IRS Delays and Cryptocurrency Regulations, Government Spending, and Environmental Protection Agency Grant Programs
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Tax Policy/News:
November 22: The IRS delayed its controversial new policy regarding digital payment platforms
The IRS delayed the release of new guidelines for digital sales and payment platforms prior to the 2023 holiday season.
The previously announced reduction of the Form 1099-K threshold for third-party settlement organizations, such as Venmo and PayPal, from $20,000 in profits to $600, initially scheduled for the 2023 tax season, has been delayed.
Originally part of the Biden administration's 2021 American Rescue Plan, the regulation faced backlash, prompting the IRS to issue its first delay in December 2022.
The latest delay, announced on Tuesday, acknowledges potential confusion for taxpayers and tax professionals, with a transitional plan before the $600 limit takes effect in 2025. For the 2024 tax year, the profit margin will lower to $5,000, and the $600 limit will be implemented in 2026. The IRS also plans to update and simplify Form 1099-K to streamline the reporting process.
The government's delay coincides with efforts to simplify and potentially reduce the cost of tax filing. The upcoming 2024 filing season will introduce the IRS free federal direct tax filing pilot program for eligible citizens in 13 participating states, aiming to become a national alternative to third-party filing services.
However, for those with lucrative side gigs, the $20,000 limit will remain in place for 2024. The IRS emphasizes that business income is taxable, urging individuals to report profits even without receiving a Form 1099-K.
November 21: IRS's crypto regs threaten an undue burden
Crypto and digital assets are facing the unique challenge of 1099 tax reporting amid unsettled tax laws, unlike the traditional financial services industry, which typically had a decade of settled tax law before implementing such reporting.
Jessalyn Dean, VP of Tax Information Reporting at Ledgible, raised concerns during an Internal Revenue Service hearing on proposed regulations for digital asset transactions.
Ledgible argues against proposed rules requiring Form 1099-DA reporting for tokenized mutual funds, suggesting it could disincentivize the industry from tokenizing mutual funds due to double reporting complexities.
Dean also highlighted challenges with proposed regulations related to tokenized real estate, emphasizing the inadequacy of Form 1099-DA reporting for these transactions and the potential for double reporting issues.
Ledgible was the first of 12 stakeholders to speak at the IRS hearing, emphasizing the need for careful consideration of the proposed rules, given the significant public attention reflected in 120,000 public comments.
The proposed regulations, including the potential impact on traditional financial products and tokenized real estate, are still under review, and no final regulations issuance date has been set.
Economic News/Policy:
November 27: GOP braces for internal battle royale over government spending
House Speaker Mike Johnson (R-La.) is facing challenges from both within and outside his party as he attempts to navigate federal spending discussions at the onset of the election year.
The Speaker, who recently avoided a government shutdown, is caught between House conservatives demanding fiscal reforms and the need to keep the government operational.
Although he received leniency from conservatives for relying on Democratic votes in a recent funding measure, some members, including Rep. Chip Roy (R-Texas) from the House Freedom Caucus, are signaling that Johnson may not receive another pass. They express concerns over his concessions to Democrats and demand more significant cuts to federal spending.
The GOP's internal divisions on spending levels for 2024 create uncertainty about the path forward, with Senate Democrats anticipating further brinkmanship and warning of potential chaos within the House.
Johnson's efforts to shore up support among conservative Republicans include a meeting with former President Trump at Mar-a-Lago, setting the stage for a showdown with the Senate in the coming month.
The Senate, focusing on passing a comprehensive spending package, faces challenges in reconciling the steep spending cuts demanded by House conservatives.
House conservatives advocate for deeper cuts, setting the stage for potential conflicts as the 2024 election approaches, with both parties acknowledging the stakes involved in the upcoming fiscal fight.
November 26: Fights over the IRS, border security stall wartime aid to Israel and Ukraine
Congress is working to pass a foreign aid package by the end of the year to assist key U.S. allies, such as Israel and Ukraine.
However, there are challenges in crafting a bipartisan deal with only three weeks left in the legislative calendar. The urgency arose after Hamas' terrorist attack on Israel in October, but President Biden's emergency request for foreign aid has faced obstacles in both the House and Senate.
Disagreements revolve around issues like Israel's conflict in Gaza, funding sources for aid, and tying Ukraine assistance to immigration reform. While there is bipartisan support for elements of Biden's request, reaching a consensus remains uncertain.
The debate includes a bipartisan Israel-only aid bill stuck due to offset provisions cutting the IRS budget, which Democrats oppose.
Support for aid to Ukraine is diminishing among Republicans, with some linking it to immigration reform.
The fate of the aid package is uncertain, and negotiations continue over what it will include and how closely it aligns with Biden's initial comprehensive foreign aid request, which covered humanitarian aid to Gaza, border security, efforts to deter China, as well as funding for Israel and Ukraine.
House Republicans insist on offsets for military aid to Israel, leading to disagreements with Democrats. Internal clashes among Democrats involve conditioning aid to Israel based on its actions in the Gaza war.
Despite bipartisan support for a deal combining border measures and Ukraine aid, challenges persist, and the timeline for reaching an agreement remains uncertain.
November 22: Big investors say US markets rally could prove short-lived
U.S. stocks and bonds have experienced a year-end rebound, with the S&P 500 and Nasdaq rallying around 10% and 13%, respectively, since late October.
Investors' optimism stems from perceptions that the Federal Reserve's tightening cycle has concluded due to signs of easing inflation, job growth, and positive third-quarter earnings. However, prominent money managers anticipate the rally to be temporary, foreseeing challenges from fiscal and monetary policies, the 2024 presidential election, and concerns about a potential economic slowdown weighing on markets next year.
Despite recent data indicating stagnant consumer prices and a weakening labor market, some investors caution against extrapolating early 2024 rate cuts.
The fallout from the Fed's 525 basis points in interest rate hikes since March 2022, coupled with quantitative tightening, remains on investors' minds.
The overall expectation is for global economic growth to slow in 2024, influenced by elevated interest rates, higher energy prices, and reduced growth in major economies like the U.S. and China.
Money managers express concern about a potentially contested U.S. presidential race adding to market instability in 2024.
Additionally, the performance of large technology companies, known as the "Magnificent Seven," is a source of uncertainty, with questions about the sustainability of the current AI-driven market optimism and its contribution to earnings.
Technology:
November 27: US, other nations unveil deal to keep AI safe from rogue actors
The United States, in collaboration with 17 other nations, has introduced an international agreement designed to enhance the safety of artificial intelligence (AI) systems and encourage adherence to "secure by design principles."
The 20-page document, jointly published by the U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency and the United Kingdom’s National Security Centre, outlines guidelines to ensure that AI systems are constructed to operate as intended, preventing the unauthorized leakage of sensitive data.
The guidelines, organized into four sections, cover recommendations throughout the entire AI lifecycle, addressing aspects such as system design, development, deployment, and maintenance. Participating countries include Australia, Canada, Germany, Japan, and Singapore, among others.
The release of this international agreement reflects growing concerns about the uncontrolled development of AI, as highlighted by the recent acceleration of AI system deployment among tech firms. The guidelines underscore the need to consider safety beyond the allure of innovative features and market competitiveness.
The announcement comes on the heels of the Biden administration's executive order on AI, issued last month, which aims to manage the risks associated with AI development.
The order establishes new safety standards, principles for worker protection, and directives for federal agencies to expedite the development of privacy-preserving AI training techniques.
Additionally, the order addresses the responsible collection and use of commercially available information containing personal data, introducing a tool to expand AI research grants in critical areas such as healthcare and climate change.
Energy and Environmental Policy/News:
November 21: EPA opens $2B in grants for helping communities fight climate change, pollution
The Biden administration is allocating $2 billion to assist disadvantaged communities in addressing climate change and air pollution.
The grants will support projects aimed at enhancing community resilience to climate impacts, preventing, monitoring, or cleaning up pollution, investing in low- and no-emission energy projects, and reducing indoor air pollution.
The Environmental Protection Agency (EPA) plans to fund a total of 170 projects using funds from the Democrats' climate, tax, and health care bill passed last year.
The grants are specifically designated for communities facing underinvestment and high pollution levels.
The EPA will accept grant applications for a year, reviewing them on a rolling basis, with the goal of transforming underprivileged and overburdened areas into healthy, resilient, and thriving communities.
This initiative is introduced at a time when Republicans are targeting EPA programs focused on environmental equity and climate change for potential spending cuts.
ICYMI:
November 21: US Coast Guard looking for source of pipeline leak in Gulf of Mexico
The US Coast Guard is actively searching for the source of a crude oil leak in the Gulf of Mexico, estimating that over 1 million gallons of crude oil were released from a 67-mile-long undersea pipeline linked to Houston-based firm Main Pass Oil Gathering Co (MPOG).
The leak, observed around 19 miles offshore of the Mississippi River Delta, has impacted operations of seven energy companies. While Third Coast Infrastructure, which completed the pipeline last year, is suspected by the Coast Guard, investigations are ongoing to confirm responsibility.
Initial calculations put the leak at 1.1 million gallons, and authorities emphasize that the exact amount will remain unknown until the source is found. There have been no reported injuries or shoreline impacts, and vessel traffic remains unaffected.
MPOG, a subsidiary of Third Coast Infrastructure, is implicated in the spill, with suspicions centered on the Houston firm. Third Coast Infrastructure has not commented on the incident, and the Coast Guard continues its efforts to pinpoint the source of the discharge.
While there are no reported injuries or shoreline impacts thus far, investigations and surveys are ongoing.
The spill, which does not currently impact vessel traffic, marks a significant environmental concern in the Gulf of Mexico, where the Deepwater Horizon disaster occurred in 2010, releasing over 200 million gallons of oil into the region.
For Fun:
November 27: Cheaper microscope could bring protein mapping technique to the masses
A breakthrough in cryo–electron microscopy (cryo-EM) is challenging the high costs associated with this advanced protein-mapping technique.
While cryo-EM provides near-atomic resolution in mapping protein shapes, making it valuable for drug development, the process involves expensive equipment, costing over $5 million to purchase and operate.
Researchers at the Medical Research Council’s Laboratory of Molecular Biology (LMB) have developed a prototype cryo-EM microscope that matches high-end machines in capabilities at one-tenth of the cost.
The team believes their design, which could be manufactured and sold for $500,000, would democratize access to cryo-EM, allowing more researchers to utilize this powerful structural biology tool.
The LMB's prototype has already demonstrated its efficiency by determining the structure of 11 diverse proteins, including the benchmark iron-storing protein apoferritin, at a resolution of 2.6 angstroms.
The process is not only cost-effective but also fast, with each structure completed in less than a day.
While Thermo Fisher Scientific has introduced a lower-cost cryo-EM machine operating at 100 kiloelectronvolts (KeV), the LMB team's innovations could further reduce costs and make cryo-EM more accessible.
The challenge now lies in finding manufacturers willing to invest in commercializing this cost-effective cryo-EM technology.