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Pippa Browde, a professor at the University of Montana School of Law, discusses the Treasury Department's proposed regulations aimed at expanding the federal income tax exemption for Indian tribal governments. These regulations provide a safe harbor for tribal business enterprises, allowing them to benefit from the Inflation Reduction Act. However, Browde notes that the rules do not address all barriers, particularly for entities organized under state or local law. She emphasizes that "the focus should be on ownership of an entity," highlighting the need for flexibility in structuring tribal enterprises. The proposed regulations reflect federal policies of tribal sovereignty and self-governance, but additional barriers remain for tribes seeking to fully access tax incentives.

 

Bloomberg Tax

The IRS has clarified its position on §246(b) in GLAM 2024-002, which disallows certain FDII and GILTI deductions for taxpayers with profitable foreign operations but unprofitable US operations. Baker McKenzie practitioners note that the statute is poorly drafted, indicating that "courts will need to weigh in to resolve open issues." Many taxpayers previously believed that §250 deductions would only be disallowed under §250(a)(2), leading to confusion and prompting some to explore options against the IRS's interpretation.

 

Bloomberg Tax

The National Council of Nonprofits has, in a memorandum to the House Ways and Means Committee and the Senate Finance Committee, emphasized the critical role of charitable nonprofits as economic drivers and community problem solvers. With the expiration of key provisions of the 2017 tax law approaching at the end of 2025, the organization warns of significant tax policy debates that could greatly affect nonprofits' ability to serve their communities. The memorandum outlines essential tax policy proposals aimed at enhancing nonprofit missions while also identifying adverse policies that Congress should avoid. As stated in the memorandum, these tax policy questions "can have a profound impact" on local nonprofits' effectiveness in improving lives and strengthening communities.

 

Tax Notes

New York City's proposed tax breaks aimed at encouraging office conversions and multifamily housing are facing significant opposition from the real estate sector and tax experts. Critics argue that the new rules, which lower the income threshold for affordable units from 80% to 77% of the area median income, could hinder development. The proposals are reminiscent of the city's previous multifamily tax incentive, known as 421-a, but the changes have raised concerns among developers.

 

Bloomberg Tax

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On October 25, TaxPlanIQ will host a free virtual summit titled “Your Playbook for Building a Tax Planning Empire,” aimed at accounting firm owners looking to enhance their tax planning and advisory services. The event will run from 11 a.m. to 5 p.m. ET and feature industry leaders such as Jackie Meyer, CPA, and Anton Anderson. The agenda includes discussions on transitioning from transactional to advisory services, increasing revenue without more clients, and advanced tax strategies for high-net-worth clients. Attendees can earn entries for a chance to win a one-year subscription to TaxPlanIQ by participating in sessions.

 

CPA Practice Advisor

The U.S. restaurant industry is grappling with an alarming surge in bankruptcies in 2024, with the sector on track for the highest number of filings in decades, excluding the pandemic peak in 2020. This wave of financial distress comes as restaurants struggle to balance rising labor costs, inflation, and shifts in consumer spending habits. The cost of dining out has surged, leading to decreased foot traffic, while higher interest rates have hurt companies prioritizing expansion over profitability. Small and mid-sized chains, which lack the scale to absorb these shocks, are particularly vulnerable. Industry experts warn that despite some improvement in hiring and new restaurant openings, ongoing financial strain, reduced consumer spending, and cautious lending will likely push more operators toward bankruptcy. The long-term implications could reshape the dining landscape, forcing businesses to prioritize efficiency, close underperforming locations, and explore new strategies for survival in a highly competitive market. 

 

Wall Street Journal

Taxpayers can settle tax debt for less than owed through the IRS’s offer in compromise (OIC) program, but many are misled by aggressive tax resolution companies. Karyna Lopez of Lone Star Legal Aid said: “Where these companies really fail is these low-income people who otherwise should be pursuing currently not collectible [status].” The IRS has warned about OIC “mills” that mislead taxpayers, urging them to use official resources to determine eligibility. The number of OICs has significantly declined, from nearly 68,000 in fiscal 2014 to about 30,000 in fiscal 2023. Experts like David King, CEO of Optima Tax Relief LLC, attribute this drop to reduced IRS activity. Many taxpayers are unaware of their options, leading to exploitation by resolution companies. The IRS is working to improve communication and resources to help taxpayers navigate their options more effectively.

 

Tax Notes

Artificial intelligence (AI) has spurred M&A volume in 2024, according to Dykema, noting 55 transactions targeting AI startups during the first quarter compared with 38 during the final quarter of last year. More than 70% of dealmakers expect that mergers and acquisitions in the next 12 months will target companies that sell AI infrastructure or that either offer AI solutions or have successfully deployed the technology, Dykema found in a survey of 235 executives focused on M&A. Company valuations and the line-up of M&A targets have improved compared with last year, according to Dykema, citing its survey. Still, dealmakers said competition among buyers persists as a headwind to transactions. “The institutions and funding and talent and mechanisms are in place for M&A to reach new highs, and the M&A industry is dominated by optimists,” said Frank Ballantine, an M&A lawyer at Dykema. “But when and exactly how new highs will be reached would require an LLM [large language model] that I don’t know of anyone having developed.”

 

CFO Dive

A group of Republican lawmakers called for a federal investigation of McKinsey, saying the firm worked on sensitive U.S. national security matters while failing to disclose it was doing consulting work for China. Rep. John Moolenaar (R-MI), chair of the House Select Committee on the Chinese Communist Party Sen. Marco Rubio (R-FL), vice chairman of the Senate Intelligence Committee, and Sen. Joni Ernst (R-IA) have asked Attorney General Merrick Garland and Defense Secretary to initiate a probe into McKinsey’s work for the Defense Department complied with U.S. law and for the Defense Department to examine whether McKinsey should be eligible for future contracts. McKinsey has also directly worked with Chinese state-owned enterprises whose “interests are directly adverse to the United States,” they said. U.S.-based McKinsey is overhauling its China business, including by separating its China operations from other global operations to reduce security risks. It is also cutting back on government-linked clients. 

 

Financial Times

Wall Street Journal

Mariia Eroshin, managing director of family office at Certuity, emphasizes that with the increased compensation of law firm partnerships comes greater financial complexity. In her article, she outlines key financial strategies for new partners to secure their wealth long-term. Eroshin advises partners to create comprehensive financial plans, from cash management for partnership buy-ins to developing a tax strategy based on K-1 forms and managing quarterly estimates. She also highlights the importance of estate planning, investment diversification, net worth tracking, risk mitigation, and legacy planning.

 

The American Lawyer

The IRS has significantly increased its investment in artificial intelligence (AI), with spending rising over 700% in the past five years. According to Bloomberg Government data, the agency's AI and machine learning expenditures reached at least $60m in fiscal 2024, with expectations for further growth fueled by billions from the 2022 tax-and-climate bill. While the IRS has shared some insights into its AI applications, lawmakers are prioritizing oversight of the agency's activities. As stated by Martha Mueller Neff, Team Lead for Labor & Employment, the IRS aims to enhance its capabilities in identifying tax cheats and improving communication with taxpayers.

 

Bloomberg Tax

In his retirement reflections, Bob Stack, former managing director at Deloitte's Washington National Tax international tax group, highlights the critical lack of trust between businesses and governments in shaping effective international tax policies. Mr. Stack, who also served as deputy assistant secretary for international tax affairs in the Treasury's Department Office of Tax Policy, notes that this distrust hampers the development of sound tax strategies, particularly in the context of the OECD/G20 Base Erosion and Profits Shifting project. Mr. Stack emphasizes that "lack of trust leads both sides to reject sound tax policies," complicating the already intricate landscape of global taxation. He advocates for multilateral cooperation to address these challenges, pointing out that organizations like the OECD and the UN play vital roles in fostering productive international tax policies. The ongoing negotiations around Amount B of Pillar One illustrate the difficulties in achieving consensus, as countries weigh immediate revenue against long-term stability. Ultimately, Mr. Stack calls for a collaborative approach to navigate the complexities of international tax in a globalized economy.

 

Bloomberg Tax