Tax News & Views Weekly Roundup: Conservation Easement Shakeup, Refundable Tax Credit Block and Gelato

A.I. Tax Solution

An A.I. Tax Boom Could Curtail America’s Debt. But Not Solve It. - Andrew Duehren, The New York Times ($):

Yet a growing number of economists have started to anticipate that widespread adoption of A.I. could structurally improve the imbalance between what America spends and what it collects in tax revenue in the coming years — as long as the technology does not put too many people out of work.

That is because A.I. could help make workers more productive, in turn growing the economy more rapidly. Faster economic growth would generate more tax revenue, helping to close the widening gap between what the government spends and the taxes it brings in.

Column: Taxing AI to Help Workers Sounds Good, But Public Deserves More - Andrew Leahy, Bloomberg Tax:

We’ve seen this type of tax before: Governments tax cigarettes in part for their negative health impacts and tax gasoline to finance the wear and tear on infrastructure vehicles cause. And we’ve spilled much ink debating carbon taxes as a method of internalizing carbon emissions in manufacturing.

The problem with Casar’s bill is in the particulars, as it doesn’t really tax worker displacement. It imposes a levy equal to the greater of two amounts: a percentage of the fair market value of tokens processed in covered transactions, or a percentage of the revenue and related-party value associated with those transactions.

Treasury and IRS

IRS Bets on Tailored Deals in New Effort to Curb Easement Abuse - Erin Schilling and Erin Slowery, Bloomberg Tax ($):

The IRS said the standardized, unsolicited settlement letters sent on a rolling basis didn’t work for such a wide range of cases. The May settlement offer was valid for 90 days, disallowed all charitable contribution deductions, and applied a 10% penalty and interest.

The new office will work with conservation and historic preservation groups, tax practitioners, taxpayers, and other stakeholders to coordinate conservation easement policy and enforcement. The IRS said it will work with the Treasury Department to evaluate possible administrative and legislative solutions.

“A different settlement tone doesn’t mean it might be better,” said Carolyn Schenck, a member at Caplin & Drysdale and former IRS counsel. “It just might be different.”

Treasury, IRS move to restrict refundable tax credits to certain immigrants - Greg Iacurci, CNBC:

Figures suggest up to “several million people” could be impacted, Crandall-Hollick said.

For example, in 2023, there were 2.6 million asylum applicants, according to an analysis published last year by the Pew Research Center, a nonpartisan research group. Asylum applicants attest that they are unable or unwilling to return to their countries due to persecution or a fear of persecution.

Another 650,000 people that year had Temporary Protected Status, according to Pew. These people are granted temporary relief from removal due to circumstances such as armed conflict or natural disaster. A further 600,000, Pew found, were enrolled in DACA, which is available to those brought to the U.S. illegally as children.

Trump Account Rules Ease Path as Small Employers Face Slow Start - Brett Samuels, Bloomberg Tax:

The initial buy-in has mostly been from large corporations, particularly those in the banking and financial sectors. Major companies, including Bank of America Corp., Wells Fargo & Co., and JPMorgan Chase & Co. plan to match $1,000 in seed money from the government for eligible employees.

Smaller employers may take more time to get contributions up and running, attorneys said, as some will face a larger administrative burden in coordinating with third-party vendors and must ensure they’re complying with the terms of their benefit plans.

Opinion: New Opportunity Zone Tax Rules Create Red Tape for Businesses - Andrew Gradman, Bloomberg Tax:

I fear the new rules may be overbroad. There are lots of “accidental” qualified opportunity zone businesses out there (having the status without knowing it), and a few “zombie” qualified opportunity funds (having the status without disclosing it). If you’re the lawyer for an accidental business, you might worry that your client might unwittingly accept investment from a zombie fund and take on a reporting obligation.

Out of caution, corporate lawyers — even those with no connection to the opportunity zone program — may feel compelled to update their subscription agreements to demand a representation and warranty every time an entity in an opportunity zone takes on new investors. To spare us this needless paperwork, the Treasury Department should keep the reporting burden solely on the funds, as it’s done without complaint until now.

Congressional Scrutiny

Democrats Demand Probe of Liquid Natural Gas Exporter Tax Break - Chris Cioffi, Bloomberg Tax ($):

Senate Democrats demanded a watchdog investigation into liquid natural gas export companies they say claimed an alternative fuel tax break for which they weren’t eligible.

Led by Sen. Jeff Merkley (D-Ore.), the lawmakers requested the probe in a letter to an IRS watchdog that was shared first with Bloomberg Tax. Merkley asked the Treasury Inspector General for Tax Administration to probe how and why the IRS determined eligibility and whether Treasury Secretary Scott Bessent was involved in the decisionmaking.

It’s the latest in a monthslong inquiry from Senate Democrats into the LNG companies they say are donors to President Donald Trump.

Trade Tensions

New Risks For Importers As US Steps Up Tariff Enforcement - Dylan Moroses, Law360 Tax Authority ($):

Importers and trade lawyers have seen an upswelling of tariff enforcement efforts that is transforming the compliance relationship between businesses and the government since President Donald Trump took office a second time.

In July, the federal government announced it had recovered over $1 billion as a result of trade enforcement actions in under a year. Those efforts were led by the cross-agency Trade Fraud Task Force, and the U.S. Department of Justice announced it will establish a new legal section to prosecute trade crimes.

EU Issues CBAM Guidance on Free Allocation Adjustment - Sophie Petitjean, Tax Notes ($):

The European Commission has released practical guidance explaining how importers can reduce their carbon border adjustment mechanism obligations to account for free emissions allowances that EU producers continue to receive.

The guidance released August 14 consists of 10 documents, including six sector-specific papers covering cement, hydrogen, fertilizers, iron and steel, aluminum, and electricity. The commission says the series is intended to explain the requirements of the CBAM regulation in nonlegislative language, with a particular focus on operators of installations producing CBAM goods outside the EU.

US-Canada Trade Draft Pressures Mexico to Match Terms - Gonzalo Soto, Bloomberg Tax ($):

Canada’s preliminary trade deal with the US caught Mexican officials and business leaders off guard. Now, Mexico wants one of its own, as questions grow over whether months of painstaking engagement can deliver comparable tariff relief from Donald Trump.

After a weeklong negotiation that avoided US tariffs on a wide range of products, Ottawa and Washington reached a tentative deal to lower them on certain Canadian steel and aluminum products to 25% while cutting duties on Canadian autos to 15%. Both are key demands made by Mexican negotiators in its trade talks with the Trump administration.

Blogs & Bits

Vehicle Miles Traveled Taxes Need Not Invade Drivers’ Privacy, Jacob Macumber-Rosin, Adam Hoffer, The Tax Foundation. "Americans are not unreasonable to worry about an unconstitutional surveillance program under the guise of a VMT tax, but a properly designed VMT tax need not invade drivers’ privacy."

Five Things to Know About the Trump Administration’s New Effort to Deny Tax Credits to Lawfully Present Immigrants, Carl Davis, Institute on Taxation and Economic Policy blog. "This would be the first time the IRS has ever asked taxpayers to report their citizenship status on their tax forms, which could lead to a chilling effect that discourages tax filing among immigrant families."

IRS updates FAQs on OBBBA OT tax deduction, Kay Bell, Don't Mess With Taxes. "The good news is that, aside from the disappointment of some taxpayers upon discovering the new OBBBA tax relief was not as generous as was implied by those in Washington, D.C., who crafted the laws, claims for and IRS processing of the new tax benefits generally went smoothing during this year’s filing season."

What Day Is It?

Ice Cream

It's National Spumoni Day! Because sometimes, especially in the hot summer, one flavor of gelato isn't enough!