New Administration, 45Z Clean Fuel Production Credit, and AI Data Centers
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 20: Trump Freezes IRS Hiring, Nixes Global Tax Deal
On his first day back in office, President Donald Trump issued executive orders freezing federal hiring, with extended restrictions for the IRS, and withdrawing U.S. participation in the OECD’s global tax deal.
The hiring freeze applies broadly across the executive branch but includes exceptions for military, national security, and public safety roles. Trump justified the IRS-specific extension by referencing disputed claims about IRS hiring practices under Biden. The order also called for federal workers to return to in-person offices.
Additionally, Trump announced the creation of an "External Revenue Service" to collect tariffs and duties as part of his trade policy overhaul. Another order rejected the OECD global minimum tax deal, arguing it undermined U.S. sovereignty and competitiveness.
The administration instructed the Treasury to notify the OECD and assess retaliatory tax policies that could harm American companies. The orders underscore Trump’s emphasis on reducing federal oversight and reshaping international tax agreements to prioritize domestic interests.
January 17: Werfel Announces Departure as IRS Commissioner Ahead of Trump Administration
IRS Commissioner Danny Werfel announced he will step down on January 20, making way for President-elect Trump’s nominee, former Rep. Billy Long, to lead the agency. Werfel’s term was set to run until November 2027, but his early departure aligns with Trump’s plans to replace him. Deputy Commissioner Doug O’Donnell will serve as acting commissioner until Long’s confirmation.
Werfel highlighted significant improvements during his tenure, including enhanced taxpayer services, reduced call wait times, and the introduction of the Direct File program, which allows taxpayers to file returns electronically for free. These changes were part of a broader $80 billion IRS modernization funded by Democrats in 2022. However, ongoing Republican opposition has led to funding cuts and uncertainty about the agency’s future priorities.
Long, whose post-Congress career involved promoting controversial pandemic-era tax credits, faces scrutiny from Senate Democrats. His nomination hearing is expected to be contentious, as critics question his experience and potential impact on the agency’s apolitical mission.
Meanwhile, concerns remain over the continuation of IRS modernization efforts, including the Direct File program, as Republicans push for policy changes under Trump’s administration.
January 17: Los Angeles-Area Man Pleads Guilty to Fraudulently Seeking Millions of Dollars in COVID-Related Tax Credits
Kevin J. Gregory, 57, of Los Angeles, pleaded guilty to making false claims to the IRS after fraudulently seeking over $65 million in COVID-related tax credits for a nonexistent business.
From November 2020 to April 2022, Gregory claimed substantial employee retention and sick leave credits for "Elijah USA Farm Holdings," a fictitious Beverly Hills-based farming company. He received more than $2.7 million in refunds, which he used for personal expenses.
Among his false claims, Gregory filed a tax return in January 2022, asserting the business employed 33 people, paid $1.6 million in quarterly wages, and was owed $6.5 million in COVID tax credits. In reality, Elijah Farm had no employees, paid no wages, and made no federal tax deposits. Gregory faces a maximum sentence of five years in federal prison at his May 16 sentencing.
The case was investigated by the IRS Criminal Investigation division and is part of the DOJ’s COVID-19 Fraud Enforcement Task Force, which works to combat pandemic-related fraud. Individuals with information on COVID-19 fraud can report it to the DOJ’s National Center for Disaster Fraud Hotline.
January 17: IRS to Test Faster Dispute Resolution
The IRS announced three pilot programs aimed at improving alternative dispute resolution (ADR) processes, including fast-track settlement (FTS) and post-appeals mediation (PAM).
These initiatives seek to ease restrictions, enhance personal attention, and clarify denials to make ADR options more accessible. Changes include allowing FTS on an issue-by-issue basis, requiring executive approval for denying FTS or PAM requests, and mandating explanations for denials.
A new "Last Chance FTS" pilot will inform taxpayers of FTS availability after filing a protest, while another pilot removes limitations preventing PAM participation following FTS.
The programs align with the IRS’s broader strategic transformation efforts, aiming to revitalize ADR and encourage taxpayer participation. Traditional appeals remain an option for all taxpayers.
January 16: Trump IRS Pick Faces Scrutiny Over Ties to Dubious Tax Credits
Billy Long, President-elect Trump’s nominee for IRS commissioner, faces growing criticism over his association with Lifetime Advisors, a tax consulting firm promoting questionable tax credits.
Long previously supported the Employee Retention Credit (ERC), which the IRS paused processing in 2023 due to widespread fraudulent claims. Lifetime Advisors has since been linked to promoting "sovereign tribal tax credits," which the Treasury Department asserts are unauthorized and illegitimate.
Documents show Lifetime Advisors and its affiliate, Lifetime Navigators, pitched these credits to high-income investors, claiming they could reduce tax liabilities by up to 40%. White River Energy Corp., a key promoter, claims to offer the credits through a partnership with a Native American tribe—a claim the tribe denies, issuing a cease-and-desist order.
Senate Finance Committee Democrats are investigating Long’s role, citing his past promotion of contingency-based ERC refund claims, which violates IRS rules.
Critics, including tax experts, warn that the alleged schemes could lead to penalties for taxpayers and severe consequences for promoters. The controversy raises questions about Long's suitability to lead the IRS as calls for further investigations intensify.
January 10: Treasury Releases Initial 45Z Clean Fuel Production Credit Guidance
The U.S. Treasury and IRS issued preliminary guidance on the 45Z clean fuel production credit, providing an overview of eligibility requirements, lifecycle emissions calculations, and plans to incorporate climate-smart agriculture (CSA) practices into carbon intensity (CI) metrics for certain feedstocks.
The Section 45Z credit, established by the Inflation Reduction Act, offers per-gallon tax credits for transportation fuels with low lifecycle greenhouse gas emissions, with higher credits available for facilities meeting wage and apprenticeship standards.
While biofuel industry leaders welcomed the guidance, they criticized its lack of clarity on key details, such as emission rate calculations and CSA integration. The guidance also introduced plans for the new 45ZCF-GREET model, set to help determine emissions rates.
Industry representatives stressed the importance of swift finalization of 45Z rules under the upcoming Trump administration to ensure the credit effectively supports clean fuel innovation and investment.
Economic News/Policy:
January 20: Trump Announces 25% Tariffs on Canada and Mexico, Signs Orders on Economy
President Donald Trump announced 25% tariffs on imports from Canada and Mexico starting February 1 while hinting at softer positions on China after recent discussions with President Xi Jinping.
The tariffs are part of broader executive actions aimed at addressing inflation, increasing domestic energy production, and reshaping trade policies. Trump also opened the Arctic National Wildlife Refuge for oil drilling, paused wind energy projects, and directed agencies to identify ways to reduce costs for housing, energy, and healthcare.
Other measures include a temporary 75-day reprieve for TikTok to find a U.S. buyer and a study on establishing an "External Revenue Service" for collecting tariffs and duties.
Trump doubled down on his pledge to restore U.S. "energy dominance," citing oil and gas production as critical to lowering consumer costs and national security. Critics warn the new tariffs could increase consumer prices, with Canadian officials expressing readiness to respond.
While inflation has eased since mid-2022, voters remain frustrated by elevated prices, particularly for groceries and housing, which have risen sharply in recent years.
January 20: Trump Announces Creation of External Revenue Service to Collect Tariffs
President Trump has unveiled plans to create the "External Revenue Service" (ERS), a new agency tasked with collecting tariffs and other foreign trade revenues.
Part of Trump’s broader strategy to overhaul the U.S. trade system, the ERS is intended to generate substantial revenue for the Treasury by taxing foreign goods. Economists warn that such tariffs could increase costs for consumers.
Additionally, Trump signed an executive order freezing federal hiring across all agencies, with extended restrictions for the IRS. Exceptions apply to roles in national security and public safety, but the freeze could strain the IRS during tax season.
Trump also announced the U.S. withdrawal from the OECD global tax deal, arguing it undermines American sovereignty and economic competitiveness. The Treasury Department was directed to notify the OECD and investigate retaliatory tax policies affecting U.S. companies.
These moves reflect Trump’s focus on shrinking the federal workforce and reshaping tax and trade policies to prioritize domestic interests.
January 17: Senate GOP Rejects House Conservative Pitch on Corporate Tax Rates
House conservatives’ proposals to raise corporate taxes to offset the costs of President-elect Trump’s tax package are facing strong opposition from Senate Republicans, who argue that such increases could harm economic growth and competitiveness.
Ideas floated include raising the corporate tax rate from 21% to 25% or limiting state and local tax (SALT) deductions for corporations. However, Senate Republicans warn that higher corporate taxes could deter investment, lead to foreign takeovers, and result in job losses.
While some Republicans, such as Sen. Ron Johnson (R-Wis.), support re-evaluating corporate tax policy, others like Sen. John Cornyn (R-Texas) and Senate GOP Whip John Barrasso (R-Wyo.) firmly oppose tax hikes, emphasizing the need to maintain U.S. competitiveness.
Speaker Mike Johnson (R-La.) faces the challenge of uniting his slim House majority around any tax plan while navigating these stark disagreements.
January 17: CBO Projects US Debt to Grow $23.9 Trillion Over 10 Years
The Congressional Budget Office (CBO) projects the U.S. national debt will increase by $23.9 trillion over the next decade, excluding potential costs from extending President-elect Trump’s proposed tax cuts, which could exceed $4 trillion.
While rising taxable incomes provide modest relief, annual deficits are expected to average 6.1% of GDP by 2035, significantly above the historical 50-year average of 3.8%. Major contributors to rising deficits include Social Security, Medicare, and growing interest costs on debt, with federal spending projected to reach $7 trillion this fiscal year, or 23.3% of GDP.
Although discretionary spending is forecast to decline relative to GDP, an aging population and lower birth rates are driving mandatory outlays higher, straining popular entitlement programs.
The CBO also highlights a widening gap between tax revenue and government services, with tax collections expected to outpace spending temporarily before reversing in 2027. Economists warn of the long-term risks of unchecked debt growth, with fiscal analysts urging policymakers to avoid further fiscal harm as expiring tax policies are debated later this year.
Technology:
January 20: Trump Revokes Biden Executive Order on Addressing AI Risks
President Donald Trump signed an executive order revoking a 2023 directive by Joe Biden that mandated AI developers to share safety test results with the U.S. government before public release for systems posing risks to national security, the economy, or public health.
Biden’s order, rooted in the Defense Production Act, sought to establish standards for testing AI and addressing risks, including cybersecurity and hazardous materials. Trump’s action aligns with the Republican Party platform emphasizing AI innovation free from regulatory "hindrances."
Biden’s now-revoked order came amid Congressional inaction on AI regulation, while Trump’s repeal underscores ongoing industry debates over balancing innovation with safeguards.
Notably, Trump retained Biden’s separate executive order supporting energy demands for advanced AI data centers, leaving it intact amidst his administration’s AI policy shifts.
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 expedite the development of gigawatt-scale AI data centers powered by emissions-free electricity.
The order mandates leasing federal sites for data centers and clean power facilities, prioritizing areas with high-capacity transmission infrastructure and minimal environmental impact.
Private developers will bear the cost of building and operating these facilities while ensuring sufficient clean energy generation matches their electricity needs.
The executive order also calls for streamlined permitting processes, leveraging “categorical exclusions” to fast-track projects without significant environmental reviews.
The initiative aims to support AI’s rapid growth, with U.S. electricity demand projected to rise by 128 GW over the next five years, largely driven by data centers and manufacturing.
Critics, however, warn that prioritizing AI infrastructure may increase utility bills for consumers and circumvent environmental protections. Despite concerns, the administration asserts the plan will accelerate the clean energy transition responsibly and without additional costs to American families.
Energy and Environmental Policy/News:
January 20: Trump to Declare National Energy Emergency, Ending Biden’s "Electric Vehicle Mandate"
President Donald Trump announced plans to declare a national energy emergency on his first day back in office, focusing on boosting domestic oil and gas production and ending what he referred to as Biden’s “electric vehicle mandate.”
The executive order will prioritize tapping Alaska’s energy resources and eliminating regulations on appliances like gas stoves and dishwashers. Trump argues that increased fossil fuel production is essential for lowering energy prices, creating jobs, and bolstering national security.
The declaration comes amid record U.S. oil production, which hit 13.4 million barrels per day in late 2024. Energy firms are expected to benefit significantly as the new administration dismantles regulatory barriers.
Critics warn that expanded fossil fuel use could undermine efforts to transition to clean energy and combat climate change. Trump maintains that his policies will address inflation by reducing energy costs and restoring consumer choice. The declaration signals a stark shift from the Biden administration’s clean energy incentives and EV tax credits.
January 17: U.S. Electricity Demand Set to Soar, Challenging Climate Goals
U.S. electricity demand is projected to grow nearly 16% over the next five years, driven by energy-intensive technologies like AI-powered data centers, increased manufacturing, and a shift to electric vehicles and appliances.
To meet this surge, utilities are relying heavily on natural gas, which, while cleaner than coal, still emits significant greenhouse gases and methane during production and transport.
Despite major investments in clean energy under the Inflation Reduction Act, U.S. emissions stagnated in 2024, putting the nation’s goal of halving emissions by 2030 out of reach.
Analysts warn that regulatory hurdles are slowing renewable energy development, leading some utilities to delay coal plant retirements and expand natural gas usage.
Experts stress the urgent need for faster deployment of clean energy solutions, streamlined regulations, and innovative approaches to meet rising electricity demand while reducing emissions. Failure to act swiftly could hinder global climate efforts as extreme weather events linked to warming exact devastating costs.
January 17: U.S. Invests $635 Million in Zero-Emission EV Charging and Hydrogen Infrastructure Expansion
The U.S. Department of Transportation’s Federal Highway Administration (FHWA) announced $635 million in grants to expand zero-emission electric vehicle (EV) charging and hydrogen refueling infrastructure.
Supported by the Bipartisan Infrastructure Law, the funding will back 49 projects across 27 states, four federally recognized tribes, and Washington, D.C., adding over 11,500 EV charging ports and alternative fueling stations.
Highlights include the Port Authority of Houston’s $24.8 million hydrogen fueling station for heavy-duty trucks and a $55.9 million California project to build 21 public EV charging stations and a hydrogen refueling station.
These efforts align with the National Zero-Emission Freight Corridor Strategy, aiming to accelerate the deployment of zero-emission medium- and heavy-duty vehicles, reduce carbon emissions, and promote equitable access to clean transportation. Officials emphasize the grants’ role in fostering innovation, creating jobs, and preparing the energy grid to support a sustainable future.
January 14: US Battery Market Faces Possible ‘Significant Tariff Impacts’: Clean Energy Associates
The U.S. battery market is bracing for steep price increases as multiple trade actions target Chinese lithium-ion battery imports.
Clean Energy Associates (CEA) warns that proposed tariffs, including Section 301 duties rising to 60% and new Section 232 levies, could push total import tariffs on Chinese batteries to nearly 150%.
These measures would increase prices for 5-MWh lithium-ion battery systems by 8% from 2023 to 2028, even as lithium carbonate prices drop significantly.
Alternative production from U.S., Southeast Asian, and Korean manufacturers is expected to come online between 2025 and 2027 but may remain costlier than Chinese lithium-iron-phosphate (LFP) systems. Legislative efforts to revoke China’s permanent normal trade relations status could further inflate costs if implemented.
Despite these challenges, CEA notes that tariffs will likely set the market price for U.S. energy storage systems over the next two years due to limited alternatives.
Meanwhile, prices for non-lithium raw materials like steel and copper are expected to stay stable, but rising software and battery management costs may offset other savings in the supply chain.
For Fun:
January 15: Hydrogen Project Brings Hope to Utah Coal Town as a Renewable Energy Success Story
Delta, Utah, a small town of 3,800, is being transformed by the Intermountain Power Project (IPP), which is replacing its coal-fired power plant with hydrogen-capable natural gas turbines.
The new facility, set to open this year, will initially operate on a 30% hydrogen blend, transitioning to 100% green hydrogen by 2045. This shift ensures continued power generation for its primary customer, Los Angeles, while maintaining jobs and economic stability in Delta.
Construction of the plant, which peaked at 1,200 workers, has brought a housing shortage to the town, but the long-term goal is to secure Delta’s future as a hub for hydrogen production and renewable energy.
The IPP has generated significant local tax revenue, funding schools, public services, and infrastructure, while fostering cooperation between Utah’s conservative politics and California’s clean energy goals.
Challenges remain, including the high costs of hydrogen and potential job reductions once construction ends. However, Mitsubishi and Chevron’s investments in hydrogen production at the site highlight the project’s potential as a blueprint for transitioning other coal-dependent communities to renewable energy. Advocates say the success lies in Delta’s openness to collaboration and commitment to innovation.