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
- Using A.I. to fight A.I.—Meta plans to use facial recognition to protect users from celebrity-bait scams. In response to the rise of fake ads on Facebook and Instagram, parent company Meta will reinstate its facial recognition technology (FRT) to help users recover their accounts more quickly. The tech giant is already rolling out this feature to celebrity users who will be auto-enrolled but have the ability to opt out. The scam uses celebrity likenesses to get social media users to click on ads that lead them to websites asking for their personal information or inviting them to invest in fake investment schemes. The new feature will rely on FRT to compare the celebrity’s actual photo to the image used in the ad. If the technology determines the ad is a scam, it will be blocked.
- Chart-topping podcaster Alex Cooper gets into the beverage business. Host of “Call Her Daddy,” the No. 2 ranked podcast on Spotify this year, Cooper recently announced a partnership with Nestlé to launch Unwell Hydration, an electrolyte beverage that will be available at the start of 2025. The popular podcaster stated that the idea was born from her observation that the energy and hydration drinks on the market are primarily catered to men. Unwell Hydration will be largely marketed to women. The beverage will be low in sugar and contain some caffeine, as well as B vitamins. Cooper follows in the footsteps of other celebrities who made their foray into the world of hydration and energy drinks, including Logan Paul and KSI, 50 Cent, Dwayne Johnson, and Kim Kardashian.
- Trump pegs former Missouri Congressman Billy Long as the new Commissioner of the IRS. Among the new officials that President-elect Donald Trump has already named is former U.S. Representative, auctioneer, and conservation radio show host, Billy Long. Trump announced the pick on his social media platform, Truth Social. As part of the reasoning for his selection, Trump identified Long’s experience as a business owner, most recently as a business and tax advisor, helping small businesses comply with the IRS Rules and Regulations. Trump is expected to push forward a wide swath of significant tax cuts and to advocate for the extension of provisions from his 2017 Tax Cuts and Jobs Act. If Long is confirmed by the Senate, part of his role will include overseeing these changes to federal tax policy.
What's New In The Tax World?
Inauguration Day may also be new tariffs day as Trump returns to the White House. A recent Truth Social post from President-elect Donald Trump indicates that the first order of business of January 20th may be to push forward a 25% tariff on all imported goods from Canada and Mexico. The U.S. consumes the majority of exports from its neighbors—estimated at 83% of exports from Mexico and 75% from Canada. Trump has stated that the tariffs will be in retaliation for illegal immigration and drugs coming across the border, naming the synthetic opioid known as fentanyl in particular. Government officials from both Canada and Mexico have issued responses to the post. Canadian Prime Minister Justin Trudeau called Trump shortly after the tariff announcement appeared and purportedly discussed border security and trade. Mexican President Claudia Sheinbaum read a letter expressing concern that the two countries would simply continue imposing tariffs, resulting in a negative impact on shared companies.
Which goods would be impacted by the new tariffs on Canada and Mexico? The top import from Canada is oil, as well as cars, machinery, plastics, and wood. From Mexico, the U.S. purchases the majority of its cars and car parts from Mexico—a role previously held by China. Mexico also provides a large portion of alcohol, electronics, furniture,machinery, oil, and optical apparatus used in the U.S. During his last term as president, Trump worked on the passage of the United-States-Mexico-Canada Agreement (USMCA), a trade agreement which replaced NAFTA and exempted Canada and Mexico from tariffs. Trump has not issued a statement on how he would implement tariffs without violating the current terms of the USMCA.
Similarly, China faces an increase in tariffs—on the campaign trail, Trump spoke of a 60% tariff and recently added that he would propose an additional 10% on top of that. The president-elect also named the flow of illegal drugs as part of the reason for targeting China. During his previous presidency, Trump imposed tariffs on about $380 billion worth of goods, including thousands of Chinese-made products. The top imports from China include electronics, furniture, games, machinery, sports equipment, and toys.
Many economists predict that these tariff hikes will result in significantly increased costs for American businesses and consumers. Supply chains will also likely be impacted. Trump has countered that the tariffs will have the positive benefit of increasing domestic manufacturing. He intends to increase tariffs further during his second term, including a tariff of 10% or 20% for all foreign goods.
State-By-State Updates
- California’s governor queues up a tax credit for zero-emission vehicles. The Golden State recently reached the milestone of 2 million electric, plug-in hybrid, and hydrogen-powered vehicles sold across the state. Consumers were previously able to get a financial boost through the federal EV tax credit, but under the Trump presidency, this tax break is expected to disappear. In response, California Governor Gavin Newsom has proposed creating a state-level rebate for zero-emission vehicle purchases. This would be a revival of the state’s previous Clean Vehicle Rebate Program, which contributed to the purchase of 594,000 energy-efficient vehicles. The rebates would likely be funded by the Greenhouse Gas Reduction Fund under California’s cap-and-trade program. The program implements a cap on greenhouse gas emissions and allows companies to buy and sell allowances for permission to emit a certain amount.
- Colorado taxes may not be enough to sustain the free school lunch program. In 2022, Coloradans voted in favor of a new tax on households earning over $300,000 a year. The funds went toward the Healthy School Meals for All program, providing free breakfasts and lunches for students from kindergarten through 12th grade. However, the increase in demand for these meals has outpaced the funding available. The tax brought in $109 million and was combined with federal reimbursements, but even this total was not enough to cover costs. Now the state has created a working group to find a way to either cut costs or increase revenue for the program. One proposal is to ask voters to either increase the current tax or extend it to households earning over $250,000.
- New data stalls a Massachusett’s mayor’s plans to increase commercial property taxes. Boston Mayor Michelle Wu has been steadily advocating for a shift in the city’s tax system in response to estimates that declining property values for office buildings would result in astronomical increases for homeowners. However, new data shows that the impact may not be as dramatic as experts once thought. Previously, projections suggested that residential property taxes could increase by 14% annually, but new estimates put the number closer to 10.5% year-over-year. Since the COVID-19 pandemic, the increase in remote work has left office buildings across the country vacant. Though the House had already approved Mayor Wu’s plan, the Senate used a parliamentary maneuver to delay action.
- Utah’s governor proposes eliminating the state’s Social Security tax as part of a $30.6 billion budget for the coming year. Utah is one of just nine states that tax these retirement benefits. Estimates suggest that the tax cut would cost the state $143.8 million a year but save the average Social Security beneficiary $950 a year. Governor Spencer Cox has advocated for ending Social Security taxes instead of lawmakers’ previous plan to eliminate the state’s sales tax on food. For the sales tax on food to be overturned, Utah voters would need to approve a constitutional amendment, which faced opposition because the amendment would remove an earmark on income tax dollars to be used for education. Since becoming governor in 2021, Cox has been involved in implementing about $1.2 billion in tax cuts, most of which comes from a measure that lowered the state’s income tax rate.
Tax Planning Tips
The Biden administration will leave behind unfinished business—its guidelines on new clean fuel production tax credits. The tax credit, targeted at the airline and biofuel industries, was set to be enacted on January 1st, 2025, but without additional guidance, the program will likely be stalled. The Treasury did issue a statement that it will aim to issue enough guidance before January 20th—when Donald Trump will be inaugurated—that fuel producers would be able to access the credit in 2025. The goal behind this program was to generate 3 billion gallons in production of sustainable aviation fuels by 2030, a key part of Biden’s climate agenda. Once Trump takes the White House, he is expected to work toward overturning a number of Biden’s energy policies and shift focus toward maximizing U.S. fuel and power output. Policies that may be in danger include the Environmental Protection Agency’s power plant rules, new auto-emissions regulations, clean energy subsidies under the Inflation Reduction Act, and participation in the Paris Agreement—an international pact to fight climate change.
Delayed tax relief is coming to wildfire victims on the West Coast and beyond. After stalling in Congress, the Federal Disaster Relief Act of 2023 has been approved by Congress through a unanimous vote in the Senate. President Biden is expected to sign the bill into law imminently. The bill includes a temporary tax exclusion for any compensation a taxpayer receives to assist with recovery from a Qualified Wildfire Disaster, which includes federally declared disasters that occurred after December 31, 2014. Funds to help with losses, expenses, and damages due to the disaster will not count toward an individual’s taxable income. The one exception is if the loss or expense was already reimbursed through another source, such as insurance. Because the bill is retroactive, the exclusion can be applied to tax years beginning after December 31, 2019, and before January 1, 2026. Under the standard statute of limitation, taxpayers can file an amended tax return within three years of the date that the return was originally due.
Within the last 10 years, the U.S. has seen some of the most destructive wildfires in recorded history. In California alone, over 70,000 people suffered losses from the Butte Fire of 2015, the North Bay fires of 2017, and the 2018 Camp Fire. Significant fires have also impacted residents of Arizona, Hawaii, Kansas, Montana, New Mexico, Oklahoma, Oregon, Tennessee, Virginia, Washington, and Wyoming.
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