Alternative Dispute Resolution, Michigan Innovation Fund, & White House Office of Science and Technology Policy
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:
January 15: IRS Launches Fast Track Settlement Pilots to Streamline Alternative Dispute Resolution
The IRS has announced three pilot programs aimed at enhancing Alternative Dispute Resolution (ADR) processes, including Fast Track Settlement (FTS) and Post-Appeals Mediation (PAM), to resolve tax disputes more quickly and efficiently. These initiatives are part of the IRS’s broader transformation efforts under its Strategic Operating Plan.
Key updates include expanding FTS to allow issue-by-issue mediation, ensuring requests for FTS and PAM cannot be denied without first-line executive approval, and requiring formal explanations for denied requests. A new "Last Chance FTS" pilot will notify taxpayers about FTS options after a protest is filed, increasing awareness and participation. Additionally, a restriction barring PAM eligibility for cases previously using FTS has been removed to encourage broader use of ADR programs.
These changes aim to make ADR more transparent, flexible, and accessible while reducing the need for litigation. The pilots incorporate feedback from the Government Accountability Office, the Taxpayer Advocate Service, and other stakeholders. The traditional appeals process remains available for all taxpayers, while further ADR enhancements are in development.
January 13: Governor Whitmer Signs Bipartisan Bills Establishing Innovation Fund and R&D Tax Credit
Michigan Governor Gretchen Whitmer signed five bipartisan bills creating the Michigan Innovation Fund and an R&D Tax Credit to boost entrepreneurship, lower business costs, and create jobs.
The Michigan Innovation Fund, supported by $60 million in funding, will address the state’s early-stage capital gap, fostering growth for startups and attracting new businesses.
The R&D Tax Credit allows businesses with fewer than 250 employees to claim up to $250,000 annually, while larger companies can claim up to $2 million. An additional $200,000 credit is available for collaborations with research universities. These measures aim to align Michigan with 36 other states offering R&D incentives and encourage innovation in sectors such as life sciences and advanced manufacturing.
State leaders and industry representatives lauded the legislation, emphasizing its potential to transform Michigan’s economic landscape by attracting talent, driving innovation, and expanding the state’s high-tech industries. Governor Whitmer highlighted the bipartisan effort as key to ensuring Michigan remains a top destination for entrepreneurs and innovators.
January 10: IRS Free File Opens Friday, Offering Free Tax Filing Services to Millions
The IRS has announced the launch of its Free File Guided Tax Software on January 10, ahead of the official start of the 2025 tax season later this month. This program enables taxpayers with an Adjusted Gross Income (AGI) of $84,000 or less to prepare and file their federal tax returns at no cost through IRS.gov.
The IRS Free File program is a collaboration with private tax software providers, ensuring eligible taxpayers have access to free online tax preparation tools. While the IRS will officially begin accepting individual tax returns on January 27, taxpayers are encouraged to file early and opt for direct deposit to expedite refunds, which are typically processed within 21 days for electronically filed returns.
This year, the IRS is also expanding its Direct File program, allowing individuals to file returns directly with the IRS at no cost. The initiative will now be available in 25 states, up from 12 last year, providing greater access to free filing services.
Taxpayers are advised to gather essential documents such as W-2s and 1099s and to verify eligibility for credits like the Earned Income Tax Credit (EITC) to avoid delays or errors. For those ready to begin their filings, the IRS Free File portal is now live on IRS.gov.
January 10: IRS Announces Jan. 27 Start to 2025 Tax Filing Season, Highlights New Tools and Services
The IRS has announced that the 2025 tax filing season will begin on January 27 and feature expanded services and tools, reflecting ongoing modernization efforts. More than 140 million individual tax returns are expected to be filed ahead of the April 15 deadline, with over half prepared by professional tax preparers.
Key improvements include enhanced IRS Individual Online Accounts, which now offer access to over 200 notices, digital payment options, and new scam alerts. Mobile-friendly tax forms and upgraded virtual assistants will provide faster support, including voicebots and chatbots available in English and Spanish. Taxpayers will also see redesigned notices and expanded e-filing options.
The IRS’s Direct File program will launch on January 27 in 25 states, doubling the reach of last year’s pilot. It includes features like data import tools, expanded deduction coverage, and live chat support, making it easier for taxpayers to file for free. The IRS Free File program is already available on IRS.gov for taxpayers with an AGI of $84,000 or less.
The agency also emphasized the importance of electronic filing and direct deposit for quicker refunds, which are typically processed within 21 days. Taxpayers are encouraged to visit the "Get Ready" page on IRS.gov for resources to streamline the filing process.
January 8: National Taxpayer Advocate Flags Processing Delays, Calls for Improved Funding
National Taxpayer Advocate Erin M. Collins released her 2024 Annual Report to Congress, highlighting improvements in IRS taxpayer services but raising concerns over ongoing delays in processing Employee Retention Credit (ERC) claims and resolving identity theft cases.
The report notes that as of October 2024, approximately 1.2 million ERC claims were backlogged, with many businesses waiting over a year for resolution. Similarly, identity theft cases took nearly two years on average to resolve in fiscal year 2024, impacting nearly half a million taxpayers. Collins described these delays as “unconscionable” and urged prioritization of such cases.
The report also emphasized the importance of adequate funding for taxpayer services and technology upgrades. Only 4% of the $78.9 billion in Inflation Reduction Act (IRA) funding was allocated to taxpayer services, while 58% went to enforcement. Collins called for reallocating enforcement funds to enhance taxpayer services and IT modernization.
Improvements funded by the IRA include reducing telephone wait times, halving the time to process individual correspondence, and enabling electronic submission of key taxpayer forms. However, challenges remain in areas such as paper return processing, service accessibility, and staffing.
Collins also proposed legislative changes, including establishing minimum standards for tax preparers, expanding Tax Court jurisdiction to refund cases, and improving services for low-income taxpayers. Visit the Taxpayer Advocate Service website for the full report and recommendations.
Economic News/Policy:
January 10: Senate GOP Fears House Divisions Could Derail Trump’s Tax Agenda
Senate Republicans are concerned that internal divisions within the House GOP could jeopardize President-elect Trump’s proposed $4.5 trillion tax initiative.
Key challenges include disagreements over raising corporate tax rates and lifting the cap on state and local tax (SALT) deductions. With a narrow House majority, even small defections could stall the bill.
Speaker Mike Johnson (R-La.) aims to strengthen GOP unity by bundling the tax package with border security measures, which have broad Republican support. However, conservative lawmakers like Rep. Chip Roy (R-Texas) have raised concerns about deficit impacts and suggested raising corporate tax rates as a potential compromise.
Meanwhile, some House Republicans from high-tax states are pushing to increase the SALT deduction cap, a move that faces strong opposition from Senate Republicans like Sen. Thom Tillis (R-N.C.), who argue it subsidizes poor state-level tax policies.
The proposed tax package is expected to move through reconciliation, bypassing the Senate filibuster, but intraparty disputes in the House threaten to derail the process. Senate Republicans warn that failure to pass the bill could result in a $4 trillion tax increase if Trump-era tax cuts are not extended.
January 8: White House Official Warns R&D and AI Advances Are ‘At Risk’
Arati Prabhakar, Director of the White House Office of Science and Technology Policy (OSTP), expressed concerns about federal research and development (R&D) funding and the future of artificial intelligence (AI) under the incoming Trump administration. Speaking at the National Academies of Sciences, Engineering, and Medicine, Prabhakar criticized past Republican efforts to reduce R&D budgets and warned of potential challenges ahead.
Prabhakar highlighted the Biden administration’s significant increases in federal R&D funding, which rose 28% between 2021 and 2023. In contrast, she noted the Trump administration’s previous attempts to cut funding by billions, citing a 2023 Republican proposal to reduce R&D budgets by 19% over a decade.
She warned that funding shortfalls could hinder AI innovation, particularly for the laboratory infrastructure required to develop advanced technologies. Prabhakar also cautioned about a “dark future” of AI misuse, including risks of privacy violations, widespread misinformation, and systemic discrimination in areas like housing and healthcare.
Prabhakar emphasized the importance of continued investment in AI and federal R&D to maintain global leadership in science and technology, urging vigilance as the next administration takes charge. The Trump transition team did not comment on her concerns.
January 8: Trump Considering National Economic Emergency for New Tariff Program
President-elect Donald Trump is weighing a national economic emergency declaration to enact sweeping tariffs on imports, citing the International Economic Emergency Powers Act (IEEPA) to streamline implementation.
The plan seeks to boost U.S. manufacturing and economic security while avoiding the lengthy investigations required by other trade laws. Trump’s team is also exploring alternative options, such as sections 338 and 301 of U.S. trade law, to target nations deemed discriminatory in trade practices or to adjust existing tariffs on China.
The proposal has sparked debate, with supporters viewing tariffs as essential for rebuilding industrial capacity and critics warning of economic risks and potential legal challenges. This approach echoes Trump’s 2019 tariff threats on Mexico, which led to legal pushback but prompted policy concessions.
Although no final decision has been made, Trump recently highlighted the economy’s strength and outlined plans for pro-American trade policies to drive future growth.
Technology:
January 14: Biden Orders Energy, Defense Departments to Lease Sites for AI Data Centers, Clean Energy Generation
President Biden signed an executive order directing the Departments of Energy (DOE) and Defense (DOD) to lease federal sites for gigawatt-scale AI data centers and emissions-free power generation.
The initiative aims to support AI advancements while minimizing environmental impact by requiring data centers to be powered entirely by clean energy.
The executive order expedites permitting processes, including the use of “categorical exclusions” to streamline approval for projects that don’t significantly affect the environment. DOE and DOD will prioritize sites near high-capacity transmission infrastructure and will hold competitive solicitations for private-sector development of the facilities at private expense.
The White House projects AI data centers may require up to 5 GW of power within three years, potentially contributing to a surge in U.S. electricity demand, which is expected to increase by 128 GW over the next five years. Critics have raised concerns over potential impacts on consumer utility bills and preferential treatment for tech companies.
DOE will also advance geothermal energy projects, distributed energy resources, and nuclear energy deployment to support clean energy goals. These measures align with the administration’s commitment to accelerating the clean energy transition while addressing the growing demands of AI technology.
January 7: Monetization of Tax Data Sparks Concerns About Security
Tax data is increasingly being monetized by tax software companies like April, raising alarms about security and privacy risks.
Embedded in financial platforms, such software uses AI to streamline tax filing and leverage sensitive data for personalized financial products, often without clear consumer consent. Critics highlight lax regulations, insufficient consumer protections under IRS section 7216, and the potential misuse of personal information.
Recent reports spotlight data breaches and practices like sharing taxpayer information with third parties, including social media platforms, for targeted advertising. Experts warn that unauthorized access to sensitive tax data, including income and Social Security numbers, can lead to identity theft and fraud. Federal investigations and state-level privacy laws aim to address these risks, but critics argue that current measures are inadequate.
With tax-related identity theft cases on the rise and limited federal oversight of third-party tax preparers, calls for stricter security standards and comprehensive data privacy laws have intensified. As debates over consumer data rights continue, experts emphasize the need for greater accountability in the rapidly evolving digital tax ecosystem.
Energy and Environmental Policy/News:
January 13: DOT Announces $635M in EV Charging and Clean Transportation Grants
The U.S. Department of Transportation (DOT) has awarded $635 million in grants to expand electric vehicle (EV) charging and alternative fueling infrastructure across 27 states, four tribal areas, and Washington, D.C. The funding includes $368 million for community EV charging projects and $268 million for fast-charging infrastructure along key transportation corridors.
Key projects include $10.7 million for the Cherokee Nation in Oklahoma to install EV chargers at 12 locations and over $700,000 for Troy, Alabama, to establish community charging at sites like a hospital and university. Additionally, the Port Authority of Houston will receive nearly $25 million to build a hydrogen fueling station, while Maryland and neighboring states will use $18.6 million to deploy alternative fueling infrastructure along the I-81 and I-78 corridors.
In total, the grants will fund more than 11,500 EV charging ports and hydrogen and natural gas fueling stations. The initiative is part of the bipartisan infrastructure law’s $2.5 billion Charging and Fueling Infrastructure program and aims to create accessible transportation options, support clean energy innovation, and prepare the U.S. grid for zero-emission fueling needs.
The Biden administration’s emphasis on clean transportation aligns with rising EV adoption, which accounted for nearly 9% of U.S. light-duty vehicle sales in Q3 2024 and is projected to reach 36% market share by 2030.
January 9: Treasury Finalizes Guidance for IRA’s Tech-Neutral Clean Electricity Tax Credits
The U.S. Treasury has finalized guidance for the Inflation Reduction Act’s tech-neutral 45Y and 48E clean electricity tax credits, offering clarity on qualifying zero-emissions technologies, including wind, solar, hydropower, marine, geothermal, nuclear, and waste energy recovery.
These credits replace the Section 45 and 48 tax credits and are hailed as transformative for clean energy development, with extended availability through at least 2032.
Experts emphasize that the credits’ long-term certainty and inclusive framework promote innovation and facilitate investment in diverse energy technologies. The Solar Energy Industries Association and the American Council on Renewable Energy praised the credits, highlighting their role in boosting U.S.-manufactured components like solar modules and batteries. Offshore wind and emerging technologies, such as wave and tidal energy, stand to benefit significantly, particularly in remote areas like Alaska.
A Rhodium Group analysis estimates these credits could add 146 GW to 308 GW of clean energy capacity to the U.S. grid by 2030. Brad Townsend of the Center for Climate and Energy Solutions called them “the most important clean energy tax credits ever enacted,” supporting advanced nuclear and yet-to-be-developed technologies that can drive emissions reductions, economic growth, and job creation.
January 9: Texas Tops U.S. States for Renewable Energy and Battery Capacity
Texas leads the nation in renewable energy and battery capacity, with nearly 80% more combined solar, wind, and battery capacity than any other state.
As of 2024, Texas boasts 42,000 MW of wind, 22,000 MW of solar, and 6,500 MW of utility-scale battery capacity. Since 2019, Texas has achieved rapid growth, with solar capacity increasing 800%, wind by 50%, and battery storage by an extraordinary 5,500%.
Renewables now account for 30% of Texas's electricity generation, up from 18% in 2019. California ranks second, with a combined 40,000 MW of solar, wind, and battery capacity, including the country’s largest battery network at 11,000 MW. Florida, Arizona, Colorado, and Nevada follow, with significant growth in solar and battery storage. Florida has surged from 50 MW of solar capacity in 2019 to over 10,500 MW in 2024.
Nationally, grid-scale battery storage is projected to grow by 62,000 MW by 2028, alongside 10,000 MW of residential and 2,500 MW of commercial storage. Texas's dominance and the continued nationwide expansion of renewable energy underscore the sector's critical role in transforming the U.S. energy landscape.
January 7: Biden Expands Wind and Solar Tax Credit to Nuclear, Hydropower, Geothermal Energy
The Biden administration has finalized guidance to broaden tax credits, previously limited to wind and solar energy, to encompass a wider array of clean energy technologies.
This expansion now includes nuclear, hydropower, geothermal, marine, and hydrokinetic energy sources. The initiative is part of the Inflation Reduction Act of 2022, aiming to accelerate the deployment of diverse clean energy solutions to achieve climate goals.
Eligible projects can now access tax credits of up to 30% for production and investment in these technologies, promoting innovation and diversification in the energy sector.
The administration emphasizes that this move is crucial for decarbonizing the power sector, which accounts for approximately a quarter of U.S. greenhouse gas emissions. However, the future of these tax credits may face challenges, as President-elect Donald Trump has indicated intentions to dismantle certain climate policies, favoring increased fossil fuel production.
The business community, having shaped these policies, is expected to advocate for the continuation of clean energy investments.
For Fun:
January 6: Storm Surfers of the Sky: How Bats Harness Winds to Power Migration
Researchers have discovered that migratory bats conserve energy during their long journeys by "surfing" warm winds from storm fronts.
A new biotelemetry system using lightweight Internet of Things (IoT) tags tracked 71 female common noctule bats across central Europe, revealing detailed insights into their migration patterns.
These bats traveled up to 1,116 kilometers over 46 days, with some covering 383 kilometers in a single night. Their migrations were often synchronized with warm nights and storm-induced tailwinds, demonstrating impressive adaptability. Late-season migrants, however, faced higher energy costs due to maternity weight and less favorable weather.
Despite the novel insights, the study underscores the challenges bats face, including habitat loss, declining insect populations, and climate change. Migratory ranges are shifting, and conservation efforts are critical to protecting these nocturnal travelers. Scientists stress the importance of leveraging advanced technologies to better understand and address threats to bat populations.