SALT Deductions, Back Taxes, and Emissions Policies
Probity Tax Recovery is a tax consulting firm specializing in tax credits and incentives for small to mid-sized businesses. We work with business owners and their CPAs to identify tax credits and incentives while saving them time and money. As of November 1, 2024, Probity began operating as a division of MS Consultants. Read more about the exciting news here.
Tax Policy/News:
December 12: IRS recovers $4.7 billion in back taxes and braces for cuts with Trump and GOP in power
The IRS announced it has recovered $4.7 billion in back taxes and proceeds from financial crimes since receiving funding through the 2022 Inflation Reduction Act.
This includes $1.3 billion collected from high-income taxpayers with overdue tax debts, $2.9 billion recovered through criminal investigations targeting drug trafficking and terrorist financing, and $475 million stemming from whistleblower-provided information. Additionally, the IRS secured $292 million from over 28,000 high-income non-filers who have failed to submit tax returns since 2017.
Despite these achievements, the agency faces an uncertain financial future as Republicans prepare to take control of both chambers of Congress. GOP leaders have vowed to rescind the IRS funding, which was already reduced by $21.4 billion through previous budget deals. Treasury officials warn that further cuts could undermine enforcement efforts and jeopardize taxpayer services.
IRS Commissioner Danny Werfel expressed confidence in the agency’s ability to administer potential new tax laws, including extensions to the 2017 Tax Cuts and Jobs Act—an initiative Republicans plan to pursue under the next administration.
Meanwhile, former Congressman Billy Long has been nominated by Donald Trump to lead the IRS, a choice criticized by some Democrats for his association with industries flagged for tax-related scams. As Werfel’s term extends to 2027, it remains unclear if he will stay on or face dismissal under the incoming administration.
December 12: House Republicans Urge Trump to End Direct File
House Republicans are urging President-elect Donald Trump to end the IRS’s Direct File program, which allows taxpayers to file federal returns for free online.
Led by Representatives Adrian Smith (R-Neb.) and Chuck Edwards (R-N.C.), GOP lawmakers argue the program is costly, unauthorized, and a conflict of interest for the IRS, estimating its pilot phase cost $814 per return.
The IRS, however, reported spending $24.6 million on the program, which benefited over 140,000 taxpayers and delivered $90 million in refunds.
Democrats, including Senate Finance Chair Ron Wyden (D-Ore.), have defended Direct File as a cost-saving, user-friendly option for taxpayers.
While IRS Commissioner Daniel Werfel praised its success, Trump’s nomination of former Rep. Billy Long as IRS commissioner signals a likely rollback under the new administration.
December 12: Republicans clash over 'SALT' deduction as they seek to extend Trump's tax law
House Republicans are divided over the federal cap on state and local tax (SALT) deductions as they prepare to extend the 2017 Trump tax cuts next year.
The $10,000 cap, introduced in 2017, disproportionately affects taxpayers in high-tax states like New York, New Jersey, and California.
A group of Republicans from these states, including Representatives Nick LaLota and Nicole Malliotakis, are demanding an increase to the deduction, leveraging the GOP's slim House majority of 220-215. Without congressional action, the SALT cap will expire at the end of 2025, potentially restoring unlimited deductions.
Pro-SALT Republicans argue the cap unfairly burdens middle-class families in their districts. Malliotakis emphasized the need for changes, including eliminating the "marriage penalty" and potentially adding income caps to target relief toward middle-income earners.
However, opposition remains strong within the party. Critics, like Rep. Thomas Massie (R-Ky.), contend that expanding SALT encourages state-level tax hikes, while Sen. Josh Hawley (R-Mo.) dismissed it as a “tax break to wealthy people on the coasts.”
The debate over SALT reflects broader challenges Republicans face in extending the 2017 tax law, which is expected to add trillions to the deficit. With Democrats excluded from the process due to reconciliation rules, Republicans must navigate internal divisions to pass their bill. Trump has expressed support for restoring SALT deductions but has yet to offer specific proposals.
The IRS announced it has recovered billions of dollars through tax and financial criminal investigations in 2023, targeting areas such as drug trafficking, terrorist financing, and other illicit financial schemes.
These efforts were led by the IRS Criminal Investigation (CI) division, which conducted over 2,600 investigations and identified nearly $37 billion in tax fraud and financial crimes. Cases included major seizures and successful prosecution of large-scale money laundering and tax evasion schemes tied to organized crime and global financial networks.
In addition to enforcement, the IRS unveiled new online business account features aimed at streamlining tax compliance for small businesses. Business owners can now view tax balances, manage payment plans, and access transcripts, providing greater transparency and easier navigation of IRS systems.
The enhancements are part of the IRS’s broader initiative to modernize its digital services and improve taxpayer experience. IRS Commissioner Danny Werfel emphasized the agency's commitment to holding financial criminals accountable while providing tools to help businesses meet their tax obligations efficiently.
Economic News/Policy:
December 16: Lawmakers signal movement toward government funding deal
Congressional leaders are making progress on a government funding deal ahead of Friday’s deadline, though aid for farmers remains a key sticking point, with lawmakers debating over $10 billion in proposed assistance.
The continuing resolution (CR) is expected to include disaster relief for hurricane-affected areas, a two-year extension of Medicare telehealth flexibilities, pharmacy benefit manager reforms, and reauthorizations of the Pandemic All-Hazards
Preparedness Act and the SUPPORT Act.
Speaker Mike Johnson (R-La.) faces a critical test ahead of the January 3 Speakership vote, as he may need Democratic support to pass the CR amid opposition from hard-line conservatives like Rep. Chip Roy (R-Texas), who criticized additional measures for failing to address deficit concerns.
December 10: Biden: Trump’s tax and tariffs plans are a ‘major mistake’
President Joe Biden sharply criticized President-elect Donald Trump’s economic agenda, calling his proposed tariffs and tax cuts a “major mistake” that would harm the economy.
Speaking at the Brookings Institution, Biden warned that Trump’s policies would primarily benefit the wealthy while reversing progress made for the working class.
He criticized Trump’s plan for steep, universal tariffs, stating it would burden American consumers, not foreign nations. Biden also blamed Trump for pandemic-related economic struggles, contrasting it with his administration’s achievements, such as low unemployment and investments in infrastructure.
Acknowledging lingering inflation, Biden defended his handling of economic challenges, attributing price hikes to the pandemic and the war in Ukraine. He urged voters to evaluate Trump’s upcoming administration based on economic performance while expressing hope that current progress would not be reversed.
December 10: Traders are pretty sure of a Fed rate cut. What happens if inflation data is too hot?
Traders have priced in an 85% chance that the Federal Reserve will deliver a 25-basis-point rate cut at its upcoming December 17-18 policy meeting, supported by economic indicators and recent market performance.
The S&P 500 and Nasdaq ended last week at record highs, while the Dow Jones surpassed the 45,000 milestone. However, upcoming inflation data—particularly the Consumer Price Index (CPI) on Wednesday and the Producer Price Index on Thursday—could challenge this outlook.
Analysts expect CPI to rise 0.3% for November, with core inflation remaining steady at 3.3% year-over-year.
Fed officials, including Chair Jerome Powell, have signaled caution, prioritizing a gradual approach to rate cuts unless significant inflation surprises emerge. Some economists argue it would take a stronger-than-expected 0.4% CPI increase to derail expectations for a December cut.
Policymakers remain confident that inflation is trending toward the 2% target, with housing costs seen as overstated in current data. Analysts also anticipate a “hawkish” rate cut, where the Fed may trim rates but signal a slower pace of easing moving forward. The Fed's updated "dot plot" projections, expected at the meeting, will play a key role in setting expectations for rate cuts in 2025.
Technology:
December 16: The AI revolution is running out of data. What can researchers do?
AI researchers are approaching a critical bottleneck: the internet’s finite supply of high-quality text data is being exhausted as training demands for large language models (LLMs) continue to skyrocket.
Projections suggest that by 2028, the data needed to train models like those behind ChatGPT will match the total stock of publicly available online text. Meanwhile, content providers are increasingly restricting access to their data, and lawsuits over AI training practices, such as those involving The New York Times, are further tightening resources.
To address this, AI developers are exploring alternatives, including proprietary data, specialized datasets (like medical or genomic data), synthetic data generated by AI, and multimodal training using images and videos.
Synthetic data shows promise for rule-based tasks like coding or mathematics but risks quality degradation through recursive learning. Developers are also improving algorithms to extract more efficiency from smaller datasets, training models to re-read data, and incorporating reinforcement learning to enhance reasoning capabilities. Experts believe the future of AI may rely on smaller, specialized models or systems that interact with the real world to expand their knowledge base beyond text.
December 13: Google CEO eyes AI ‘Manhattan Project’ after Trump inauguration
Google CEO Sundar Pichai has expressed support for a national research initiative on artificial intelligence (AI), likening it to the Manhattan Project, following President-elect Trump’s return to the White House next month.
In an interview with Semafor, Pichai emphasized the need for collaborative efforts to advance AI development, aligning with bipartisan recommendations from the U.S.-China Economic and Security Review Commission to maintain a technological edge over China.
Google recently launched Gemini 2.0, its latest AI model, which Pichai says builds on progress in multimodal capabilities and lays the groundwork for new AI-driven applications.
The remarks follow Trump’s appointment of venture capitalist David Sacks as the White House’s AI and cryptocurrency czar, underscoring the incoming administration’s focus on AI.
Pichai, who met with Trump on Thursday, highlighted Google’s longstanding commitment to AI development, stating the company has pursued an “AI-first” strategy since 2015.
Energy and Environmental Policy/News:
December 16: Trump transition team to roll back Biden EV, emissions policies
President-elect Donald Trump’s transition team is recommending major rollbacks of Biden-era electric vehicle (EV) policies, including cutting EV purchase incentives, reducing emissions standards, and redirecting funds for charging stations toward national defense.
The proposals aim to boost domestic production of critical battery materials while imposing tariffs on global battery imports, with exceptions negotiated for allies. The plan would revert emissions and fuel economy standards to 2019 levels, allowing 25% higher tailpipe emissions, and block California from setting its stricter emissions rules adopted by other states.
The recommendations, seen by Reuters, also include ending federal requirements to purchase EVs, expanding export restrictions on EV technologies to adversarial nations, and halting the Defense Department’s EV-related programs.
Trump’s team argues that EV supply chains are critical for defense but claims charging infrastructure and incentives are unnecessary. Automakers, including Tesla and General Motors, could face significant impacts, particularly as Trump targets tariffs to protect U.S. production. Critics warn these changes could slow the EV transition and undermine climate goals.
December 16: Bipartisan energy talks collapse, say Manchin, Carper, blaming House GOP
Efforts to advance bipartisan energy permitting reform have collapsed, with Senators Joe Manchin (I-W.Va.) and Tom Carper (D-Del.) blaming House Republican leaders for walking away from negotiations.
The proposed reforms aimed to accelerate the buildout of both fossil fuel and renewable energy projects, addressing GOP priorities for streamlined permitting and Democratic goals for clean energy expansion.
House Speaker Mike Johnson (R-La.) defended the decision, stating Senate Democrats failed to act earlier and promising stronger reforms under a Republican-controlled Congress next year.
The breakdown marks a significant setback for both Manchin and Carper, who are retiring and had hoped to finalize a deal as part of their legacy. While some reforms were secured in last year’s debt ceiling deal, including time limits on environmental reviews, lawmakers across the aisle pushed for broader changes.
Senate Republicans, led by Sen. John Barrasso (R-Wyo.), vowed to continue pursuing reforms, particularly as the GOP eyes potential reconciliation opportunities to advance energy priorities when they assume full control of Congress and the White House in 2025.
December 11: EVs leap to almost 9% of US light-duty vehicle sales in Q3: EIA
Electric vehicles (EVs) accounted for 8.9% of U.S. light-duty vehicle sales in the third quarter of 2024, up from 7.4% in the previous quarter, according to the U.S. Energy Information Administration (EIA).
Combined sales of hybrids, plug-in hybrids, and battery electric vehicles (BEVs) reached 21.2% of all new light-duty vehicle sales, driven largely by growth in BEV adoption.
While EVs remain most popular in the luxury segment—making up over a third of luxury vehicle sales—non-luxury EV sales are expanding, with luxury models now comprising the lowest share of EV sales since 2017.
EIA noted that 71% of EVs sold in Q3 were luxury vehicles, reflecting ongoing price challenges. The average transaction price for BEVs, before incentives, stood at $56,351, about 16% above the industry average.
Federal incentives, such as the $7,500 tax credit extended under the Inflation Reduction Act, have helped boost adoption, with EV sales more than quadrupling since 2021. However, President-elect Donald Trump has pledged to eliminate EV tax credits, a move opposed by automakers who argue the incentives are critical to maintaining market growth.
For Fun:
December 16: The skin’s ‘surprise’ power: it has its very own immune system
New research has revealed that the skin can produce its own antibodies, functioning as a semi-autonomous immune system, independent of the body’s lymph nodes.
Two studies published in Nature demonstrate that the skin generates antibodies in response to harmless bacteria like Staphylococcus epidermidis, which helps strengthen local immunity. Researchers observed that this response persists for over 200 days and involves specialized immune structures that attract T and B cells to the skin.
Building on these findings, scientists engineered S. epidermidis to display proteins from pathogens, such as tetanus, and applied it to the skin of mice. This approach triggered immune responses in both the bloodstream and mucous membranes, protecting the mice from lethal doses of toxins.
Researchers hope this breakthrough could lead to needle-free vaccines applied via creams, offering an affordable, easy-to-distribute alternative to conventional vaccines, particularly in underserved regions. However, further studies in humans are needed to confirm the skin’s immune potential and the safety of this novel vaccine strategy.