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Trump backs massive single bill for taxes, border and energy - Jordain Carney and Meredith Lee Hill, Politico:

Incoming President Donald Trump threw his support on Sunday behind having one sweeping border, energy and tax bill.

“Members of Congress are getting to work on one powerful Bill that will bring our Country back, and make it greater than ever before. We must Secure our Border, Unleash American Energy, and Renew the Trump Tax Cuts,” Trump wrote on Truth Social.

This appears to resolve the plans to deal with the scheduled 2026 expiration of the 2017 Tax Cuts and Jobs Act.

Trump’s direct endorsement of the reconciliation strategy comes just a day after Speaker Mike Johnson told his members behind closed doors that the president-elect was backing a one-bill approach using reconciliation, instead of two bills. Ways and Means Committee Chair Jason Smith (R-Mo.) was among those pushing for one package, while the two-bill strategy was backed by Senate Majority Leader John Thune, some of Trump’s Capitol Hill allies and incoming White House staffer Stephen Miller.

Trump backs one reconciliation-bill approach - Punchbowl News. "Trump endorsed the one-bill strategy in a post Sunday night, saying Republicans must 'Secure our Border, Unleash American Energy, and Renew the Trump Tax Cuts.' The president-elect also called for his 'no tax on tips' pitch to be in the bill. Trump said the cost of these policies will 'all be made up with tariffs.' So the reconciliation strategy debate appears settled."

The storm arrives in Washington - Eugene Daniels, Politico Playbook:

Last night, Trump called for Congress to get “to work on one powerful Bill.”

“We must Secure our Border, Unleash American Energy, and Renew the Trump Tax Cuts, which were the largest in History, but we will make it even better - NO TAX ON TIPS,” Trump posted on Truth Social. “Republicans must unite, and quickly deliver these Historic Victories for the American People. Get smart, tough, and send the Bill to my desk to sign as soon as possible.”

That’s a tall order. Not only is it a breathtakingly expansive amount of policy to enact, but Trump’s definition of “as soon as possible” is likely different from that of Republicans on the Hill. At the moment, House Speaker MIKE JOHNSON can only afford to lose the vote of a single Republican (assuming united Democratic opposition), and members of the Freedom Caucus, for example, are unlikely to accept a bill that doesn’t try to do something about government spending or the debt.

Trump’s tax cuts are about to unleash chaos on the Hill. Here’s how. - Brian Faler, Politico.

Deficit concerns are running hot in the House, where many Republicans say a tax bill ought to be completely paid for. That’s anathema to party heavyweights like House Ways and Means Chair Jason Smith (R-Mo.) and Senate Finance Chair Mike Crapo (R-Idaho), not least because it would be extremely difficult to find enough offsets to cover the projected $4 trillion cost.

...

If Republicans decide to pay for at least some of their plans, the question then becomes who’s a winner and who’s a loser — and that’s something seemingly everyone is already focused on, from Capitol Hill, to K Street and beyond.

Republicans have already offered a long list of possibilities: higher tariffs, increasing the college endowment tax, cutting green energy credits, rescinding IRS funding, cutting other government spending, among many others.

Given that IRS funding raises revenue, the math may be hard.

Key 1980s Tax Figure to Head Treasury Tax Team

Trump Turns to Hill Vet’s Deep Lobbying Ties to Boost Tax Deal - Lauren Vella, Bloomberg ($):

President-elect Donald Trump’s pick for the Treasury Department’s top tax adviser shows how seriously the incoming administration is about delivering on a mammoth 2025 tax bill.

Trump on Jan. 2 announced he’d picked Kenneth Kies, a veteran lobbyist and former congressional staffer from the Republican establishment. He’ll be tasked with selling a bill that both achieves the policy objectives of the president and addresses the concerns of lawmakers and their constituents.

Trump Taps Former Hill Staffer For Assistant Tax Policy Role - Asha Glover, Law360 Tax Authority ($):

President-elect Donald Trump has tapped a longtime tax policy lobbyist to serve as the assistant secretary for tax policy at the U.S. Department of the Treasury during his coming second term.

The nominee, Ken Kies, is the managing director of lobbying firm Federal Policy Group LLC. Trump announced his nomination Thursday on the social media platform Truth Social. Kies served brief stints as a congressional staffer in Washington, D.C., most recently as chief of staff at the Joint Committee on Taxation from 1995 to 1998. He also served as chief Republican tax counsel to the House Ways and Means Committee from 1982 to 1987.

Trump's inside-the-box pick to run tax at Treasury - Brian Faler, Politico:

Ken Kies, a leading tax lobbyist who has advocated for big corporations such as Microsoft and Hess, is widely seen as extremely knowledgeable about both the tax code and the ways of Washington, though he has also developed a reputation among some for sharp elbows and a prickly, suffer-no-fools personality.

...

If confirmed to be assistant secretary for tax policy, Kies would have a big voice in the fight over Republicans’ expiring tax cuts, not to mention a panoply of regulatory issues — from the fate of Democrats’ “Direct File” initiative at the IRS to the shape of their corporate minimum tax.

He would also make up one-half of an odd couple with Billy Long, the folksy former Missouri member of Congress Trump named to head the IRS despite having little experience with tax policy.

Trump and Tax Regulation

Trump Agenda Casts Doubt on Fate of Basis-Shifting Initiative - Kristen Parillo, Tax Notes ($):

A Biden administration plan to combat partnership related-party basis shifting via guidance is likely to get cut by the Trump administration, but legislation to curtail the practice could gain the support of revenue-hungry Republicans in 2025.

The article says that the Trump tax team is unlikely to advance the guidance - but that it may become a "pay-for" in extending the 2017 TCJA:

For Republican lawmakers, who will be looking for revenue raisers to fund an extension of the Tax Cuts and Jobs Act past its December 31 expiration, a basis-shifting bill could be an attractive pay-for option — particularly after the Biden Treasury Department doubled its revenue estimate.

Treasury initially estimated that its crackdown on related-party basis shifting could raise more than $50 billion over 10 years. According to the Post’s December 4 story, Treasury “has quietly” updated its forecast to more than $100 billion.

Will the New Administration Take Down Controversial Regs? - Mindy Herzfeld, Tax Notes ($):

Some taxpayers, unhappy with various regulations issued by Treasury and the IRS, have pinned their hopes on the Supreme Court’s decision in Loper Bright v. Raimondo, 144 S. Ct. 2244, as a means of getting taxpayer-unfavorable guidance overturned. But the path to the courthouse is long, judges’ decisions have an element of randomness, and litigation requires exposing more information to the public than many taxpayers wish to do.

Those taxpayers and their advisers may see in Donald Trump’s presidential victory another pathway to the withdrawal of regs that employees of executive agencies have promulgated in pursuit of their own agenda and without statutory authority. But despite the much-hyped promises of the recently created Department of Government Efficiency — an advisory commission to be headed by Elon Musk and Vivek Ramaswamy — eliminating those regs may not be so easy. Similar efforts undertaken in the first Trump administration should serve to temper the optimism of those looking for an overhaul of aggressive IRS rulemaking.

Trump May Further Delay Crypto Reporting for Brokers - Mary Katherine Browne, Tax Notes ($). "While some tax professionals predict delays and tweaks to the crypto reporting rules, Annette Nellen of San Jose State University expects that the broker reporting rules will remain largely in place under the new administration."

Disaster returns coming due

IRS reminder to disaster area taxpayers with extensions: All or parts of 14 states, 2 territories need to file 2023 returns by Feb. 3; others have until May 1 - IRS:

The Internal Revenue Service today reminded disaster-area taxpayers who received extensions to file their 2023 returns that, depending upon their location, their returns are due by Feb. 3 or May 1, 2025.

Currently:

- Taxpayers in the entire states of Louisiana and Vermont, all of Puerto Rico and the Virgin Islands and part of Arizona, Connecticut, Illinois, Kentucky, Minnesota, Missouri, Montana, New York, Pennsylvania, South Dakota, Texas and Washington state have until Feb. 3, 2025, to file their 2023 returns.

- Taxpayers in the entire states of Alabama, Florida, Georgia, North Carolina and South Carolina, and parts of Alaska, New Mexico, Tennessee, Virginia and West Virginia will have until May 1, 2025, to file their 2023 returns. For these taxpayers, May 1 will also be the deadline for filing their 2024 returns and paying any tax due.

Atoms, Hydrogen, and Tax Credits

Nuclear-Energy Stocks Gain After Easing of Hydrogen Tax-Credit Rules - Katherine Hamilton, Wall Street Journal. "The Treasury Department and Internal Revenue Service on Friday released final rules for sections of the Inflation Reduction Act that make a tax credit to encourage renewable energy more widely available than previously drafted. The final rule for clean-hydrogen production would allow some nuclear power plants that are at risk of retirement to produce the gas, which is used in fuel cells."

Blogs and Bits

IRS will accept e-filed business tax returns on Jan. 15 - Kay Bell, Don't Mess With Taxes. "That's a day earlier than it started processing business filings last year, but still about two weeks earlier than the agency is expected to start putting individual filings through its system."

The Wild End To 2024 That Could Shake Up The 2025 Tax Season Edition - Kelly Phillips Erb, Forbes. "As 2024 came to a close, it refused to go quietly. Two significant court challenges were introduced at the end of the year with the potential to shake up the 2025 tax season."

IRS Provides Automatic Consent Procedures for Research Expenditures After 2021 - Parker Tax Pro Library. "Before January 1, 2022, Code Sec. 174 allowed taxpayers to deduct research or experimental expenditures paid or incurred in connection with a trade or business as current expenses, or alternatively, charge such expenditures to a capital account and amortize them ratably over a period of not less than 60 months."

Federal Tax Treatment of Proposed NY Inflation Refunds - Annette Nellen, 21st Century Taxation:

Big question ... Will these "tax refunds" be subject to federal income taxes (must the recipients include them in their federal income tax)?

I think the answer is yes.

Name, Image, Likeness Promoter Denied Tax-Exempt Status - Tax Notes ($). "The IRS denied tax-exempt status to an organization formed to offer the name, image, and likeness of a college’s student athletes, primarily its men’s basketball and football players, to partner charities, because it confers benefits primarily on those athletes rather than serving a public interest."

Link: Release Number 202452017.

Court Authorizes John Doe Summons For Identities of U.S. Taxpayers Who Participated in the “Gig Economy” Via a Digital Platform - Ronald Marini, The Tax Times. "Federal law requires U.S. individual taxpayers to pay taxes on all income earned worldwide. Individuals must report all income earned from the gig economy on a tax return."

Opinion: The case for killing the tax credit for electric vehicles - Veronique de Rugy, Los Angeles Times. "Subsidizing high-end car buyers is a poor strategy for achieving meaningful environmental progress."

Naughty Taxpayers, Naughty Preparers

Taxpayer Found to Have Embezzlement Income from Transactions with Retirement Plans for Which He Was a Fiduciary - Ed Zollars, Current Federal Tax Developments. "The Court found that the diverted funds were taxable income, that the petitioners were liable for the additional tax on early distribution, failure to file penalty, and that Mr. Hutcheson was liable for a fraud penalty due to his intentional and deceitful actions."

Return Preparers: An Update on Efforts to Crack Down on the Bad Ones - Leslie Book, Tax Notes ($). "As to the merits of new penalties, especially in the absence of upfront competency requirements, I see the need for more robust sanctions. To help make the case for those penalties, however, it would be helpful to consider how the IRS is doing in administering its current return preparer penalties, as well as its efforts with the Justice Department to enjoin unscrupulous preparers from reengaging with the tax system. And while I am sympathetic to the challenges that the IRS faces and its need to align punishment with incentives to voluntarily comply, I question whether imposing a new penalty on taxpayers who fail to identify that they used a return preparer may be too blunt, especially as many taxpayers who use paid preparers likely don’t and wouldn’t understand a paid preparer’s obligations."

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Joe B. Kristan, CPA