments around the world.
- States conflict with 2025 tax law.
- Practitioners see pros, cons in Tax Court transparency.
- Before Halloween, there's National Candy Corn Day!
Wealth Taxes
Billionaires shatter spending record to fight California wealth tax - Christine Mui and Sean McMinn, Politico:
It’s a particularly striking display of unity from Silicon Valley’s notoriously hard-to-organize donor class. Google co-founder Sergey Brin is by far the well-funded opposition’s biggest benefactor, with former Google CEO Eric Schmidt, venture capitalist John Doerr, Stripe CEO Patrick Collison and crypto executive Chris Larsen also among those who have contributed the most dollars in trying to stop the billionaire tax.
The possibility of a tax on their assets has drawn more than $293 million from at least 30 California billionaires, the majority of whom made their fortunes in tech but otherwise span industries, from agriculture to real estate — as well as the political spectrum, from established Democratic megadonors to some Republican allies and first-time donors.
The possibility of a tax on their assets has drawn more than $293 million from at least 30 California billionaires, the majority of whom made their fortunes in tech but otherwise span industries, from agriculture to real estate — as well as the political spectrum, from established Democratic megadonors to some Republican allies and first-time donors.
Wealth-Tax Masterminds Bet That Their Moment Has Finally Arrived - Alicia Clanton, Bloomberg Tax ($):
When Senator Elizabeth Warren ran for president in 2020, she suggested making America’s richest households pay a tax on their wealth. David Gamage was one of the people called in to work on it.
Gamage, a University of Missouri tax law professor who worked in the Treasury Department under President Barack Obama, was asked to help tailor a proposal and then a bill that could survive legal challenges. But Warren’s White House bid fell short, and her tax idea didn’t make it out of committee even though Democrats controlled Congress at the time (she has since reintroduced the legislation).
In spite of that, the unassuming Gamage became something of a guru. After Warren’s effort failed, he started hearing from politicians and activists across the US who wanted to tax wealth. Most of the queries he put aside. But at the urging of fellow law professor Darien Shanske, Gamage reconsidered a pitch from SEIU-UHW, a labor union looking for a way to tax California’s billionaires.
Gamage, a University of Missouri tax law professor who worked in the Treasury Department under President Barack Obama, was asked to help tailor a proposal and then a bill that could survive legal challenges. But Warren’s White House bid fell short, and her tax idea didn’t make it out of committee even though Democrats controlled Congress at the time (she has since reintroduced the legislation).
In spite of that, the unassuming Gamage became something of a guru. After Warren’s effort failed, he started hearing from politicians and activists across the US who wanted to tax wealth. Most of the queries he put aside. But at the urging of fellow law professor Darien Shanske, Gamage reconsidered a pitch from SEIU-UHW, a labor union looking for a way to tax California’s billionaires.
Billionaires Don’t Like the Wealth Tax. Here’s What Some Propose Instead. - Juliet Chung, The Wall Street Journal ($):
But even some billionaires who are skeptical of wealth taxes support elements of progressive changes to the tax code.
John Arnold, an energy investor and philanthropist, said “turning a couple knobs on the existing code” would help ensure the very wealthy pay a fair share of taxes, helping to rein in the federal deficit and inflation.
Arnold would have the tax rates on long-term capital gains and ordinary income, which is taxed at higher rates, match. “Income should be taxed at the same rate regardless of whether it is earned from labor or unearned through capital gains or interest” or gifts, Arnold, 52, wrote in an email. He would index the original cost of investment to inflation to better capture its true return.
John Arnold, an energy investor and philanthropist, said “turning a couple knobs on the existing code” would help ensure the very wealthy pay a fair share of taxes, helping to rein in the federal deficit and inflation.
Arnold would have the tax rates on long-term capital gains and ordinary income, which is taxed at higher rates, match. “Income should be taxed at the same rate regardless of whether it is earned from labor or unearned through capital gains or interest” or gifts, Arnold, 52, wrote in an email. He would index the original cost of investment to inflation to better capture its true return.
AI and Data Centers
AI Firms, Big Four Grapple With Tech-Led R&D Tax Credit Claims - Somesh Jha, Bloomberg Tax ($):
Tax advisers typically conduct interviews and surveys with employees to draw up a list of qualifying projects, document the research activities involved, identify which staff worked on them and for how long, and calculate eligible costs including wages, software, and certain supply expenses. The result is a detailed report that acts as the company’s line of defense if tax authorities come calling. The whole process can take up to six to nine months.
Accounting firms and AI startups have automated the process with the help of artificial intelligence.
“Technology can obviously help us with automation and pulling out data, but it cannot replace human judgment,” which involves a competent professional in the field, said Rachel Moore, a partner who handles R&D at PwC.
Accounting firms and AI startups have automated the process with the help of artificial intelligence.
“Technology can obviously help us with automation and pulling out data, but it cannot replace human judgment,” which involves a competent professional in the field, said Rachel Moore, a partner who handles R&D at PwC.
As Rich Countries Rein in Data Center Tax Breaks, Others Move In - William Hoke, Tax Notes ($):
Developed countries have begun backing away from the lucrative tax incentives they once offered to attract data centers, while some of their less prosperous counterparts move to pick up the slack.
As recently as a few years ago, governments were in a frenzy to attract data centers and become host to the sites that power the artificial intelligence agents that many thought held the key to making the world a cleaner, healthier, and more productive place. Expectations, which were already sky high when data centers started out by hosting websites and cloud storage, went stratospheric when they took on the role of supporting AI apps.
Now, many highly developed countries that were once racing to lure data center projects have turned far more reticent, while others have stepped forward to encourage investment that is no longer as welcome as it once was elsewhere.
As recently as a few years ago, governments were in a frenzy to attract data centers and become host to the sites that power the artificial intelligence agents that many thought held the key to making the world a cleaner, healthier, and more productive place. Expectations, which were already sky high when data centers started out by hosting websites and cloud storage, went stratospheric when they took on the role of supporting AI apps.
Now, many highly developed countries that were once racing to lure data center projects have turned far more reticent, while others have stepped forward to encourage investment that is no longer as welcome as it once was elsewhere.
IRS
Former IRS Officials Balk at Tax Form’s Citizenship Question - Erin Slowey, Bloomberg Tax ($):
A new question on an IRS draft tax form that asks for filers’ citizen status could discourage taxpayers from filing, risking a dip in tax revenue, former government officials said Monday.
The IRS in September included a new yes-or-no citizenship and work-authorization question on the Draft 2026 Form 1040. Immigrant and tax advocates have criticized the policy move, saying it’s another effort by the Trump administration to use the tax system to squeeze immigrants.
Former IRS Commissioners John Koskinen and Danny Werfel, as well as former National Taxpayer Advocate Nina Olson, were among those who submitted a comment letter to the IRS warning of the consequences of the proposed citizenship question and that it would not improve tax administration. The Tax Law Center at NYU Law and Center on Budget and Policy Priorities also signed the letter.
The IRS in September included a new yes-or-no citizenship and work-authorization question on the Draft 2026 Form 1040. Immigrant and tax advocates have criticized the policy move, saying it’s another effort by the Trump administration to use the tax system to squeeze immigrants.
Former IRS Commissioners John Koskinen and Danny Werfel, as well as former National Taxpayer Advocate Nina Olson, were among those who submitted a comment letter to the IRS warning of the consequences of the proposed citizenship question and that it would not improve tax administration. The Tax Law Center at NYU Law and Center on Budget and Policy Priorities also signed the letter.
As IRS Hires Again, Private Sector Watches for Enforcement Shift - Erin Slowey, Bloomberg Tax ($):
A renewed hiring effort from the IRS in its compliance divisions is signaling to the private sector that it isn’t shying away from enforcement.
IRS Chief of Compliance Jarod Koopman said last week the IRS is hiring roughly 1,000 workers for the small business and self-employed and large business and international divisions. The agency is also hiring about 175 workers for its crime unit.
It’s one of the agency’s biggest hiring pushes after it started hiring again this year to fill some of the holes left by the workers who took Elon Musk’s Department of Government Efficiency’s incentives to leave the government. The IRS lost about a quarter of its then-100,000 workforce last year.
IRS Chief of Compliance Jarod Koopman said last week the IRS is hiring roughly 1,000 workers for the small business and self-employed and large business and international divisions. The agency is also hiring about 175 workers for its crime unit.
It’s one of the agency’s biggest hiring pushes after it started hiring again this year to fill some of the holes left by the workers who took Elon Musk’s Department of Government Efficiency’s incentives to leave the government. The IRS lost about a quarter of its then-100,000 workforce last year.
In Congress
Midterms, Retirements Set to Shake Up Hill Taxwriting Panels - Cady Stanton, Tax Notes ($):
The House Ways and Means and Senate Finance committees are both set to have a different look in the coming Congress even before the smoke clears on the midterm election results.
Several departures of Senate Republicans and senior Democrats in the House will leave gaps on each panel, creating opportunities for both parties.
And the growing possibility of a flip in control in the House — and further uncertainty of party control in the Senate — sets up a rebalance of the dais, with chances for new voices to be heard on tax policy during hearings and markups.
Several departures of Senate Republicans and senior Democrats in the House will leave gaps on each panel, creating opportunities for both parties.
And the growing possibility of a flip in control in the House — and further uncertainty of party control in the Senate — sets up a rebalance of the dais, with chances for new voices to be heard on tax policy during hearings and markups.
‘Tax-Aware’ Long-Short Strategies a Growing Problem, Wyden Says - Cady Stanton, Tax Notes ($):
Wyden encouraged Treasury to designate long-short strategies as an IRS listed transaction to allow the agency to collect information and impose penalties for failing to disclose the strategy, and to use the agency’s authority around tax-straddle rules to characterize the long-short strategy as a presumed offsetting position.
“Given their potential for tax avoidance and evasion, the long-short strategies merit this designation, which would put taxpayers on notice that the blatant tax-motivated strategy may not withstand regulatory scrutiny,” Wyden said.
When reached for comment, a Treasury spokesperson referred Tax Notes to a September 28 post on the social platform X from Bessent on the recent IRS guidance, which said the government issued “a notice on tax-motivated investment strategies that makes clear Treasury is serious about cracking down on transactions designed to dodge taxes or exploit our federal tax code.”
“Given their potential for tax avoidance and evasion, the long-short strategies merit this designation, which would put taxpayers on notice that the blatant tax-motivated strategy may not withstand regulatory scrutiny,” Wyden said.
When reached for comment, a Treasury spokesperson referred Tax Notes to a September 28 post on the social platform X from Bessent on the recent IRS guidance, which said the government issued “a notice on tax-motivated investment strategies that makes clear Treasury is serious about cracking down on transactions designed to dodge taxes or exploit our federal tax code.”
OBBBA
Political Fights Over Trump Tax Law Complicate State Tax Returns - Daniel Moore, Bloomberg Tax ($):
State moves to sever from parts of President Donald Trump’s signature 2025 tax law continue to complicate returns as once-humdrum decisions have been engulfed in partisan fighting, tax filing preparers said Wednesday.
Nearly two dozen states automatically conform to changes in the federal tax code unless they pass laws to go in their own direction. But some states, facing significant revenue hits from the federal Republican law’s tax cuts, approved budgets or called special sessions last fall and early this year to decouple from some of the costliest provisions.
Democrat-led states like Delaware, Michigan, Pennsylvania, Illinois, and Rhode Island separated from some federal business provisions that allow companies to immediately write off research expenses and depreciate property. They also decoupled from an expanded exemption that largely benefits startup founders and investors in Silicon Valley and New York.
Nearly two dozen states automatically conform to changes in the federal tax code unless they pass laws to go in their own direction. But some states, facing significant revenue hits from the federal Republican law’s tax cuts, approved budgets or called special sessions last fall and early this year to decouple from some of the costliest provisions.
Democrat-led states like Delaware, Michigan, Pennsylvania, Illinois, and Rhode Island separated from some federal business provisions that allow companies to immediately write off research expenses and depreciate property. They also decoupled from an expanded exemption that largely benefits startup founders and investors in Silicon Valley and New York.
Tax Court
Tax Pros: Expanded Access to Tax Court Docs Has Benefits and Risks - Kristen Parillo, Tax Notes ($):
Reaction to the Tax Court’s expansion of remote access to court filings suggests that taxpayers and advisers will gain greater insight into disputed issues, but that increased transparency could bring privacy risks.
Tax professionals are praising the Tax Court’s October 21 announcement as a welcome and long-overdue move to broadening the public’s electronic access to some motions and briefs.
Under Administrative Order No. 2026-02, motions electronically filed on or after January 1, 2027, by practitioners admitted to practice before the Tax Court will be available remotely through DAWSON, the court’s electronic case management system, along with supporting briefs and memoranda, as well as oppositions e-filed by admitted practitioners.
Tax professionals are praising the Tax Court’s October 21 announcement as a welcome and long-overdue move to broadening the public’s electronic access to some motions and briefs.
Under Administrative Order No. 2026-02, motions electronically filed on or after January 1, 2027, by practitioners admitted to practice before the Tax Court will be available remotely through DAWSON, the court’s electronic case management system, along with supporting briefs and memoranda, as well as oppositions e-filed by admitted practitioners.
Blogs & Bits
How to avoid being haunted by ghost tax return preparers, Kay Bell, Don't Mess With Taxes. "By hiding their identities, ghost preparers escape accountability and leave taxpayers responsible for the inaccurate or fraudulent returns filed by the phantom preparers."
A “Token Tax” Could Kill the Promise of AI, Garett Watson and Andrew Lautz, The Tax Foundation Tax Policy Blog. "Lawmakers want to tax artificial intelligence, but the playbook they’re pulling from increasingly resembles a relic of the past."
Bigger Corporations, Bigger Tax Breaks: Consolidation Leads Six Corporations to Grab a Giant Share of Subsidies, Matthew Gardner, Institute on Taxation and Economic Policy blog. "This is, in part, the predictable consequence of a dramatic concentration of corporate profits."
What Day Is It?
It's National Candy Corn Day!
For those who enjoy, a good day to do some pre-Halloween indulging in the most polarizing Trick-or-Treat candy.
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