At Around the Tax World, you can find out all about what’s going on in the wonderful, worldwide world of tax. Every month, we’ll feature a few mini-articles on what’s been going on in the world when it comes to tax, and fully available for viewing even if you don’t have a subscription.
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In The Headlines
Just how bad is the energy crisis? Experts assess the impact of the ongoing war in Iran. After predicting a quick end to the conflict in the Middle East, last week President Trump ordered a blockade of the Strait of Hormuz, preventing all oil tankers from leaving the region. Within the day, the price of oil shot up. WTI futures (contracts for U.S. crude oil) rose by more than 8% to $104.40 per barrel. Brent crude (a global benchmark for crude oil) also jumped up 7% to $101.86. Before the U.S. strikes in Iran began, about one-fifth of the world’s oil passed through the strait. Some experts are raising the alarm that if problems continue the energy shortage could become worse than the 1970s oil crisis when oil prices quadrupled. As economic growth slows and inflation rises, other side effects begin to rear their heads. The cost of transportation causes prices for other commodities to increase, which can cause workers to demand higher wages to reflect the cost of living, and businesses may hesitate to hire or expand until the conflict is over.
Trump’s pick for the next Federal Reserve chair may need to offload much of his wealth to be confirmed. Kevin M. Warsh served as a governor of the Federal Reserve from 2006 to 2011. He also happens to hold assets worth between $131 million and $209 million, making him significantly wealthier than any previous chair. Warsh is also married to Jane Lauder, the heir of the Estée Lauder fortune. To those who flagged this as a conflict of interests, Warsh responded by promising to divest much of his assets. This would include about $50 million in stakes in Juggernaut Fund. This would also include resigning from several posts, including his role as adviser to investor Stanley Druckenmiller and his board seats at UPS and the South Korean company Coupang. Meanwhile, current chair Jerome H. Powell will hold the position until May 15th. The Department of Justice recently began a criminal investigation of Powell’s handling of renovations at the Federal Reserve’s headquarters, and at least one voting senator has stated that they will not confirm a new chair until that investigation is complete.
A potential merger between United and American could create the largest airline in the world. Sources say that United Airlines CEO Scott Kirby met with President Trump earlier this year and pitched the possibility of the merger. The meeting centered on the future of Washington Dulles International Airport (IAD) and a revitalization effort led by Transportation Secretary Sean Duffy. Data from the Metropolitan Washington Airports Authority showed that 68.5% of commercial passengers passing through IAD flew with United. The rumors of the merger were met with immediate pushback by those concerned it would violate antitrust laws. In 2023, United Airlines ranked as the top U.S.-based commercial airline, based on revenue by passenger miles, and American Airlines ranked third. Combined, the airlines would account for about 40% of total U.S. domestic flight capacity. Some experts state that the merger would be unlikely to make it past the regulatory hurdles. As a point of comparison, the Biden administration blocked JetBlue’s attempt to purchase Spirit Airlines based on similar concerns.
What's New In The Tax World?
Despite the OBBBA tax cuts, polls show that most Americans think they are overpaying on taxes—a sentiment that could impact midterm elections
According to a recent Fox News poll, about 7 in 10 registered voters say taxes are still “too high,” a slight climb from last year’s poll which found that 6 in 10 voters said the same. By comparison, a Gallup poll found that 6 in 10 Republicans and about half of Democrats say federal income taxes are “too high.” This is notable since Gallup’s past polls show that historically fewer Republicans view their tax bill negatively under a Republican president.
Additionally, a Pew Research Center poll shows that a similar number of Americans believe that the wealthy and corporations are not paying their fair share of taxes. About 8 in 10 Democrats said this notion bothers them “a lot,” whereas only 4 in 10 Republicans said the same. Accordingly, about 49% of respondents say the income tax they will pay this year is “not fair.”
These results come even after the passage of the “One Big Beautiful Bill” Act last year, which introduced a higher standard deduction, an increased child tax credit, a new tax deduction for tips and overtime pay, the return of 100% bonus depreciation, and a slew of other tax changes. Even though tax refunds have been higher this tax season, taxpayers still seem to be feeling the pressures of inflation, namely the higher cost of living and of operating a business.
This may mean that the OBBBA will not have the impact on voters that Republicans hoped for going into the midterm elections this year. Notably, the Fox News poll found that 64% of voters disapprove of how Trump is handling taxes, with the biggest increase coming from independents. Polls also show increased dissatisfaction with taxes among moderates, rural voters, and white voters without a college degree—all demographics that conservatives would need to maintain their control of Congress. Over a third of Senate seats, alongside all House seats, are up for election this year.
A recent digital ad campaign from the National Republican Congressional Committee promoted the benefits of the OBBBA tax breaks in hopes of winning over voters. Meanwhile, an ad campaign launched by the Democratic Congressional Campaign Committee highlights rising gas prices and other financial problems as the result of Republicans’ handling of the economy.
State-By-State Updates
Hawaii’s climate cruise tax is blocked by an appeals court—what’s next? This first-of-its-kind tax would have introduced an 11% surcharge on cruise fares. The exact amount would depend on how long the ships stay in Hawaiian ports. Revenue from the tax would be funneled toward environmental and climate resilience initiatives to address problems like rising sea levels, eroding shorelines, wildfires, and other threats. After being passed by the state legislature in May 2025, the tax was temporarily paused by an appeals court, and now the U.S. Court of Appeals for the Ninth Circuit will determine if the tax is constitutional. The cruise industry and the Trump administration have both urged the court to rule against the tax. The main argument centers around two laws: the federal Rivers and Harbors Appropriation Act of 1884, which abolished tolls for vessels passing through U.S. waterways, and the U.S. Constitution’s Tonnage Clause, which prevents states from taxing ships for entering ports unless the tax is federally approved.
The Kansas Legislature goes back to the drawing board as the latest property tax relief bill is vetoed. Governor Laura Kelly recently vetoed a bill that would set a 3% limit on property tax revenue growth for local governments. If a budget exceeded that cap, residents could petition against the increase and potentially block it. The governor stated that the bill failed to provide real property tax relief and instead urged legislators to consider a different three-part tax relief package. The suggested package included a one-time $250 vehicle tax credit, an increased homestead exemption, and a new state fund to reward local governments that keep budget growth under 3% each year. Instead, Republican leaders assembled another alternative bill that would limit annual spending increases to 3% or the inflation rate—whichever is smaller. A petition can block an increase above 3% if 10% of local voters who participated in the most recent election for secretary of state sign on. Given the similarities to the vetoed bill, many have speculated that this version is destined for a veto as well.
Missouri inches closer to repealing its state income tax. The House recently passed a proposal that would place a constitutional amendment on this year’s statewide ballot: Voters will be asked to give lawmakers the power to eliminate the state income tax and expand sales taxes. A recent estimate puts the total lost revenue at $4.2 billion in the first year alone. The Senate version of the bill has the first tax cut scheduled for January 1st, 2027. At that time, the top income rate would be reduced from 4.7% to 3.1%. The tax rate would continue to decrease until the end of fiscal year 2029 when the total cost is expected to land at $8.5 billion. The version put forward by the House featured a three-year window for lawmakers to update sales tax laws to replace the lost revenue. Lawmakers would be allowed to override current prohibitions against sales tax on real estate transactions or other goods and services not subject to sales tax. To compensate for the income tax cut, legislators would need to increase the sales tax rate by as much as 8.5% or expand economic activity by about $300 billion.
North Carolina discusses an official limit on property tax increases. Lawmakers are weighing a new constitutional amendment that would cap how much cities and counties can raise property taxes. The proposal would give the state control over property tax limitations. Right now, local governments have the power to set tax rates, since the funds go toward local services like parks, police, roads, and schools. However, advocates of this new amendment believe that some local governments have been raising property taxes too aggressively in recent years. This is more likely to be true in rural areas where homes are not worth as much, and there are fewer businesses to contribute to tax revenue. Some city and county leaders have spoken out against the amendment, saying that many school districts are already struggling with tight budgets, and outside limitations would add unnecessary stress. Opponents are also concerned that an amendment would be much harder to repeal than a regular tax law. If the amendment passes the House and Senate, it could make it onto the 2026 ballot this fall.
Tax Planning Tips
As annuity sales reach record growth levels, what does this mean for tax planning?
LIMRA reports that in 2025, U.S. retail annuity sales totaled $461.3 billion. Annuities are long-term contracts with an insurance company. The agreement allows you to generate retirement income while shifting risk away from yourself and toward the company. The recent growth in annuity sales may be linked to their tax advantages, but do taxpayers understand how to factor annuities into their tax plans?
Qualified and nonqualified annuities are treated differently by the IRS. Qualified annuities are held inside retirement accounts like an IRA, 401(k), or 403(b) and are funded with pre-tax dollars. Because of this, qualified annuities are taxed by the same rules as the retirement account they are in. If funds are withdrawn before age 59 ½, the account holder will have to pay an additional 10% tax. Otherwise, distributions are subject to typical required minimum distribution (RMD) rules and are taxed as ordinary income. Nonqualified annuities are funded with after-tax dollars, so the principal is not taxed as income. However, the earnings portion of withdrawals is treated as income, so only this part is taxed. This means earnings grow tax-deferred but not tax-free. There are also no annual contribution limits or RMDs with nonqualified annuities.
What are our takeaways? Nonqualified annuities can be helpful for higher-income households since there are no contribution limits or RMDs. Qualified annuity holders should acquaint themselves with RMD rules, since distributions from multiple accounts can end up generating more income than expected and push you into a higher tax bracket.
One biodiesel tax fuel replaces another—but is newer actually better?
As of 2025, the “Section 45Z Clean Fuel Production Credit” (45Z) has officially taken the place of the “Section 40A Biodiesel Blenders’ Tax Credit” (BTC). What’s the difference? The BTC offered a $1 per gallon blender credit for all biomass-based diesel. The 45Z credit is less straightforward and varies based on greenhouse gas emissions.
An independent study suggests that BTC was a much more consumer-friendly policy than its replacement. Almost 70% of the value of the BTC flowed through the supply chain to blenders and consumers, resulting in lower prices at the pump. Comparatively, the study found that as little as 20% of the 45Z credit would flow through to blenders and consumers. As a result, the industry is advocating to reinstate the BTC, stating that this would help to stabilize prices and increase demand for renewable fuels.
The “Tax Credit Impact on U.S. Biofuels” report was prepared by energy research and analytics firm GlobalData and commissioned by NATSO, SIGMA, and the National Association of Convenience Stores. Together, these organizations represnt 90% of fuel sold at retail.
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CURRENT EDITION
Kwong v. United States: A Pandemic-Era Decision That Could Reshape Tax Deadlines, Penalties, and Refund Opportunities
The 2025 court decision, Kwong v. United States, is quietly gaining traction among tax professionals for exactly these reasons. Its implications could be far-reaching, potentially opening the door to refund claims, penalty abatements, and revived tax deadlines that many assumed were long closed. But there’s a catch: the opportunity to act may be time-sensitive, and the window to preserve claims could begin closing in just a few short weeks. Here’s what the court actually decided and why it matters now.
Untapped State Benefits for Veterans: Planning Opportunities for Advisors and Families
Two veteran clients with seemingly similar financial profiles can end up with very different outcomes, simply based on where they live and how informed they are. Much of that difference comes down to smaller, state-specific benefits that tend to sit just outside the typical planning checklist. But when layered alongside federal veteran benefits, they can reshape major decisions like where to buy a home or settle long-term. For advisors working with military families, recognizing how these state benefits show up in real life can go a long way in helping veteran clients feel seen, understood and better supported in the decisions ahead.
What The Heck Is A Cash Balance Plan?
One of my obsessions is about what we can do for somebody who has high earnings and not much else. When I review multiple collections of year-end tax tips, there is not much for HENRY (high earnings not rich yet) other than a couple of Captain Obvious things like maximizing 401(k) contributions. Henry doesn’t have losses to harvest and is not about to set up a private foundation or a donor advised fund. Charity begins at home. So I got excited when I saw ads about cash balance plans. Was this the great white whale that I have been seeking that is a good answer for Henry? Or is it some sort of scam? As we will see it turns out to be neither, but it is probably something you should consider for some high earners.
