IRS Funding, R&D Advisor, and the GENIUS Act

Probity Tax Recovery is a tax consulting firm specializing in tax credits and incentives for small to mid-sized businesses. We work with business owners and their CPAs to identify tax credits and incentives while saving them time and money. As of November 1, 2024, Probity began operating as a division of MS Consultants. Read more about the exciting news here. 

Tax Policy/News:

 July 22: House GOP appropriations bill would slash IRS funding 
House Republicans have introduced a fiscal year 2026 appropriations bill that would cut Internal Revenue Service (IRS) funding by approximately $2.8 billion, exceeding the Trump administration’s proposed 20% reduction with a 23% cut.  

The bill, marked up by the House Appropriations Financial Services and General Government Subcommittee, would reduce enforcement funding by 45% and significantly impact taxpayer services. The IRS has already seen its workforce shrink from 103,000 to 77,000 employees in 2025 due to layoffs and voluntary departures. 

Critics, including tax professionals and the National Treasury Employees Union, warn that the cuts could severely degrade customer service, with projections showing phone service levels dropping from 87% in 2025 to just 16% during the 2026 filing season. The bill also threatens the IRS’s ability to address issues arising from recent legislation and natural disaster-related filing extensions. The Senate is expected to take a different approach, having previously favored stable IRS funding. 

July 22: Big boons for R&D advisors 
The One Big Beautiful Bill Act introduces Section 174A, offering significant tax advantages for research and development (R&D) spending and creating new opportunities for tax advisors.  

For tax years after 2024, domestic R&D expenses can be fully deducted in the year incurred, while foreign R&D costs must still be amortized over 15 years. Transitional rules for 2022–2024 allow small businesses—those with under $31 million in 2025 gross receipts—to retroactively expense domestic R&D costs and amend returns to claim credits.  

Larger businesses can immediately expense remaining capitalized R&D costs. These changes open the door for substantial refunds and tax planning opportunities, particularly for firms like Arvo Tech, which leverages automation to make R&D credit studies accessible to small and midsized businesses. 

July 18: Billy Long sworn in as IRS commissioner, taking over an agency he once sought to close 
Former Missouri congressman Billy Long was ceremonially sworn in as commissioner of the Internal Revenue Service (IRS) on July 18, assuming leadership of an agency he previously sought to abolish.  

The ceremony, held in the Oval Office, was overseen by Lee Zeldin, head of the Environmental Protection Agency, with President Donald Trump in attendance. Long’s appointment follows significant staffing reductions at the IRS and a period of interim leadership.  

Despite lacking a background in tax administration and facing scrutiny over ties to a tax credit scheme and campaign contributions, Long was confirmed by the Senate in a 53-44 vote. In his message to IRS employees, Long emphasized a desire to reshape the agency’s culture. His appointment aligns with broader Trump administration goals to reduce federal bureaucracy and potentially replace income tax with tariff-based revenue. 

 Economic News/Policy:

July 22: Trump tax law to add $3.4 trillion to US deficits, CBO says 
President Donald Trump’s recently enacted “One Big Beautiful Bill” is projected to increase U.S. deficits by $3.4 trillion over the next decade, according to a new estimate from the Congressional Budget Office.  

The law includes a $4.5 trillion reduction in revenues and a $1.1 trillion decrease in spending through 2034, primarily due to the permanent extension of the 2017 income-tax cuts, temporary elimination of taxes on tips and overtime, and expanded deductions for state and local taxes.  

While the Trump administration argues that increased tariff revenues will offset the deficit impact, the CBO projects that 10 million Americans will lose health insurance coverage due to Medicaid cuts and new work requirements. A separate analysis using a current policy baseline suggests a $366 billion deficit reduction, though critics note this relies on accounting assumptions that minimize the cost of tax cut extensions. 

July 21: What Passage of the 'GENIUS Act' Means for Stablecoins 
The GENIUS Act, recently passed by the U.S. Senate, marks a pivotal step toward regulating stablecoins—blockchain-based tokens pegged to assets like the U.S. dollar.  

The legislation introduces a federal licensing system for “payment stablecoin” issuers, mandates full asset backing, monthly attestations, and anti-money laundering compliance, while exempting stablecoins from securities and banking classifications. Smaller issuers may opt for state-level oversight, while larger entities fall under federal regulators such as the OCC and FDIC.  

The bill is expected to benefit U.S.-based issuers like Circle, while posing challenges for under-collateralized or offshore tokens. If enacted, the GENIUS Act could accelerate mainstream adoption of stablecoins for digital payments, reduce remittance costs, and encourage broader use by retailers and financial institutions. 

July 17: How the ‘Big, Beautiful Bill’ Impacts Small-Business Owners 
The “Big, Beautiful Bill” (BBB), signed into law on July 4, introduces several tax provisions aimed at supporting small businesses, including the permanent extension of the 20% Qualified Business Income deduction, immediate expensing of domestic R&D costs, and full write-offs for eligible property purchases.  

It also raises the IRS reporting threshold for third-party payment apps, easing compliance for online sellers and gig workers.  

However, the bill may also pose challenges, such as increased borrowing costs due to a projected $3 trillion rise in the federal deficit, cuts to Medicaid and ACA subsidies that could affect healthcare access, and reduced funding for the Consumer Financial Protection Bureau, potentially weakening protections against predatory lending.  

Experts advise small-business owners to consult tax professionals, reassess healthcare strategies, and secure financing early to navigate the bill’s mixed impacts. 

July 17: Businesses are passing along tariff costs, Fed reports 
The Federal Reserve’s July “beige book” survey reveals that businesses across all 12 regional districts are passing increased input costs from tariffs onto consumers through price hikes and surcharges.  

Those that chose not to raise prices experienced tighter profit margins due to growing consumer price sensitivity. The Labor Department’s consumer price index rose to a 2.7% annual rate in June, up from 2.4% in May, reflecting the inflationary impact of tariffs. Fitch Ratings estimates the aggregate U.S. tariff rate at 14.1%, the highest in decades.  

While President Donald Trump has implemented a 10% general tariff and targeted levies, his reciprocal tariffs are paused until August 1 amid ongoing trade negotiations. Import prices rose slightly in June, though fuel prices declined, and the U.S. dollar has weakened by about 9% since the start of the year, potentially amplifying inflationary effects. Economists warn that the depreciating dollar may increase the likelihood of businesses passing more tariff costs to consumers. 

Energy and Environmental Policy/News:

July 19: EPA eliminates research and development office, begins layoffs 
The Environmental Protection Agency (EPA) announced the elimination of its Office of Research and Development (ORD) and the reduction of its workforce by over 3,700 employees, nearly 23% of its total staff.  

The agency will replace ORD with a new Office of Applied Science and Environmental Solutions, aiming to streamline research efforts and save approximately $750 million. Administrator Lee Zeldin stated the changes will enhance the EPA’s mission while supporting the administration’s broader goals. Critics, including Rep. Zoe Lofgren and EPA union leaders, condemned the move, warning of long-term harm to public health and environmental oversight.  

The announcement follows a Supreme Court ruling enabling federal workforce downsizing and comes amid controversy over the suspension of 139 EPA employees who publicly opposed Trump administration policies. 

July 17: Utilities may speed renewable projects under new tax credit timeline: Jefferies 
Utilities with renewable-heavy portfolios are expected to accelerate wind and solar projects to qualify for clean energy tax credits under the new one-year safe harbor period established by the recently passed Republican budget megabill.  

According to a report from Jefferies, companies like Xcel Energy, WEC Energy Group, CMS Energy, and Ameren may move projects originally planned for 2030–31 into the 2027–28 timeframe. The law requires projects to begin construction within a year of enactment or be placed in service by the end of 2027 to remain eligible for Inflation Reduction Act tax credits.  

An executive order issued by President Donald Trump on July 7 further directs the Treasury to tighten guidance on what qualifies as the “beginning of construction,” raising concerns about potential constraints on the safe harbor window. While utilities are reviewing the law’s impact, Jefferies anticipates a surge in equipment orders as companies rush to secure eligibility under the new timeline. 

July 15: Trump touts $92B in data center, energy investments 
President Trump announced $92 billion in private investments aimed at strengthening the U.S. power supply to support the rapid growth of artificial intelligence (AI).  

Speaking at the Pennsylvania Energy and Innovation Summit, Trump highlighted contributions from 20 major companies, including Google, CoreWeave, and Blackstone. CoreWeave will invest $6 billion in a data center in Lancaster, PA, while Google plans $25 billion for AI infrastructure across the Midwest and mid-Atlantic, plus $3 billion to modernize hydropower facilities in Pennsylvania. Blackstone will contribute over $25 billion to data center and power infrastructure.  

Other investments include $15 billion by Homer City Redevelopment for Pennsylvania gas and $5 billion by Energy Capital Partners for a data center and community solar projects. The administration’s energy strategy favors fossil fuels and nuclear power, while reducing subsidies for wind and solar. A recent Department of Energy report warns of increased blackout risks due to AI and manufacturing demands, projecting significant strain on the grid by 2030. 

Technology:

July 19: For privacy and security, think twice before granting AI access to your personal data 
As AI becomes increasingly integrated into everyday tools—from web browsers to productivity apps—concerns are mounting over the extensive personal data access these technologies request.  

 A recent example is Perplexity’s AI-powered browser, Comet, which asks for sweeping permissions to users’ Google accounts, including access to emails, contacts, calendars, and even company directories. While companies claim much of this data is stored locally, users still grant rights that can be used to train AI models. 

Experts warn that such permissions pose significant privacy and security risks, likening them to past concerns over invasive app behaviors. Critics argue that the convenience offered by AI assistants often comes at the cost of handing over deeply personal information, with limited transparency and accountability from the companies involved. 

July 17: AI-powered attacks rise even as companies prioritize AI security risks 
A new report from cybersecurity firm Team8 reveals that one in four chief information security officers (CISOs) experienced AI-generated attacks in the past year, with AI-related risks now topping their priority lists.  

The report, based on interviews with over 110 security leaders, highlights growing concerns around securing AI agents and ensuring employee compliance with AI usage policies. Despite these risks, nearly 70% of companies are already using AI agents, with another 23% planning to deploy them next year.  

Many CISOs are also exploring AI to replace human roles in security operations, penetration testing, and threat modeling, driven in part by workforce shortages and cost-saving goals. However, the rapid adoption of AI is creating friction between security teams and business leaders, especially as companies struggle to implement effective governance frameworks. 

July 15: Trump Energy secretary: AI race is next Manhattan Project 
Energy Secretary Chris Wright likened the global race to dominate artificial intelligence (AI) to the historic Manhattan Project, which developed the atomic bomb during World War II.  

In a post on X, Wright referred to AI as the “second Manhattan project,” emphasizing its strategic importance. The comment comes amid growing pressure on President Donald Trump to safeguard emerging U.S. technologies from foreign adversaries while promoting American leadership in AI.  

In May, Trump signed multibillion-dollar AI agreements with Gulf nations, and on Tuesday, he announced $92 billion in private investments from companies such as Google, CoreWeave, and Blackstone to expand data center and energy infrastructure, supporting the energy-intensive demands of AI development. 

For Fun:

July 22: Engineers transform dental floss into needle-free vaccine 
Researchers have developed a novel method for delivering vaccines using specially coated dental floss, which successfully triggered immune responses in mice by placing inactivated viruses directly into their gums.  

The study, published in Nature Biomedical Engineering, demonstrated that mice flossed with protein- or virus-coated floss developed robust systemic immunity, including elevated antibody levels and increased T cell activity. All mice that received three doses survived a subsequent flu virus challenge, while unvaccinated mice did not.  

Human trials using dye-coated floss showed promising delivery rates and participant openness to the method. Experts praised the innovation but noted the need for further testing, especially in individuals with varying gum health. 

July 15: Some Australian dolphins use sponges to hunt fish, but it’s harder than it looks 
A study published in Royal Society Open Science reveals that a small group of bottlenose dolphins in Shark Bay, Australia, use marine sponges on their beaks to protect themselves while foraging for fish on the seafloor.  

This unique behavior, passed down from mother to offspring, interferes with the dolphins’ echolocation abilities, making it a challenging skill to master. Researchers found that only about 5% of the local dolphin population—roughly 30 individuals—engage in this technique, which requires years of learning.  

The sponges, ranging in size from softballs to cantaloupes, help the dolphins stir up prey like barred sandperch while shielding their sensitive beaks from sharp rocks. Despite the sensory limitations, the method proves to be an efficient hunting strategy for those who master it.