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Tax News & Views Reconciliation Passage and Pistachio Roundup

By Joe Kristan
February 26, 2025
Pistachios

Key Takeaways

  • House GOP holdouts fold to pass "one big beautiful bill" budget.
  • A tax bill "will take several months to complete if GOP leaders and the White House are lucky."
  • IRS Chief Operating Officer takes helm at agency.
  • Direct File design agency mass resignation.
  • Suzanne Somers Estate loses reg challenge in Tax Court.
  • Minnesota payroll tax provider heads to prison for embezzlement, tax charges.
  • Pistachio Day.
  • Johnny Cash birthday.

House Passes GOP Budget Plan as Holdouts Relent - Richard Rubin, Olivia Beavers, and Siobhan Hughes, Wall Street Journal:

The 217-215 vote delivered a victory for House Speaker Mike Johnson (R., La.), who united all but one of his GOP members—Thomas Massie of Kentucky—around an approach that requires significantly reducing Medicaid costs and likely won’t accommodate all of Trump’s desired tax cuts. The House-passed plan calls for $1.5 trillion to $2 trillion in spending reductions over a decade and $4 trillion to $4.5 trillion in tax cuts. 

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Still, the path ahead isn’t straightforward. Tuesday’s vote sets up a conflict with the Senate, which favors larger tax cuts and plans to alter the House plan rather than accept it. That means another nail-biting House budget vote is on the horizon. 

And even after the House and Senate agree on a budget, lawmakers will have to negotiate hundreds of details on taxes, healthcare, energy and food stamps before they can get a bill to Trump’s desk. 

 

House narrowly passes GOP’s ‘big, beautiful bill’ for Trump’s agenda - Jacob Bogage and Marianna Sotomayor, Washington Post. "All the holdouts except for Massie flipped — even after Spartz earlier in the day declared, 'I never change my vote without changes in the rules or changes in procedures or changes in the taxes. Never did and never will.'"

A turbulent vote brings Congress to the tricky part of reconciliation - Jake Sherman, Laura Weiss, John Bresnahan and Andrew Desiderio, Punchbowl News:

Second, this now kicks off the most difficult part of the reconciliation process, a phase that will take several months to complete if GOP leaders and the White House are lucky.

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Tax Policy. perhaps the most important demand of Senate Republicans is that the 2017 tax cuts be made permanent. This is Thune’s red line, as he made clear once again in his statement last night. The House’s budget plan doesn’t realistically allow for permanence. Thune also hinted that there could be changes to the $4 trillion debt-limit increase included in the House bill, a nod to some GOP senators’ opposition to using reconciliation for this purpose.

 

IRS COO to take over as acting commissioner

Krause to serve as acting IRS Commissioner; O’Donnell retires after distinguished career - IRS:

Secretary of the Treasury Scott Bessent announced today that IRS Chief Operating Officer Melanie Krause will become acting IRS Commissioner following the retirement announcement of Doug O’Donnell.

O’Donnell, the IRS Deputy Commissioner who has been serving as the agency’s acting Commissioner since January, plans to retire on Friday. Krause will move into the deputy Commissioner role and serve as the acting Commissioner of the nation’s tax agency.

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Krause will become the acting IRS Commissioner. She has served as the IRS chief operating officer since April 2024 after acting as deputy Commissioner of operations support since January of the same year. As chief operating officer, Krause oversees the operations including the Chief Financial Officer; Chief Risk Office; Facilities Management and Security Services; Human Capital Office; Office of Chief Procurement; Privacy, Governmental Liaison and Disclosure; Research, Applied Analytics and Statistics (RAAS).

 

IRS Top Operating Officer To Serve As Acting Commissioner- Kat Lucero, Law360 Tax Authority ($):

Krause will take on the interim role as the IRS grapples with the fallout of around 6,700 layoffs, as well as the controversy surrounding unprecedented access to sensitive agency data systems amid the tax filing season.

The layoffs and controversy stem from Trump's orders to trim federal government spending through a new White House commission called Department of Efficiency, or DOGE, which is led by Tesla CEO Elon Musk.

 

Krause to Serve as Acting IRS Commissioner - Benjamin Valdez, Tax Notes ($):

But Krause will face a number of internal and external challenges as commissioner, Rettig pointed out, including increased scrutiny from Congress on IRS operations; a diminished, less experienced workforce; and ongoing efforts to improve the quality of taxpayer exams.

Many ongoing priorities of the IRS under the Biden administration are now in flux, including the agency’s plans to increase audit rates on wealthy and complex taxpayers. Most of the recent round of layoffs affected new employees at SB/SE and LB&I, including tax examiners, and administration officials have signaled there are more cuts to come.

Meanwhile, the Senate has yet to begin work on confirming Billy Long, President Trump's pick as new IRS commissioner.

 

Meanwhile in Tax Administration

Staffers at Agency Behind IRS Direct File Resign - Alexander Rifaat, Tax Notes ($):

Twenty-one staff members at USDS — which has been integrated into Elon Musk’s intragovernmental Department of Government Efficiency (DOGE) — submitted a joint resignation letter February 25 citing their unwillingness to “dismantle critical public services,” according to a report by the Associated Press.

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The creation of an IRS-run, free online tax filing service was a key component of the Biden administration’s push for additional funding for the agency. After securing the extra resources as part of the Inflation Reduction Act, the IRS, in coordination with the USDS and later the General Services Administration’s 18F team, launched the Direct File platform in January 2024. The platform is currently available to taxpayers with a Form W-2 in 25 participating states.

While it is unclear whether any of the USDS employees who resigned were involved in the IRS’s Direct File program, Musk has targeted other government entities involved in Direct File, having already, in his words, “deleted” 18F.

 

GAO Says Action on Fraud Needed to Close Tax Gap - Tax Notes ($). "Actions such as expanding the IRS’s tax fraud detection capabilities could provide help in closing the tax gap, which will amount to $606 billion after the collection of $90 billion through late payments and enforcement, Comptroller General Gene L. Dodaro said at a February 25 House Oversight and Government Reform Committee hearing."

 

International Terminal

Eide Bailly's International Tax Team and our affiliates at HLB, the Global Advisory and Accounting Network stand ready to help with your worldwide tax planning and compliance needs.

Trump Threat to Double-Tax Foreigners Runs Up Against Treaties - Lauren Vella, Bloomberg ($):

An untested tool in President Donald Trump’s arsenal that would allow him to double taxes on foreign companies and individuals in retaliation for “discriminatory” taxes on US companies is likely to hit a legal snag—US double-tax treaties.

Practitioners said such treaties would take legal precedence over Section 891 of the tax code. Trump mentioned exploring use of the levy, enacted in 1934, in a few communications, including a Feb. 21 memo.

 

2024 European Tax Policy Scorecard - Sean Bray and Alex Mengden, Tax Foundation. "The distribution of the scores also shows the distance between first and second place, again demonstrating how significantly different the Estonian tax system is, even relative to the ETPS country with the second most competitive and neutral tax system, Cyprus (with a final score of 91.1)."

 

Blogs and Bits

Do you live in a tax procrastinating state or city? - Kay Bell, Don't Mess With Taxes. "Taxpayers in Wisconsin, Ohio, Michigan, and Indiana tend to procrastinate the least when it comes to filling out their federal returns, according to IPX1031’s latest Tax Procrastinators report."

Tax Court Disallows Deductions for Failed Home Renovation Business - Parker Tax Pro Library. "The Tax Court held that a taxpayer was not entitled to deduct payments he made to fund home renovation and demolition/excavation businesses because he was an investor rather than an active participant in the businesses. The court also found that the taxpayer could not deduct any of the payments to the businesses as theft losses after his associate stopped performing work on the properties because he failed to prove that a theft occurred."

IRS Extends Use of Digital Signatures & Encrypted Email - Ronald Marini, The Tax Times. "The IRS has also extended, to October 31, 2025, its Interim Guidance allowing tax practitioners to use encrypted email when working with IRS personnel to address compliance or resolve issues in ongoing or follow-up interactions."

What Would Extending The Tax Cuts and Jobs Act Look Like Without the Tax Rate Cuts? - Joseph Rosenberg, TaxVox. "TPC estimates that if Congress extended all TCJA’s expiring provisions except for the lower individual income tax rates, the cost of making TCJA permanent would fall from about $4 trillion to about $800 billion through 2034."

 

Loper Bright, The Tax Court, and Suzanne Somers - Three's Not Company

Tax Court Reaffirms Suzanne Somers' Estate Owes $2.7M - Anna Scott Farrell, Law360 Tax Authority ($):

The U.S. Tax Court on Tuesday reaffirmed roughly $2.7 million in tax liabilities against television producer Alan Hamel and the estate of his wife, actor Suzanne Somers, finding a Treasury regulation it had relied on in its initial decision was sound.

The court granted a request by Hamel and the estate to reconsider its reasoning in light of the U.S. Supreme Court's ruling in Loper Bright Enterprises v. Raimondo, which eliminated the requirement that courts defer to agency interpretations to settle ambiguities in law.

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Hamel, the owner of ThighMaster World Corp., and Somers, who died in 2023, had argued they didn't owe the taxes related to partnership-level adjustments on their return for Palm Canyon because the Internal Revenue Service had missed a deadline for collecting them.

 

Iron Range Payroll Tax Pilferer

Tower woman sentenced to prison for embezzling over $300k from clients - IRS (emphasis added, Defendant name omitted):

St. Paul, MN — A Tower woman has been sentenced to 28 months in prison, three years of supervised release, and was ordered to pay nearly $430,000 in restitution to more than two dozen former payroll clients and the IRS, announced Acting U.S. Attorney Lisa D. Kirkpatrick.

According to court documents, Defendant owned and operated an accounting and payroll service headquartered in St. Louis Park, Minnesota, where she managed payroll for various small businesses. To facilitate the payroll service, Defendant was granted access to client bank accounts. On multiple occasions between 2016 and 2020, Defendant embezzled funds from her clients’ bank accounts and used the money to cover personal expenses, or to pay back money she had previously embezzled from other clients. To accomplish her scheme, Defendant would electronically transfer funds from a client account into an account she controlled – in an amount appearing to be consistent with clients’ payroll – and spend the money for unapproved purposes. In total, she embezzled $344,813 from her clients over a period of five years.

According to court documents and her guilty plea, on Feb. 6, 2020, Defendant tried to cover her scheme by transferring money from an account she controlled and that had been funded with embezzled money into the account of another payroll client. Defendant also filed false income tax returns in which she failed to report the embezzled income, resulting in a $84,746 tax loss to the United States.

Terrible news for her clients, who still have to pay the payroll taxes. This has a valuable lesson for employers: log into the Electronic Federal Tax Payment System, EFTPS, regularly to make sure your payroll taxes are being credited properly. Whether you are using a payroll service or internal personnel to deposit your payroll taxes, it's worth a few minutes to make sure they are going where they are supposed to go. 

Related: The Impact of Internal Controls in Reducing Fraud Risk

 

What day is it? 

It's National Pistachio Day! A fine snack for observing the birthday of Johnny Cash.

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About the Author(s)

Joe Kristan

Joe B. Kristan, CPA

Partner
After 38 years centered on tax consulting for closely held businesses and their owners, Joe is joining Eide Bailly's National Tax Office. Joe's responsibilities include communication, process improvement and training. He is a principal contributor to the Eide Bailly Tax News and Views blog, providing daily updates on tax reform and other tax news. Joe is a Certified Public Accountant and a member of the AICPA Tax Section and Iowa Society of Public Accountants.

Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.