Key Takeaways
- Supreme court stays Corporate Transparency Act injunction.
- Republicans strategize how to fund tax cuts.
- Trump pledges to lower corporate tax rate.
- Proposed bill to restore oil industry deduction.
- Proposed bill to make QBI deduction permanent.
- IRS hiring freeze.
- Economic impact of tariffs.
- National compliment day!
Corporate Transparency Act
Alert: Ongoing Litigation – Texas Top Cop Shop, Inc., et al. v. McHenry, et al., No. 4:24-cv-00478 (E.D. Tex.) & Voluntary Submissions - FinCEN (my emphasis added):
On January 23, 2025, the Supreme Court granted the government’s motion to stay a nationwide injunction issued by a federal judge in Texas (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland). As a separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place, reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
Supreme Court Stays Nationwide Injunction Against Transparency Act - Andrew Velarde, Tax Notes ($):
The Supreme Court has stayed a district court’s injunction that had prevented enforcement of the Corporate Transparency Act (CTA) over concerns from the lower court on the constitutionality of the beneficial ownership reporting regime.
...
The stay, which was presented to Justice Samuel A. Alito Jr., relates to a December 5, 2024, order from the U.S. District Court for the Eastern District of Texas that granted the plaintiffs’ motion for a preliminary injunction against the CTA. The Supreme Court’s stay is pending a disposition of the Fifth Circuit appeal and, if it is sought, a petition for a writ of certiorari. The stay will terminate if the certiorari is denied or, if granted, when the Court issues its judgment.
...
The stay, which was presented to Justice Samuel A. Alito Jr., relates to a December 5, 2024, order from the U.S. District Court for the Eastern District of Texas that granted the plaintiffs’ motion for a preliminary injunction against the CTA. The Supreme Court’s stay is pending a disposition of the Fifth Circuit appeal and, if it is sought, a petition for a writ of certiorari. The stay will terminate if the certiorari is denied or, if granted, when the Court issues its judgment.
Corporate Transparency Law Remains Flanked By Threats - Kevin Pinner, Law 360 Tax Authority ($):
On Thursday, Justice Samuel Alito of the Supreme Court stayed that injunction — one of two broad, nationwide blocks on the law's enforcement originating from a Texas district court — granting the government's emergency request while it appeals the injunctioncat the Fifth Circuit. Justice Neil Gorsuch said in a concurrence that he would prefer to take the entire case now "to resolve definitively" whether a district court is allowed to issue universal injunctive relief.
In a dissent, Justice Ketanji Brown Jackson said the government hadn't shown serious harms would occur if the law were delayed even further, noting it had already waited four years to implement it.cSo far, district courts are split on the CTA. A Law360 review of court filings shows three have issued injunctions, three have dismissed complaints, four have yet to issue decisions and one has issued a stay.
In a dissent, Justice Ketanji Brown Jackson said the government hadn't shown serious harms would occur if the law were delayed even further, noting it had already waited four years to implement it.cSo far, district courts are split on the CTA. A Law360 review of court filings shows three have issued injunctions, three have dismissed complaints, four have yet to issue decisions and one has issued a stay.
Corporate Transparency Act Still Blocked Despite Supreme Court Decision - Mengqi Sun, Wall Street Journal:
The Treasury’s Financial Crimes Enforcement Network, which is overseeing the law’s implementation, has said companies and trusts aren’t currently obligated to file beneficial ownership information with it and won’t face liability if they fail to comply while the injunction is in effect. But companies can still voluntarily file their ownership information with FinCEN, the agency added.
Trump Administration
House G.O.P. Floats Medicaid Cuts and More to Finance Trump’s Huge Agenda - Catie Edmondson and Andrew Duehren, New York Times:
Top Republicans are passing around an extensive menu of ideas to cover the cost of a massive tax cut and immigration crackdown bill. They could create a 10 percent tariff on all imports, bringing in an estimated $1.9 trillion. They could establish new work requirements for Medicaid recipients, bringing in $100 billion in savings.
They have even calculated that they could generate $20 billion by raising taxes on people who can use a free gym at the office, according to a 50-page list of options that the House Budget Committee has circulated in recent days.
They have even calculated that they could generate $20 billion by raising taxes on people who can use a free gym at the office, according to a 50-page list of options that the House Budget Committee has circulated in recent days.
Trump Offers Carrots and Sticks in Davos Speech - Alexander Rifaat, Tax Notes ($):
In a speech delivered virtually to the World Economic Forum in Davos, Switzerland, on January 23, Trump touted, in addition to the extension of expiring tax provisions in the Tax Cuts and Jobs Act, his pledge to lower the corporate tax rate from 21 percent to 15 percent for companies that manufacture products in the United States.
“Come make your product in America, and we will give you among the lowest taxes of any nation on Earth. We’re bringing them down very substantially, even from the original Trump tax cuts,” Trump said, before threatening, “But if you don't make your product in America, which is your prerogative, then, very simply, you will have to pay a tariff — differing amounts, but a tariff — which will direct hundreds of billions of dollars and even trillions of dollars into our treasury to strengthen our economy and pay down debt.”
“Come make your product in America, and we will give you among the lowest taxes of any nation on Earth. We’re bringing them down very substantially, even from the original Trump tax cuts,” Trump said, before threatening, “But if you don't make your product in America, which is your prerogative, then, very simply, you will have to pay a tariff — differing amounts, but a tariff — which will direct hundreds of billions of dollars and even trillions of dollars into our treasury to strengthen our economy and pay down debt.”
Proposed Legislation
Carey Announces Bill Would Restore Oil Industry Deduction - Tax Analysts, Tax Notes ($):
The Promoting Domestic Energy Production Act would promote domestic oil production by “restoring common-sense tax deductions that every other industry is allowed to utilize,” such as those for intangible drilling costs, House Ways and Means Committee member Mike Carey, R-Ohio, said in a January 23 release.
IRS
Trump Imposes Extra Scrutiny on IRS Hiring - Richard Rubin, Wall Street Journal:
President Trump’s order to freeze federal civilian hiring includes an extra squeeze at the Internal Revenue Service. Under the order signed Monday, all agencies have hiring frozen for up to 90 days while the Office of Management and Budget and the new government-efficiency effort write a plan to shrink the federal workforce.
Tax Policy
Trump Tariffs: Tracking the Economic Impact of the Trump Trade War - Erica York, The Tax Foundation:
Tariffs featured heavily in the 2024 presidential campaign as candidate Trump proposed a new 10 percent to 20 percent universal tariff on all imports, a 60 percent tariff on all imports from China, higher tariffs on EVs from China or across the board, 25 percent tariffs on Canada and Mexico, and 10 percent tariffs on China.
We estimate the economic effects of two separate tariff scenarios.
For scenario 1, we model 20 percent universal tariffs and an additional 50 percent tariff on China to reach 60 percent. We estimate scenario 1 would reduce long-run economic output by 1.3 percent before any foreign retaliation.
For scenario 2, we model 25 percent tariffs on all imports from Canada and Mexico and a 10 percent tariff on all imports from China that President Trump has threatened to impose as early as February 1, 2025. We estimate scenario 2 would reduce long-run economic output by 0.4 percent (0.3 percent from the tariffs on Canada and Mexico and 0.1 percent from the tariffs on China) before any foreign retaliation.
We estimate the economic effects of two separate tariff scenarios.
For scenario 1, we model 20 percent universal tariffs and an additional 50 percent tariff on China to reach 60 percent. We estimate scenario 1 would reduce long-run economic output by 1.3 percent before any foreign retaliation.
For scenario 2, we model 25 percent tariffs on all imports from Canada and Mexico and a 10 percent tariff on all imports from China that President Trump has threatened to impose as early as February 1, 2025. We estimate scenario 2 would reduce long-run economic output by 0.4 percent (0.3 percent from the tariffs on Canada and Mexico and 0.1 percent from the tariffs on China) before any foreign retaliation.
Tax Trouble
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