Key Takeaways
- Tax Legislation
- Cost Cutting at Treasury/IRS
- Defending Trump Agenda
- Bessent Advisor
- Downsizing the Government
- Transfer Pricing
- Decentralized Finance
- Tax-Free Spinoffs
- Polar Bears
Tax Legislation
Republicans Gamble on a Regressive Economic Agenda – Andrew Duehren, New York Times:
The Republican Party won the last election in no small part because of its new appeal with working-class voters, a shift that left many in Washington wondering if a sustained political realignment was afoot.
But the economic agenda Republicans are now putting together on Capitol Hill would by and large help rich Americans, all while teeing up cuts to programs that provide health care and food to the poor.
The disconnect has left some Republicans nervous about whether they are abandoning their newfound base of support. Democrats, eyeing that vulnerability, are hammering Republicans for planning to take from the poor to give to the rich, a line of attack that they believe helped lift them back into power during President Trump’s first term.
But the economic agenda Republicans are now putting together on Capitol Hill would by and large help rich Americans, all while teeing up cuts to programs that provide health care and food to the poor.
The disconnect has left some Republicans nervous about whether they are abandoning their newfound base of support. Democrats, eyeing that vulnerability, are hammering Republicans for planning to take from the poor to give to the rich, a line of attack that they believe helped lift them back into power during President Trump’s first term.
Policy Fights Await Rewrite of Tax and Budget Roadmap – Doug Sword & Cady Stanton, Tax Notes ($):
The House’s narrow advance of its tax and spending cut budget plan is a temporary win for Republican leadership but leaves a lot of hurdles to clear.
GOP moderates in the House are worried about potentially steep cuts to the social safety net programs like Medicaid and food stamps and may not be as supportive of a final budget resolution unless changes are made during negotiations with the Senate.
Also, a key budget hardliner is insisting on a full repeal of Inflation Reduction Act energy tax credits, and the Senate’s top Republican repeated his commitment to making the Tax Cuts and Jobs Act provisions permanent, a feature absent from the House legislation.
GOP moderates in the House are worried about potentially steep cuts to the social safety net programs like Medicaid and food stamps and may not be as supportive of a final budget resolution unless changes are made during negotiations with the Senate.
Also, a key budget hardliner is insisting on a full repeal of Inflation Reduction Act energy tax credits, and the Senate’s top Republican repeated his commitment to making the Tax Cuts and Jobs Act provisions permanent, a feature absent from the House legislation.
What's next for Trump agenda after House GOP approves tax breaks and slashed spending in budget – Lisa Mascaro, Kevin Freking and Leah Askarinam, Washington Post:
Now that House Republicans have passed an ambitious budget blueprint for President Donald Trump's agenda, it’s time for the hard work of turning ideas for $4.5 trillion in tax cuts and $2 trillion of slashed spending into a bill that lawmakers warn could bring intense changes to Americans back home.
Republicans are insisting the costs of the tax breaks be partly paid for by the steep reductions in federal government spending as a way to ensure the nation's $36 trillion debt load doesn’t balloon to dangerous levels.
But deciding what to cut — health care , food stamps, green energy, government regulations or student aid — is a politically agonizing choice.
Republicans are insisting the costs of the tax breaks be partly paid for by the steep reductions in federal government spending as a way to ensure the nation's $36 trillion debt load doesn’t balloon to dangerous levels.
But deciding what to cut — health care , food stamps, green energy, government regulations or student aid — is a politically agonizing choice.
Senate, House GOP in for Fight to Make Trump Tax Cuts Permanent – Jack Fitzpatrick & Ken Tran, Bloomberg ($):
A push to permanently extend President Donald Trump’s 2017 tax cuts is emerging as a major flash point in budget negotiations between House and Senate Republicans.
Trump wants his tax cuts extended permanently to boost the economy over the long haul. Senate Republicans say the House’s plan undermines that goal. The dispute centers on how the Congressional Budget Office will be required to calculate the cost of the tax cuts. As both chambers plan to negotiate a bicameral budget framework, the debate over tax-cut permanency is the main sticking point among Republicans.
Trump wants his tax cuts extended permanently to boost the economy over the long haul. Senate Republicans say the House’s plan undermines that goal. The dispute centers on how the Congressional Budget Office will be required to calculate the cost of the tax cuts. As both chambers plan to negotiate a bicameral budget framework, the debate over tax-cut permanency is the main sticking point among Republicans.
Panel Sizes Up Carried Interest, Basis-Shifting Revenue Raisers – Kristen A. Parillo, Tax Notes ($). "Curtailing related-party basis shifting and revisiting carried interest could be attractive revenue raisers for Republicans’ plans to extend the Trump tax cuts, according to tax professionals."
Cost Cutting at Treasury/IRS
IRS to close more than 110 offices with taxpayer assistance centers – Shannon Najmabadi, Jacob Bogage, and Jeff Stein, Washington Post:
The Trump administration plans to shutter more than 110 IRS offices that have taxpayer assistance centers as the White House’s efficiency zeal carves deeper into the tax agency.
The plan, outlined in a Tuesday letter from the U.S. General Services Administration that was obtained by The Washington Post, comes in the midst of the federal tax filing season that ends April 15, and as the administration is working to reduce agencies’ headcount and scale back the footprint of the federal government. Last week, the IRS started laying off approximately 7,000 probationary employees.
The plan, outlined in a Tuesday letter from the U.S. General Services Administration that was obtained by The Washington Post, comes in the midst of the federal tax filing season that ends April 15, and as the administration is working to reduce agencies’ headcount and scale back the footprint of the federal government. Last week, the IRS started laying off approximately 7,000 probationary employees.
Additional IRS Staff Reductions on the Horizon – Alexander Rifaat, Tax Notes ($):
The Trump administration has directed agency heads to plan for large-scale terminations, which could mean more firings are on the way at the IRS.
In a memo February 26, Russell Vought, director of the Office of Management and Budget, and Charles Ezell, acting director at the Office of Personnel Management, instructed agency heads to implement President Trump’s executive order signed February 11 calling for a reduction in force (RIF) at every department and agency.
Agency heads must submit a RIF and reorganization plan for “Phase 1” of the initiative by March 13. According to the memo, Phase 1 includes identifying ways to undertake “a significant reduction in the number of full-time equivalent” positions.
In a memo February 26, Russell Vought, director of the Office of Management and Budget, and Charles Ezell, acting director at the Office of Personnel Management, instructed agency heads to implement President Trump’s executive order signed February 11 calling for a reduction in force (RIF) at every department and agency.
Agency heads must submit a RIF and reorganization plan for “Phase 1” of the initiative by March 13. According to the memo, Phase 1 includes identifying ways to undertake “a significant reduction in the number of full-time equivalent” positions.
Trump Orders Fed Agencies to Plan for Large Layoffs – Jared Foretek, Law360 ($):
The White House is telling federal agencies to submit plans for "large-scale" layoffs by mid-March, accusing them of siphoning funding for "unproductive and unnecessary programs" and "not producing results for the American public."
In a new memorandum issued Wednesday, the Office of Personnel Management also said agencies can secure waivers from the OPM to shorten the typical notice period for federal reductions in force from the standard 60 days down to 30 days.
In a new memorandum issued Wednesday, the Office of Personnel Management also said agencies can secure waivers from the OPM to shorten the typical notice period for federal reductions in force from the standard 60 days down to 30 days.
Trump Bars Travel for Treasury, IRS Officials – Alexander Rifaat, Tax Notes ($):
President Trump has effectively halted Treasury and IRS officials from traveling to conferences and froze their government-issued credit cards.
In an executive order signed February 26, Trump instructed the head of every federal agency to work with a designated member of the intragovernmental Department of Government Efficiency (DOGE) to identify cost-cutting measures which include creating a “technical system” within each agency that records the “approval for federally funded travel for conferences and other non-essential purposes.”
In an executive order signed February 26, Trump instructed the head of every federal agency to work with a designated member of the intragovernmental Department of Government Efficiency (DOGE) to identify cost-cutting measures which include creating a “technical system” within each agency that records the “approval for federally funded travel for conferences and other non-essential purposes.”
Defending Trump Agenda
DOJ Seeks Rapid Lawyer Transfers to Defend Trump Agenda in Court – Ben Penn, Bloomberg ($):
The Justice Department is pressing its lawyers to take immediate transfers to the division getting deluged defending Trump policies from lawsuits.
DOJ tax and civil rights attorneys are among those receiving messages from their bosses in recent days encouraging them to apply for temporary details to the civil division units responsible for protecting the president’s agenda, according to emails reviewed by Bloomberg Law.
The outreach includes three different tax division leaders amplifying the opportunities in under 24 hours. It reflects a staffing urgency at a time when DOJ attorneys have struggled to justify the legality of Trump’s torrent of executive actions. Judges have disparaged department lawyers attempting to defend the administration’s birthright citizenship order, ban on transgender troops, and empowerment of Elon Musk’s government efficiency team.
DOJ tax and civil rights attorneys are among those receiving messages from their bosses in recent days encouraging them to apply for temporary details to the civil division units responsible for protecting the president’s agenda, according to emails reviewed by Bloomberg Law.
The outreach includes three different tax division leaders amplifying the opportunities in under 24 hours. It reflects a staffing urgency at a time when DOJ attorneys have struggled to justify the legality of Trump’s torrent of executive actions. Judges have disparaged department lawyers attempting to defend the administration’s birthright citizenship order, ban on transgender troops, and empowerment of Elon Musk’s government efficiency team.
Bessent Advisor
Tax Overhaul Designer Named Top Tax Adviser to Treasury – Anna Scott Farrell, Law360 ($):
An attorney who worked for Exxon Mobil and helped design the 2017 tax overhaul in President Donald Trump's first term has been appointed to serve as a top tax adviser to Treasury Secretary Scott Bessent, Treasury announced Wednesday.
Derek Theurer, whom the U.S. Treasury Department credits with contributing to the design and passage of the 2017 Tax Cuts and Jobs Act, will advise Bessent on domestic and international tax policy in the role of counselor to the secretary, according to the announcement.
Derek Theurer, whom the U.S. Treasury Department credits with contributing to the design and passage of the 2017 Tax Cuts and Jobs Act, will advise Bessent on domestic and international tax policy in the role of counselor to the secretary, according to the announcement.
Downsizing the Government
Trump Picks Tasked with Helping Gut or Eliminate Their Own Agencies – Ian Kullgren, Bloomberg ($):
Many of President Donald Trump’s political appointees face the unusual task of drastically downsizing and even eliminating the agencies they have been asked to lead.
A little over a month into his second term, many agency heads have already been tasked with slashing the work forces they’re supposed to lead as the administration escalates its war on what it says is an unwieldy federal bureaucracy. The starkest example has been the US Agency for International Development, now virtually nonexistent after becoming a target of Elon Musk’s the Department of Government Efficiency. Yet many other agencies are on the chopping block, too.
A little over a month into his second term, many agency heads have already been tasked with slashing the work forces they’re supposed to lead as the administration escalates its war on what it says is an unwieldy federal bureaucracy. The starkest example has been the US Agency for International Development, now virtually nonexistent after becoming a target of Elon Musk’s the Department of Government Efficiency. Yet many other agencies are on the chopping block, too.
White House Orders Agencies to Prepare ‘Large-Scale’ Staff Cuts – Gregory Korte, Bloomberg ($):
The White House told federal agencies to submit plans by March 13 for “large-scale reductions in force,” the first phase of an effort to drastically reduce the size of the US government.
The two-phase plan would also require agencies to overhaul their organizational charts by April 14 — and submit proposals to move offices out of Washington and into “less costly parts of the country.”
The two-phase plan would also require agencies to overhaul their organizational charts by April 14 — and submit proposals to move offices out of Washington and into “less costly parts of the country.”
Transfer Pricing
Coca-Cola Appeal Tears Up IRS’s ‘$3 Billion Jaywalking Ticket’ – Alexander F. Peter, Tax Notes ($):
The Tax Court incorrectly endorsed the IRS’s violation of its own transfer pricing regulations and its sudden method change in a bait and switch, Coca-Cola Co. said in its opening brief at the Eleventh Circuit.
The taxpayer's opening brief in The Coca-Cola Co. v. Commissioner, filed February 25, says the IRS issued a “$3 billion jaywalking ticket in the form of a transfer-pricing bill,” which ran contrary to the company’s reliance on the administration’s previous actions. The government also used “apples-to-oranges comparisons” by juxtaposing the routine functions and returns of its bottling companies with the more sophisticated group service entities (“supply points”), the brief alleges.
The taxpayer's opening brief in The Coca-Cola Co. v. Commissioner, filed February 25, says the IRS issued a “$3 billion jaywalking ticket in the form of a transfer-pricing bill,” which ran contrary to the company’s reliance on the administration’s previous actions. The government also used “apples-to-oranges comparisons” by juxtaposing the routine functions and returns of its bottling companies with the more sophisticated group service entities (“supply points”), the brief alleges.
Coke's $2.7B Tax Bill Due To 'Bait and Switch,' 11th Circ. Told – Natalie Olivo, Law 360 ($):
Coca-Cola urged the Eleventh Circuit to reverse a U.S. Tax Court decision putting the beverage giant on the hook for $2.7 billion in taxes, arguing the ruling excused the IRS' "blatant bait and switch" regarding how it allocates income from foreign affiliates.
The Tax Court ignored fundamental limits on administrative action when it upheld the Internal Revenue Service's decision to "abruptly" switch the longstanding method Coca-Cola used — and the IRS repeatedly approved — to price transactions with foreign affiliates, the company said Tuesday in its opening brief. The agency "did not even attempt to justify" its change, which more than doubled royalties the company received from foreign affiliates that use its brand names and other trademarks, according to the brief.
The Tax Court ignored fundamental limits on administrative action when it upheld the Internal Revenue Service's decision to "abruptly" switch the longstanding method Coca-Cola used — and the IRS repeatedly approved — to price transactions with foreign affiliates, the company said Tuesday in its opening brief. The agency "did not even attempt to justify" its change, which more than doubled royalties the company received from foreign affiliates that use its brand names and other trademarks, according to the brief.
Related: Eide Bailly Transfer Pricing Services
Decentralized Finance
DeFi Reporting Rules for Crypto Brokers Inch Closer to Repeal – Tyrah Burris, Tax Notes ($). "A House panel advanced legislation to claw back rules requiring cryptocurrency brokers operating in decentralized finance (DeFi) to collect customer information and provide certain forms to taxpayers involved in crypto transactions."
House Panel Advances Bill to Repeal IRS DeFi Broker Rule – Asha Glover, Law 360 ($):
House Ways and Means Committee Republicans advanced legislation that would repeal a final U.S. Treasury Department rule implementing additional reporting requirements for decentralized finance brokers.
The panel voted 26-16 to advance H.J.R. 25, a joint resolution that would immediately overturn Treasury's rule requiring decentralized finance, or DeFi, industry participants to act and report to the Internal Revenue Service as brokers and treat the rules as though they had never taken effect. The bill was introduced by Rep. Mike Carey, R-Ohio.
The panel voted 26-16 to advance H.J.R. 25, a joint resolution that would immediately overturn Treasury's rule requiring decentralized finance, or DeFi, industry participants to act and report to the Internal Revenue Service as brokers and treat the rules as though they had never taken effect. The bill was introduced by Rep. Mike Carey, R-Ohio.
Tax-Free Spinoffs
IRS Spinoff Safe Harbors Not Seen as All-Purpose Reprieve – Natalie Olivo, Law360 ($):
Safe harbors proposed by the IRS would allow certain corporate spinoffs to get statutory tax-free treatment, but the bright-line requirements to qualify for these provisions reflect the tension between a blanket approach and the unique complexities of each transaction.
The safe harbors, which the Internal Revenue Service floated in proposed rules Jan. 13, are generally seen as giving spinoffs more latitude than what the agency outlined in a May revenue procedure. In that guidance, which drew criticism from tax practitioners, the IRS narrowed the spinoffs that companies could bring in ahead of time for a private letter ruling stating that the transaction would be tax-free under Internal Revenue Code Section 355.
The safe harbors, which the Internal Revenue Service floated in proposed rules Jan. 13, are generally seen as giving spinoffs more latitude than what the agency outlined in a May revenue procedure. In that guidance, which drew criticism from tax practitioners, the IRS narrowed the spinoffs that companies could bring in ahead of time for a private letter ruling stating that the transaction would be tax-free under Internal Revenue Code Section 355.
What Day is it?
Its International Polar Bear Day! Its also my brother-in-law’s birthday, but I don’t believe the two are connected. Either way, happy birthday Bill!
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