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Accountancy Slice
USA
16th February 2026
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THE HOT STORY

Court ruling suggests pandemic disaster declaration paused tax deadlines for three years

A federal court has ruled that U.S. tax filing and payment deadlines were effectively suspended from January 20, 2020 to July 10, 2023, after pandemic-era disaster declarations combined with a 2019 change to the tax code paused statutory deadlines. The decision has triggered a scramble among taxpayers and lawyers seeking refunds of interest and penalties paid during the period, with companies including Western Digital suing for millions of dollars and potential class actions emerging on behalf of individual taxpayers. Attorneys argue the IRS may have improperly charged interest or failed to pay refund interest during what the court says was an extended disaster window. The government can appeal the ruling, and many taxpayers may already be outside the usual time limits for filing claims. Congress amended the law in 2021 to prevent a similar open-ended suspension in future disasters, but that fix applies only prospectively.

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TAX

Oregon lawmakers push for tax vote shift

A committee of Oregon lawmakers has advanced a proposal to shift a statewide vote on controversial transportation taxes from November to May. The tax hikes, initially passed by Democratic lawmakers, were delayed after Republican opponents gathered enough signatures for a referendum. Senate Republican Leader Bruce Starr said: “I believe that ultimately this will be in front of the courts,” indicating potential legal action against the change. Democrats argue that moving the vote will provide clarity on transportation funding, while Republicans claim it undermines the referendum process. With a budget shortfall of $288m looming, the urgency to finalize the tax measures is high, as lawmakers aim to balance the Oregon Department of Transportation's budget by next month.

Wisconsin lawmakers clash over tax relief

Wisconsin lawmakers are in a race against time to finalize a tax relief package, but tensions are rising between Republican leaders. Senate Majority Leader Devin LeMahieu expressed frustration, commenting: "I have no idea what's going on," regarding the lack of communication with Assembly Speaker Robin Vos and Governor Tony Evers. Vos acknowledged the need for collaboration, saying: "We need to sit down and figure this out." The urgency stems from skyrocketing property tax bills, prompting discussions on potential income tax rebates and property tax relief. Evers has indicated a willingness to negotiate, but Vos remains hesitant about proposed funding increases. As the Assembly wraps up its work this month, the Senate may reconvene in March to address these pressing issues.

IRS reassigns staff to taxpayer services amid filing season workforce strain

The IRS has temporarily reassigned employees from IT and human capital offices to taxpayer services roles during the current filing season, as the agency grapples with staffing cuts. Affected staff have been placed on 120-day involuntary details as customer service representatives or tax examiners, with training beginning in late February. The move follows warnings from the Treasury Inspector General that the IRS has lost about 19% of its workforce since October 2025, including significant reductions in IT and filing-related staff, potentially jeopardising system upgrades and modernisation efforts. While the agency says the reassignments are intended to support taxpayers during its busiest period, some employees have raised concerns that diverting IT personnel could further delay technology projects and increase processing backlogs.

Illinois democrats tackle budget woes

As Illinois faces significant budget challenges due to federal tax cuts, Governor JB Pritzker is preparing for his annual budget address. The Governor's Office of Management and Budget reported a $587m revenue drop this fiscal year, prompting discussions among Democrats about new tax measures. "We must lean into transforming our tax system and creating sustainable revenue," said the Affordability and Tax Justice Coalition. Proposed measures include a digital advertising tax, a billionaire wealth tax, expanded tax haven reporting, and closing corporate loopholes. Despite a slight increase in state revenues, federal sources have declined by 8% this fiscal year, complicating fiscal planning. Attorney General Kwame Raoul has temporarily halted some federal funding cuts, but uncertainty remains as the state seeks to stabilize its finances.

SALT cap increase delivers bigger refunds in high-tax states

An expansion of the state and local tax (SALT) deduction cap in President Donald Trump’s 2025 tax law is delivering larger refunds for many taxpayers in high-tax states such as New York, New Jersey and California. The cap was raised to $40,000 from $10,000, potentially cutting up to $9,600 from a couple’s tax bill compared with last year, according to the Bipartisan Policy Center, with taxpayers earning under $500,000 eligible for the full deduction. The change is expected to generate $32.2bn in savings this filing season, with higher-income households in Democratic-led states among the biggest beneficiaries. Financial advisers say the higher cap is prompting more taxpayers to itemize rather than take the standard deduction, unlocking additional write-offs such as mortgage interest and charitable donations. While the benefit phases out for incomes above $500,000 and reverts to $10,000 for those earning $600,000 or more, advisers note that even taxpayers in lower-tax states may gain if property or sales taxes push them above the new threshold. 

Understanding the new tip tax deduction

Under the One Big Beautiful Bill Act, U.S. workers can temporarily deduct tips from their federal income taxes, up to a $25,000 limit. However, Illinois and several other states, including New York and California, are opting out of this policy, meaning tipped income will still be taxed at the state level. Frank Manzo IV, an economist with the Illinois Economic Policy Institute, stated: “The main issue with this type of provision is that... employers now have less incentive to actually raise wages.” While the federal tip deduction aims to provide tax relief to working families, it is temporary and set to expire after the 2028 tax year. Manzo suggests that better alternatives for tax relief could include increasing the Earned Income Tax Credit or personal exemptions.

FIRMS

BDO USA names new managing principals for assurance and tax

BDO USA has appointed Demetrios Frangiskatos as managing principal of assurance and Mat DeMong as managing principal of tax, strengthening leadership at the Chicago-headquartered accounting and consulting firm. Mr. Frangiskatos, based in New York and with the firm since 2000, will oversee strategy and delivery across audit, attest and advisory services. Mr. DeMong, based in Boston and a BDO veteran since 2004, will lead the tax practice spanning corporate, international and state and local tax services. 

Intuit CEO bets on ‘grit’ to navigate AI upheaval

Intuit chief executive Sasan Goodarzi says resilience and a willingness to embrace “pain and suffering” have been central to transforming the maker of TurboTax and QuickBooks into a $20bn full-service financial technology provider. Since taking the helm in 2019, Mr. Goodarzi has shifted Intuit from a traditional tax and accounting software model to a broader platform combining human expertise, data analytics and artificial intelligence (AI), doubling its growth rate from 8%–9% to roughly twice that pace. Despite a recent share-price slide driven by investor fears over emerging AI tools, he maintains the company is “built for these moments” and is developing its own AI agents to stay competitive. Mr. Goodarzi credits his leadership style to personal hardship and says he prioritises hiring employees with “grit,” arguing that the ability to endure and overcome challenges is essential to succeeding in a rapidly evolving technology landscape.

ECONOMY

Soft landing in sight, but economists wary of declaring victory

The U.S. economy is showing its strongest signs yet of achieving a “soft landing,” with inflation easing, unemployment steady and growth holding up - though policymakers and economists remain cautious about celebrating too soon. Core inflation fell to 2.5% in January, its lowest since the pandemic price surge began, while the unemployment rate dipped to 4.3% and employers added 130,000 jobs. The data suggests inflation could return to the Federal Reserve’s 2% target without triggering a recession, a scenario many once considered unlikely. However, the Fed’s preferred inflation gauge remains closer to 3%, and some economists warn that tariff-related price pressures and resilient consumer spending could keep inflation stuck above target. Job growth has also slowed markedly, concentrated in healthcare and education, leaving the labor market vulnerable to shocks. While strong household balance sheets and AI-driven investment are supporting expansion, risks remain from potential market volatility, policy shifts and persistent services inflation.

U.S. inflation cooled to 2.4% in January, boosting rate cut hopes

U.S. consumer prices rose 2.4% year-on-year in January, below expectations and down from the prior month, marking the lowest annual inflation rate since May 2025, according to Labor Department data. Core inflation, which excludes food and energy, increased 2.5% annually, in line with forecasts, while monthly headline CPI rose 0.2%. Shelter costs increased 0.2% on the month, energy prices fell 1.5%, and used vehicle prices dropped 1.8%, helping ease overall price pressures. The softer-than-expected reading lifted market expectations for a Federal Reserve rate cut in June, as inflation continues to trend lower despite remaining above the Fed’s 2% target.

CORPORATE

Soaring AI spending clouds Big Tech earnings transparency

Rapid capital spending by major technology companies on AI infrastructure is creating a growing accounting blind spot, as soaring depreciation costs become harder for investors to track. Five leading tech groups - Alphabet, Amazon, Meta, Microsoft, and Meta, are projected to spend $3tn on property and equipment over the next four years, with depreciation expected to rise sharply as investments in data centres and AI chips are written down over five to six years. Analysts warn that inconsistent reporting practices — including embedding depreciation within broader expense categories — make it difficult to model earnings and assess margins. A new US accounting rule requiring clearer quarterly breakdowns, including separate disclosure of depreciation, will not take effect until 2028, prompting calls for companies to improve transparency sooner as AI-driven capital spending accelerates.

PERSONAL FINANCE

Social Security trust fund depletion moves closer

The Congressional Budget Office projects the Old-Age and Survivors Insurance trust fund will be exhausted in 2032, one year earlier than previously estimated. The combined Social Security trust funds are forecast to run out in 2033. Higher inflation and tax changes affecting benefit income are cited as contributing factors. If depleted, benefits would continue but could face cuts of around 20% without congressional action. Social Security supports about 70m Americans, with many retirees relying on it for a substantial share of income.

REGULATORY

U.S. regulators move closer to proposing new bank risk rules

U.S. bank regulators appear to be making progress toward proposing a revised version of the ‘Basel endgame’ rules, which would implement global standards on how lenders should measure their risk and assign capital accordingly. The Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) submitted proposals to the Office of Management and Budget (OMB) for review on Thursday. The OMB’s Office of Information and Regulatory Affairs is responsible for reviewing such proposals. Reuters notes intense banking industry opposition to an effort under the Biden administration to adopt rules that would have significantly raised big bank capital requirements.

Trump sanctions chief is poised to exit

Bloomberg reports that John Hurley, the Treasury's undersecretary for terrorism and financial intelligence, is set to depart the role amid friction with Treasury Secretary Scott Bessent, according to people familiar with the matter. The expected departure of  the Trump administration’s top sanctions official comes as US sanctions play an increasingly pivotal role for international investors, global energy flows and geopolitical risk, and the likely change has raised questions among current and former officials about stability inside the Treasury Department, Bloomberg reports.

LEGAL

Tax Court rejects flawed deductions

The Tax Court recently denied a couple's nearly $200,000 deduction for non-cash donations due to insufficient documentation and lack of an appraisal for high-value items. In the case of Gibson, TC Summ. Op. 2026-1, the court emphasized that "the importance of strict compliance with the recordkeeping rules cannot be overstated." For donations valued over $5,000, donors must obtain an independent appraisal and meet specific substantiation requirements. The couple's failure to provide an appraisal for their high-end cycling gear and other items led to the IRS auditing their 2019 return and ultimately resulted in the court siding with the IRS.

SMALL BUSINESS

Financial stress steals 33 days annually from small businesses

According to Xero's Emotional Tax Return 2026 Report, small business owners in the U.S. are losing an average of 33 working days annually due to financial stress. The report, which surveyed 300 owners of businesses with fewer than 200 employees, revealed that 81% of respondents feel their work has become more stressful. Key stressors include rising costs (44%) and unpredictable demand (28%). Andrew Kanzer, managing director for North America at Xero, stated: "Ongoing financial stress has become a persistent and defining factor in how small businesses operate." The survey also highlighted that 40% of owners have considered quitting their business, while 61% report getting less sleep, with nearly a quarter losing five or more hours per night.

TECHNOLOGY

Soaring AI spending clouds Big Tech earnings transparency

Rapid capital spending by major technology companies on AI infrastructure is creating a growing accounting blind spot, as soaring depreciation costs become harder for investors to track. Five leading tech groups - Alphabet, Amazon, Meta, Microsoft, and Meta - are projected to spend $3tn on property and equipment over the next four years, with depreciation expected to rise sharply as investments in data centers and AI chips are written down over five to six years. Analysts warn that inconsistent reporting practices - including embedding depreciation within broader expense categories - make it difficult to model earnings and assess margins. A new US accounting rule requiring clearer quarterly breakdowns, including separate disclosure of depreciation, will not take effect until 2028, prompting calls for companies to improve transparency sooner as AI-driven capital spending accelerates.

INTERNATIONAL

Amazon searched in new Italian tax probe

Tax police in Italy have searched Amazon's headquarters in Milan in a new tax evasion probe, two sources have told Reuters. The Guardia di Finanza tax police also searched the homes of seven Amazon managers and the offices of auditing firm KPMG. The tech giant said in a statement that the Milan prosecutors' actions were "aggressive and wholly disproportionate" at a time when it was engaged in a "transparent dialogue with Italian tax authorities to gain clarity on complex technical matters." The ongoing investigation is examining whether the company had an undisclosed, permanent base in Italy from 2019 to 2024 and should therefore have paid more local taxes.

Foreign entities banned from clean energy credits

The One Big Beautiful Bill Act has introduced stringent rules that prevent "prohibited foreign entities" from claiming clean energy tax credits. The Treasury Department and the IRS issued interim guidance on February 12, detailing how to assess whether certain energy facilities are receiving material assistance from these foreign entities. According to Bracewell, the rules target entities from countries like China, Russia, Iran, and North Korea, ensuring they do not benefit from tax credits such as the Carbon oxide sequestration credit and the Clean electricity investment credit. Notice 2026-15 outlines the proposed regulations for defining a prohibited foreign entity and calculating the material assistance cost ratio. The guidance allows taxpayers to use interim safe harbors until new regulations are published, with comments requested within 45 days of the notice's publication.
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