Tax News & Views Cheese Fries Tariff Refund Roundup

What We Know—and Don’t Know—About the Tariff-Refund Process - Liz Young, Wall Street Journal:

U.S. importers can begin filing refund claims on Monday, April 20, for $166 billion in tariffs collected illegally over the past year.

...

U.S. Customs and Border Protection has set up a system known as Consolidated Administration and Processing of Entries, or CAPE, to handle refunds within its online portal called the Automated Commercial Environment.

Importers and customs brokers will log in to the portal to file so-called CAPE declarations for Customs to review. If a declaration is accepted, the Customs system will go into that particular shipment’s records, remove the line of tariffs tied to IEEPA and recalculate the duties. Refunds will be issued in a lump sum per importer including interest, rather than per shipment.

Trump Administration to Begin Refunding $166 Billion in Tariffs - Tony Romm and Ana Swanson, New York Times:

At the heart of the matter is the ever-changing slate of so-called reciprocal tariffs that Mr. Trump imposed last year using the International Emergency Economic Powers Act, or IEEPA. No president before him had ever used the 1977 law to apply tariffs, prompting the Supreme Court to rule against Mr. Trump in February. The decision ended Mr. Trump’s most nimble and potent trade power, which he had used for a vast array of purposes — from fighting illegal drugs to protecting political allies abroad.

...

Katie Hilferty, who oversees the trade practice at the Washington law firm Morgan Lewis, described the refund process as novel and complex, adding that she would be “pleasantly surprised” if refunds were paid as quickly as the government said.

But, she added, given the scale of the operation, “I would not be surprised if there are technical glitches or other processing errors that occur.”

Some small-business owners seemed especially pessimistic, particularly after weathering a year of ever-changing tariff pressures from Washington.

Trump Administration Presents Update on its Tariff Refund Plan - Ilya Somin, The Volokh Conspiracy via Reason:

In March, Judge Richard K. Eaton of the US Court of International Trade - the judge assigned to oversee the refund process - ordered the administration to grant refunds to all those businesses that were forced to pay the tariffs - including those that had not filed lawsuits seeking refunds. This week, on April 14, in response to Judge Eaton's court order, the US Customs and Border Protection agency (CBP) submitted a required update on the status of their refund plan...

This seems less bad than the worst-case scenario in which the administration could simply stonewall most victims of the illegal tariffs, through some combination of malice and bureaucratic incompetence. It is also significant that the administration has - so far, at least - not tried to appeal Judge Eaton's order. In my earlier post on this subject, I indicated they might at least appeal the universal nature of the order, which could potentially be attacked based on the Supreme Court's 2025 ruling Trump v. CASA, Inc. (though I also indicated that I believe Judge Eaton correctly distinguished CASA).

But, as the Hill article notes, the process may still be time-consuming and difficult for many businesses. That is particularly true for smaller importers that have less bureaucratic capacity than bigger firms. Meanwhile, the longer the process drags on, the more interest payments we taxpayers will be on the hook for, a point Judge Eaton rightly stressed in his March ruling.

Related: IEEPA Tariff Refund Process; Article from The Hill referenced in passage.

Tariffs After IEEPA

3 Key Questions On Trump's Pharma Tariffs - Dylan Moroses, Law360 Tax Authority ($):

President Donald Trump recently announced 100% tariffs on certain imported pharmaceutical products, with opportunities for drug companies to lower their tariff rates to zero, but questions remain about the requirements for preferential treatment and abilities to administer the regime.

On April 2, Trump ordered tariffs on imported pharmaceuticals under Section 232 of the Trade Expansion Act to begin in 120 days for the largest multinational corporations, and in 180 days for smaller businesses.

The law gives the president power to impose tariffs on imports deemed to pose a national security threat following an investigation by the U.S. Department of Commerce's Bureau of Industry and Security.

"Pause" in Trump $10 Billion Suit Against IRS

Agencies in talks with Trump, family to resolve $10B lawsuit over tax leaks - Maegan Vazquez, Washington Post:

Federal agencies are engaging in discussions to resolve a lawsuit brought by President Donald Trump and his family over the leak of their tax information to news organizations, according to new federal court filings.

In January, Trump, his two eldest sons and the Trump family business filed a lawsuit against the IRS and the Treasury Department over the unauthorized disclosure, which took place during the first Trump administration.

The Trump legal team, in a Friday filing to Florida’s Southern District Court, requested a 90-day extension in all proceedings. The legal team said in the filing that “good cause exists to grant an extension in this matter while the Parties engage in discussions designed to resolve this matter and to avoid protracted litigation.”

Trump Moves to Pause His $10 Billion Tax Data Leak Suit - Kristen Parillo, Tax Notes ($):

The lawsuit has generated fierce criticism from Democratic lawmakers who say the president is trying to enrich himself on the backs of taxpayers. Other observers have questioned whether Justice Department attorneys could objectively defend against the lawsuit given that Trump is effectively their boss. Tax professionals have also pointed out that the statute of limitations appears to have run on the claims and that Trump could have difficulty proving actual damages if the suit moves forward.

Trump appeared to suggest in public comments that he would donate any proceeds from the lawsuit to charity.

The charitable donation idea has its own problems. The income would still be includible in gross income, subject to a 60% of adjusted gross income charitable deduction ceiling and a 1/2% of AGI floor. That would leave about $4 billion in taxable income and a tax liability in the neighborhood if $1.5 billion.

IRS Budget Cut Advances and Other D.C. News

House Panel Advances Partisan IRS Funding Bill to Full Committee - Cady Stanton, Tax Notes ($):

A House subcommittee advanced a Republican bill that would slash the IRS enforcement budget for the coming fiscal year despite objections from Democrats over the impact of the cuts on the national debt and tax evasion crackdown efforts.

The House Appropriations Financial Services and General Government (FSGG) Subcommittee advanced the GOP-led fiscal 2027 funding bill April 17 in a 9-6 vote. The legislation would cut the IRS annual budget by $1 billion compared with fiscal 2026 and would give the agency its smallest budget in two decades and lowest enforcement funding since fiscal 2000. The House Appropriations Committee is scheduled to mark up the bill April 21 and 22.

The bill includes $3 billion for taxpayer services, the same as for fiscal 2026; $3.6 billion for enforcement, a nearly 28 percent cut from fiscal 2026; and $3.6 billion for technology and operations support, a boost of nearly 14 percent.

Capitol Hill Recap: Democrats on Offense on Tax Day - Alex Parker, Eide Bailly:

Another tax day came and went—and according to Internal Revenue Service CEO Frank Bisignano, it was a successful one. But Democrats in Congress say the taxpayer experience could be vastly improved.

During an April 15 hearing, where Bisignano testified before the Senate Finance Committee, Democratic members honed in on the agency’s decision to scuttle the Direct File program, which allowed taxpayers to pay taxes online directly to the IRS, rather than through third-party software. Bisignano said the program was “costly” and “duplicative” of current free filing options through the private sector, and that the increase in electronically filed returns this year, as well as the promptness in which refunds and deposits were processed, shows that taxpayers are being well-served by the current options.

Democrats begged to differ.

Tech Fix for Amended Return Processing Delays Coming?

IRS Testing Tech to Slash Amended Return Processing Time - Ben Valdez, Tax Notes ($):

The agency has begun to automatically process electronically filed Forms 1040-X and plans to expand its use of the technology, the agency told Tax Notes April 17. The ongoing project, which is first being deployed on a small scale, involves automating e-file business rules that typically require human intervention.

Unlike regular e-filed tax returns, amended returns require additional review by IRS employees during the processing pipeline because of their complexity. It typically takes the IRS eight to 12 weeks — but sometimes even longer — to process them, frustrating taxpayers and leading to backlogs.

The issue topped the “Most Serious Problems” list published in National Taxpayer Advocate Erin Collins’s annual report to Congress in January. Collins, who has urged the IRS to automate the processing for years, said she welcomes the progress.

“My understanding is that the rollout will be gradual as the IRS validates the data and programming, but I’m hopeful that all newly e-filed Forms 1040-X can be processed using this technology by year’s end,” Collins said in a statement. “When fully implemented, this change could reduce processing times from 10 to 20 weeks to under one week, which would be a significant win for taxpayers.”

The article cautions that the project is still in early stages, and that business returns are not part of it. It cites the Taxpayer Advocate as saying the turnaround time for amended business returns hit 401 days last year.

The State Tax The Rich Focus

Wealth-Tax Fever Is Spreading to Less-Wealthy States - Jeanne Whalen, Wall Street Journal:

Maine has one of the nation’s smaller economies, rooted in timber, lobster, manufacturing and tourism.

But it also has growing pockets of wealth, which have caught the attention of state bean counters. Maine this month joined a growing list of blue states exploring or adopting new taxes on the highest earners, enacting a new 2% surcharge on annual income over $1 million.

Brandon Johnson wants a ‘millionaires’ tax. Should Springfield pass one? - Austin Berg, The Last Ward:

How should Chicago deal with the city’s persistent financial problems?

That might be the most common question posed to Mayor Brandon Johnson since he took office in 2023.

And his answer has always been a variation on one theme: Hike taxes on millionaires.

State Tax News and Views: The Carrots-and-Sticks Edition - Melissa Menter and Colette Sutton, Eide Bailly. "Even as states push to expand their taxing reach, courts continue to reinforce statutory and federal limits on that authority."

Blogs and Bits

Tax reading for fun now that Tax Day is over - Kay Bell, Don't Mess With Taxes. "Joumana Khatib, writing for the Sunday literary magazine’s Read Like the Wind column, focused on money. And given that it was just days before April 15, she highlighted a couple tax themed books."

IRS grants estimated tax penalty relief for farmers and fishermen and updates 2026 foreign housing limits - Tax Coda. "Notice 2026-24 provides relief from the §6654 tax penalty for certain farmers and fishermen who missed the usual March 2, 2026 deadline under their special estimated tax rule. They qualify if they file their 2025 return and pay the full tax by April 15, 2026."

Funds Received to Boost Production Were Income, Not Contributions to Capital - Parker Tax Pro Library. "The Tax Court held that funds received by a manufacturer from a company looking to help the manufacturer increase its production capacity of items that company was selling was income to the manufacturer and not a nontaxable contribution to capital under Code Sec. 118 as the manufacturer argued."

A Costly Bookkeeper

Former Austin school bookkeeper sentenced for embezzling over $1m - IRS (Defendant name omitted, emphasis added):

A Leander woman was sentenced in a federal court in Austin to 33 months in prison for wire fraud and tax evasion, said U.S. Attorney for the Western District of Texas, Justin R. Simmons.

According to court documents, Defendant was employed as a bookkeeper and accountant for a non-profit private school in Austin for children with special needs and learning disabilities. Beginning in or around 2018, she began embezzling money from the school, directing parents to make tuition and other payments to a PayPal account connected to her consulting business. Defendant had renamed her business PayPal account to reflect the name of the school to misdirect the school’s funds. Additionally, she modified the school’s accounting files to reflect that funds had been paid to the school, when in reality the funds had been transferred to her personal bank account to make credit card and mortgage payments, and install an in-ground swimming pool at her residence.

In total, between the PayPal payments and the checks deposited into her personal bank account, Defendant embezzled more than $1 million from the school. She also underreported her income by $863,963.32 between 2018 and 2021.

Non-profits often skimp on accounting personnel and controls in favor of program services. If that was the case here, it will have cost this one more than $1 million that could have been directed to special needs kids. Nice pool, though.

What day is it?

It's National Cheddar Fries Day! Perhaps dangerously sharing a day with another holiday.