$100 Billion Tax Deal, R&D Expense Amortization, and the U.S. National Debt
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January 5: Treasury: Nearly 9,000 auto dealers have registered for electric vehicle tax credit
Since the implementation of the point-of-sale electric vehicle tax credit on January 1, over 1,000 additional auto dealers have registered, bringing the total to more than 8,700, as confirmed by the Treasury Department.
This marks an increase from the 7,400 dealers reported in late December and the 7,000 announced earlier that month.
The Inflation Reduction Act's modifications to the credit now allow electric vehicle buyers to claim it at the time of purchase, streamlining the process and eliminating the need to wait until filing taxes the following year.
Dealers are required to submit a "time-of-sale report," and the IRS has extended the deadline to January 16 to accommodate the transition, anticipating a smooth process afterward.
The tax credit, capped at $7,500, underwent changes, excluding certain vehicles associated with foreign entities of concern and imposing criteria for critical minerals in the battery's sourcing.
January 5: Lawmakers weigh $100B tax deal for business, children
Businesses are optimistic about Congress potentially reviving expired research and investment tax breaks through a $100 billion tax deal, with hopes of reaching an agreement as early as this month.
Both Republicans and Democrats are expressing willingness to retroactively renew an expired research and development break for 2023, along with a deduction for specific interest types and expanded "bonus" depreciation for investments like equipment.
Senate Finance Committee Chairman Ron Wyden and House Ways and Means Chairman Jason Smith are engaged in ongoing bipartisan discussions, aiming to finalize the deal in time for the 2023 tax filing season.
Democrats aim to include an expanded child tax credit in the package, while discussions continue on how to fund the roughly $100 billion proposal, potentially through curtailment of other tax breaks.
The business tax package is a key priority for industry groups, including the Business Roundtable and the U.S. Chamber of Commerce.
January 2: What accountants need to know about R&D expensing changes - Voices
The impending U.S. income tax season poses challenges for accountants, primarily due to changes in the treatment of research and experimentation expenditures under Section 174.
Enacted in 2017 and effective from 2022, this amendment requires the capitalization and amortization of specified research and experimental (SRE) expenditures over five years.
Formerly, taxpayers had the option to deduct these expenses immediately. The change impacts the timing of deductions, creating short-term tax liabilities that even out over the long term due to amortization.
Non-compliance with Section 174 may result in penalties. Notably, SRE expenditures must be amortized under Section 174, irrespective of claiming the research and development (R&D) credit under Section 41.
Failure to act may lead to missed R&D tax credit savings, especially for the software industry, which is particularly affected by the capitalization of certain software development expenditures.
Startups, heavily relying on research and experimentation, may struggle due to the inability to deduct these costs.
Accounting teams should understand clients' business nature, document activities and expenses, seek guidance, and proactively address uncertainties while claiming applicable R&D tax credits.
January 9: Speaker Johnson faces conservative unrest over funding deal
Speaker Mike Johnson (R-La.) is grappling with significant challenges in finalizing a government funding deal amid strong opposition from conservatives within his party.
Facing a tight deadline with the risk of a partial government shutdown on Jan. 19, Johnson's slim House GOP majority complicates the situation.
The top-line spending deal, announced over the weekend, includes a $1.59 trillion base along with $69 billion in budget adjustments for nondefense spending in the 2024 fiscal year.
The House Freedom Caucus criticized the deal, calling it a "total failure." Johnson acknowledged that the spending levels might not satisfy everyone but emphasized some wins, including accelerated clawbacks of IRS funding and a $6.1 billion cut to COVID-era funds.
The additional challenge arises from hard-line GOP members demanding border policy changes, potentially leading to a government shutdown. The procedural votes and policy riders pose further hurdles, making Johnson's path to success a political minefield.
January 3: Fed ‘likely’ done with rate hikes, concerned with ‘uncertainty’: minutes
Members of a key Federal Reserve committee anticipate rate cuts in 2024, signaling a shift from the highest interest rates in over two decades.
The minutes from the December meeting reveal an expectation that the policy rate is likely at or near its peak for the current tightening cycle.
Chair Jerome Powell previously mentioned being at or close to the peak rate, fueling market optimism. The minutes highlight factors like declining inflation and improving balance in product and labor markets, indicating a potential policy adjustment.
Market projections suggest seven quarter-point rate cuts in 2024, exceeding the Fed's own cautious forecast, with most committee members anticipating at least two rate cuts by the end of 2024.
The Fed is praised for achieving a rare soft landing, but challenges remain, including elevated inflation and risks of holding rates too high for too long, impacting household balances and a slowing global economy.
Participants note the potential for a rapid shift in labor market conditions if demand weakens substantially further.
January 3: US national debt surpasses $34T for first time
The U.S. national debt has surpassed $34 trillion for the first time, according to Treasury Department data.
The total public debt outstanding reached $34.001 trillion, just over three months after crossing the $33 trillion mark.
This milestone coincides with Congress facing impending spending deadlines in the new year.
A stopgap measure passed in November is set to lapse on January 19 for four federal agencies, with funding for the rest of the government expiring on February 2.
The growing debt has been a recurring point of contention in recent battles over government funding, leading to a credit rating downgrade by Fitch Ratings in August due to the increasing debt burden and partisan battles over the debt limit.
January 4: Biden administration awarding $162M to expand computer chip factories in Colorado, Oregon
The Biden administration has announced a $162 million federal funding agreement with Microchip Technology to expand domestic production of computer chips, marking the second tranche of funds from the CHIPS and Science Act, a bipartisan law signed in 2022.
The Commerce Department revealed preliminary terms with the Arizona-based manufacturer, enabling increased U.S. production of microcontroller units (MCUs) and other specialty semiconductors crucial to various industries.
The investment includes $90 million for improvements in a Colorado Springs plant and $72 million to expand a factory in Gresham, Oregon, with the projects expected to nearly triple the company's semiconductor output and create over 700 jobs.
The CHIPS and Science Act aims to strengthen the domestic semiconductor industry and reduce reliance on foreign supply chains, aligning with President Biden's focus on securing critical supply chains.
January 3: Tax credits to Intuit better spent to fund a free alternative to TurboTax, Warren says
U.S. lawmakers, including Senators Elizabeth Warren and Bernie Sanders, are questioning Intuit Inc.'s use of federal research tax credits, suggesting that the funds could have been better utilized to create a government alternative to TurboTax.
The lawmakers assert that Intuit's research tax break from 2022 alone could have funded a year of a free e-File program for millions of Americans. They have requested details on Intuit's research expenses dating back to 2018.
Intuit, which received $106 million in federal research credits in the fiscal year ending in July 2023, contends that a government-run program is unnecessary, as a third of TurboTax users already receive free tax services.
The company's opposition to a government-run tax filing system has drawn criticism from progressive lawmakers.
The IRS, supported by President Biden's Inflation Reduction Act, plans to launch a pilot free electronic filing program for the 2024 tax season.
Intuit spokesperson Rick Heineman argues that this plan will cost taxpayers billions and questions the IRS's ability to evaluate associated costs.
Intuit has faced previous scrutiny, with a Federal Trade Commission judge ruling in September that the company misled consumers about the free nature of its TurboTax product. The company settled with state regulators in 2022, agreeing to pay $141 million in fines and modify its advertising.
January 2: Software developers implore accountants to learn AI
In the accounting solutions space, software developers are placing a significant emphasis on integrating artificial intelligence (AI) into their product lines in 2024.
This strategic move aims to leverage AI for planning, forecasting, content generation, automation, document management, research, and more.
With AI already impacting the accounting profession, developers stress the importance for accountants to acquire at least a basic competency in AI to stay relevant in a tech-driven landscape.
Various software vendors advise accountants to explore AI applications, experiment with tools like ChatGPT, and incorporate automation to enhance efficiency.
Recommendations also include upskilling in emerging technologies, embracing openness and interoperability, and using AI as a tool to augment human expertise.
The consensus is that AI adoption is pivotal for accountants to navigate complexities, streamline processes, and provide higher-value services to clients in the evolving accounting industry.
January 3: First major U.S. offshore wind farm sends first power to the grid
The Vineyard Wind project off the coast of Martha's Vineyard in Massachusetts, expected to be the first large-scale offshore wind farm in the U.S., has successfully delivered power to the New England grid during initial testing.
Though the project, set to feature 62 wind turbines, is in its early stages, one turbine has already contributed power, with five more expected to be operational later this year.
Massachusetts Governor Maura Healy hails the development as a historic moment for the American offshore wind industry, emphasizing the state's progress toward energy independence.
The Biden administration has been actively supporting offshore wind, aiming to generate enough power for 10 million homes by 2030. However, the industry has faced challenges, with recent cancellations of offshore wind projects in New York and New Jersey due to high costs.
January 4: IRS signs $32M deal for data delivery services
The Internal Revenue Service (IRS) has awarded a $32 million, four-year contract for data delivery services to government contractor Maximus in McLean, Virginia.
The contract aims to provide development support for two mission-critical systems at the IRS, assisting in the identification and development of data delivery service models.
Maximus will work on refining the technical components and processes in place, consulting with the IRS on the design, building, and deployment of data services to internal and external stakeholders.
The partnership with Maximus is part of the IRS's broader efforts to modernize its technology infrastructure, enhance services for taxpayers, and meet its technology goals by leveraging contemporary capabilities.
January 8: Cells Across the Body Talk to Each Other About Aging
Recent research reveals a novel biochemical pathway governing aging, focusing on communication between mitochondria, organelles widely recognized as the cell's powerhouse.
Studies conducted on worms demonstrate that when mitochondria in brain cells suffer damage, a repair response is triggered and amplified, leading to similar reactions in mitochondria throughout the organism.
This repair activity resulted in a 50% increase in the worms' lifespan. Crucially, cells in the germline, responsible for producing eggs and sperm, play a central role in this anti-aging communication system.
This discovery sheds new light on the connection between aging and fertility, adding complexity to discussions about the biological clock.
The research suggests that mitochondria act as cellular walkie-talkies, communicating messages throughout the body that impact the organism's survival and lifespan.
The findings emphasize the significance of tissue communication in regulating aging alongside genetic programs.
The study, led by cell biologist Andrew Dillin, builds upon recent work indicating that mitochondria can communicate with each other across different tissues.
Mitochondria, having originated as free-living bacteria, may retain this communication ability as a relic from their evolutionary history.
While the study was conducted on worms, further research is needed to determine if these mechanisms apply to more complex organisms like humans.