Tax News & Views Weekly Roundup: New Taxes on AI, Cloud Computing, Billionaires

More Robot Taxes

Bernie Sanders unveils AI "tax" plan - Dan Primack and Maria Curi, Axios:

Sen. Bernie Sanders (I-Vt.) on Thursday unveiled his plan for the U.S. government to take 50% equity stakes in large AI companies.

Why it matters: This is a supercharged version of what members of President Trump's administration already are discussing — all of which would be unprecedented — and a tacit acknowledgment that AI may eventually cause major labor disruptions.

Zoom in: The one-time "tax" would apply to any company with annual AI revenue of at least $200 million.

See more on this subject here.

Trump Audit Update

Democrats Push to Block Trump Settlement Fund and Audit Order - Cady Stanton, Tax Notes ($):

A House hearing on six crypto tax bills revealed a lack of bipartisan consensus on the subject Tuesday, with industry leaders pushing to expand the legislation—and Democrats questioning whether the entire process should be slowed down significantly.

Unspoken at the proceedings, but playing a major role behind the scenes, is the likelihood that Democrats will retake the House in November’s midterm elections. Republicans in both chambers are racing to get crypto bills passed while their party still controls Congress and the White House. Democrats, meanwhile, are starting to coalesce around a message that passing crypto legislation is an important goal—but one that might not need to be accomplished right away.

Tax Controversy Lawyer Is in Line for Top Counsel Job at IRS - Chris Cioffi and Erin Slowery, Bloomberg Tax ($):

If nominated and confirmed by the Senate, Gadwood would oversee the office that provides advice to IRS leaders and crafts regulations including to carry out the 2025 GOP tax law. The office could also become enmeshed in the controversy over Trump’s settlement with the IRS, including the so-called weaponization fund, and the audit exemptions for Trump and his family.

The White House did not reply to a request for comment.

California Tax Overhaul

California ‘billionaire tax’ makes ballot despite opposition from tech moguls - Nick Robins-Early and Dara Kerr, The Guardian:

A popular proposal in California to impose a wealth tax on billionaires has gained enough signatures to qualify for the ballot in November, state officials announced on Wednesday.

The news is set to intensify an already heated debate around the tax, which has pitted tech moguls and the state’s governor, Gavin Newsom, against the labor union backing the measure.

The California Billionaire Tax Act, colloquially known as the billionaire tax, would levy a one-time 5% tax on any California resident worth more than $1bn. The proposal is backed by the Service Employees International Union-United Healthcare Workers West (SEIU-UHW) as a means of funding California’s strained healthcare, food assistance and education programs.

California Sends New Tax on Cloud-Based Software to Governor - Michael J. Bologna, Bloomberg Tax ($):

An IRS notice that eliminated a beginning of construction safe harbor for claiming expiring wind and solar energy tax credits is arbitrary and capricious and must be vacated in full, a U.S. district court held.

The IRS didn’t adequately explain how taxpayers could misuse the safe harbor to circumvent statutory deadlines or engage in “artificial manipulation of eligibility,” nor did it explain why it didn’t adopt alternative anticircumvention and antimanipulation measures proposed by commenters, Judge Colleen Kollar-Kotelly of the U.S. District Court for the District of Columbia wrote in a June 6 memorandum opinion in Oregon Environmental Council v. IRS.

Kollar-Kotelly agreed with the plaintiffs that the correct remedy is to vacate Notice 2025-42, 2025-36 IRB 351, in full and remand the matter to the IRS for further consideration.

International Developments

Supreme Court Won’t Review Broad Power to Modify Tariffs - Chandra Wallace, Tax Notes ($):

However, the significance of the decision extends beyond just the tariffs currently in place, according to Harden. “The bigger picture here is that USTR now has a court-tested playbook for ramping up tariffs under Section 301 when it determines an initial response is no longer appropriate, particularly in the case of retaliation by trading partners,” she told Tax Notes in an email.

Harden advised importers to actively monitor the section 301 investigations currently underway addressing forced labor and excess manufacturing capacity and to participate in public comment proceedings to be sure their voices are heard.

OECD: Countries Should Assess How Pillar 2 Affects Tax Incentives - Sarah Paez, Tax Notes ($):

Countries with multinationals in scope of global minimum tax rules should examine their own tax incentives to see how pillar 2 affects their low-taxed profit and tax revenue, among other things, according to OECD officials.

In order to identify which tax incentives are most likely to be affected by the updated global minimum tax rules, which provide for carveouts for qualified tax incentives, governments should catalog pillar 2 in-scope firms and make plans to attract investments from those firms, according to Sarah Dayan, economist and policy analyst at the OECD Centre for Tax Policy and Administration. They should also catalog all tax incentives offered and determine which firms are eligible for which incentives, she said.

See Eide Bailly partner Chad Martin's thoughts on the OECD latest tax guidance here.

Tax-Exempt Turmoil

Nonprofits Fear Drop in Charity Work After New Trump Policy - Erin Slowery, Bloomberg Tax ($):

The looming changes worry Democrats and left-leaning tax-exempt groups of potential targeting of organizations the Trump administration deems not aligned with its priorities.

Part of the rules will address so-called fiscal sponsorship, where a tax-exempt entity may be funding charitable projects of other organizations. It’s a way that related groups, instead of forming a nonprofit, can align themselves with one already established and become a program of that nonprofit. Donors get a tax break.

Eide Bailly Exempt Organization Tax

Anonymous Tip

Anonymous Letter Accuses Attorney of Deception in Act 60 Probe - Lauren Loricchio, Tax Notes ($):

A letter to Senate Finance Committee ranking member Ron Wyden, D-Ore., accuses a tax attorney of attempting to influence through deception a federal investigation into the misuse of Puerto Rico tax incentives.

A copy of the unsigned letter was mailed to Tax Notes. The writer of the letter identified themselves as a tax controversy attorney who “has been practicing for more than 30 years” and who represents “a client who received an opinion letter from Jeffrey Rubinger regarding the federal income tax treatment of gains derived from Puerto Rico source income under Section 933 of the Internal Revenue Code.”

Blogs & Bits

Yale University's The Budget Lab delves into who would be helped most by a gas tax holiday.

Reconciliation 3.0 Should Be For Deficit Reduction - The Committee for a Responsible Federal Budget. "Although reconciliation cannot include reductions in discretionary spending or reforms to Social Security, it can and should be used to reduce deficits."

The Rich’s Real Tax Trick Isn’t ‘Buy, Borrow, Die’ - Edward G. Fox and Zachary Liscow, Tax Policy Center Taxvox blog. "Buy-borrow-die is a real loophole, and in absolute terms the rich borrow a lot—but the data say the very wealthy are mostly saving, not borrowing."

Parker Tax Publishing looks into new IRS guidance on qualified long-term care distributions.

Happy Juneteenth, and have a good weekend!