Hydrogen Tax Credit, IRS Direct File, and AI Privacy Rules
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October 20: US hydrogen tax credits touch off sparring letters from Senate Democrats
A group of ten Senate Democrats is urging the Biden administration to avoid implementing strict guidelines on the use of clean hydrogen tax credits, set to be released by the Treasury Department by year-end.
In a draft letter directed to prominent White House officials, the senators, led by Maria Cantwell of Washington, advocate for flexibility in the Treasury's guidance. They suggest allowing projects powered by current energy sources, such as gas, hydroelectricity, and nuclear, to qualify for these tax credits.
The senators caution that overcomplicating the eligibility criteria, as supported by some of their Democratic peers and environmental factions, might stifle the growth of the budding hydrogen sector.
Contrarily, another faction of Senate Democrats, spearheaded by Sheldon Whitehouse of Rhode Island and Jeff Merkley of Oregon, is pushing for stricter controls on these tax credits, which are valued at up to $100 billion.
They emphasize that the credits should strictly cater to hydrogen producers relying on new clean energy sources and not the existing grid. Moreover, they promote the idea of "time-matching" to guarantee that electrolyzers producing hydrogen operate concurrently with renewable energy, ensuring no inadvertent reliance on fossil fuels.
This group argues that the lack of such precautions might inadvertently promote fossil fuel usage, defeating the purpose of the clean hydrogen initiative.
Following significant improvements in the 2023 filing season due to the Inflation Reduction Act (IRA) investments, the Internal Revenue Service (IRS) is amplifying its enforcement efforts targeting high-income individuals, complex partnerships, and large corporations who evade paying overdue tax bills.
Several initiatives have been launched: increased compliance on the U.S. subsidiaries of foreign firms that misuse transfer pricing to underreport profits; the expansion of the Large Corporate Compliance program to audit large corporate taxpayers; a crackdown on the abuse of a repealed corporate tax break that had formerly granted deductions for U.S.-produced goods; and heightened focus on high-income individuals who have evaded significant tax bills, with recent efforts collecting over $122 million from 100 cases.
To improve taxpayer service, the IRS is enhancing its efforts to provide taxpayers with the necessary assistance, aiming for clarity and accuracy on initial submissions.
Expansion of in-person services, particularly in underserved regions, has seen the launch of the Community Assistance Visits and the opening of 50 Taxpayer Assistance Centers nationwide since the IRA's enactment.
Emphasizing on modern digital solutions, the IRS has unveiled the business tax account for unincorporated sole proprietors, provided online response options to certain notices, introduced mobile-friendly forms, and enhanced online platforms for both individual taxpayers and tax professionals.
Concurrently, there is an ongoing commitment to modernizing the IRS's antiquated technological infrastructure to ensure top-tier customer service and secure taxpayer data.
The Internal Revenue Service (IRS) has introduced a special withdrawal process to assist businesses that filed an Employee Retention Credit (ERC) claim and are unsure about its validity.
This new system allows employers who have submitted an ERC claim but haven't yet been refunded to retract their claim, thus evading future repayments, interest, and penalties. The facility was established to aid businesses misled into filing invalid claims due to aggressive marketing from ERC promoters.
The IRS emphasized that this withdrawal won't protect those who have deliberately filed or aided in a fraudulent claim from potential legal repercussions. However, if withdrawn, claims will be as if they never existed, and no penalties will be charged by the IRS.
In the backdrop of the COVID-19 pandemic, the ERC was established as a refundable tax credit to benefit businesses that sustained employee wages during government-mandated operational interruptions or a significant slump in receipts. The IRS has noticed a surge in ineligible ERC claims, leading to the announcement of a moratorium on processing new ERC claims from September 14.
This moratorium will remain at least until year's end, with existing claims undergoing stricter scrutiny and extended processing times. To prevent potential fraud and mitigate risks for businesses, the IRS has enhanced its compliance reviews and is diligently warning taxpayers about the hazards of ill-advised ERC claims.
For employers wishing to utilize the withdrawal process or get further details, the IRS has provided specific guidelines and resources, including an upcoming webinar and an interactive feature on their website.
October 23: Republican leadership fight means growing backlog of bills in US House
Infighting among Republicans in the U.S. House of Representatives has resulted in a leadership void for three weeks, stalling Congress from addressing pressing legislative matters.
The escalating agenda includes President Joe Biden's request for significant military aid for Israel and Ukraine as part of a $106 billion package which also encompasses funds for U.S. border security and humanitarian aid.
While Biden wants the package considered in its entirety, Republicans are divided, particularly over support for Ukraine.
Key impending deadlines compound the urgency. Government funding will lapse on November 17, risking a partial shutdown that could impact diverse federal services unless differences between House-passed bills and bipartisan Senate proposals are reconciled.
Congress also confronts a year-end cutoff to update Federal Aviation Administration regulations, with potential tax revenue implications.
Additionally, the renewal of pivotal legislation related to agriculture and flood insurance is pending. The latter, if not addressed, could disrupt property sales as the National Flood Insurance Program expires on the same day as government funding.
October 20: Federal deficit rose to $1.7 trillion in fiscal 2023
The federal budget deficit rose to $1.7 trillion in fiscal 2023, according to data released Friday by the Treasury Department.
The gulf between how much money the federal government spent and made in revenue rose by $320 billion between fiscal 2023 - which ended September 30 - and the previous fiscal year.
The fiscal 2023 budget deficit was equal to 6.3 percent of U.S. gross domestic product, up from 5.4 percent in fiscal 2022.
Biden administration officials attributed the spike in the deficit to a steep drop in federal revenue, which rose sharply during a rapid economic rebound from the COVID-19 pandemic.
Federal receipts dropped by 9.3 percent from fiscal 2022, almost entirely due to a $456 billion decline in individual income taxes.
The government has also been gradually rolling out billions of dollars in funding for green energy, infrastructure and other Biden administration initiatives that officials say has boosted the economy through choppy waters.
"The Biden Administration continues to focus on navigating our economy's transition to healthy and sustainable growth. As we do, the President and I are also committed to addressing challenges to our long-term fiscal outlook,” Treasury Secretary Janet Yellen stated.
October 19: Powell sees ‘bumpy’ path forward as Fed weighs new rate hikes
In prepared remarks at the Economic Club of New York, Fed Chairman Jerome Powell also warned "The path is likely to be bumpy and take some time."
He also said if inflation remains stubbornly high due to elevated economic growth and labor demand, further monetary policy tightening - and potentially additional interest rate hikes - may be necessary.
"Inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal," Powell said in prepared remarks.
The Fed has raised interest rates to their highest level in more than two decades, to a range of 5.25 to 5.5 percent, as it fights to bring inflation back to that target without triggering a recession.
Powell has repeatedly said high interest rates are a tradeoff to bring down high inflation that has eaten into Americans' wallets.
"The world counts on us to deliver low and stable inflation, that's what we have to do," Powell said Thursday.
Interest rate hikes have not come at the price of significantly higher unemployment, as some predicted.
October 18: Congress scrambles to craft AI privacy rules as industry races ahead
As companies roll out more AI tools for commercial use, Wednesday's House Energy and Commerce subcommittee hearing will focus on concerns around how AI systems collect and use data.
Amba Kak, executive director of the AI Now Institute, an AI research nonprofit, said lawmakers should be cognizant of the regulatory tools and frameworks already in place to address risks.
In testimony prepared for Wednesday, Kak will recommend prioritizing data privacy - in particular, passing "Strong, legally enforceable data minimization mandates," such as the ones included in the American Data Privacy Protection Act.
Victoria Espinel, the president and CEO of The Software Alliance, will also urge the committee to advance a comprehensive privacy bill that requires businesses to collect, use and share data in a way that respects consumers' privacy, gives consumers rights to access and delete their data and ensures companies that violate rules are subject to strong enforcement.
Kak said that countries with data privacy laws have been able to "Act very quickly" in response to privacy concerns after the public release of OpenAI's ChatGPT and other large-scale AI systems.
Even at the same time Wednesday, a separate hearing is being held in the House Science, Space and Technology Committee to weigh risk management strategies for AI. In the Senate, Majority Leader Chuck Schumer held an AI forum in September that brought in tech leaders to discuss the risks and benefits of AI with senators.
"Now is the moment to emphasize that there's nothing about the current path that technology is on that is inevitable, and that we need strong data privacy laws and strong competition frameworks to make sure that the trajectory of AI technologies is shaped in the public interest and not not solely by a handful of corporate actors that are ultimately only going to be driven by commercial incentives," Kak added.
The Internal Revenue Service (IRS) has unveiled key details of the Direct File pilot slated for the 2024 filing season. This pilot program, aimed at offering taxpayers a free method to electronically file their federal tax returns directly with the IRS, will initially be available to a limited group of eligible taxpayers in 13 states, including Arizona, California, Massachusetts, New York, and nine other states without a state income tax.
This endeavor stems from the 2022 Inflation Reduction Act, which tasked the IRS to explore a free direct e-file program. The pilot's goal is to test the system's overall feasibility and performance, focusing on areas such as technology, customer support, and state integration, before potentially rolling it out on a larger scale.
While the Direct File program does not replace existing filing options like Free File, commercial software, or tax professionals, it adds another potential choice for eligible taxpayers.
The pilot's eligibility criteria are based on the taxpayer's residence state and specific income types, credits, and deductions, targeting those with relatively straightforward returns.
Taxpayers with income sources such as W-2 wage income, unemployment compensation, and limited interests, and those claiming credits like the Earned Income Tax Credit and the Child Tax Credit, are likely to be included in the pilot. As the program progresses, the IRS aims to refine the pilot's parameters and evaluate its broader adoption, all while ensuring it aligns with the agency's mission to provide taxpayers with suitable options tailored to their unique needs.
October 23: New research reveals how plants warn each other of danger and how it could revolutionize farming
Plants possess the unique ability to alert each other to potential threats through the emission of chemicals, according to a recent study in Nature Communications.
When plants experience damage, they release volatile organic compounds (VOCs) which can penetrate the internal tissues of neighboring plants, activating their defense mechanisms.
This groundbreaking research has offered scientists a first-time visualization of plant-to-plant communication. By inflicting damage on plants, either by physically crushing leaves or allowing insects to feed on them, the researchers observed the release of VOCs.
They then exposed healthy plants to these VOCs and, using genetically modified plants that fluoresce due to calcium signaling, observed the plants illuminating, indicating the triggering of defense responses. Such mechanisms include producing proteins that deter insect consumption.
This discovery has monumental implications for the future of agriculture. By understanding and potentially harnessing these naturally occurring defense responses, it may be possible to proactively protect crops from various threats, including pests and drought conditions.
As described by senior study author, Masatsugu Toyota, this could essentially act as a form of "vaccination" for plants, priming them to counter challenges such as environmental stressors before they manifest, enhancing the overall resilience and yield of crops.