The American Institute of CPAs, Government Shutdown, and US Trade Policies
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:
The Internal Revenue Service announced that over 1.1 million people across the nation have unclaimed refunds for tax year 2021 but face an April 15 deadline to submit their tax returns.
The IRS estimates that more than $1 billion in refunds remain unclaimed by taxpayers who have not filed their Form 1040, Federal Income Tax Return, for the 2021 tax year. The median refund amount is estimated to be $781, meaning half of the refunds are more than $781 and half are less. Taxpayers usually have three years to file and claim their tax refunds, and if they don’t file within this period, the money becomes the property of the U.S. Treasury.
By missing out on filing a tax return, people stand to lose more than just their refund of taxes withheld or paid during 2021. Many low- and moderate-income workers may be eligible for the Earned Income Tax Credit (EITC), which was worth as much as $6,728 for taxpayers with qualifying children in 2021. The IRS reminds taxpayers seeking a 2021 tax refund that their refunds may be held if they have not filed tax returns for 2022 and 2023.
Additionally, any refund amount for 2021 will be applied to amounts still owed to the IRS or a state tax agency and may be used to offset unpaid child support or other past due federal debts such as student loans. Taxpayers are encouraged to gather the necessary documents and file their returns before the April deadline to claim their refunds.
March 7: Could Musk's DOGE Layoffs Hurt the IRS's Fight Against Fraud?
Layoffs and executive moves at the Internal Revenue Service (IRS) are the latest in a series of changes the Trump administration has made in the tax arena. Thousands of employees across various IRS divisions were laid off on February 20, further complicating the agency's struggles with retaining talent.
These layoffs have raised concerns among former IRS commissioners about the agency's ability to improve filing turnarounds and handle the ongoing tax season. Bipartisan legislators are working on proposals to improve the digital filing process and provide more flexibility in the IRS's "math error" calculations.
The IRS's diminished enforcement capabilities have fueled concerns about fraud, with data showing that the agency's Criminal Investigations unit identified over $9.1 billion in total fraud for the 2024 fiscal year. The layoffs could impact the IRS's ability to combat fraud, as criminals are already using stolen taxpayer identification numbers to file fake and fraudulent returns.
A draft agreement between the IRS and Elon Musk's Department of Government Efficiency (DOGE) proposes a joint task force to oversee debugging, software testing, and implementing safeguards to prevent fraud. Legal experts believe that proper restrictions on DOGE's access to taxpayer information could help root out mismanaged money and fraud without compromising taxpayer privacy. Once a new IRS acting commissioner is confirmed, the agency's path forward will become clearer.
March 7: AICPA in Discussions with IRS Over Tax Season Worries
The American Institute of CPAs (AICPA) is closely monitoring the situation at the Internal Revenue Service (IRS) amid reports of significant layoffs, which could affect up to half of the staff.
AICPA president and CEO Mark Koziel emphasized the importance of maintaining service levels during the critical tax season and stated that the AICPA is actively discussing the situation with IRS officials to clarify information and assess the immediate and long-term implications. Despite conflicting reports, Koziel assured that the IRS is making every effort to maintain service levels comparable to recent years.
Koziel highlighted the importance of a modern, functioning IRS for Americans to meet their tax obligations and for the country's financial health. He noted that IRS services, combined with modernization efforts and technology advancements, have been central to AICPA's recommendations for many years.
The AICPA is offering recommendations to the IRS to provide some level of relief and minimize public confusion about current IRS operations. Koziel reiterated the AICPA's commitment to understanding the impacts on services offered to taxpayers and their practitioners during this volatile period.
March 5: President's Remarks Keep the Pressure on Congress to Deliver on Taxes
President Trump used his March 4, 2025, address to the joint session of Congress to emphasize his commitment to tax reform, thereby increasing the pressure on Republican leadership and tax committee chairs to extend the 2017 tax cuts using budget reconciliation.
He highlighted several tax policies he has championed, including a reduced tax rate on US manufacturers, 100% full expensing retroactive to January 20, 2025, and making the 2017 Tax Cuts and Jobs Act tax cuts permanent. Additionally, he proposed no taxes on tips, overtime, social security, and deductibility of car loan interest for vehicles produced in the United States. Notably, he did not mention his proposal to lift the cap on state and local taxes (SALT), which remains a contentious issue within the Republican caucus.
Each of these proposals has financial implications, requiring tax writers to find revenue offsets or risk increasing the deficit. Some of the President's other proposals, such as scaling back the ability of sports team owners to amortize player contracts and taxing carried interest as ordinary income, were not mentioned during his remarks.
Congressional Republicans are currently navigating the budget reconciliation process to enact tax reform without relying on Democrats. The House resolution limits a decrease in revenue to $4.5 trillion, barely enough to extend the 2017 tax cuts and accommodate the President's priorities. The President's remarks reinforced his commitment to his tax proposals, leaving it to his House and Senate counterparts to address these priorities within the constraints of the budget reconciliation process.
Economic News/Policy:
Senators Sheldon Whitehouse (D-RI) and Chuck Grassley (R-IA) sent a letter to Treasury Secretary Scott Bessent requesting an explanation for the Treasury Department’s announcement to suspend enforcement of the bipartisan Corporate Transparency Act (CTA).
The CTA, considered the most important anti-money laundering law in decades, was designed to provide law enforcement and national security officials with beneficial ownership information of U.S. corporations and other legal entities. This information is crucial for combating terrorist financing, money laundering, sanctions evasion, proliferation financing, tax evasion, and other forms of illicit finance.
On March 2, the Treasury Department announced it would refuse to enforce penalties or fines associated with the CTA’s reporting rule against U.S. citizens or domestic reporting companies, narrowing the scope to foreign reporting companies only. Whitehouse and Grassley requested the legal basis for this decision and information on how the Treasury intends to satisfy the policy goals of the CTA. They emphasized the importance of fully implementing the CTA to ensure law enforcement agencies have access to necessary information to prevent various criminal activities. The senators asked the Treasury Department to respond to their questions by March 12, 2025.
March 10: GOP-led Congress races to avert government shutdown ahead of Friday deadline
The Republican-controlled Congress is facing a challenging path to avert a government shutdown by the end of the week. Speaker Mike Johnson is pushing for a House vote on a six-month funding extension, relying solely on Republican votes and daring Democrats to oppose it.
The bill needs a simple majority in the House and 60 votes in the Senate, requiring at least seven Democratic votes to break a filibuster. However, Democratic senators have reacted negatively, criticizing the measure for excluding them from negotiations and objecting to changes that increase military spending while reducing nondefense funds.
President Donald Trump and his aides are actively urging undecided Republicans to support the continuing resolution, with Vice President JD Vance also engaging with House Republicans. Despite some Republican support, there are dissenting voices like Rep. Thomas Massie, who opposes the bill over spending concerns.
Senate Democrats, including Sen. Elissa Slotkin and Sen. Mark Warner, have criticized the bill for giving the Trump administration too much flexibility in spending and potentially cutting funds for critical programs. The bill's passage remains uncertain, with Democrats calling for a short-term funding solution to allow time for a comprehensive appropriations package.
March 6: Trump’s erratic trade policies are baffling businesses, threatening investment and economic growth
President Donald Trump's unpredictable tariff policies are causing significant challenges for businesses, leading to uncertainty and potential delays in investment and economic growth.
Marc Rosenberg, CEO of The Edge Desk, is struggling to set prices and manage shipments due to the fluctuating tariffs on imports from China, Mexico, and Canada. Trump's recent decision to suspend many of the tariffs on Mexico and some on Canada for a month has added to the confusion, with businesses unsure of the status of their goods. Democratic Rep. Don Beyer criticized Trump's approach, stating that it maximizes chaos and uncertainty for businesses.
Tariffs, which are taxes paid by importers and often passed on to consumers, can increase inflationary pressure and draw retaliation from trading partners, further hurting economies. The uncertainty surrounding tariffs complicates business decisions, such as supplier choices, factory locations, and pricing strategies, leading to delays or cancellations of investments that drive economic growth.
Trump's erratic imposition of tariffs, sometimes citing border security or revenue generation, has left businesses baffled and hesitant to move forward with investments. The unpredictability of the tariff environment is causing volatility and uncertainty among customers, affecting various industries and delaying growth plans for small businesses.
Energy and Environmental Policy/News:
March 10: 21 House Republicans Ask Leadership to Limit Changes to Energy Tax Credits in Reconciliation
A group of 21 House Republicans has requested that any changes to energy tax credits be "targeted and pragmatic" as the GOP seeks to overhaul the U.S. tax code through reconciliation.
In a letter dated Sunday, the mostly moderate Republicans emphasized the importance of promoting conference priorities without undoing current and future private sector investments that increase domestic manufacturing, promote energy innovation, and keep utility costs down. The letter, addressed to Rep. Jason Smith (R-Mo.), who chairs the House Ways and Means Committee, highlights the broader challenge House Republicans face in reforming the tax code with their small majority.
House Speaker Mike Johnson (R-La.) previously indicated that the approach to tax credits would be "somewhere between a scalpel and a sledgehammer." The issue is particularly challenging for Republicans because many energy projects are located in red and purple districts, meaning a repeal of such credits could harm local economies.
The GOP will need significant cuts to pay for the tax credits they hope to enact, and the hundreds of billions' worth of energy tax credits could be part of that. The letter underscores the need for tax reforms that do not raise energy costs for hard-working Americans, aligning with the conference's goal of making energy prices more affordable.
March 7: IRA funding freeze has put ‘many’ clean energy projects on pause
The Trump administration's funding freeze for programs related to the Inflation Reduction Act (IRA) has caused numerous clean energy projects to be put on hold as the industry awaits clarity on potential changes to existing programs.
President Donald Trump's inauguration day executive order, titled "Terminated the Green New Deal," paused funding disbursements related to the IRA and parts of the Infrastructure and Jobs Act. This uncertainty has led renewable energy projects across the country to pause, with industry stakeholders lobbying Congress to maintain renewable energy tax credits. Until there is more certainty on the policy environment, many projects remain on the back burner, according to Russ Bates, CEO of NXTGEN Clean Energy Solutions.
The funding freeze has already resulted in the cancellation of at least two billion-dollar U.S. battery plant projects, with Kore Power and Freyr Battery abandoning plans for facilities in Arizona and Georgia, respectively. The Environmental Protection Agency recently unfroze funds related to the IRA's $7 billion Solar for All program, but the uncertainty has created hesitancy among solar developers and prompted legal action from Pennsylvania Gov. Josh Shapiro.
The freeze on the IRA's $20 billion Greenhouse Gas Reduction Fund has also endangered operations for recipients. Clean energy executives, like Jon Powers of Clean Capital, emphasize that policy certainty is crucial for the industry's growth and for ensuring that projects are built with less expensive capital, ultimately benefiting consumers.
Technology:
March 10: Federal research funding feeds technological advancement, US official says at Baker Institute event
Dario Gil, senior vice president and director of research at IBM and recently nominated undersecretary for science and innovation at the U.S. Department of Energy, emphasized the critical role of research and development (R&D) funding in driving technological advancement and national security during his speech at Rice University’s Baker Institute for Public Policy.
Gil highlighted the historical significance of federal funding in augmenting business investments in R&D, particularly during the 1950s and 1960s, which led to significant contributions in natural sciences and computer science. He noted that while business investment in R&D has increased dramatically in recent decades, it is concentrated in a few key sectors, making federal R&D funding essential for fostering new ideas across all scientific fields.
Gil also addressed the growing competition from China, which has surpassed the U.S. in research publications, patents, and doctorates in science and engineering. He expressed concern about the U.S. facing a STEM talent crisis and the need to better educate and nurture domestic students and workers.
Following his presentation, Gil discussed the future of science and technology with Neal Lane, senior fellow in science and technology policy at the Baker Institute. They emphasized the importance of the "Vision for American Science & Technology (VAST)" initiative, which advocates for the continued cooperation between government, private industry, academia, and other sectors to maintain U.S. leadership in innovation and address global challenges.
March 6: GOP lawmakers balk at Trump’s call to repeal CHIPS Act
Republican lawmakers have rejected President Trump's call to repeal the 2022 CHIPS and Science Act, which allocated $52 billion for domestic semiconductor manufacturing.
They argue that the funds are crucial for national security and have already been spent, making repeal impractical. The law, which passed with strong bipartisan support, is seen as essential for reconstituting domestic manufacturing of advanced semiconductors, particularly in the event of disruptions between Asia or Taiwan and the United States. Senators like John Cornyn and Thom Tillis emphasize the importance of the act for economic and security reasons, and note that any changes would require significant bipartisan support.
Senator Todd Young, the lead Republican on the CHIPS and Science Act, expressed surprise at Trump's demand to repeal the law, especially after receiving reassurances from Trump's Cabinet nominees about maintaining its priorities. Young highlighted the act's success in attracting private sector commitments and its role in supply chain resiliency and national security.
Senate Majority Leader John Thune also noted the contradiction between Trump's call to repeal the act and his broader goal of bringing high-tech manufacturing back to the United States. Despite Trump's assertion that tariffs could incentivize investment, GOP lawmakers remain firm in their support for the CHIPS Act and its contributions to the semiconductor industry.
March 5: How much energy will AI really consume? The good, the bad and the unknown
The rapid expansion of data centers to support generative AI, such as ChatGPT, is causing significant concerns about energy consumption, particularly in regions like Virginia, which is already known as the data-center capital of the world.
These facilities consume vast amounts of electricity, potentially driving up costs for residents and straining local power infrastructure. Despite the global impact of AI on electricity demand being relatively small, the concentration of data centers in specific areas can have profound local effects, leading to conflicts over energy resources and transparency issues regarding the actual electricity demands of AI systems.
Researchers are struggling to accurately assess AI's energy consumption due to a lack of detailed data from companies. They have used various methods to estimate energy demands, such as examining the power draw of servers and measuring energy consumption for specific AI tasks.
However, these estimates often rely on third-party data and can quickly become outdated as AI models become more efficient. The uncertainty surrounding the future growth of AI and its energy demands makes it challenging to predict long-term trends, with some experts warning that overestimations could lead to unnecessary infrastructure investments and increased carbon emissions.
For Fun:
March 5: How the brain decides whether to persist — and when to give up
Researchers at University College London (UCL) have discovered that the activity of three types of neurons in the brainstem's median raphe nucleus determines whether mice persist with a task, explore new options, or give up.
By genetically engineering these neurons to express a light-responsive protein, the researchers were able to control the behaviors of the mice by switching the neurons on and off using light. Suppressing GABAergic neurons led to increased persistence, activating glutamatergic neurons increased exploration, and suppressing serotonergic neurons caused disengagement. These findings, published in Nature, suggest that similar mechanisms may be relevant to neuropsychiatric conditions in humans, such as obsessive-compulsive disorder, autism, major depressive disorder, and attention deficit hyperactivity disorder.
The study also found that the lateral habenula, a midbrain region, plays a role in suppressing serotonergic neurons, leading to disengagement from tasks. Further research is needed to understand the role of serotonergic function in disengagement, especially given its link to depressive symptoms. The researchers observed similar behavioral effects in a different experimental setup involving a T-shaped maze, where mice were trained to expect a food reward. The median raphe nucleus receives inputs from the prefrontal cortex and other brainstem areas, including the dorsal raphe nucleus, and is influenced by neurotransmitters such as dopamine and noradrenaline. Understanding how these neurotransmitters shape behavioral priorities over extended timescales remains a key open question.