Key Takeaways
- Continuing resolution deal falls apart.
- Beneficial ownership reporting may be dead; still blocked in court.
- Research cost automatic method changes extended.
- SECURE 2.0 required minimum distribution rules delayed.
- There is no Tax Fairy.
- Looking into the IRS Commissioner nominee.
- Changes coming to expat taxation?
- CPA tax crime.
- Oatmeal Muffin Day.
Webinar reminder: Mel Schwarz of our National Tax Office team has its Quarterly Legislative Update webinar today! Get the latest on the path of 2025 tax policy. Register here.
Spending bill collapse threatens farm funding and ownership reporting delay
Government shutdown nears after Trump and Musk kill compromise - Jacob Bogage and Marianna Sotomayor, Washington Post:
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Johnson had declared repeatedly over his nearly 14-month speakership that the House would not pursue “Christmas tree” bills, so named for all the legislative ornaments that hang on a year-end funding measure.
But in trying to funnel additional disaster aid to farmers, Johnson cracked the bill open to broader negotiations with Democrats, upsetting Republicans who were licking their chops at reshaping broad swaths of federal policy under unified conservative control in 2025.
Among the "unrelated" provisions was a one-year delay in the effective date of the business ownership reporting requirements of the Corporate Transparency Act. These requirements are on hold as a result of a court order, pending further legal action.
Punchbowl News looks at the prospects for the disaster and other provisions:
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And what about the numerous other provisions in the CR package? They’re dead, forget about them. Maybe they can be enacted in the next Congress.
Related: Corporate Transparency Act Disclosures Paused
New IRS guidance on research costs, retirement plan minimum distributions
IRS Updates Research Amortization Procedural Guidance - Nathan Richman, Tax Notes ($):
The TCJA change to section 174 didn’t take effect until 2022. A 2024 attempt to reverse the change legislatively stalled in the Senate, and it isn’t clear where the provision stands in the ongoing TCJA extension debate.
The method change, housed in the current list of automatic method changes — Rev. Proc. 2024-23, 2024-23 IRB 1334 — adds 2024 to the years listed as exceptions to standard method change eligibility rules. Taxpayers can now make automatic method changes to comply with the section 174 changes for tax years beginning in 2022, 2023, or 2024.
Andrea Mouw, who leads Eide Bailly's Accounting Methods practice, comments: "This is welcome relief because we had a number of clients that were facing the prospect of filing a non-automatic Form 3115 to modify their 174 calculations for 2024. The IRS had indicated that they were going to extend the waiver but you never want to bank on that until you actually see it come through."
Coming Minimum Distribution Regs Will Have Delayed Start - Caitlin Mullaney, Tax Notes ($):
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The December 18 announcement said that the anticipated delay will apply to provisions in the proposed rules addressing RMDs for stock bonus, pension, and profit-sharing plans. The proposed regs (REG-103529-23), issued in 2024, address additional questions that weren’t covered in the related final regs (T.D. 10001), issued concurrently, regarding the RMD provisions enacted in the SECURE 2.0 Act.
Link: Announcement 2025-2
Related: Omnibus Bill Brings Expanded Changes for Retirement Savings
Seeking the Tax Fairy
Many people are swindled into making bad tax decisions because they believe in the Tax Fairy. This mythical sprite has the secret to make taxes disappear, if only timid tax advisers would believe. A fantastic story today shows another incarnation of the Tax Fairy search:
Rich People Pay Millions for Tribal Credits Treasury Debunks - Erin Schilling, Bloomberg:
That’s the pitch from financial advisers to put wealthy clients into these investments.
But no such credits exist, according to the Treasury Department. The two law firms named in promotional materials deny they’ve given any opinions or guidance blessing them. The Cherokee Nation, referenced in a promotional document, also denied association. And the auditor for the publicly traded company behind the so-called credits has questioned the arrangement’s legality.
Seems absurd? The article reports that more than $24 million of "credits" have been sold this year. The link above is no longer paywalled, and it is well worth your time if you have clients or acquaintances who get these sorts of pitches. I will share this comment by a financial planner, Jeff Socha: "This offer and similar ones play on the feeling that other wealthy people have a secret that allows them to pay less taxes than the typical person."
This shelter has come to our firm's attention. Ben Peeler, director of our Tax Controversy Services group, says "We independently contacted the same people named in the report and the Cherokee Nation, who confirmed similarly they had no idea what the promoters were talking about. After we presented that information to the promoters, they indicated it is not the Cherokee Nation but some secret Indian Nation they would reveal for a fee."
I'm sorry, but there is no Tax Fairy.
More on IRS Commissioner nomination
Dems want answers on Billy Long's tax credit work - Brian Faler, Politico:
The IRS has been battling a torrent of suspicious filings retroactively seeking the lucrative credit, which was offered during the pandemic to help prevent layoffs. But in a podcast last year, Long said “virtually everyone” qualifies for the credit, and told listeners to ignore accountants who said they were ineligible.
Long bragged about getting clients seven-figure payments.
Related: What to Know About the Employee Retention Credit
International Terminal
Trump Pledged to Cut Taxes for Expats. This Republican Wants to Make It a Reality. - Richard Rubin, Wall Street Journal:
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The current U.S. individual income tax system for expatriates dates back to the 1860s and the taxes that financed the Civil War, and it is an outlier in the world. Every other major country taxes their residents but doesn’t tax their citizens on income they earn outside the home country. The U.S., however, uses citizenship-based taxation, so that Americans living elsewhere in the world—of which there are more than four million—must file U.S. tax returns.
Breaking! Residence-Based Taxation for Americans Abroad May Become Reality - Virginia La Torre Jeker, US Tax Talk. "Under the new system, Americans residing abroad who elect to be taxed under this proposed new system would pay income taxes solely in their country of residence, aligning the US with the tax practices of most other nations. They would be taxed for US tax purposes as nonresident alien individuals (e.g., subject to tax only on US-source income)."
Related: Eide Bailly Global Mobility Services
Corporate Tax Rates Around the World, 2024 - Cristina Enache, Tax Foundation (footnotes omitted). "One hundred and forty-three of the 225 separate jurisdictions surveyed in 2024 have corporate tax rates at or below 25 percent. One hundred and twenty-five have rates above 20 percent but below or at 30 percent. The average rate among the 225 jurisdictions is 23.51 percent. The United States has the 82nd-highest corporate tax rate with a combined federal and state statutory rate of 25.63 percent."
The Great Unknown - Alex Parker, Things of Caesar:
Over the past month, everyone has been asking–what will the election mean for the global minimum tax? What will it mean for digital services taxes? What will it mean for enforcement? And the answer is always the same–nobody knows anything.
IRS to Propose Regs on OECD Amount B Transfer Pricing Approach - Kiarra Strocko and Stephanie Soong, Tax Notes ($):
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Amount B is a simpler approach for applying the arm’s-length principle to baseline distribution activities. The goal of the approach is to decrease disputes over routine distribution transactions and simplify transfer pricing enforcement for lower-capacity tax administrations.
Blogs and Bits
3 more tax moves to consider by year's end - Kay Bell, Don't Mess With Taxes. "Don’t overlook your HSA: Speaking of health care costs, some people opt for coverage that offers lower monthly premiums in exchange for a higher deductible. If you have an aptly-named high deductible health plan (HDHP), you probably have a health savings account, or HSA, to help you cover your insurance costs, like the plan’s titular high deductible."
How you could benefit from tax-loss selling this year - Christine Benz, Morningstar via Associated Press and The Hill. "It’s important to note that tax-loss selling is only a worthwhile strategy if you have taxable accounts."
Key U.S. Expat Tax Deadlines for 2025 - 1040Abroad. "Form 3520-A: U.S. citizens with foreign grantor trusts must file this form by March 15 to report their trust’s financial activity."
Tax CPA Crime
D.C. Accountant Pleads Guilty to Mortgage Fraud and Tax Crimes Documents to Obtain Mortgage - US Department of Justice (defendant name omitted, emphasis added):
According to court documents and statements made in court, Defendant worked in tax compliance for several large accounting and finance firms. In recent years, Defendant was managing director at a tax firm where he specialized in transaction structuring and advisory service, tax compliance and tax due diligence. Nevertheless, for a decade, Defendant did not file federal income tax returns or pay all the taxes that he owed despite earning more than $7.7 million during that time. He caused a tax loss to the IRS of $2,057,256.40.
In February 2023, Defendant sought to obtain a $1.36 million bank-financed loan to purchase a home in D.C. and was working with a mortgage company to do so. After the mortgage company told Defendant that the bank would not approve the loan without copies of Defendant’s filed tax returns, Defendant provided the mortgage company with fabricated documents to make it appear as if he had filed tax returns and provided copies of tax returns for 2020 and 2021 that Defendant never filed with the IRS.
A puzzling case. The guy knew he had to file. He even went through the trouble of preparing tax returns to get a loan - and never filed them with the IRS.
Not filing is a great way to get IRS attention, especially if you make good money. Eventually the unmatched W-2s and 1099s trigger the examiners' curiosity.
What day is it?
It's National Oatmeal Muffin Day! Yum!
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