Tax News & Views Pasta Ring Impasse Roundup

Legislative Update! The next Eide Bailly Quarterly Legislative Update webinar is slated for next Tuesday, December 16, at Noon Central Time. Our Alex Parker will cover the (in)action in Congress and what we can expect when the calendar turns. Register here!

ACA Tax Credit Extension on Life Support

Senate Set to Reject Dueling Bills, Leaving ACA Credit in Limbo - Katie Lobosco, Tax Notes ($):

While the Senate is expected to reject two competing partisan bills meant to address rising healthcare costs on December 11, a group of moderate House Republicans are looking to force a vote to temporarily extend the enhanced ACA tax credit two years.

In the Senate, a Democrat-backed bill would extend the enhanced tax credit for three years and a Republican-backed plan would replace the enhanced tax credit with a federally funded health savings account.

The votes come just days before ACA enrollees must decide on their healthcare plan for next year to avoid a lapse in coverage in January 2026. The enhanced premium tax credit officially expires after December 31, but people are generally required to enroll by December 15 to have coverage at the start of the new year.

Doomed Health Votes Double as Political Weapons for Democrats - Erin Durkin and Lillianna Byington, Bloomberg ($):

Senate Democrats are bringing to the floor legislation to extend enhancements to Affordable Care Act premium subsidies for another three years — a nonstarter with most Republicans. Conversely, Republicans will counter with a proposal that allows those credits to expire while creating federally funded health savings accounts for certain Affordable Care Act plans, with an income cap at 700% of the federal poverty level.

The enhancements, set to expire after 2025, made the tax credits larger and more available to people of higher income levels. Without an extension, premium payments are expected to soar for enrollees. And Senate Democratic leaders’ decision to put forward a lengthier extension — even as bills emerge in both chambers coalescing around a two-year continuance — looks more like early election-year politics than policy, according to some Republicans.

Senators try to look past health votes - Burgess Everett, Semafor. "There’s a palpable distrust underlying the entire exercise: Democrats think Republicans are ideologically opposed to propping up Obamacare, and Republicans think Democrats want a campaign issue more than a solution."

Health care deal gets further out of reach - Andrew Desiderio, Laura Weiss and Max Cohen, Punchbowl News:

On Wednesday, we outlined the many reasons to be skeptical about a bipartisan Senate health care deal coming together in the new year. Now, President Donald Trump says Hill Republicans “don’t need” to pass a big legislative package in 2026 at all.

If that holds — and it’s a big “if” given Trump’s penchant for changing his mind — it would be yet another sign that Congress will be unable to address soaring health care costs, a major policy and political problem for Republicans.

Trump’s comments came on the eve of today’s Senate votes on dueling partisan health care plans, neither of which will get 60 votes. While many senators are hoping these failed votes will spur a bipartisan deal next year, the challenges here are immense.

Ways and Means Clears Minor Tax Bills

House Advances Bill To Suspend Tax Refund Claim Limits - Asha Glover, Law360 Tax Authority ($):

The committee voted 41-0 to send the Taxpayer Due Process Enhancement Act, or H.R. 6506, to the House for a floor vote. The bill suspends the running of the normal limitation period to file a credit or refund claim from the time the Internal Revenue Service receives the taxpayer's hearing request until all appeals rights have been exhausted.

...

The committee on Wednesday also voted 41-0 to send the Taxpayer Notification and Privacy Act, or H.R. 6495, to the House for a floor vote. The bill requires the IRS, in some situations, to provide taxpayers with tailored notices identifying each specific item of information that the agency plans to request from a third party, according to JCT's description of the proposal.

Filing Matters: Don't Sleep on IRS Enforcement; Don't Go Postal

The IRS looks weak. That is when fraud becomes most expensive. - taxcoda:

The unlimited statute of limitations for civil fraud is the most misunderstood feature of tax administration. It dissolves the idea that risky behavior ages into safety. A return filed during a period of low enforcement can become the basis for a case many years later. Resource cycles at the IRS do not match the cycles of taxpayer conduct. This mismatch is why the agency does not need to be fully staffed every year to pursue significant fraud.

Criminal cases also operate on long timelines. Five to six years of exposure is common. Continued conduct extends the window. Taxpayers who rely on the weakness of a moment forget that administrations change, priorities shift, and institutional muscle memory does not disappear.

USPS Changes to Postmark Date System Taking Effect December 24, 2025 - Ed Zollars, Current Federal Tax Developments:

The United States Postal Service (USPS) has adopted a final rule (FR Doc. 2025-20740) adding Section 608.11, "Postmarks and Postal Possession," to the Domestic Mail Manual (DMM). The rule formally defines postmarks and identifies the types of markings that qualify as such. Its primary purpose is to improve public understanding that while a postmark confirms the USPS possessed a mailpiece on the date inscribed, that date does not necessarily align with the date the USPS first accepted possession of the item. The rule clarifies that the USPS does not postmark all mail in the ordinary course of operations and that the absence of a postmark does not imply the USPS did not accept custody.

Impact on Postmarking Timing The rule clarifies that the date displayed on a machine-applied postmark represents the "date of the first automated processing operation" performed at a processing facility, rather than the date the mail was dropped off.

So you drop off your return in a post office box with a check for the balance due on April 15. Then it gets postmarked someday, when the postal service gets around to it. It arrives at the service center with an April 19 postmark, so the IRS assesses a 5% late filing penalty. And you're stuck with it.

E-file. Or at least pay for a certified mail postmark, if you must paper file.

Around The World - Estonia Dunks on Minimum Tax; FDII guidance; Deere Cross.

Estonia Rejects Deal to Exempt US Companies From Global Tax - Lauren Vella, Bloomberg ($):

Estonia rejected a recent proposal by the OECD to carve out US companies from parts of the global minimum tax framework, arguing the substance of the deal is not yet acceptable for all countries.

“We have not considered this initiative suitable for Estonia from the very beginning, and even less so now, when the United States, who initiated this effort, has declined to implement it themselves,” said Estonian Finance Minister Jürgen Ligi Wednesday in a statement posted to the government’s website. “It would not bring revenue to the budget, but it would bring substantial bureaucratic costs. I told my U.S. colleague when asked that we do not want anything other than what they want for themselves.”

The statement that Estonia didn't care for Pillar 2 from the start is telling, and may bode poorly for the future of the OECD global minimum tax.

Tax News & Views International Weekly: Year-End Global Tax Negotiations - Alex Parker, Eide Bailly:

Congress is currently debating whether and how to extend enhanced healthcare tax credits before the year is out. Meanwhile, at the Organization for Economic Cooperation and Development and around the world, negotiations continue on how to design a “side-by-side” agreement to ultimately exempt U.S. companies from the Pillar Two 15% global minimum tax. The parties have a self-imposed deadline of the end of the year—otherwise, under the Pillar Two rules U.S. companies could be subject to new taxes from participating nations.

Last week, Republicans in the House of Representatives sought to remind the OECD, and tax officials at other participating nations, of the potential consequences should the agreement break down.

“Congressional republicans stand ready to take immediate action if the other parties walk away from this bill or slow-walk its implementation,” said Rep. Jason Smith, R-Mo., chairman of the House Ways and Means Committee during a recent hearing about international tax issues.

IRS Foreign-Derived Income Guidance Rewards US-Based Intangibles - Lauren Vella, Bloomberg ($). "Recent guidance released by the IRS on what kinds of foreign-earned income qualify for a highly lucrative tax deduction underscores Republicans’ goal of rewarding companies for keeping IP in the US, tax practitioners say."

Donald Trump’s tariffs intensify strain on US farmers, Deere warns - Susannah Savage, Financial Times:

Tractor maker Deere has warned that US President Donald Trump’s tariffs are backfiring on American farmers, prompting cash-strapped producers to delay replacing ageing equipment.

Cory Reed, president of the company’s agriculture and turf division, told the Financial Times that demand for expensive farm equipment in the US is faltering as growers contend with weak crop prices, higher input costs and persistent trade uncertainty.

State Stuff: Bessent Lectures Non-conforming States; Illinois Loses Equity Theft Case; Hockey Players Do Math.

Bessent Slams Blue States for Severing From Trump Tax Exemptions - Daniel Moore, Bloomberg ($):

Treasury Secretary Scott Bessent attacked Democratic-led states for passing laws to decouple their tax codes from some of the personal income tax breaks in President Donald Trump’s signature tax law enacted in July.

Bessent in a statement Wednesday singled out “liberal strongholds” like Colorado, Illinois, and the District of Columbia for “deliberately blocking their own residents from receiving these historic benefits at the state level.” Those states decoupled from at least one personal income provision in the federal law that excluded tipped income and overtime pay from taxes and allowed seniors to claim a new deduction.

Federal Court: Illinois County’s Tax Sale Scheme Is Unconstitutional - Christopher Jardine, Tax Notes ($):

In its December 8 decision in Kidd v. Pappas, the U.S. District Court for the Northern District of Illinois, Eastern Division, granted partial summary judgment to Michelle Kidd and other class plaintiffs on their takings and excessive fines claims, finding that Cook County’s tax foreclosure scheme took their property and sold it for more than their tax debt without providing just compensation.

The court rejected the county’s claim that the state's indemnity fund provides a sufficient remedy for the damage done to the former homeowners, finding that the fund is insufficiently funded and is backlogged. But the court declined to set damages, saying that the county’s liability under the U.S. Supreme Court’s decision in Monell v. Department of Social Services of the City of New York must be determined at a trial.

Does state income tax matter to NHL players? Response is emphatic yes — ‘Make more money’ - The Athletic:

Five million dollars is a lot of money.

But $5 million in New York or Toronto is not the same as $5 million in Fort Lauderdale or Nashville. State income taxes — and the higher federal and provincial taxes in Canada — appear to give some NHL teams a clear advantage in roster building solely due to where they’re located.

And while NHL commissioner Gary Bettman is correct when he says nobody was talking about the lack of state income taxes in Florida when the Tampa Bay Lightning and Florida Panthers were languishing at the bottom of the league, the fact is that those two teams have made the past six Stanley Cup Finals. And seeing the Panthers re-sign the likes of Brad Marchand, Sam Bennett and Aaron Ekblad at below market value this past offseason only added fuel to the fire.

To be sure, Florida didn't become attractive to the better players until the teams became competitive, but now that they are, taxes make a difference. Taxes aren't everything, but they surely are a thing.

Blogs and Bits

IRS Says It’s Not Too Early To Get Ready For The 2026 Tax Season - Kelly Phillips Erb, Forbes. "One easy way to set yourself up for success is to get organized early. Missing or incorrect records (like relying solely on pay stubs) can lead to errors, audits, or delayed refunds. Starting early helps avoid the scramble once tax season begins."

The Soon-To-Expire Work Opportunity Tax Credit Has Not Been Working - Adam Looney and Elena Spatoulas Patel, TaxVox. "Employers cannot screen applicants for WOTC eligibility in the hiring process. Employers are typically not allowed or are reluctant to ask applicants about criminal records or benefit receipt, since doing so can expose them to discrimination lawsuits. As a result, the credit does not influence who gets hired."

How Does the OBBBA Impact Debt, Deficits, and Tax Revenue? - William McBride, Tax Foundation. "While lawmakers limited the fiscal cost of the OBBBA by including provisions that reduce spending and boost economic growth, the net effect is higher deficits and debt, putting the federal government in a more dangerous fiscal position sooner."

The Truth About ‘No Tax On Social Security’ - Andrew Leahey, Forbes. "There is no provision in the OBBBA that exempts Social Security from federal income taxation. Instead, the bill expands a deduction for seniors—$6,000 for individuals and $12,000 for married couples—which in some cases may incidentally offset the portion of Social Security that would otherwise be taxable."

Homeland Security Side Hustle

7th Circ. Upholds Tax Conviction Of DHS Special Agent - Anna Scott Farrell, Law360 Tax Authority ($; Defendant name omitted):

A three-judge panel's opinion affirmed a Chicago jury's 2023 decision that former special agent [Defendant] had illegally structured financial transactions, hidden important facts from DHS and filed false tax returns as part of a scheme to steal from people under investigation and pressure an informant to pay him.

[Defendant], who was part of Homeland Security Investigations, or HSI, a special unit that investigates money laundering and drug trafficking, had argued that the DOJ didn't prove at trial that he had unreported taxable income. But Judge Joshua P. Kolar said the panel found that "the jury heard ample evidence at trial that [Defendant] misappropriated cash from dealers and HSI in 2015, 2016, 2017, and 2018, and heard the IRS agent testify that such cash was unreported 'income.'"

Remember, kids: just because the drug dealer whom you shook down didn't send you a 1099 doesn't mean the shakedown income is tax-exempt.

What day is it?

It's Noodle Ring Day! The Noodle Ring caused a minor scandal in the Grant administration, one that is overshadowed by the Whiskey Ring tax scandal. And yes, I made that up. Noodle rings are just delicious pasta.

Tax News & Views Pasta Ring Impasse Roundup

Make a habit of sustained success.

Joe B. Kristan, CPA