Tax News & Views Questionable Tax Credit Empanada Roundup

IRS Pick Billy Long Filing Shows Ties to Dubious Tax Credits - Chris Cioffi, Bloomberg ($):

New ethics filings reveal connections between IRS commissioner-pick Billy Long and companies promoting a pandemic-era credit associated with fraud and tribal tax credits the Treasury Department has said is not authorized by law or regulation.

...

Long already faced criticism from Senate Finance Committee Democrats over his promotion of the employee retention tax credit, created in the pandemic to help employers retain workers, but subsequently became riddled with fraudulent claims. The new disclosures show ties to White River Energy Corp., an oil and gas company that has worked with a network of promoters to sell the “sovereign tribal tax credit.”

White River claims to have received billions of dollars in “sovereign tribal tax credits” through a joint venture formed in 2023. Treasury has said there is no such credit authorized by law, regulation, or interagency agreement.

According to the article, the filings show that he received "at least $5,000" from White River as a "referral agent."

An older (paywalled) Bloomberg article explains the credits and White River's ties to them:

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.

...

Bloomberg Tax reviewed about a dozen documents, pitch materials, and emails from wealth management firms promoting this program that were provided by two separate sources. At least five wealth advisers are or have promoted the offer. Bloomberg Tax also reviewed almost a decade of SEC filings by the sponsor, White River Energy Corp., and its predecessor companies, and spoke to multiple attorneys specializing in tribal tax law and tax credits.

One source says the credits were marketed at 60 cents on the dollar - a 40% tax savings. Billy Long's X (formerly Twitter) page still says "DM me to save 40% on your taxes. We have a new traunch of tax credits just out!"

Treasury Announces Three More Tax Policy Appointments - Alexander Rifaat, Tax Notes ($):

In an April 7 statement, Treasury announced Rebecca Burch as deputy assistant secretary for international tax affairs and Kevin Salinger as deputy assistant secretary for tax policy. It also announced that Derek Theurer, President Trump’s nominee for deputy undersecretary for legislative affairs, will be designated assistant secretary for legislative affairs if his nomination is approved by the Senate.

...

Theurer already works at Treasury as counselor to the secretary. He previously served as chief tax counsel for the House Ways and Means Committee for both current Chair Jason Smith, R-Mo., and his GOP predecessor, Kevin Brady. He also previously worked as a senior policy adviser to House Speaker Mike Johnson, R-La.

ERC Update

IRS Can Continue Using Employee Retention Credit Screening Tool - Tristan Navera, Bloomberg ($):

The Internal Revenue Service can continue using automated software to screen Employee Retention Credit applications after a federal judge in Arizona disagreed that the plaintiffs—businesses that help companies file the claims—had standing to sue or that they had the right to bring a due process case on behalf of their clients.

Denying their motion for a preliminary injunction, Judge Stephen M. McNamee of the US District Court for the District of Arizona on Monday wrote that the plaintiffs’ “financial interest in their clients’ approved tax claims is not a constitutionally protectable property interest.”

L Day + 6: No Pausing Tariffs

Trump Says No Pause to Tariffs as He Targets China for Retaliation - Tony Romm and Ana Swanson, New York Times:

“We’re not looking at that,” Mr. Trump said, when asked about a possible pause on his tariffs. “We’re going to have one shot at this and no other president is going to do what I’m doing.”

Mr. Trump began the day by drawing new battle lines over his so-called reciprocal tariffs, which he plans to impose on certain countries after midnight on Wednesday. The taxes, which can reach as high as 46 percent for some nations, will snap into effect just days after the president imposed a minimum 10 percent levy on nearly every U.S. trading partner.

Trump threatens additional 50 percent tariffs on China - Amanda Friedman and Daniel Desrochers, Politico. "'If China does not withdraw its 34% increase above their already long term trading abuses by tomorrow, April 8th, 2025, the United States will impose ADDITIONAL Tariffs on China of 50%, effective April 9th,' Trump said in a Truth Social post."

Republicans rattled by tariff troubles begin to push back on Trump - Al Weaver and Emily Brooks, The Hill. "Seven Republican senators signed on to a bill led by Sens. Chuck Grassley (R-Iowa), the Senate’s president pro tempore, and Maria Cantwell (D-Wash.) that would require the president to give Congress 48 hours notice of new tariffs, make them subject to congressional approval after 60 days, and allow Congress to rescind tariffs."

White House and Republican leaders chill momentum for internal tariff rebellion - Burgess Everett, Semafor:

In quick succession on Monday, the GOP’s senior leaders clamped down on the bipartisan Trade Review Act, which would require Congress to vote on new presidential tariffs within 60 days. Trump’s White House issued a veto threat that said the bill “would dangerously hamper the president’s authority,” House Speaker Mike Johnson said Trump deserves “latitude” on the issue, and Senate Majority Leader John Thune declared that the bill doesn’t have a “future” in Congress.

Businesses, conservative lawyers planning legal challenge to Trump's tariffs - Jonathan Karl, ABC News:

The issue is this: Congress, not the president, has the power to impose taxes and regulate trade. In imposing these tariffs, President Trump cited the 1977 International Emergency Economic Powers Act (IEEPA), which gives the president power to regulate international commerce in the event of a national emergency.

But the IEEPA -- which specifically cites the power to impose sanctions and seize foreign assets -- does not mention tariffs. And, even if one argues the right to impose tariffs is implied, it's not clear what "national emergency" could justify the imposition of global tariffs.

Manufacturing and Trade - Alex Tabarrok, Marginal Revolution:

1. The US is a manufacturing powerhouse. We produce $2.5 trillion of value-added in manufacturing output, more than ever before in history.

2. As a share of total employment, employment in manufacturing is on a long-term, slow, secular trend down. This is true not just in the United States but in most of the world and is primarily a reflection of automation allowing us to produce more with less. Even China has topped out on manufacturing employment.

Congress, Budget, and Tax Cuts (?)

Budget Resolution Faces Early Opposition Among House Republicans - Cady Stanton and Katie Lobosco, Tax nOTES ($):

House fiscal hawks are threatening to halt progress on Republicans’ reconciliation bill, saying that the Senate-adopted, tax-focused budget resolution doesn’t include strong enough requirements for spending cuts.

Republican leadership in the House said they hope to adopt the new budget resolution, which includes $1.5 trillion in net tax cuts and a current-policy scoring direction for the extension of provisions from the Tax Cuts and Jobs Act, the week of April 7 before leaving for a two-week recess.

Republicans Fracture on Trump’s Tax Bill - Richard Rubin and Olivia Beavers, Wall Street Journal:

In a post on Truth Social, Trump directed the House to pass the Senate measure quickly, saying it “will make, even the subject of World Trade, far easier and better for the U.S.A.”

...

Republican opponents already have more than enough declared “no” votes to block the House from passing the version that came out of the Senate on Saturday. They argue that the Senate version fails to lock in enough spending cuts alongside tax cuts and that pushing it forward now risks unacceptably large budget deficits. Republicans control the House with a 220-213 majority, meaning they can’t afford to lose more than three of their own members on any legislation if all Democrats vote no.

Johnson has faced this kind of math before, and his playbook is clear: Have Trump lean on wavering House Republicans and promise critics a bigger say in the next phase, when final legislation is written. That general approach worked three times already this year—once to get Johnson re-elected as speaker, once on a short-term spending bill and once on the House version of the fiscal framework.

Republicans Warm to Millionaire Tax Hike to Pay for Levy Cuts - Eric Wasson, Bloomberg via MSN:

House Freedom Caucus Chairman Andy Harris says he is open to the creation of a new 40% tax bracket for those earning $1 million or more, lending credence to an idea Republicans are considering as a way to offset some new tax cuts.

Harris said in an interview on Monday that he views the millionaires’ tax rate as a “reasonable way to pay for” President Donald Trump’s campaign pledge to eliminate levies on tipped wages.

“You are only raising it a couple of points,” the Maryland Republican added. The current top tax rate is 37% for individuals earning more than $626,350 a year.

Blogs and Bits

April 15 is not Tax Day for taxpayers abroad or in 12 disaster-area states - Kay Bell, Don't Mess With Taxes.

Americans who live and work abroad, including military personnel, get two additional months to file. Some members of the armed forces who are in combat zones get later filing deadlines based on their service.

And the Internal Revenue Service provides taxpayers in major disaster areas get new filing and payment due dates based on Federal Emergency Management Agency (FEMA) assessments and White House declarations.

Supreme Court Rules That Bankruptcy Trustee Can't Claw Back Federal Tax Payments - Parker Tax Pro Library. "Therefore, the Court held that an avoidance claim brought by a bankruptcy trustee for funds that the shareholders of a corporation misappropriated and used to satisfy their personal federal income tax liabilities, which relied on a state fraudulent transfer statute that gives creditors a cause of action to invalidate certain transfers by a debtor, was barred by sovereign immunity."

Personal Liability for Corporate Sales and Use Tax: An Analysis of the Matter of the Appeal of B. Wageman - Ed Zollars, Current Federal Tax Developments. "This case serves as a critical reminder for tax practitioners advising clients, particularly those operating closely held corporations, about the potential for personal liability for unpaid sales and use taxes."

Bozo Tax Tip #4: Use a Bozo Accountant - Russ Fox, Taxable Talk:

Here’s another Bozo Tax Tip that keeps coming around. The problem is, the Bozos don’t change their stripes. In any case, here are some signs your accountant might be a Bozo:

– He’s never met a deduction that doesn’t fit everyone. There’s no reason why a renter can’t take a mortgage interest deduction, right? And everyone’s entitled to $20,000 of employee business expenses…even if their salary is just $40,000 a year. Ask the proprietors of Western Tax Service about that.

- He believes every return needs at least three dependents, no matter whether you have any children or not.

Family Dysfunction Discount

Bad Behavior Affects Gift Tax Value of Baby Products Business - Chandra Wallace, Tax Notes ($):

A Utah entrepreneur’s estate planning gift of his interest in an online baby products business was properly valued, taking into consideration the “less savory” aspects of its business model, the Tax Court ruled.

In an April 7 memorandum opinion in Pierce v. Commissioner, Judge Travis A. Greaves ruled that market conditions inherently limiting the petitioner’s business model should be considered in determining the value of the business for federal gift tax purposes.

“Backstabbing, infidelity, and blackmail — not the first words that come to mind in relation to a baby products company,” Greaves wrote. “However, these words aptly describe Mothers Lounge in the years leading up to” the gift tax valuation date, he said.

Most Tax Court cases aren't this interesting. For business owners, the takeaway isn't the use of bad behavior to bring down your business value. The real lesson is the importance of a good outside valuation to support your gift tax filings.

What day is it?

It's National Empanada Day, which sounds a lot tastier than the concurrent Pygmy Hippo Day.

Tax News & Views Questionable Tax Credit Empanada Roundup

We're Here to Help

Joe B. Kristan, CPA