Key Takeaways
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Day 21 of the shutdown.
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Trump adviser threatens "stronger measures."
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Tariff challengers brief the Supreme Court.
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Betting markets say TACO.
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3M transfer pricing case: our man weighs in.
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IRS criminal reorganization concerns.
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American Frog Day.
"This is Day 21 of the government shutdown. There’s no solution in sight to this crisis." - Punchbowl News.
Trump Adviser Sees ‘Stronger Measures’ If Shutdown Continues - Lauren Dezenski and John Harney, Bloomberg via MSN:
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Trump last week also said he plans to release a list of “Democrat” programs for cuts. The president said he would do that last Friday, but no document was released.
Tariff Tuesday: Supreme Court, China, Cattle
Emergency Tariffs Unlawfully Unprecedented, Justices Told - Dylan Moroses, Law360 Tax Authority ($):
The small businesses led by VOS Selections Inc. told the Justices in their brief that the language in IEEPA that Trump and the federal government have relied on to impose a bevy of tariffs on major trading partners cannot provide that kind of authority, noting that the "power to regulate is not the power to tax," and the U.S. Constitution weighs each term differently.
The Court is scheduled to hear the case November 5.
Trump demurs, China hardens - Ari Hawkins, Politico:
“It’s not sustainable, but that’s what the number is,” Trump told Fox Business host Maria Bartiromo. “It could stand. But they forced me to do that.”
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Trump also expressed confidence that his tariff threats would pressure Xi to reverse expansive restrictions on rare earth exports. Those curbs followed the Trump administration’s crackdown last month on subsidiaries of blacklisted firms — a move aimed at preventing China from bypassing export controls.
What Betting Markets Show About Trump - Natasha Solo-Lyons, Bloomberg:
The smart money seems to be on the 79-year-old Republican doing absolutely nothing, they write: You would have made a $12 net profit for every $100 you spent. See for yourself how the professionals are gaming out this moment in American history.
Trump Hopes Argentina Can Help Bring Down Meat Prices - Alan Rappeport, New York Times:
Mr. Trump, who has imposed tariffs on nearly everything that America imports, said that he was considering buying beef from Argentina to bolster supplies and curb rising prices. The idea contradicts Mr. Trump’s guiding economic philosophy of erecting import barriers to encourage domestic production. It also suggests that the president believes that in some cases, open markets can be an antidote to rising prices.
“We would buy some beef from Argentina,” Mr. Trump said to reporters aboard Air Force One on Sunday. “If we do that, that would bring our beef prices down.”
More imports result in lower consumer prices? Would that work with, say, steel and aluminum? Or even cars and trucks?
Trade and Taxes
Beyond Common Ownership: the Next Frontier of Transfer Pricing Rules?- Chad Martin, Eide Bailly:
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The most common determinant of common control is common ownership—where the same related-party interests own more than half of the associated enterprises. However, both U.S. and OECD guidance clarify that common control is distinct from common ownership.
3M Case Marks Pathway for Coca-Cola’s Transfer Pricing Victory - Tristan Navera, Bloomberg ($):
The decision marked an upheaval in how courts interpret that provision, as the IRS has long asserted it had such authority.
Chad Martin, a principal of transfer pricing services at Eide Bailly LLP, says Coca-Cola stands to gain from the 3M decision, which showed that courts can and will step in to read vague tax code provisions.
That’s especially true for the “uniquely positioned” Section 482, a law that conveys broad IRS power to reallocate income without clear constraints in just a few sentences, he said.
Related: Eide Bailly Transfer Pricing Services.
IRS - Layoffs, Favoritism Questions
Questions are piling up - Bernie Becker, Politico:
Whether lawmakers will be able to get answers at the moment is another question. Democratic aides say they have had trouble getting answers out of the agency on even cursory questions during the shutdown, as the IRS works with barely half of its workforce at the moment.
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Democrats on the House Ways and Means Committee also want more answers out of Bessent.
They want their GOP counterparts to convene a meeting with Bessent about last week’s Wall Street Journal report that the IRS plans to place allies of President Donald Trump in the agency’s criminal investigations unit, which would then open the door to more inquiries into Democratic-aligned groups.
Inconsistent Tax Enforcement Is a Threat to All - Karen Kelly, Tax Notes ($):
Karen Kelly is the former acting assistant attorney general and delegated component head of the Justice Department Tax Division.
Look Through is Through
IRS to Scrap Look-Through Rule for Qualified Investment Entities - Jonathan Curry, Tax Notes ($). "A 10-year exemption from the foreign-controlled domestic corporation look-through rule would become permanent under newly proposed guidance from the IRS and Treasury."
Treasury Floats Plan To Scrap Look-Through Rules - Natalie Olivo, Law360 Tax Authority ($):
The proposed regulations would eliminate rules Treasury uses to determine when to treat domestic real estate investment companies as foreign-owned under the Foreign Investment in Real Property Tax Act. In general, FIRPTA taxes foreign investors on sales of shares in real estate investment trusts unless at least 50% of a given REIT is owned by a nonpublic domestic company.
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Under Section 897, REITs are considered domestically controlled — and thus exempt from taxes on sales of shares — if less than 50% of the stock is held "directly or indirectly" by foreign corporations or individuals.
Blogs and Bits
Federal government shutdowns, then and now - Kay Bell on Substack. "Adding insult to injury is that this shutdown, like almost all such closures, was made possible by members of Congress, all of whom are still being paid."
IRS issues penalty relief for remittance transfer providers ahead of new 1% excise tax - National Association of Tax Professionals. "Starting in 2026, a 1% excise tax will apply to certain outbound remittance transfers, payments sent from the United States to recipients in other countries. The tax applies when the transfer is made using cash, money orders, cashier’s checks or other similar physical instruments. Electronic transfers initiated through banks or payment apps are not affected unless they fall under specific qualifying conditions outlined in the new guidance."
The Border-Adjusted Tax Trap - Adam Michel, Liberty Taxed. "First, Trump loves tariffs, not because they’re good economics, but because he sees tariffs as a negotiating tool, a way to reward friends, and punish rivals. Replacing the International Emergency Economic Powers Act tariffs with a border adjustment tax may result in additional revenue, but it is unlikely to meet Trump’s economic and non-economic reasons for loving tariffs. Americans would likely end up paying higher tariffs and the new corporate income levy."
Paying For the Big Destination Wedding
Tax Startup CEO Swindled $13M From Investors, SEC Says - Anna Scott Farrell, Law360 Tax Authority ($; name omitted):
In a complaint, the SEC accused [the defendant] of fraudulently raising money from venture capital investors from October 2020 until the L.A.-based ComplYant App Inc. "ran out of cash and abruptly ceased operations" in September 2023, just on the heels of raising $750,000 from new investors.
...She repaid a student loan, footed expenses for her destination wedding in the Caribbean, bought Super Bowl tickets and put more than $700,000 toward the purchase of her $1.1 million house, according to the complaint.
The investors apparently did not require audited financial statements:
This is why I stick with index funds.
What day is it?
It's American Frog Day! Accept no Argentine frogs, I guess.
Make a habit of sustained success.
