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The IRS has issued Rev. Rul. 2025-4, providing essential guidance on the tax treatment of contributions and benefits from state paid family and medical leave programs. This ruling addresses the tax implications for employees and employers in states with mandatory paid leave, clarifying that employees must include state paid family leave payments in their gross income. The IRS says: "An employee who receives state paid medical leave payments must include the amount attributable to the employer portion of contributions in the employee's gross income." The guidance also outlines various tax treatment scenarios and offers transition relief for 2025. The IRS is inviting comments on additional aspects of these programs through the Federal eRulemaking Portal.

 

Accounting Today

The IRS has issued final regulations (T.D. 10027) concerning taxes on gifts and bequests received from individuals who have renounced their U.S. citizenship or residency. These regulations, effective from January 14, 2025, provide guidance on reporting and paying the tax imposed under Section 2801 of the Heroes Earnings Assistance and Relief Tax Act of 2008. This section mandates that U.S. citizens or residents receiving "covered gifts" or "covered bequests" from "covered expatriates" must pay tax at the highest applicable gift or estate tax rate. A covered expatriate is defined as someone who expatriated after June 17, 2008, and meets specific income and net worth criteria. The IRS noted that the final regulations revise several provisions, including the definition of covered bequests and the indirect acquisition of property.

 

Journal of Accountancy

The U.S. Department of the Treasury and the IRS have held a public hearing on proposed regulations concerning entities wholly owned by Indian tribal governments, known as Regulation 113628-21. Amanda Markarian, an attorney with the IRS, emphasized the importance of these regulations, saying: "This is a long overdue regulation that the tribes have been advocating now for quite a few years." Tribal leaders, including W. Ron Allen of the Jamestown S'Klallam Tribe and Martin Tucker of the Choctaw Nation, expressed the need for clarity on tax-exempt status for tribal businesses. They highlighted the significant funding gap between federal resources and the actual needs of tribes, estimated at $250bn to $300bn annually. The proposed regulations aim to provide guidance on the tax treatment of tribally chartered entities, which is crucial for economic development and sovereignty.

 

Tax Notes

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In today's fast-paced market, intellectual capital—encompassing knowledge, skills, and creativity—emerges as a crucial yet often overlooked asset for corporations. While traditional accounting focuses on tangible assets, it frequently neglects the dynamic knowledge flows that drive growth. If a key group of employees leaves or a critical research process is lost, a corporation's true value can vanish virtually instantly. Accountants play a vital role in bridging this gap by advising on the measurement and preservation of intellectual capital. By incorporating insights into financial reporting, companies can better allocate resources and mitigate risks associated with talent migration and process failures. Emphasizing intellectual capital not only enhances corporate understanding of its strengths and weaknesses but also reinforces the accounting profession's role in informed decision-making and sustainable performance.

 

Accounting Today

Manufacturing activity declined in New York State in January, according to the latest Empire State Manufacturing survey from the New York Fed. The diffusion index for General Business Conditions was fell nearly 15 points to -12.6. New orders fell modestly, and shipments were little changed; however, delivery times were slightly longer, supply availability was flat, and inventories grew slightly. Labor market indicators pointed to steady employment levels but a shorter average workweek. Firms grew more optimistic that conditions would continue to improve in the months ahead. The index for future business activity climbed ten points to 36.7, with fifty-three percent of respondents expecting conditions to improve over the next six months.

 

Advisor Perspectives

The IRS faced a setback when the U.S. Tax Court denied its motion for summary judgment to reduce the basis price of a land parcel involved in a disputed conservation easement donation. DeSoto Holdings LLC claimed a $25.3m donation for a 147-acre property in Shelby County, Alabama, during the 2016 tax year. The court's decision comes ahead of a trial scheduled for January 27th, and emphasizes that "basis price often reflects the acquisition costs for the property." The ruling highlights the ongoing complexities surrounding conservation easements and their valuation.

 

Bloomberg Tax

A Kentucky partnership, Mammoth Cave Property LLC, is suing the IRS to reinstate its $110m conservation easement deduction claim, asserting that the IRS failed to issue its adjustment notice within the required timeframe. The partnership's motion for summary judgment highlights that the IRS missed its statutory deadline to claim a $41m tax underpayment, as the notice regarding its 2019 returns was only received in January 2024. The partnership argues that the IRS also neglected to utilize a 330-day extension by only contacting its former representative instead of the current one.

 

Bloomberg Tax

The U.S. Federal Reserve has announced its withdrawal from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), saying the group's expanded focus exceeds its statutory mandate. The Fed, which joined the NGFS in 2020, said: "The Fed has a limited role to play" in climate policy, and stressed that such responsibilities lie with Congress. The decision came just days before President-elect Donald Trump, known for his skepticism towards climate policies, assumes office. Although the Fed has made some efforts to incorporate climate considerations into its operations, Chair Jerome Powell has consistently maintained that the central bank is not tasked with setting climate change policy.

 

Reuters

US President Donald Trump plans to use his executive powers to reduce the regulatory burden faced by cryptocurrency companies and promote digital asset adoption in his first few days in office, say people briefed on the plan. Trump is expected to sign an executive order creating a crypto advisory council, an idea he first mentioned in July last year. The council, which would help advise the government on crypto-friendly policy, could have as many as 20 members, say sources. It is also expected that Trump will order the end of what has been called "Operation Choke Point 2.0" - the term used by executives in the crypto sector to describe what they claim has been a concerted effort by bank regulators to prevent crypto companies entering the traditional financial system by instructing lenders to deny them services. Also being considered is the creation of a national Bitcoin stockpile, which would encompass the government’s existing $20bn holdings of the world’s biggest cryptocurrency.

 

Bloomberg

Reuters

In a landmark U.K. class action antitrust trial, Apple's newly-appointed chief financial officer, Kevan Parekh, has refuted allegations that the App Store enjoys profit margins of around 75%. He said: "I wouldn't say they're accurate," in response to claims made by barrister Michael Armitage, who cited evidence from U.S. litigation suggesting high operating margins. The £1.5bn ($1.92bn) case, led by class representative Rachael Kent, accuses Apple of monopolistic practices by compelling developers to use its App Store for app distribution. The claimants argue that the "excessive and unfair" commissions charged by Apple are ultimately passed on to consumers. Apple, however, contends that its integrated system offers significant benefits and faces intense competition in the market. City AM notes that there are over 20 class actions now active in the U.K. against Apple, Google and its parent firm Alphabet, Microsoft and Meta, with an estimated total of more than £30bn in alleged damages.

 

Financial Times

Financial Times

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