IRS and AI, U.S. Inflation, and Northern Hemisphere Temperatures

Tax Policy/News:

September 8: IRS Uses AI To Step Up Audits Of Large Partnerships, Corporations And Wealthy

The IRS is deploying the extra resources it gained under the IRA on cutting-edge technology like AI and data analytics to improve its agents' visibility into how the wealthy have become more creative on where they shield their income while focusing more staff attention on the areas of greatest abuse.

While the initial funding last year helped with hiring more IRS employees to assist with taxpayer service and alleviate the stress of tax season earlier this year, the IRS is now using the money to hire more employees who can pursue tax evasion by big businesses and individuals, with the help of AI and data analytics to spot suspicious patterns of activity.

The IRS will also be devoting more attention to large partnership audits.

In 2021, the IRS launched the first stage of its large partnership compliance program with audits of some of the largest and most complex partnership returns, he noted.

With extra resources from the Inflation Reduction Act now in place, the IRS is expanding that program to encompass more large partnerships.

Starting in October, hundreds of partnerships will receive a special compliance alert from the IRS in the mail about what the agency has identified as an ongoing discrepancy on balance sheet involving partnerships with over $10 million in assets.

"Prior to the IRA, the IRS did not have the resources needed to follow up and engage with all the large partnerships with such discrepancies," said IRS commissioner Daniel Werfel.

In early October, the IRS will start sending out the mailings to about 500 partnerships, and depending upon the response, the IRS will add each to its audit stream for more work.

The IRS plans to step up its efforts in the crypto area as well, thanks to the extra funding, and after issuing so-called John Doe summonses to crypto exchanges such as Coinbase and Kraken seeking information on their customers.

"The IRS virtual currency compliance campaign will continue in the months ahead, after an initial review showed the potential for a 75% noncompliance rate among taxpayers identified through the record production of digital currency exchanges. The IRS projects more digital asset cases will be developed for further compliance work in the months ahead," said Werfel. 

September 7: IRS employees face taxpayer threats and assaults

The IRS needed to respond to nearly 800 employee reports of assaults and threats in recent years, but often not very promptly, according to a new report.

The report, released Thursday by the Treasury Inspector General for Tax Administration, reviewed 790 potentially dangerous taxpayer cases from October 2019 to November 2022 and found it took an average of 30 calendar days from the date of the incident for the IRS to post an indicator of a potentially dangerous taxpayer indicator to the taxpayer's account.

Guidance to IRS employees on how to report assaults and threats from taxpayers contained inaccurate, inconsistent information, including a fax number listed as a reporting option that no longer operated.

The IRS provided different ways for employees to report assaults and threats, including contacting local TIGTA offices, calling various TIGTA or IRS telephone numbers, or completing online incident reporting forms on both TIGTA's public website and the IRS's internal website.

TIGTA's site visits found that not all IRS employees knew how to report assaults and threats.

"While most Americans respect IRS employees and its mission, taxpayers experiencing financial difficulties may feel increased pressure and act aggressively toward IRS employees," said the report.

The IRS also developed a list of inaccurate information on reporting of assaults and threats and plans to update all its internal guidance with a unified message instructing employees on processes and procedures for reporting assaults and threats.

Economic News/Policy:

September 12: This week’s US inflation data shows signs of volatility

In recent financial developments, stock markets are showing signs of volatility, with investors closely monitoring the unfolding events. Factors such as global economic indicators, geopolitical tensions, and corporate earnings reports are influencing market sentiments.

As traders await further cues from central banks and financial institutions, there's an air of caution, with many opting for a wait-and-see approach.

Major stock indices have experienced fluctuations, reflecting the uncertainty in the global economic landscape. Key sectors, including technology, energy, and healthcare, are under scrutiny as analysts try to gauge the potential medium to long-term impacts. 

Investors are also keeping an eye on commodity prices, currency movements, and bond yields, which provide insights into broader market trends.

Amidst this backdrop, financial experts advise investors to stay informed and diversify their portfolios. While short-term market movements can be unpredictable, a well-balanced investment strategy can help navigate the complexities of the current financial environment. As always, understanding the underlying factors driving market dynamics is crucial for making informed investment decisions.

September 11: Yellen 'Feeling Very Good' About Chances For Economic Soft Landing

Treasury Department Secretary Janet Yellen said she is "feeling very good" about the U.S. making a soft economic landing without a recession.

"I am feeling very good about that prediction," Yellen told Bloomberg when asked whether the U.S. would avoid a recession while still containing inflation.

"Every measure of inflation is on the road down," Yellen said.

Yellen gave the interview while heading back from attending the Group of 20 summit in New Delhi, which she said "Remains the premier forum for global cooperation." She attended the meeting alongside President Biden.

Yellen has previously said she doesn't expect a recession in the U.S. despite slow economic growth in China.

"Many countries do depend on strong Chinese growth to promote growth in their own economies, particularly countries in Asia - and slow growth in China can have some negative spillovers for the United States," Yellen told Bloomberg Television in an interview in July.

"[U.S. economic] growth has slowed, but our labor market continues to be quite strong - I don't expect a recession," Yellen added.

Energy and Environmental Policy/News:

September 9: Why Trump's Tax Law Could Limit Biden's Efforts To Protect Arctic Wildlife From Drilling

The Biden administration's efforts to protect wildlife in the Arctic from oil and gas drilling is on a collision course with a Trump-era law requiring oil and gas leasing there.

When President Biden was on the campaign trail he called for "permanently protecting" the Arctic National Wildlife Refuge from drilling.

A 2017 tax law also required at least one drilling rights sale to be held by the end of 2021, and another to be held by the end of next year - meaning the Biden administration is expected to have to auction off some land in the refuge for oil and gas development.

On Wednesday, the Interior Department announced it would cancel seven leases in the wildlife preserve that were issued to the Alaska Industrial Development and Export Authority during the Trump administration.

Mark Squillace, a professor at the University of Colorado Law School, said the Biden administration's move presents "Some risk from a litigation perspective."

Christophe Courchesne, director of the Environmental Advocacy Clinic and an assistant professor of law at the Vermont Law and Graduate School, said that if the state of Alaska prevails in its legal challenge, the seven leases could be reinstated.

Squillace noted that while the 2017 law may constrain the Biden administration's ability to protect the land, the leases may not actually ever amount to any actual oil extraction in the refuge.

September 6: This summer was a global record breaker for the highest heat ever measured, meteorologists say

Earth has sweltered through its hottest Northern Hemisphere summer ever measured, with a record warm August capping a season of brutal and deadly temperatures, according to the World Meteorological Organization.

Scientists blame ever warming human-caused climate change from the burning of coal, oil and natural gas with an extra push from a natural El Nino, which is a temporary warming of parts of the Pacific Ocean that changes weather worldwide.

Usually an El Nino, which started earlier this year, adds extra heat to global temperatures but more so in its second year.

Climatologist Andrew Weaver said the numbers announced by WMO and Copernicus come as no surprise, bemoaning how governments have not appeared to take the issue of global warming seriously enough.

"We will not limit warming to 1.5 C; we will not limit warming to 2.0 C. It's all hands on deck now to prevent 3.0 C global warming - a level of warming that will wreak havoc worldwide," said Weaver. 

Copernicus, a division of the European Union's space program, has records going back to 1940, but in the United Kingdom and the United States, global records go back to the mid 1800s and those weather and science agencies are expected to soon report that the summer was a record-breaker.

Scientists have used tree rings, ice cores and other proxies to estimate that temperatures are now warmer than they have been in about 120,000 years.

Technology:

September 8: Hawley, Blumenthal Unveil Bipartisan AI Framework

Two senators released a bipartisan framework for artificial intelligence legislation Friday as Congress ramps up efforts to regulate the novel technology.

Richard Blumenthal and Josh Hawley calls for requiring AI companies to apply for licensing and clarifying that a tech liability shield would not protect those companies from lawsuits.

"This bipartisan framework is a milestone-the first tough, comprehensive legislative blueprint for real, enforceable AI protections. It should put us on a path to addressing the promise and peril AI portends," Blumenthal said in a statement.

Hawley said the principles laid out in the framework should "Form the backbone" of Congressional action on AI regulation.

The framework calls for establishing a licensing regime administered by an independent oversight body.

The release of the framework, and the hearing announced alongside it, come just before the Senate Majority Leader Chuck Schumer's AI forum, which will bring in leaders from top AI companies to brief lawmakers on the potential risks and benefits of AI. Schumer also released an AI framework in June.

The leader's framework provided a much broader set of key principles rather than some of the more specific action in Hawley and Blumenthal's proposal.

For Fun:

September 11: Webb Discovers Methane, Carbon Dioxide in Atmosphere of K2-18 b

NASA's James Webb Space Telescope has made a significant discovery, detecting methane and carbon dioxide in the atmosphere of the exoplanet K2-18b. This finding is crucial as both methane and carbon dioxide are considered key indicators in the search for potential life beyond Earth. 

K2-18b, located 124 light-years away in the constellation Leo, has been a subject of interest for astronomers due to its position within the habitable zone of its star, where conditions might allow for liquid water to exist.

The presence of these gasses in the atmosphere of K2-18b raises intriguing questions about the planet's potential habitability and the processes occurring there. While the detection of methane and carbon dioxide does not directly indicate life, it does suggest a complex atmosphere with the potential for some of the necessary conditions for life. 

Scientists are keen to further study K2-18b and other similar exoplanets to gain a deeper understanding of their atmospheres and the potential for life elsewhere in the universe.

The James Webb Space Telescope, with its advanced infrared capabilities, has proven to be an invaluable tool in the study of distant exoplanets. Its ability to detect and analyze the chemical compositions of exoplanetary atmospheres offers researchers unique insights into these distant worlds. 

As the telescope continues its observations, it is expected to provide even more detailed data on K2-18b and other exoplanets, furthering our understanding of the universe and the potential for life beyond our solar system.