Tax News & Views Revenge Tax No, Food Trucks Yes Roundup

Revenge Tax to Be Scrapped as Bessent Teases Pillar 2 Deal - Jonathan Curry, Stephanie Soong, and Cady Stanton, Tax Notes ($):

The United States has reached a tentative agreement with its G7 partners that would exclude U.S. companies from OECD pillar 2 taxes in exchange for its abandoning the section 899 retaliatory tax, Treasury Secretary Scott Bessent announced.

The announcement, made by Bessent via a June 26 post on the social platform X, indicates that a “joint understanding” among the countries will be announced soon. Shortly after Bessent's announcement, top Republican taxwriters agreed to remove section 899 from the One Big Beautiful Bill Act at his urging.

Bessent Says Proposed ‘Revenge Tax’ No Longer Needed - Richard Rubin, Wall Street Journal:

The potential tax, which would have become Section 899 of the tax code, had roiled markets and frustrated foreign-owned companies, who had argued that it would depress investment in the U.S. Removal, however, could punch a hole in the GOP tax bill; the House version was slated to raise $116 billion through 2034 and a gentler Senate version would have raised $52 billion.

Byrd Droppings Fowl Tax Bill Progress

Background: The Byrd Rule and Its Impact on Reconciliation

Key Medicaid provision in Trump's bill is found to violate Senate rules. The GOP is scrambling - Lisa Mascaro, Associated Press:

The Senate parliamentarian has advised that a Medicaid provider tax overhaul central to President Donald Trump’s tax cut and spending bill does not adhere to the chamber’s procedural rules, delivering a crucial blow as Republicans rush to finish the package this week.

Guidance from the parliamentarian is rarely ignored and Republican leaders are now forced to consider difficult options. Republicans were counting on big cuts to Medicaid and other programs to offset trillions of dollars in Trump tax breaks, their top priority. Additionally, the parliamentarian, who is the Senate’s chief arbiter of its often complicated rules, advised against various GOP provisions barring certain immigrants from health care programs.

Endowment Tax Carveouts Ruled Out of Bounds by Senate Referee - Chris Cioffi, Bloomberg ($):

Exemptions for some religious schools must be removed from Republicans’ plan to impose a major tax hike on some of the largest university endowments, the Senate’s scorekeeper ruled early Friday.

The Senate’s parliamentarian said two carveouts to lawmakers’ proposal sought to create a tiered tax regime with a top rate of 8%, Senate Finance Committee ranking member Ron Wyden (D-Ore.) said in a statement. The current tax rate for investment income of certain large private colleges and universities that are subject to the levy is 1.4%.

Senate Referee Rules Against EITC Provision in Senate Tax Bill - Cole Reynolds, Bloomberg ($):

The provision would require taxpayers to submit documentation—and the IRS to approve it—before claiming children for earned income tax credits starting in 2028. The Senate Parliamentarian determined the proposal was against Senate rules for the process by which Republicans are seeking to use to pass the bill, Senate Democrats said Friday. Under the rules, every budgetary provision has to be primarily about spending or revenue.

Flailing for the Fourth

Trump urges senators to get his big tax bill done by July 4th - Lisa Mascaro and Mary Clare Jalonick, Associated Press. "President Donald Trump wants his “big, beautiful” bill of tax breaks and spending cuts on his desk to be signed into law by the Fourth of July, and he’s pushing the slow-rolling Senate to make it happen sooner rather than later."

Is the GOP’s July 4 deadline still in play? - Andrew Desiderio, Laura Weiss and Samantha Handler, Punchbowl News:

The short answer is yes, it is. But with each passing day, Senate Republican leaders are being dealt new setbacks while making limited headway on the biggest remaining hang-ups.

...

Key Issues. The biggest question mark remains the Senate’s drastic crackdown on Medicaid provider taxes and an accompanying stabilization fund for rural hospitals that many GOP senators are demanding.

Elizabeth MacDonough, the Senate parliamentarian, determined that the provider tax limits don’t comply with the chamber’s reconciliation rules, sending Republicans scrambling. The ruling centered around the provider tax freeze in the bill rather than the Senate’s more drastic constraints for Medicaid expansion states, according to two sources with knowledge of the decision.

GOP dissent over Trump tax bill mounts as deadline draws nearer - Jacob Bogage and Emily Davies, Washington Post:

Republicans have jostled for weeks about the legislation’s sizable debt impact; when conservatives starting charting a course for the legislation shortly after November’s elections swept them to power, many pledged their tax bill would be deficit-neutral.

The legislation is far from that mark, and the parliamentarian’s ruling on the health care provisions probably increased the price by $250 billion. That’s spooked some House lawmakers wary of increasing the national debt, which already exceeds $36 trillion.

“They’re profoundly unserious about spending,” Rep. Chip Roy (R-Texas), a leading budget hawk, said Thursday about Senate Republicans. “The majority leader ought to honor his commitment to actually match what we’re doing on the spending levels in the [bill].”

Tax Administration: Kies Approved; Next Busy Season Could Be Terrible.

Senate Confirms Kies to Top Treasury Tax Role - Alexander Rifaat, Tax Notes ($):

The Senate has confirmed Kenneth Kies as Treasury assistant secretary for tax policy in a 53-45 vote along party lines.

Kies, who previously served as managing director of the lobbying firm Federal Policy Group LLC, is well known in the tax policy world and will be the third person, after Laurence Woodworth and Ronald Pearlman, to have served as both chief of staff for the Joint Committee on Taxation and assistant secretary for tax policy at Treasury.

Former Officials Expect Worst Tax Season in 40 Years - Tyrah Burris, Tax Notes ($):

Former officials say they are worried that the IRS could have the worst tax season in 40 years because of the recent employee losses and budget cuts.

Terry Lemons, a former communications and liaison chief at the IRS, said June 26 that the last time the IRS had a “really bad” tax season was in 1985 because of a rush of technology change, staffing cuts, and a lack of employee training. Those factors parallel what’s happening today, he said.

Rain or Shine: The IRS Must Prepare Now for Next Year’s Filing Season - Erin Collins, NTA Blog:

As of this month, as Figure 1 shows, IT staffing has been reduced by 27 percent, and Taxpayer Services staffing has been reduced by about 22 percent, or by more than 9,000 employees. The Administration’s FY 2026 budget proposal calls for keeping Taxpayer Services staffing at about FY 2025 levels (taking into account both appropriated funds and Inflation Reduction Act funds). Until the IRS effectively implements IT solutions, it requires well trained employees to process the returns. Thus, the IRS will need to rapidly hire and train thousands of new Taxpayer Services employees before the start of the 2026 filing season to process returns and deliver timely refunds.

It is essential that the IRS prepare for and efficiently execute the next filing season. The continued staffing constraints, combined with stagnant technology and potential legislation changes, jeopardize next year’s success. Early preparation ensures the IRS can deliver both effective taxpayer service and secure operations.

Tariff Talk

US goods exports tumble by most since 2020 as Trump’s tariffs disrupt trade - Stephanie Stacey and Peter Wells, Financial Times:

US goods exports tumbled in May at their steepest rate since the coronavirus crisis in 2020, as trading partners cut back purchases of American goods in the wake of President Donald Trump’s “liberation day” tariff blitz.

Exports tallied $179.2bn in May, a $9.7bn — or 5.2 per cent — drop from the previous month’s figure, according to Census Bureau data released on Thursday. That marked a reversal from an increase of 3.5 per cent in April.

EU Considers Lowering Tariffs on U.S. Imports in Effort to Woo Trump - Kim Mackrael, Bertrand Benoit and Gavin Bade, Wall Street Journal. "EU leaders debated how much they are willing to sacrifice to win over Trump at a meeting in Brussels on Thursday evening. Other concessions under consideration include lowering nontariff barriers, buying more American products including liquefied natural gas, and offering to cooperate with the U.S. to tackle its economic concerns about China."

Blogs and Bits

ETAAC has legislative advice for Congress, which it is ignoring as it works on the one big tax bill - Kay Bell, Don't Mess With Taxes. "One way to simplify taxes, argues ETAAC, is make as few as possible changes."

Can Summer Camp Expenses Qualify for a Tax Deduction? - Jill Kennedy, Tax School Blog. "Summer camps are lots of fun and provide an enriching experience for children, but they can be more than that—they can provide meaningful tax savings for working parents."

Merger Termination Fee Is Deductible as Ordinary Loss - Parker Tax Pro Library. "The Tax Court held that a corporation's rights and obligations under a cooperation agreement it entered in connection with a proposed merger with another corporation were fundamentally in the nature of services and thus, when the merger could not be completed, the taxpayer's payment under the agreement to the other corporation was deductible as an ordinary loss and not as a capital loss under Code Sec. 1234A(1) as the IRS had argued."

State Tax News & Views: Car Dealers Are Big Winners in CA Tax Sharing; NM Issues Publication for Tax Credits; More Than 58,000 Businesses Get TN Franchise Refunds - Melissa Menter and Colette Sutton, Eide Bailly. "Under Tennessee's franchise tax refund program Eide Bailly was able to help clients obtain over $2.2 million in refunds."

How Would the Proposed Additional Senior Deduction Compare to No Tax on Social Security? - Alex Durante, Tax Policy Blog. "Overall, the increased senior deduction with the phaseout would deliver a larger tax cut to lower-middle- and middle-income taxpayers compared to exempting all Social Security benefits from income taxation and would not weaken the trust funds as much."

Fossil Fuel Subsidies Are Mostly Fiction, But the Real Energy Subsidies Should Go - Adam Michel, Liberty Taxed. "Most of what critics label as fossil fuel subsidies are standard tax treatments available to many industries."

Bold Play Backfires on Life Coach

Raleigh basketball scout and life coach sentenced to prison for obtaining nearly $300,000 in fraudulent COVID-19 relief loans in nationwide scheme - IRS (Names omitted, emphasis added):

Defendant was sentenced to six years in prison Monday and will be ordered to pay over half a million dollars in restitution to the Small Business Administration. Defendant went to trial in November and ultimately pled guilty to one count each of bank fraud and wire fraud while the jury was deliberating. He received almost $300,000 in fraudulent Paycheck Protection Program (PPP) COVID-19 loans. This fraud was part of a multimillion-dollar national scheme, and, to date, more than 30 defendants have pled guilty and 29 have been sentenced.

Defendant applied for and received loans for two businesses, Get Me Recruited, LLC (a basketball scouting and tournament staging business) and Changing the Game Life Coach (purportedly a life coaching service for young athletes). The total received for both loans was $291,665.50...

Information presented at the trial showed that Get Me Recruited, LLC did have business in 2019 and 2020, but employees listed on the loan application testified that they never made more than $2,000 per year and were not regularly salaried employees. The loan application submitted by Defendant listed their annual salaries as being between $110,145 and $128,416. In contrast, Changing the Game Life Coach did not appear to have any meaningful business during the relevant period and employees testified that they had never done any work for the company, and the bank account associated with the business was only open to receive the loan disbursement.

Life coaching lesson #1: Don't do that.

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