Tariff Pause, Renewable Energy Tax Credits, and the Google Search Case
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:
June 2: A new era at the IRS after mass layoffs?
The Internal Revenue Service (IRS) is undergoing significant changes under the Trump administration and the Department of Government Efficiency, previously led by Elon Musk.
The IRS has seen a series of acting commissioners since Donald Trump took office, creating uncertainty within the agency. The latest moves include granting Immigration and Customs Enforcement (ICE) agents limited access to tax records for non-tax criminal matters. The IRS is also poised to increase its use of artificial intelligence in auditing due to reduced headcount from mass layoffs.
The agency has parted ways with roughly 31% of its auditors, impacting various divisions. The IRS has fallen short of the Payment Integrity Information Act's goal to reduce improper payment rates for refundable tax credits. The agency will slightly raise health savings account limits for 2026. The IRS's crackdown on high-income non-filers needs improvement, with "sweeps" uncovering more productive cases than non-sweep counterparts.
Billy Long, the Trump nominee for IRS commissioner, faced probing questions during his Senate Finance Committee confirmation hearing. The IRS's changes and challenges continue to create an air of uncertainty for accountants and taxpayers alike.
June 2: Senate begins putting stamp on Trump tax bill
The Senate has begun closed-door talks on President Donald Trump's $3.9 trillion tax-cut bill, which narrowly passed the House. Senate Republican leaders aim to make many of the temporary tax cuts in the House bill permanent, increasing the bill's deficit impact.
This move risks alienating fiscal hawks who are already at odds with party moderates over safety-net cuts. The Senate will also consider other significant changes, including making permanent business tax breaks, addressing the state and local tax (SALT) deduction cap, and modifying green energy tax credits.
The House bill expanded the SALT deduction limit to $40,000, but Senate Republicans may propose keeping the current $10,000 cap. Moderate Republicans are pushing back on provisions that gut tax credits for clean energy sectors. The Senate will also address Medicaid and food stamp cuts, with some senators demanding more spending reductions.
Regulatory matters in the House bill, such as gun silencer regulations and artificial intelligence policy, may be challenged in the Senate. The Senate will also consider a major auction of government radio spectrum to generate revenue. The House bill increases the estate tax exemption, but Senate Republicans may push for a total repeal of the estate tax. The goal is to send the bill to Trump's desk by July 4, but the real deadline is August or September when the Treasury Department estimates the US will run out of borrowing authority.
May 30: ‘Big Beautiful Bill Act’ proposes restoring full R&D expensing for 2025-2029
The House Republicans' sweeping tax bill, H.R. 1, the "One Big Beautiful Bill Act," includes a provision to temporarily restore the ability for businesses to immediately deduct 100% of their domestic R&D expenses from January 19, 2025, through 2029. This move would reverse a change implemented in 2022 that required companies to amortize these costs over five years, providing immediate tax relief for companies investing heavily in R&D.
The landscape varies dramatically by sector, with significant divergence across industries. Big tech companies like Alphabet and Microsoft would capture approximately $15.0 billion in tax benefits over five years, reflecting their massive R&D investments in AI and cloud infrastructure. Pharmaceutical giants like Merck and Johnson & Johnson would each save approximately $2.4-2.5 billion, supporting drug discovery and clinical trials.
The semiconductor sector shows significant contrasts, with NVIDIA thriving with strong revenue growth and AI dominance, while Intel struggles despite high R&D spending. The auto industry faces challenges with EV transitions and potential tariff impacts, with Ford adjusting R&D amid EV losses and cost-cutting measures, while Tesla continues R&D in FSD and new models amidst market uncertainties. The shift to amortization in 2022 has been a point of contention for many businesses, with policy analysts arguing that it has a significant negative effect on U.S. workers and companies.
The National Association of Manufacturers and the Semiconductor Industry Association have advocated for the restoration of immediate expensing for R&D costs, while fiscal watchdogs highlight the potential budgetary impact. The overall bill could lead to $3.8 trillion of red ink, giving deficit hawks fresh ammunition.
Economic News/Policy:
June 4: House GOP ‘big, beautiful bill’ would increase the deficit by $2.4 trillion, CBO says
House Republicans’ sweeping tax and spending cuts package would increase the deficit by $2.4 trillion over the next decade, according to the Congressional Budget Office’s (CBO) analysis.
The bill, which narrowly passed the House, faces challenges in the Senate, where some GOP senators are concerned about its deficit impact and want deeper spending cuts. The analysis has also drawn criticism from billionaire Elon Musk, who argues the bill would bankrupt America.
The House package aims to make permanent the individual income tax cuts from the 2017 Tax Cuts and Jobs Act and provide temporary tax relief to certain senior citizens and workers. To offset the cost, the bill proposes historic cuts to Medicaid and food stamps, potentially resulting in millions losing access to health coverage and nutrition assistance.
The bill also boosts spending on defense, border security, and immigration enforcement. Senate Majority Leader John Thune hopes to send the bill to President Donald Trump’s desk by July 4, but the real deadline is August or September when the Treasury Department estimates the US will run out of borrowing authority.
The Trump administration has doubled tariffs on steel and aluminum imports to 50%, effective as of June 4. This move is intended to protect the beleaguered American steel industry but raises concerns for sectors that heavily use these metals, such as car manufacturers and can makers.
The administration argues that domestic steel and aluminum production is crucial for national security and the economy. While the tariffs may protect steel manufacturing jobs, they could harm employment in larger industries that use steel and aluminum. The American Iron and Steel Institute supports the tariffs, stating that the cost increase for building a car would be minor.
However, the Aluminum Association worries that the tariffs could hurt the industry by cutting off the supply of raw aluminum from Canada. Industries that use steel and aluminum, such as can manufacturers, also express concern about potential price hikes. Experts warn that more jobs are at risk in industries that use steel and aluminum than would be protected by the tariffs.
The tariffs could lead to higher prices on construction projects, cars, appliances, and other goods. The previous round of tariffs in 2018 resulted in job losses in manufacturing due to higher input costs. The Aluminum Association is seeking a carve-out for Canadian imports to ensure the US economy has access to the aluminum it needs.
Small businesses are facing significant challenges due to President Donald Trump's chaotic tariff policies. The situation has been confusing, with frequent changes and stops and starts of tariffs at different levels.
A recent court ruling stated that Trump overstepped his authority in imposing most of the tariffs, but an appeals court paused this ruling, adding to the uncertainty. Business owners have had to consider changing their product strategies, shifting supply chains, reducing staff hours, or delaying products. Julie Robbins, CEO of EarthQuaker Devices, expressed fear of a mass extinction of small businesses if the situation continues.
Trump announced blanket tariffs globally on April 2, with frequent changes since then, including pauses, exemptions, and threats of new tariffs. The National Federation of Independent Business Small Business Optimism Index fell in April, indicating uncertainty as a major impediment for small business owners. EveAnna Manley of Manley Labs has had to cut employees' hours and freeze product development due to the impact of tariffs.
Some business owners are looking to diversify their sourcing and procurement strategies to mitigate risks. Assaf Gad of Intuition Robotics is considering expanding into international markets. Sarah O’Leary of Willow, a medical device company, has faced difficulties in moving manufacturing and had to pause exporting a product due to high costs. The chaos and uncertainty surrounding tariffs continue to pose challenges for small businesses.
May 29: Appeals court pauses ruling that blocked Trump’s tariffs Summary of Article
A federal appeals court has paused the ruling from the Court of International Trade that blocked President Donald Trump’s tariffs. The United States Court of Appeals for the Federal Circuit’s decision restores Trump’s ability to levy tariffs using emergency powers.
Both sides are required to submit written arguments by early next month. This pause adds to the confusion surrounding Trump’s tariffs, which are a key part of his economic policy. The Court of International Trade had ruled that Trump did not have the authority under the International Emergency Economic Powers Act to impose sweeping tariffs. The Trump administration immediately appealed, leading to a legal battle over the economic policy.
Trump argued that the CIT decision undermines presidential power and called on the Supreme Court to reverse it. Peter Navarro, Trump’s top trade adviser, stated that the administration is pursuing all strategic options. The Liberty Justice Center, representing companies suing to stop the tariffs, said the appeals court’s decision is a procedural step. The whirlwind of decisions adds to the chaos around Trump’s economic policy.
The appeals court granted the stay, setting deadlines for responses from both sides. In a separate lawsuit, US District Court Judge Rudolph Contreras ruled that two toy companies would be irreparably harmed by Trump’s tariffs, but paused the injunction for two weeks, expecting an appeal. The Trump administration has quickly appealed Contreras’ ruling to the US DC Circuit Court of Appeals.
May 28: White House plans — at last — to send some DOGE cuts to Hill
President Donald Trump plans to send a small package of spending cuts to Congress next week, confirmed by White House budget director Russ Vought. The $9.4 billion package, part of Elon Musk’s Department of Government Efficiency initiative, targets NPR, PBS, and foreign aid agencies. Speaker Mike Johnson expressed eagerness to act on the findings.
The package, a fraction of the $1.6 trillion yearly discretionary spending, has faced delays and internal battles. An online pressure campaign has gained momentum, with Musk criticizing a recent spending bill. Deputy chief of staff Stephen Miller noted the cuts must be done through a rescissions package or appropriations bill.
The Senate’s top Republican appropriator, Susan Collins, wants her panel to vet any request for clawbacks. Sen. Rand Paul expressed frustration over the delay. House Appropriations Chair Tom Cole mentioned robust negotiations with the White House. The package’s passage remains uncertain, with some Republicans wary of cuts to NPR and PBS.
Energy and Environmental Policy/News:
June 4: Senate Republicans eye saving some green credits
Senate Republicans are considering changes to the House-passed megabill, with some aiming to save or alter renewable energy tax credits that were slashed by House Republicans.
Senator Thom Tillis of North Carolina wants to modify a provision that bars companies associated with China from accessing tax credits, arguing that the House language misunderstands supply chains. Senator Bill Cassidy of Louisiana may seek changes to the requirement that projects start construction within 60 days to qualify for clean energy credits, which is seen as impractical. Other senators, including John Hoeven of North Dakota and Shelley Moore Capito of West Virginia, are advocating for carve-outs for geothermal and hydrogen incentives. Clean energy advocates are hopeful but cautious, as no Senate Republican has drawn a red line on their support for the final bill.
The bill aims to end "technology-neutral" production and investment tax credits for projects starting construction within 60 days and plugged into the grid by 2028. The bill also enacts complex supply chain requirements and prevents project sponsors from transferring tax credits to third parties, except for the nuclear industry. Moderate Republicans want to maintain business certainty for investments already underway.
Elon Musk criticized the House-passed package for increasing the budget deficit, contradicting his support for clean energy incentives. Senate Republicans are aiming to pass the final bill through the budget reconciliation process by July 4. Capito expressed concern over changes to the hydrogen tax credit, which could impact projects like the Appalachian hydrogen hub. Supporters of saving more IRA credits face opposition from senators who argue against incentivizing intermittent power like wind and solar over baseload power like nuclear and gas. Representative Andrew Garbarino is helping senators protect energy incentives in the final bill.
May 23: US DOT Freeze of EV Infrastructure Funding Is Illegal, Watchdog Says Summary of Article
The U.S. Department of Transportation (DOT) violated the law when it suspended the National Electric Vehicle Infrastructure Formula Program, according to a report released by the U.S. Government Accountability Office (GAO) on May 22. The GAO found that DOT officials wrongly considered funds obligated when deals were signed, rather than when tranches of funding set by Congress became available to the program.
This led to the improper impoundment of funds. The EV funding program, created through the 2021 Infrastructure Investment and Jobs Act, aims to support state efforts to deploy and maintain electric vehicle charging infrastructure with $5 billion appropriated for the program. In February, DOT issued a memo canceling previous guidance and suspending all state plans under the program, stating that no new spending obligations would be incurred until new guidance was issued.
The GAO report states that this move violated the law covering government spending obligations and the Impoundment Control Act. DOT officials claim the program was not implemented well and most of its funding has not been activated by states. A department spokesperson argued that the GAO report shows a misunderstanding of the law and conflicts with Congress' intent.
DOT is reviewing and updating the program guidance to improve its efficiency and effectiveness. As of February 6, the department had signed agreements for only $526.6 million of the $3.3 billion available. The GAO report comes as DOT faces a federal lawsuit from a coalition of states over the program's freeze. Rep. Rick Larsen (D-Wash.) emphasized that DOT must release the funds to states and cannot ignore the law when they disagree with it.
Technology:
May 30: AI dominates as judge weighs penalties in Google search case
A federal judge grappled with the rapid changes AI is bringing to the internet as he considered penalties for Google’s illegal search monopoly. Following a three-week hearing, U.S. District Judge Amit Mehta questioned both Google and the DOJ about AI's impact on the search market.
The DOJ argued that Google's search dominance gives it an advantage in the AI race and proposed remedies like forcing Google to sell its Chrome browser. Google countered, highlighting competition from AI rivals like OpenAI’s ChatGPT and suggesting limited remedies. Mehta appeared skeptical of both sides' proposals. The DOJ pushed for data-sharing to boost competitors, while Google resisted, citing privacy concerns.
The case is part of broader antitrust challenges Google faces, with another ruling against its advertising technology monopoly. Google plans to appeal both decisions, with Mehta aiming to rule by August and the ad tech remedies trial set for September.
For Fun:
June 3: A long-running experiment finds a tiny particle is still acting weird
Final results from a long-running U.S.-based experiment announced Tuesday show that muons, tiny particles considered heavier cousins to electrons, continue to act strangely.
This is still good news for the laws of physics as we know them. The experiment, conducted at the Fermi National Accelerator Laboratory near Chicago, involved racing muons around a magnetic, ring-shaped track and studying their signature wiggle. The team used more than double the amount of data compared to 2023 and submitted their results to the journal Physical Review Letters. The muons' behavior has puzzled scientists since the late 1990s and early 2000s when tests at Brookhaven National Laboratory produced unexpected results. Decades later, an international collaboration of scientists decided to rerun the experiments with an even higher degree of precision.
The first two sets of results, unveiled in 2021 and 2023, seemed to confirm the muons' weird behavior, prompting theoretical physicists to try to reconcile the new measurements with the Standard Model. While the muons raced around their track, other scientists found a way to more closely reconcile their behavior with the Standard Model with the help of supercomputers. There is still more work to be done as researchers continue to put their heads together and future experiments take a stab at measuring the muon wobble, including one at the Japan Proton Accelerator Research Complex expected to start near the end of the decade.
Scientists are also analyzing the final muon data to see if they can glean information about other mysterious entities like dark matter. By wrangling muons, scientists are striving to answer fundamental questions that have long puzzled humanity. This measurement will remain a benchmark for many years to come.