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October 13: Guidance on R&D expensing helps, but more is needed

The IRS released Notice 2023-63 in September, providing interim guidance on the capitalization and amortization of specific research or experimental expenditures incurred in taxable years beginning after Dec. 31, 2021, under Section 174 of the Tax Code as amended by the TCJA. The notice announced that the Treasury Department and the IRS intend to issue forthcoming proposed regulations to address the capitalization and amortization of the expenditures, the treatment of them under Section 460, and the application of Section 482 to cost-sharing arrangements involving the expenditures.

"It's clear that the IRS and the Treasury are being responsive to all the uncertainty on identifying and allocating the Section 174 research and experimentation costs, and how nuanced it can be based on a business' profile. We finally have some guidance in our hands, but it's gotten us even more eager for more guidance. Taxpayers have such diverse facts and circumstances, maybe based on their entity structure or their global footprint and the size of their company and the types of industries that they serve. They all share this common goal of seeking answers to ensure compliance with the law,” the notice stated. 

The guidance helps companies determine what is or is not considered R&D and provides more clarity on definitions.

The IRS may need to issue more guidance to clarify what actually rises to the level of software development.

The guidance at least provides some flexibility, and more guidance is on the way eventually.

"As long as the allocation methods are applied consistently for each type of cost, using a reasonable method leaves a lot of options for computing it for taxpayers. Of course, there are still some more questions on what this means in terms of allocating the book-to-tax differences impacted by Section 174, which are not mentioned in the notice. But hopefully, we'll get some more guidance in the proposed regulations,” the notice continued. 

October 12: IRS 'Tax Gap' Widens To $688 Billion In 2021: Report

The projected gross "Tax gap," the difference between the total taxes owed to the IRS and how much is collected on time, jumped to $688 billion for tax year 2021, the agency projects.

Late payments and IRS enforcement efforts are expected to bring in an additional $63 billion, which would narrow the projected net tax gap to $625 billion for 2021.

Previously measured every three years, this is the first time the tax gap projection has been provided for a single tax year.

The agency says it will provide tax gap estimates on an annual basis moving forward.

The Inflation Reduction Act, passed by Democrats last August, included an additional $80 billion in funding for the IRS to beef up its enforcement efforts.

In 2022, the most recent tax year, the IRS collected more than $4.9 trillion in taxes, penalties, interest and fees.

"These steps are urgent in many ways, including adding more fairness to the tax system, protecting those who pay their taxes and working to combat the tax gap," Werfel said.

October 16: As global debt worries mount, is another crisis brewing?

The global debt situation is causing mounting concerns, with questions arising about the potential for another financial crisis. 

According to a Reuters report, the world's debt levels have reached a staggering $303 trillion, sparking fears of instability in the global financial system. 

The combination of high government and corporate debt, coupled with rising interest rates, poses significant risks to economies worldwide.

Additionally, central banks' efforts to combat the economic fallout from the COVID-19 pandemic, which involved lowering interest rates and implementing massive stimulus measures, have contributed to the current debt predicament. 

As interest rates start to climb, servicing this enormous debt load becomes more challenging for both governments and corporations. This growing debt burden has raised concerns about potential defaults, credit market turmoil, and their broader impact on the global economy. 

Investors and policymakers are closely monitoring the situation, as addressing these debt worries will be crucial in maintaining financial stability in the coming years.

October 12: Inflation holds steady as Fed mulls more rate hikes

The consumer price index - a closely watched gauge of inflation - rose roughly in line with economists' expectations.

The annual inflation rate stayed flat, and monthly price growth fell from a 0.6-percent increase in August.

Rising housing costs were the biggest contributor to inflation in September, marking the second straight month of price growth driven primarily by rents and the impact of high home prices.

A 10.6-percent spike in gasoline costs last month also drove overall inflation higher.

The October inflation report is likely to comfort Federal Reserve officials as they mull whether to hike interest rates again before the end of the year.

Annual inflation still remains well above the Fed's target of 2 percent, and the September jobs report showed a labor market far stronger than most economists expected.

Fed rate hikes would also do little to curb inflation in housing and gasoline but could still bring the U.S. economy closer to recession.

October 11: Global emissions from energy use to increase through 2050: analysis 

Despite efforts to shift toward low-carbon energy, global emissions from energy use will increase through 2050, according to a new analysis.

The report, from the independent Energy Information Administration, said that while there will be some shift away from fossil fuels, current policies are "Not enough" to cut global emissions from energy use.

The burning of fossil fuels releases planet-warming emissions and is the main driver of climate change.

The United Nations's Intergovernmental Panel on Climate Change has said the world needs to cut its emissions all the way down to carbon neutrality by 2050 to limit global warming to a level that evades some of the worst impacts of climate change.

China will still be the "Primary" source of carbon dioxide emissions through 2050, the EIA said, though its share of emissions is expected to decline.

China has said it hopes to see its emissions peak by 2030 and reach net zero by 2060.

Globally, emissions from the transportation sector's energy use are expected to grow between 8 percent and 41 percent between 2022 and 2050, while emissions from the industrial sector's energy use are slated to grow by between 9 and 62 percent.

October 10: IRS Rules Allow Car Dealers To Provide Rebates For EV Tax Credits Upfront

The Internal Revenue Service and the Treasury Department released guidance on how buyers of electric vehicles can transfer their tax credits to automobile dealers and get advance payments that effectively lower the cost.

Only vehicles purchased under the consumer clean vehicle credits are eligible for the tax benefit.

"For the first time, the Inflation Reduction Act allows consumers to reduce the upfront cost of a clean vehicle, expanding consumer choices and helping car dealers expand their businesses," said Laurel Blatchford, Chief Implementation officer for the Inflation Reduction Act at the Treasury Department, in a statement Friday.

The registration is also a requirement for dealers to offer consumers clean energy tax credits for qualifying products like electric vehicles.

The IRS agreed with four of the five recommendations and plans to review the identified claims, expand invalid vehicle identification number criteria for tax year 2023, and update its business rules to incorporate the legislative changes from the IRA related to claims made over the allowable threshold amounts.

"The IRS relies heavily on available data to identify and select cases in the most efficient manner, and these IRA provisions will allow the IRS to obtain vehicle data to identify noncompliance," wrote Lia Colbert, commissioner of the IRS's Small Business/Self-Employed Division, in response to the report.

These IRA provisions all provide that no credit shall be allowed or determined unless the taxpayer includes a vehicle identification number of their vehicle on their tax return."

October 16: AI-Caused Financial Crisis 'Nearly Unavoidable' Without Regulation: SEC Chief

The head of the Securities and Exchange Commission warned that a financial crisis caused by artificial intelligence is "Nearly unavoidable" in the next decade without further regulation of the rapidly advancing technology.

"It's frankly a hard challenge," SEC Chairman Gary Gensler told the Financial Times.

"It's a hard financial stability issue to address because most of our regulation is about individual institutions, individual banks, individual money market funds, individual brokers; it's just in the nature of what we do,” he continued. 

"And this is about a horizontal many institutions might be relying on the same underlying base model or underlying data aggregator," he continued.

Gensler predicted that a financial crisis could occur in the late 2020s or early 2030s, warning that multiple institutions basing their decisions on the same models could lead to herd mentality and undermine stability.

"I do think we will in the future have a financial crisis  [and] in the after action reports people will say 'Aha! There was either one data aggregator or one model  we've relied on,'" he added.

Gensler told the Financial Times that the proposed rule does not solve the "Horizontal issue" that he warned could eventually produce a financial crisis.

October 11: Senators urge IRS to speed up plan to snag crypto tax cheats

A group of senators led by Democrat Elizabeth Warren and Independent Angus King is pushing U.S. tax officials to move up the start date for crypto brokerages and exchanges to report information on their clients' transactions to the government.

"We are alarmed by the self-inflicted two-year delay for the rule's implementation" that will cause the U.S. to miss out on billions of dollars in tax revenue, the senators wrote in a letter sent late Tuesday to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel.

"We urge your agencies to limit this troubling delay and implement the final rule as swiftly as possible, while maintaining the rule's substance in the face of industry attacks."

The Treasury has said the delay gives brokers more time to adjust to the rules, which still haven't been made final.

Once the rules are in place, the government has said they will help individuals file their taxes, while also making it easier to crack down on tax cheats.

The lawmakers said they agree with the substance of the rules, which has been attacked by the crypto industry.

Lawrence Zlatkin, Coinbase's vice president of tax, in August called into question the practicality of the regulations and said the current proposal goes "Well beyond the scope of pursuing wealthy tax cheats."

October 11: Democrats ask Biden to put AI safeguards into executive order

Democrats in the House and Senate urged President Biden to turn non-binding safeguards on artificial intelligence into policy through an executive order, according to a letter sent to the White House Wednesday.

The letter, led by Sen. Ed Markey and Rep. Pramila Jayapal, recommends the Biden administration use the AI Bill of Rights, as a guide to set in place policy across the federal government through an upcoming AI executive order.

The non-binding AI Bill of Rights outlines five key principles to guide the design, use and deployment of AI technology, focused on safe and effective systems, algorithmic discrimination protections, data privacy, notice and explanation, and consideration of human alternatives.

"By turning the AI Bill of Rights from a non-binding statement of principles into federal policy, your Administration would send a clear message to both private actors and federal regulators: AI systems must be developed with guardrails. Doing so would also strengthen your Administration's efforts to advance racial equity and support underserved communities, building on important work from previous executive orders," the Democrats wrote.

Last month before meeting with the president's council of advisors on science and technology in San Francisco, Biden said he would be taking executive action "So America leads the way toward responsible AI innovation."

In addition to the AI Bill of Rights, the Biden administration has also secured voluntary commitments aimed at managing risks posed by AI from top companies in the field, including Amazon, Google, OpenAI, Microsoft and Meta.

October 17: ‘Monster Quake’ Hints at Mysterious Source within Mars

In a recent seismic event on Mars detected by NASA's InSight lander in December 2018, scientists have dubbed it a "monster quake" with a magnitude of 4.0. This event marked one of the most significant seismic occurrences ever recorded on the Red Planet, capturing the attention of researchers eager to uncover its source.

Researchers initially struggled to determine its origin, but they have now proposed that this seismic activity could be linked to a mysterious underground feature known as a "diatreme." 

Diatremes are volcanic formations that result from explosive eruptions, and if one is confirmed on Mars, it could provide valuable insights into the planet's geologic history and current activity.

Essentially underground volcanic vents, these diatremes, if confirmed on Mars, could provide essential clues about the planet's geological history and the potential for past or even ongoing volcanic activity. Understanding these underground features is crucial in piecing together the puzzle of Mars' geological evolution and its potential habitability in the past or present.

The discovery highlights the importance of InSight's mission in unraveling the mysteries of Mars' interior and understanding the planet's geological evolution, potentially shedding light on its past and its potential for harboring subsurface water and life.

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