Recovery Rebate Credit, Form 6765, Stopgap Spending Bill, and AI Patent 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:
December 26: IRS Left Sensitive Paper Documents Exposed Before Destroying Them
The Treasury Inspector General for Tax Administration (TIGTA) has released a report highlighting significant flaws in the IRS’s sensitive document destruction program.
Inspectors found sensitive documents stored in open containers and bins with compromised slots, allowing easy access to discarded materials. The issues stem from a 2022 contract change that shifted billing from weight-based to bin-based criteria, resulting in inadequate oversight.
The IRS lacks standard operating procedures for document destruction across its 387 facilities, and officials are unaware of specific protocols at 110 locations. TIGTA identified billing discrepancies in October 2023 invoices, with charges exceeding the number of bins serviced.
The report also found that the IRS has stopped conducting on-site inspections, relying solely on contractors and subcontractors for compliance.
TIGTA made 12 recommendations, including developing uniform procedures, inspecting facilities annually, replacing damaged bins, and conducting a cost-benefit analysis for bin optimization.
The IRS agreed to seven recommendations and committed to additional employee training and communication initiatives. However, the IRS noted resource limitations in staffing smaller facilities and conducting regular site visits.
December 20: IRS Announces Special Payments to 1 Million Taxpayers Who Missed 2021 Recovery Rebate Credit
The IRS will issue automatic payments this month to approximately 1 million taxpayers who missed claiming the 2021 Recovery Rebate Credit on their returns. The payments, which require no action from recipients, will provide up to $1,400 per individual and are expected to reach recipients by late January 2025.
Eligible taxpayers include those who filed 2021 returns but left the Recovery Rebate Credit field blank or entered $0 despite being eligible.
The IRS estimates the payments will total $2.4 billion. Separate notification letters will accompany the payments.
The IRS also reminds taxpayers who have not yet filed 2021 returns that they may still be eligible to claim the credit by filing before the April 15, 2025, deadline.
This refundable credit does not count as income when determining eligibility for federal benefits.
December 20: IRS Requests Feedback on Draft Instructions for Form 6765, Credit for Increasing Research Activities
The IRS has released draft instructions for Form 6765, used to claim the Credit for Increasing Research Activities, and is seeking public feedback. Key areas for comment include Section G reporting for controlled groups, ASC 730 Directive, business component details, and statistical sampling.
The draft includes updates such as a new Section E for other business information, Section F summarizing qualified research expenses, and Section G for reporting business component details.
While Section G reporting will be optional for tax year 2024, it will become mandatory for most filers starting in tax year 2025, with exceptions for qualified small businesses and taxpayers with lower qualified research expenses and gross receipts. The final instructions are expected by January 2025.
These updates aim to enhance consistency in reporting and improve the information provided to the IRS for effective tax administration. Feedback on the draft or final instructions can be submitted via email to lbi.rt.team@irs.gov through June 30, 2025.
December 18: Senate Democrats Launch Probe into Trump IRS Nominee
Senate Democrats have launched an inquiry into President-elect Trump’s nominee for IRS commissioner, former Rep. Billy Long (R-Mo.).
The investigation focuses on Long’s promotion of the employee retention tax credit (ERTC), which has been tied to fraudulent claims and IRS operational delays.
Senate Finance Committee Chair Ron Wyden (D-Ore.) and Sen. Catherine Cortez Masto (D-Nev.) have requested information from two tax advisory firms allegedly paying Long on a contingency basis for referrals.
The firms must respond by January 2. The IRS has criticized the ERTC as fostering a “gold rush” for promoters at public expense.
Long’s nomination comes amid partisan tensions over IRS funding, with Republicans cutting portions of the agency’s budget increases intended for enforcement.
December 17: Hawley Pitches Massive Increase to Child Tax Credit
Sen. Josh Hawley (R-Mo.) has proposed a significant expansion of the child tax credit (CTC), raising it from $2,000 to $5,000 per child.
This move sets the stage for a potential clash with budget-conscious lawmakers, as the plan could add over $3 trillion to the national deficit, which currently stands at $36 trillion. Hawley argues the proposal aligns with priorities for working families, calling for a “big tax cut” for parents.
However, GOP lawmakers are divided on tax priorities, with some advocating for a focus on border security and energy production before tackling tax reform. If no action is taken, the CTC will drop to $1,000 per child by the end of 2025.
The enhanced CTC of $3,600 under the Biden administration’s American Rescue Plan helped lift millions of children out of poverty, according to Columbia University research. Hawley’s proposal faces skepticism from fiscal conservatives and uncertainty over legislative coordination within the Republican Party.
Economic News/Policy:
December 30: Treasury Small Business Ownership Rule on Hold as Court Eyes Constitutionality
The 5th U.S. Circuit Court of Appeals has delayed enforcement of the Treasury Department’s new beneficial ownership information (BOI) reporting rule.
The rule, stemming from the Corporate Transparency Act, required small businesses to report their owners' identities to FinCEN by January 13, 2025, to combat financial crimes involving shell companies.
The court’s injunction halts the rule until at least March 25, 2025, when oral arguments are scheduled. During this time, businesses are not required to file BOI reports or face penalties, which include daily fines of up to $591 and potential criminal charges.
The rule applies to approximately 32.6 million businesses, excluding those with over $5 million in gross sales and more than 20 employees.
Businesses may still voluntarily submit BOI reports. The delay follows a series of court decisions earlier this month, creating uncertainty for affected small businesses.
December 21: Biden Signs Stopgap Spending Bill, Preventing a Government Shutdown
President Biden signed a short-term spending bill to avert a government shutdown, extending funding through March 14, 2025.
The measure, which passed the Senate 85-11, provides $100 billion for disaster relief, including aid for Maui wildfires and North Carolina flooding, as well as a one-year extension of federal farm policy.
The bill excludes provisions to address the debt ceiling, a point of contention after demands from President-elect Donald Trump and criticism from Elon Musk disrupted earlier negotiations. House Speaker Mike Johnson, R-La., faced challenges balancing Trump’s policy preferences with bipartisan realities in Congress.
Despite this, the Senate approved the Gabriella Miller Kids First Research Act, allocating $12 million annually for pediatric cancer research over five years.
The White House voiced strong support, highlighting the bill’s role in maintaining essential government services. The legislative battle reflects ongoing partisan tensions as Republicans prepare to navigate a narrowly divided Congress in 2025.
Technology:
December 30: AI Will Have a Major Impact on Labor Markets. Here’s How the US Can Prepare
As artificial intelligence (AI) reshapes labor markets, the U.S. must improve its ability to forecast job and skill changes to stay competitive and mitigate disruption.
A recent American Enterprise Institute (AEI) paper calls for new data systems to provide timely, region-specific insights into technology-driven employment shifts. Existing federal labor market information often lags by years and lacks the forward-looking detail needed to prepare for AI’s impact.
A proposed nonpartisan institute, modeled after the Frontier Model Forum, would integrate data from government, businesses, and educational institutions, providing “headlight” reports to predict emerging job and skill needs.
The institute would work with state labor market agencies to generate regional forecasts, helping businesses, workers, and educators adapt to AI’s rapid advancements.
With AI poised to create new jobs and render some roles obsolete, proactive measures such as regional testbed programs and upskilling initiatives are critical to navigating this shift. By providing fair warning and actionable insights, the U.S. can maximize AI’s benefits while minimizing its disruptions.
December 24: AI Patent Policy Should Promote Economic Growth and Innovation
As artificial intelligence (AI) continues to drive technological progress and economic growth, the U.S. must bolster its patent system to encourage AI-related innovations.
Strong patent protections incentivize research and development, enabling the widespread adoption of new technologies. However, judicial interpretations like the Alice/Mayo test have created uncertainty about what constitutes a patentable invention, particularly for AI innovations.
The Trump administration could address these challenges by supporting legislative reforms to eliminate restrictive judicial precedents and restore the presumption of injunctive rights for patent holders.
Additionally, updates to the U.S. Patent and Trademark Office’s guidance could clarify the patentability of AI-assisted and AI-specific technologies, ensuring they are treated equitably under the law.
Broader efforts, such as repealing regulatory barriers and advocating internationally for AI patent rights, may further enhance the U.S.'s competitive edge in AI. By fostering a robust patent framework, these measures could maximize AI’s potential to boost productivity, create jobs, and sustain economic growth.
December 17: House Task Force Releases Sweeping End-of-Year Report on AI
The House Task Force on Artificial Intelligence (AI) has unveiled a comprehensive 253-page report outlining a roadmap for AI governance and legislative priorities.
The report highlights the transformative potential of AI in healthcare, education, national security, and more, while emphasizing the importance of addressing risks like misinformation, algorithmic bias, and misuse.
Task force co-chairs Reps. Jay Obernolte (R-Calif.) and Ted Lieu (D-Calif.) stressed the critical need for the U.S. to maintain leadership in AI innovation while ensuring ethical safeguards.
Developed after consulting over 100 experts, the report offers actionable recommendations, including fostering AI literacy, promoting ethical research practices, and strengthening oversight mechanisms.
It also explores the implications of AI on workforce dynamics and privacy, advocating for policies that mitigate harm while encouraging innovation. This landmark initiative underscores Congress's intent to balance technological progress with public safety and ethical responsibility, setting the stage for future AI-related legislation.
Energy and Environmental Policy/News:
December 16: US Renewable Energy Pushes Beyond Project Cancellations, and Trump
Despite challenges, including the cancellation of New York’s $11 billion Clean Path New York transmission project and potential restrictions from the incoming Trump administration, U.S. renewable energy projects continue to advance.
Rising costs led to the project’s cancellation, though developers remain committed to addressing New York’s energy needs. New York has struggled to meet its renewable energy goals, retiring 5.2 GW of fossil fuel power since 2019 while adding only 2.25 GW of renewables.
In offshore wind, the Interior Department fast-tracked environmental reviews for six projects in the New York Bight, while a 2-GW Maryland project and New Jersey’s Atlantic Shores wind project received key approvals.
Virginia’s Coastal Virginia Offshore Wind project remains on schedule, with infrastructure arriving at its installation site. A report from S&P Global Commodity Insights predicts 12 GW of offshore wind capacity in place by 2030, supported by ongoing federal approvals and port expansions.
Marine terminals in New York and Massachusetts are also under development to support the growing demand for infrastructure.
For Fun:
December 24: Near-Unlimited EV Range Now a Possibility Thanks to Surprising New Technology — Solar Paint
Mercedes-Benz has introduced a groundbreaking photovoltaic paint that can convert sunlight into electricity, potentially adding up to 7,456 miles (12,000 kilometers) of range annually under optimal conditions.
This nanoparticle-based paint, which integrates seamlessly with a vehicle’s body without altering its appearance, achieves 20% energy efficiency, comparable to conventional solar panels.
The lightweight, non-toxic coating is applied beneath the vehicle's topcoat, capturing 94% of sunlight energy to power the car or store energy for later use.
In sunny locations like Los Angeles, it could eliminate the need for traditional charging while also enabling bidirectional charging to power homes with excess energy.
Although Mercedes-Benz is optimizing the technology for various vehicle surfaces, the company has not announced a timeline for commercial availability.
December 14: Creating ‘Mirror Life’ Could Be Disastrous, Scientists Warn
A group of leading scientists, including Nobel laureates, has issued a warning about the potential dangers of “mirror life,” synthetic organisms with molecules that are mirror images of natural ones. Published in Science, their report raises concerns about ecological damage and health risks if mirror bacteria, a form of mirror life, are created.
Mirror molecules, which exhibit a property called chirality, do not interact with natural biomolecules, potentially allowing mirror bacteria to evade immune responses, predators, and ecological checks.
While applications such as longer-lasting drugs and bioreactors using mirror bacteria show promise, researchers fear these same traits could lead to unchecked infections and environmental spread.
The authors call for global discussions to assess and mitigate these risks, suggesting that research into mirror bacteria be halted unless its safety can be assured.
While some experts downplay the potential threats, others argue that the precautionary approach is necessary as technology advances toward creating synthetic organisms.