Tax News & Views Cuts the Cake Inspection Budget Roundup

Happy Thanksgiving! Eide Bailly offices are closed for Thanksgiving and Black Friday, so Tax News & Views will be off. We will be back on Monday. Enjoy the long weekend!

White House, Senate Want Biggest Cuts Ever to TIGTA Budget - Doug Sword, Tax Notes ($):

It’s been more than 20 years since the White House, the House, and the Senate all pushed for cuts to the budget of the IRS’s watchdog, but never at the percentages sought in fiscal 2026 proposals.

After the Trump administration earlier this year proposed a 20.2 percent cut to the annual budget of the Treasury Inspector General for Tax Administration, the Senate Appropriations Committee countered with a recommended 7.3 percent cut in its fiscal 2026 financial services and general government (FSGG) appropriations bill, released November 24. The House Appropriations Committee, meanwhile, approved a 1.5 percent cut to TIGTA’s funding when it advanced its FSGG bill in September.

TIGTA’s annual appropriations have changed little in recent years; $173 million was provided in fiscal 2025, compared to $170 million in fiscal 2017. Accounting for inflation, the purchasing power of the annual appropriations has dropped 20 percent since 2017.

If you want to protect the integrity of the tax collection function, you might support TIGTA funding. If you want to make the IRS a political arm of the administration, you might not.

Senate Panel Calls For Deep Cut To IRS Tech Budget - Anna Scott Farrell, Law360 Tax Authority ($):

The Senate Appropriations Committee proposed reducing the Internal Revenue Service's budget to $11.8 billion for 2026, including a sizable cut to the agency's technology budget only partially offset by an increase in funding for taxpayer services, according to a report on the committee's financial services bill.

The $481 million loss to the agency would represent a 4% drop in funding compared with this year, and the technology budget would drop 22% to roughly $3.2 billion in 2026, according to a bill report released Monday.

The $900 million loss in tech funding would affect the technology and operations support program responsible for protecting taxpayer data and physical infrastructure.

I was told that the IRS would make up for the DOGE personnel cuts with automation. Maybe not.

What's In A Name

"Trump accounts" get a rebrand - Emily Peck, Axios:

Companies, lawyers and policy types are starting to call "Trump accounts" a new name: 530A accounts.

Why it matters: It's a way to avoid politicizing the accounts — investment vehicles for kids that proponents hope will be widely used by families, companies and philanthropies on both sides of the aisle.

Zoom out: 530A is the name of the section of the One Big Beautiful Bill Act that established the accounts

....

Whatever these accounts wind up getting called, the key thing is: Babies are getting some money.

Bonus (Depreciation) Season

Companies Reap Tax Boon as Law’s Boost for Investment Kicks In - Michael Rapoport, Bloomberg ($):

Business advocates say the law’s “bonus depreciation” provisions are spurring companies to spend more on facilities, equipment, and other capital investments to boost growth. Tech behemoths like Meta Platforms Inc. and manufacturers like Boeing Co. are among companies showing stronger capital-spending growth since the law was enacted in July.

“We are very much seeing encouraging early signs that companies are willing and able to use these provisions to actually make capital investments,” said Charles Crain, managing vice president for policy at the National Association of Manufacturers.

Companies also are buzzing about how the law allows them to reduce or push back their cash tax payments. Critics say the bonus depreciation change is largely a giveaway that rewards companies for investments they’d make anyway.

How Does This Work?

IRS Seeks Input for Scholarship Organization Contribution Credit - Mary Katherine Browne, Tax Notes ($):

Treasury and the IRS requested taxpayer input on specific issues regarding the new tax credit for scholarship-granting organizations that will likely be addressed in future guidance.

Notice 2025-70, 2025-50 IRB 1, released November 25, requests that taxpayers provide comments on the section 25F qualified education scholarship tax credit by December 26.

Section 25F, enacted in the One Big Beautiful Bill Act (P.L. 119-21), provides a dollar-for-dollar tax credit of up to $1,700 per individual who contributes to federally recognized nonprofits that are approved by their state and distribute scholarships to eligible students. The program will start January 1, 2027.

This program mimics the tax credit programs run by some states, including Iowa, but it does not overlap with them to provide double benefits for the same contribution.

UK Gives Us Reasons to Be Thankful in the US

While the US has tax policy problems (do we ever!), at least we aren't the UK. The tax authorities in the United Kingdom are releasing a new budget today making a bad system worse.

Rachel Reeves’ Budget raises tax take to all-time high - George Parker, Sam Fleming and Ian Smith, Financial Times:

Rachel Reeves’ Budget raises taxes by £26bn, taking the burden to an all-time high of 38 per cent of GDP by the end of the parliament, according to an accidentally released forecast by the Office for Budget Responsibility.

The OBR’s assessment of Reeves’ Budget was published amid chaotic scenes before noon on Wednesday, around 45 minutes before the chancellor was due to deliver her crucial second Budget.

...
Dividends will also be more highly taxed. From April 2026, a 2 percentage point increase to the basic and higher rates of tax on dividends will lift them to 10.75 and 35.75 per cent respectively, raising £1.2bn a year on average from 2027.

US federal taxes run about 18% of GDP, with spending at about 23%. UK government spending is more federalized than US. The Economic Policy Institute says total US government spending is about 37.8% of GDP, vs. 41% for the UK.

Still, we shouldn't be too smug. The UK and US share one feature: a compulsion to spend combined with an unwillingness to enact broad-based tax increases to support the spending. Both countries pretend that the rich guy will pick up the tab.

Other coverage:

Britain’s Most Unpopular Chancellor in Decades Faces Another Big Test - Eshe Nelson, New York Times.

The Budget – what it says - Dan Neidle, Tax Policy Associates.

State Taxes: MN PTET to expire; AICPA seeks partnership clarity; Renting a car to drive to Grandma's for Thanksgiving.

Minnesota SALT Workaround to Expire at Year's End - Emily Hollingsworth, Tax Notes ($):

Minnesota's elective passthrough entity (PTE) tax will sunset at the end of the year, the state Department of Revenue reminds taxpayers.

In updated guidance issued November 21, the DOR said that the elective entity-level tax will no longer be available for tax years after December 31.

The PTE tax allows partnerships and S corporations to elect to pay tax at the entity level (calculated by multiplying the entity’s taxable income by 9.85 percent) and passthrough owners, partners, and shareholders can claim a refundable tax credit equal to their share of the taxes paid.

Accountants Seek Clarity on Tax Treatment of Partnership Income - Michael Bologna, Bloomberg ($):

The American Institute of CPAs wants a multistate initiative crafting rules around fair taxation of partnership income to provide taxpayers with greater clarity on the allocation of such income under each state’s pass-through tax system.

The accounting organization made a series of recommendations to the Multistate Tax Commission’s partnership work group, which has been drafting a research paper and uniform rules addressing the sourcing of partnership income in complex business structures across multiple states. The AICPA generally wants greater consistency in the tax treatment of individual partners and corporate partners, said Brian Myers, a partner at Crowe LLP and chair of the association’s state and local tax technical resource committee.

Rental Car Taxes by State, 2025 - Adam Hoffer and Jacob Macumber-Rosin, Tax Foundation. "Rental cars receive additional sales or excise tax treatment in all 50 states."

Blogs and Bits

Social Security Benefits Increase 2.8 Percent for 2026; Wage Base Grows by 4.77 Percent - Parker Tax Pro Library. "The amount of earnings subject to social security tax will increase from $176,100 to $184,500."

What If You Miss Tax Deadline as an Expat? - 1040 Abroad. "Whether you owe taxes, or simply forgot to file a tax return, expats have clear steps to fix the issue and limit long-term exposure."

A Better Way Forward on Tax Filing after the Demise of Direct File - Demian Brady and Debbie Jennings, NTUF Blog. "By ending Direct File, the IRS avoids the inherent conflict that comes from being both enforcer and preparer."

Watch out for Grandma

Arcadia woman sentenced to more than 10 years in prison for role in $11.6 million money laundering racket that conned elderly victims - IRS (Defendant name omitted, emphasis added):

A San Gabriel Valley woman was sentenced today to 121 months in federal prison for orchestrating a large-scale international money laundering conspiracy that funneled more than $11.6 million in fraud proceeds from hundreds of victims – many of them elderly – who were conned by criminals pretending to be law enforcement, government officials, or computer support representatives.

Defendant, of Arcadia, was sentenced by United States District Judge Stanley Blumenfeld Jr., who also ordered her to pay $10,069,518 in restitution.

...

From December 2022 to October 2024, Defendant conspired to launder millions of dollars in proceeds derived from various fraudulent schemes. Victims were conned via impersonation and technical support scams, in which fraudsters – often operating overseas – posed as government officials, law enforcement, or computer support representatives. The perpetrators deceived victims, typically elderly individuals, into sending large payments – sometimes their entire life savings – to bank accounts in the United States controlled by Defendant and her co-conspirators.

The IRS press release hints at the lengths the fraudsters will go to get around financial institution fraud protections:

...Defendant became a manager of money launderers and recruited at least 15 money launderers into the global scheme. Defendant and her network of recruited money launderers then opened dozens of business bank accounts to receive and transfer fraudulent funds. Once the victims’ funds were received, Defendant directed her associates to withdraw or transfer the money, taking a 5% to 10% cut before sending the remaining proceeds to fraud organizers overseas, primarily in China and Hong Kong.

Throughout the scheme, Defendant directed the recruited money launderers on how to deceive banks that questioned the suspicious transfers, and she provided them with cover stories for the transfers, victims’ driver’s licenses, and other information in order to deceive the banks into believing the transfers were legitimate and therefore to not freeze the accounts or funds. Defendant and her co-conspirators continued to launder money through various bank accounts until the banks froze the accounts for fraud, at which point, Defendant and her co-conspirators would switch to different bank accounts and co-conspirators.

Keep in touch with your elderly relatives and friends and look for signs that they might be victimized. And remember that fighting tax scams is an IRS enforcement function; reducing IRS enforcement might well empower the grandparent scammers.

What day is it?

It's National Cake Day! To help you warm up for tomorrow.

Tax News & Views Cuts the Cake Inspection Budget Roundup

Make a habit of sustained success.

Joe B. Kristan, CPA