Internal Revenue Service Advisory Council, Funding Bill, the UN 2023 Production Gap Report
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Tax Policy/News:
November 13: IRS destruction of paper returns had little impact
A report by the Treasury Inspector General for Tax Administration (TIGTA) suggests that the Internal Revenue Service's (IRS) decision to destroy around 30 million unprocessed paper information returns during the pandemic had minimal impact on taxpayers.
The move, aimed at reducing backlog, was examined by TIGTA in response to concerns raised by Congress and the tax professional community.
The report explained that in October 2020, the IRS realized it couldn't process all Tax Year 2019 paper-filed information returns due to competing priorities during the pandemic. The IRS prioritized the processing of 13.5 million backlogged tax returns to ensure timely refunds for taxpayers.
The decision to destroy unprocessed information returns was considered reasonable, and few taxpayers or filers faced compliance treatment or penalties.
TIGTA found that out of 1.3 million taxpayers whose information returns were destroyed, only 484 out of 50,732 potential examination cases (approximately 1%) might have been selected due to the destruction.
The IRS adhered to established policies for document destruction, with documents transported securely to shredding facilities. However, some bins at the Austin, Texas, tax processing center lacked locking lids, a requirement for classified waste.
TIGTA recommended the implementation of lockable bins for all classified waste at the Austin facility, and the IRS has taken steps to address this concern.
In response to the report, the IRS expressed a commitment to reducing reliance on paper processes and improving tax administration efficiency.
November 10: IRS needs to work to keep funding flowing: IRSAC
The Internal Revenue Service Advisory Council (IRSAC) has emphasized the need for the IRS to educate lawmakers to prevent potential funding cutbacks in the wake of last year's Inflation Reduction Act (IRA).
According to the council's annual report for 2023, Congress did not allocate any Fiscal Year (FY) 2023 funding for IRS business systems modernization and taxpayer services appropriations, with operations support remaining stagnant despite surging inflation.
The report notes that some IRA funding was clawed back through the Fiscal Responsibility Act of 2023, and lawmakers continue to propose bills aiming to reduce annual IRS appropriations, hindering the agency's progress.
Citing the misperception that the IRA funding provides sufficient resources for daily operations, progress improvements, and the envisioned overhaul, the report suggests that reduced annual appropriations, IRA clawbacks, and inflation pose challenges. The IRSAC recommends that the commissioner and IRS leaders present a concise but impactful analysis to lawmakers, outlining the benefits of increasing annual appropriations for taxpayer services and restoring annual funding to the business systems modernization account.
The report includes 23 recommendations covering various topics, such as the Sec. 302 escrow and certification procedure, obtaining Employer Identification Numbers (EINs) to comply with the Corporate Transparency Act, 1099-K reporting, self-correction guidance for employee plans, and forms modernization. IRSAC serves as a federal advisory committee to the IRS commissioner, facilitating discussions on tax administration issues between IRS officials and the public.
November 9: IRS adjusts tax items for inflation in 2024
The Internal Revenue Service (IRS) has announced the annual inflation adjustments for tax year 2024, providing details on approximately 60 tax provisions, including changes to the standard deduction and tax brackets.
The standard deduction for married couples filing jointly in 2024 will increase to $29,200, up by $1,500 from 2023, and for single taxpayers, it rises to $14,600, an increase of $750. The top tax rate for individual single taxpayers with incomes over $609,350 remains at 37%, with other rates ranging from 35% to 10%.
The Alternative Minimum Tax exemption for 2024 is $85,700, and the Earned Income Tax Credit maximum amount increases to $7,830 for qualifying taxpayers with three or more children.
Other adjustments include increases in the qualified transportation fringe benefit, employee salary reductions for health flexible spending arrangements, and changes to medical savings account limits.
Notably, the foreign earned income exclusion for 2024 is $126,500, up from $120,000 in 2023, and estates of descendants who die in 2024 have a basic exclusion amount of $13,610,000.
Additionally, the annual exclusion for gifts rises to $18,000 in 2024. Some items remain unaffected by indexing, such as the personal exemption, the absence of limitations on itemized deductions, and the non-adjustment of modified adjusted gross income for the reduction in the Lifetime Learning Credit for taxable years beginning after December 31, 2020.
A new provision for 2024 reinstates the Hazardous Substance Superfund financing rate for crude oil and petroleum products, with an adjusted rate of $0.26 cents a barrel for 2024.
Economic News/Policy:
November 14: House to consider stopgap funding measure today to avert government shutdown
The House is set to consider a stopgap funding measure aimed at preventing a government shutdown, as proposed by House Speaker Mike Johnson.
The continuing resolution, designed to temporarily fund the government, will be presented under a procedure called suspension of the rules, allowing it to bypass the House Rules Committee.
This approach, previously used by former Speaker Kevin McCarthy in September, requires a two-thirds majority to pass and cannot be amended. Johnson's plan, unveiled on Saturday, extends government funding at current levels for select agencies until Jan. 19 and others until Feb. 2, avoiding steep spending cuts demanded by conservatives but lacking funding for Ukraine, Israel, and the southern border.
While Johnson will need Democratic support to pass the measure, there is no indication that Republicans would seek to remove him as they did with McCarthy.
House Democrats discussed the proposal, expressing some concerns about its structure, but indicated positive aspects. Progressive Caucus Chair Pramila Jayapal noted that the bill aligns with their priorities, emphasizing the absence of "poison pills" and adherence to 2023 spending levels.
However, some Republicans, including Rep. Chip Roy, have voiced opposition, with the House Freedom Caucus criticizing the proposed "clean" Continuing Resolution for lacking spending reductions, border security, and meaningful wins for the American people.
The House Rules Committee did not pass a rule to enable the bill's debate on the floor, and the fate of the funding measure depends on Democratic support and negotiations to avert a government shutdown.
November 9: Powell says Fed ‘will not hesitate’ to hike rates further if necessary
Federal Reserve Chair Jerome Powell said Thursday that the central bank "Will not hesitate" to raise interest rates further if needed to curb inflation.
The Fed has repeatedly raised rates over the last year-and-a-half in an effort to slow the economy and rein in inflation, which reached a 40-year high last summer.
Inflation has since cooled, falling to a 3.7 percent annual increase in September.
"My colleagues and I are gratified by this progress but expect that the process of getting inflation sustainably down to 2 percent has a long way to go," Powell said at Thursday's conference.
The central bank opted not to raise rates at its last two meetings, holding steady at a range of 5.25 percent to 5.5 percent.
Powell and other Fed officials have previously emphasized that another rate hike is still possible before the end of the year.
"We are making decisions meeting by meeting, based on the totality of the incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks," the Fed chair said, adding, "We will keep at it until the job is done."
November 9: House GOP pulls second funding bill in a week
House Republicans pulled their annual financial services and general government funding bill Thursday amid divisions on abortion-related provisions and FBI funding.
It was the second time in a week GOP leaders opted to punt a vote on a funding bill over divisions within the party.
GOP leadership hoped to pass the conference's partisan plan laying out fiscal 2024 funding for the White House, the Treasury Department and other offices this week.
In the House Republicans' narrow majority, just a handful of members can sink any partisan bill.
The bill is among the 12 annual government funding bills House Republicans sought to pass this month as they look to strengthen their hand in spending talks with Senate Democrats later this year.
Like a chunk of the proposals, the bill considered Thursday seeks to cut spending partly by rolling back funding for Democratic priorities approved in the previous Congress, with a previous legislative summary detailing a pitch for clawing back billions of dollars in IRS funding.
Earlier this week, House Republicans punted plans to vote on a housing and transportation government funding bill over concerns from some in the party about a proposed drop in dollars for Amtrak.
Technology:
November 11: This was a massive week for AI
In a significant week for artificial intelligence, OpenAI unveiled updates, including the ability for developers to create custom versions of ChatGPT called GPTs. These GPTs can be used in various applications, connecting to databases, facilitating e-commerce orders, and more.
OpenAI is also launching a GPT Store to allow these tools to be searchable and categorized. The company highlighted GPT-4 Turbo, the latest version that can handle input equal to about 300 pages of a standard book, 16 times longer than the previous iteration. OpenAI aims to build a strong developer ecosystem, and CEO Sam Altman shared that about 2 million developers use the platform, with 90% of Fortune 500 companies using the tools internally.
In other AI developments, startup Humane introduced its first AI wearable device, the Ai Pin, which attaches to clothing and aims to eventually replace smartphones. The Ai Pin, equipped with AI-powered tools, features a Snapdragon processor and a Qualcomm AI engine.
Elon Musk's AI startup xAI revealed Grok, a chatbot with a sarcastic sense of humor for users of the X platform, formerly known as Twitter.
Lastly, OpenAI experienced large-scale outages attributed to potential targeted attacks on its servers two days after the developer conference, disrupting access to its tools and services.
Despite the challenges, major tech companies like Amazon and YouTube are investing in AI, with Amazon developing an AI codenamed "Olympus," and YouTube testing AI tools for content recommendations and summarization in video comment sections.
Energy and Environmental Policy/News:
November 9: Current fossil fuel plans will shatter 1.5°C climate goal this decade
The UN's 2023 Production Gap Report issued a stark warning, indicating that current government plans for fossil fuel production are on track to significantly exceed climate limits required to keep global warming within 1.5°C.
The report revealed that projected fossil fuel production could surpass compatible levels by over double by 2030 and an alarming 350% by 2050. Despite an increase in renewable energy usage, the global production gap has remained largely unchanged since 2019, highlighting the insufficient displacement of fossil fuel production.
The report singled out five affluent countries — the U.S., Canada, Australia, Norway, and the UK — for their plans to develop oil and gas fields, accounting for over half of such developments until 2050.
Romain Ioualalen of Oil Change International emphasized the urgency of halting new oil and gas projects immediately, urging a rapid and equitable phase-out of fossil fuels at the upcoming UN climate talks in Dubai.
The report underscored the dire need for governments not only to promote renewable energy but also to actively implement policies reducing fossil fuel supply to achieve an effective transition. The report's findings emphasized that continued investments in fossil fuel infrastructure pose a threat to the transition to renewable energy.
Additionally, the report called for aggressive action to tackle fossil fuel production and consumption, urging governments to take immediate steps at COP28 to end fossil fuel expansion, build a just and equitable phase-out of all fossil fuels, and provide necessary funding to triple renewable energy and double energy efficiency.
ICYMI:
November 13: The Supreme Court says it is adopting a code of ethics, but it has no means of enforcement
The Supreme Court has introduced its first-ever code of ethics in response to ongoing criticism regarding justices' undisclosed trips and gifts from wealthy benefactors.
The code, unanimously accepted by the nine justices, does not include a method for enforcement, leaving individual compliance to each justice.
While the code does not seem to introduce significant new requirements, the justices claim that they have always adhered to ethical standards and see the code as a formalization of long-standing principles governing their conduct.
The justices argue that the absence of a code has led to misunderstandings about their commitment to ethical rules.
The move comes after months of scrutiny, particularly focusing on Justice Clarence Thomas, who faced allegations of failing to disclose travel and financial ties with wealthy conservative donors.
While liberal critics find the new code insufficient and more like a suggestion, some Democratic lawmakers, including Sen. Sheldon Whitehouse, consider it a long-overdue step but insist on a more binding, enforceable guideline with investigative mechanisms.
Public trust in the Supreme Court has recently reached record lows, prompting increased scrutiny and calls for transparency and accountability.
November 7: Yellen defends IRS against cuts, plans ambitious tax season
Treasury Secretary Janet Yellen addressed concerns about proposed budget cuts to the Internal Revenue Service (IRS) amid a $14.3 billion aid package for Israel, funded by reductions in the IRS's enforcement budget.
The aid package, passed by the House primarily with Republican support, has faced opposition from Senate Majority Leader Charles Schumer and a veto threat from President Biden.
Yellen emphasized the progress made by the IRS, especially since the additional funding provided under last year's Inflation Reduction Act, highlighting achievements such as the early completion of the Paperless Processing Initiative's first goal, allowing taxpayers to digitally submit all correspondence. Yellen asserted that playing politics with IRS funding is unacceptable, and cutting it would be damaging and irresponsible.
In response to the proposed budget cuts, Yellen outlined the IRS's plans to enhance taxpayer services and technology. Initiatives include improving the Where's My Refund tool for clearer updates, offering a callback option for telephone assistance, increasing in-person assistance hours at Taxpayer Assistance Centers, and launching a pilot program for taxpayers in 13 states to file their federal tax return directly with the IRS for free.
Yellen also mentioned increased enforcement efforts, with a focus on audits of large partnerships, corporations, and high-income individuals, employing artificial intelligence and hiring more tax experts.
Despite concerns and political uncertainties, the Biden administration aims to preserve the IRS's additional funding to support these initiatives. Critics express concerns about the disproportional allocation of funds and potential risks associated with hiring contractors.
For Fun:
November 13: AI chemist finds molecule to make oxygen on Mars after sifting through millions
Scientists have used an AI-powered robot chemist to synthesize compounds capable of generating oxygen from water, using meteorites from Mars.
The potential for future crewed missions to Mars to utilize resources on the planet for oxygen production is crucial for long-term cost-effectiveness.
Mars has significant reserves of frozen water ice, and the researchers focused on finding water-splitting catalysts among materials found in Martian meteorites.
The AI chemist, with minimal human intervention, collected samples, used a laser to scan the ore, and calculated over 3.7 million molecules it could make from metallic elements in the rocks. The robot successfully selected, synthesized, and tested 243 different molecules within six weeks, with the best catalyst capable of splitting water at Mars-like temperatures.
The researchers believe that conventional trial-and-error techniques would have taken a human scientist around 2,000 years to find the best catalyst, showcasing the efficiency of AI in scientific processes.
The next step is to investigate whether the AI chemist can operate under other Martian conditions.