National Association of Manufacturers, Tax Cuts and Jobs Act, and the Corporate Transparency Act
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 you time and money. Schedule a free consultation with a member of our team here.
FINCEN FILING: Beginning this year, most small companies have a NEW small business filing requirement with FinCEN call the Business Ownership Information Report, that can be time confusing. Failure to file or erroneous filings can result in jail time and up to $10,000 in fines. Our team can handle the filing for you with minimal effort on your end. To get started, schedule a time to speak with us here.
Tax Policy/News:
The IRS is intensifying its efforts to address tax avoidance through abusive partnership transactions, leveraging new guidance and additional resources from the Inflation Reduction Act to target high-income taxpayers and corporations.
The agency has established specialized groups within the Office of Chief Counsel and the Large Business and International division to develop strategies for dealing with complex partnership and pass-through tax arrangements.
These efforts include addressing "basis shifting" transactions where taxpayers manipulate asset values to reduce tax liabilities, a tactic estimated to potentially cost over $50 billion in a decade.
The new initiatives also involve increased audits and clearer regulations to improve compliance and transparency, especially for partnerships that have seen reduced scrutiny due to previous IRS budget cuts.
IRS Chief Counsel Margie Rollinson also announced the creation of new offices focusing on partnerships and special industries to bolster the agency's expertise and enforcement capabilities in these complex areas.
The IRS has issued a warning about the increasing threat of impersonation scams targeting older adults, where fraudsters pose as government officials to steal personal information and money.
These scammers often pretend to be from the IRS or other agencies, using fear and deceit to exploit their victims.
They employ advanced techniques such as caller ID spoofing and create urgent scenarios to pressure victims into immediate actions, often demanding payment through unconventional methods like gift cards or wire transfers.
The warning is part of broader efforts leading up to World Elder Abuse Awareness Day on June 15, aimed at highlighting the abuse and neglect faced by older adults.
The IRS emphasizes the importance of understanding how and when the agency contacts taxpayers and advises caution with unsolicited communications.
The IRS also provides resources for verifying the legitimacy of communications and reporting scams, and the U.S. Department of Justice offers a National Elder Fraud Hotline to support victims.
Manufacturing Wins (National Association of Manufacturers)
The 2017 tax reforms led to significant growth in manufacturing jobs, wages, and capital investment, but impending tax increases set for the end of 2025 threaten this progress. To continue fostering growth, manufacturers urge Congress to maintain the entirety of these tax reforms.
According to the NAM’s 2024 First Quarter Manufacturers’ Outlook Survey, a vast majority of manufacturers believe that failing to prevent these tax hikes will limit their ability to invest, create jobs, and remain competitive.
Key policy recommendations include protecting the 20% pass-through deduction, preserving the 21% corporate tax rate, preventing individual tax rate hikes, restoring immediate R&D expensing, maintaining full expensing for capital equipment, supporting interest deductibility, preserving or eliminating the estate tax, and preventing international tax increases.
Manufacturers emphasize that maintaining these pro-growth tax policies is essential for sustaining economic growth, innovation, and global competitiveness.
Economic News/Policy:
June 13: TCJA Extension Could Add $4 to $5 Trillion to Deficits
The updated Build Your Own Tax Extensions tool, reflecting the latest Congressional Budget Office (CBO) estimates, shows the fiscal impact of extending expiring provisions of the Tax Cuts and Jobs Act (TCJA) and other tax policies.
Extending individual and estate tax provisions expiring at the end of 2025 would add $3.9 trillion ($4.5 trillion with interest) to deficits through FY 2035, while extending nearly all expired, expiring, and changing tax provisions would add $5.2 trillion ($6.1 trillion with interest) to deficits.
These extensions would increase the national debt to between 128.5% and 132.2% of GDP by 2035. The primary drivers of revenue loss include cuts to individual income tax rates, near-repeal of the Alternative Minimum Tax (AMT), and the pass-through income deduction.
Extending non-TCJA policies, like the Affordable Care Act's premium tax credits and green energy credits, would further increase costs. Given the significant deficit impact, policymakers are advised to consider thoughtful tax reform to avoid further exacerbating the fiscal situation.
June 12: Amid growing uncertainty, CTA under review for fraud and constitutionality
Since January, the BOI Database has faced compliance efforts alongside fraud and constitutional concerns.
The Corporate Transparency Act (CTA), enacted in 2021, aimed to identify shell companies to combat financial crimes by requiring the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) to collect beneficial ownership information.
However, this initiative has led to new crimes targeting small businesses, which often lack the resources for compliance. Scammers exploit these gaps through fraudulent filing companies, fake websites, and misleading communications.
Despite FinCEN’s efforts to inform businesses, awareness remains low, leading to increased vulnerability.
Ongoing litigation and political efforts challenge the CTA’s constitutionality, with small businesses urged to comply amidst this uncertain regulatory landscape.
June 11: Biden’s capital gains taxes would boost economic equality: Analysis
A study from American University assessing the Biden administration's tax proposals on increasing capital gains taxes has found that they would reduce wealth inequality without harming economic growth.
Biden's plan to raise the tax rate on dividends and capital gains from 20 percent to 39.6 percent would primarily impact the wealthiest Americans, leading to a decline in their wealth.
The study suggests that the increased taxes would result in a more equitable economy by reducing the return on equity, indirectly boosting investment and GDP in the long run.
The top 1 percent of U.S. wealth holders, who own about half of the stock market, would be most affected, while the bottom half owns just 1 percent of stocks.
This change addresses the dramatic rise in wealth inequality over recent decades. Despite the potential benefits, some economists, like Erica York from the Tax Foundation, question the assumptions behind the study's findings, particularly regarding the impact on capital costs.
The debate over capital gains taxes continues to center around issues of economic fairness and the proper structure of the tax code.
Technology:
June 13: Lack of federal R&D support challenges AI innovation, White House official warns
Arati Prabhakar, director of the White House’s Office of Science and Technology Policy, highlighted ongoing concerns about funding for federal research and development (R&D) organizations essential to achieving the government's artificial intelligence (AI) goals.
Addressing reporters, Prabhakar emphasized that aging facilities and inadequate infrastructure hinder progress in AI and other emerging technologies.
A May report from her office noted that poor R&D infrastructure impedes agencies' missions, calling for interagency collaboration and investments to revitalize these facilities.
Prabhakar stressed that the complexity of AI applications requires sustained laboratory research and collaboration beyond corporate capabilities, underscoring the importance of federal support.
Her comments preceded a conference at Johns Hopkins Bloomberg Center on AI applications in government, following an executive order on AI by the Biden administration.
Energy and Environmental Policy/News:
June 13: Climate law in crosshairs as Trump visits Hill
Republicans are considering targeting the Biden administration's renewable energy tax incentives, potentially repealing portions of the Inflation Reduction Act (IRA) as they plan to extend the 2017 Republican tax cuts.
Former President Trump supports repealing parts of the IRA, including incentives for offshore wind and electric vehicles. While some Republicans argue that the IRA distorts the market and increases costs, others highlight the economic benefits of the renewable energy programs, especially in red states.
The GOP's ability to repeal the IRA depends on winning control of the White House and both chambers of Congress. House Speaker Mike Johnson and Majority Leader Steve Scalise have discussed using budget reconciliation to achieve their tax policy goals.
However, internal GOP disagreements and support for certain clean energy programs complicate the repeal efforts.
Senate Majority Leader Chuck Schumer warns that repealing the IRA is a significant threat, emphasizing its importance in the upcoming elections.
June 12: Treasury says EV tax credit has saved consumers $1 billion
Since the Inflation Reduction Act’s electric vehicle (EV) tax credit took effect on January 1, consumer savings have reached $1 billion, according to the Biden administration.
Treasury Department officials reported that over 150,000 emissions-free vehicles have been sold this year, leading to an estimated average annual savings of $1,750 per consumer on maintenance and fuel costs, totaling about $262 million annually.
Over the 15-year lifespan of the vehicles, EV owners are projected to save between $18,000 and $24,000 compared to gas-powered vehicles, primarily from fuel cost reductions and maintenance savings of about 4 cents per mile.
Treasury Secretary Janet Yellen highlighted the financial benefits for consumers and the increased market opportunities for companies.
The tax credit aims to promote EV adoption despite concerns about costs and grid reliability, with restrictions on materials sourced from countries like Russia and China, but temporary exemptions for hard-to-source materials such as graphite.
Additionally, the administration has increased tariffs on Chinese EVs, although their impact is minimal due to the low volume of imports from China.
For Fun:
June 17: Pioneering studies show promise in sequencing a baby’s genome at birth
Tiffany King received a call about her newborn daughter Fern's genome, revealing a mutation linked to Pendred syndrome, which can cause hearing loss and other issues.
This discovery, part of a study offering comprehensive genome sequencing beyond standard newborn screening, allowed Tiffany and her husband to proactively address potential health concerns.
North Carolina and New York are pioneering this genomic medicine approach, identifying conditions not detected by traditional screenings.
Early results show genome sequencing can uncover potentially life-threatening conditions, with North Carolina identifying 40 undiagnosed medical conditions among over 1,800 babies and New York finding 299 conditions in over 10,000 babies.
Despite ethical concerns and the need for cost-effective implementation, the technology promises to revolutionize early disease detection and treatment, potentially guiding patient care throughout life.