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
Trump’s $1.776 billion IRS settlement is blocked by a federal judge. President Trump kicked off the new year by filing a lawsuit against the IRS. The IRS opted to settle, but now Florida judge Kathleen M. Williams has voided the deal. From the get-go, the settlement was controversial and received pushback from both conservatives and liberals. The reason? First, the settlement gave Trump and his business amnesty for any past tax liability. Second, it created an “anti-weaponization” fund for people claiming to be the victims of governmental abuses. Many expressed concern that the fund might provide payments to January 6 Capitol rioters. Those who questioned the legality of this settlement have Judge Williams on their side. The judge prohibited the Trump family from using the deal, referred Trump’s lawyers to the bar for review and discipline, and wrote a 56-page opinion explaining her view that the lawsuit was not constitutionally legitimate.
Banks are booming and software is declining: could AI be the reason? Morgan Stanley’s stock reached record highs this summer. Stock prices rose by over 24% since January, and the bank saw a 27% net revenue increase since this time last year, hitting a record high of $21.35 billion. Five other major banks saw higher-than-expected earnings this month: namely, Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, and Wells Fargo. What led to this uptick for the industry? Analysts are pointing to AI-powered trading. Artificial intelligence is making it more affordable to launch IPOs, finance debt, and facilitate mergers and other deals. On the flip side, software and mainframe maker IBM is struggling to adjust to the AI era. IBM’s stocks recently fell 26% after announcing lower-than-anticipated earnings. In a similar boat, Oracle’s shares have dropped 33% since the start of the year, and Microsoft has gone down 20%.
The IRS’ leadership gap widens as a top official and tax policymaker is rumored to be leaving. Ken Kies, the acting chief counsel of the IRS, is expected to make his departure this year. After working as a lobbyist and former tax lawyer for Trump, Kies was confirmed as the Treasury’s assistant secretary for tax policy just a year ago. Kies was instrumental in implementing the One Big Beautiful Bill Act (OBBBA). President Trump’s lawsuit against the IRS also occurred during Kies’ time at the agency, but he recused himself due to his previous connection to the president. Kies’ departure leaves yet another gap in IRS leadership, since the roles of commissioner and chief counsel are still both empty. Since both of these senior roles require a presidential appointment and Senate confirmation, filling the positions is easier said than done. The IRS has not had a confirmed commissioner since Trump fired Billy Long, his previous choice for the role.
What's New In The Tax World?
As refunds surpass $49 billion, what does the future hold for U.S. tariffs?
The refund process has just begun, but it has already taken a major toll on customs revenue. This June, the U.S. government reported a $120 billion deficit in the federal budget. Tariffs are thought to be the main culprit, since payouts totaled $49.2 billion that month, but collections came in at only $23.6 billion.
These refunds are a result of a recent Supreme Court decision. Back in spring of 2025, President Trump imposed widespread tariffs, using the International Emergency Economic Powers Act as his basis. However, the Supreme Court ultimately ruled that the act does not give the president authority to impose tariffs and required them to be refunded to eligible businesses. As of this May, about 42% of eligible tariffs have been refunded, amounting to about $71 billion.
However, that refund total may be a moving target. The Trump administration recently expanded the list of scenarios that make tariffs eligible for a refund. On top of that, the president has created temporary exemptions for U.S. businesses in special need of tariff relief. For instance, Trump announced an exemption for Moroccan fertilizer to help stabilize the domestic food supply. Another similar exemption was announced for duties on farm equipment.
To be eligible for a refund, a business must be an Importer of Record and the tariff in question must have been imposed under the International Emergency Economic Powers Act. The first step is to establish an ACE Secure Data Portal account. The business must then provide a list of entries for the refunds being requested. Once the request is accepted, refunds are generally issued within 60 to 90 days.
Amid the ongoing refunds, new tariffs may still be on the horizon—this time as an effort to end the war in Ukraine. A bipartisan bill was recently introduced in the Senate that would place sanctions on Russia and its trade partners. This would include tariffs of up to 100% on the top five purchasers of Russian oil and the top five purchasers of Russian natural gas. The bill also blocks Americans from doing business with the Russian government, buying Russian debt, or engaging with Russia’s energy sector, which has supplied significant revenue for the war.
State-By-State Updates
Will Alaska’s gasline tax bill become law? The Alaska LNG is a 807-mile project expected to cost between $44 billion and $54 billion. The new pipeline would transport natural gas from the North Slope to Southcentral Alaska and onward to local and global markets. The conundrum for its supporters is how to make the project financially viable. Lawmakers have introduced a new bill that would replace the state’s 2% property tax with an alternative volumetric tax that would lower costs for developers to the tune of $16 billion. The bill passed the Senate, but the House passed a larger tax break. Now legislators will have to decide whether to move forward with one of the current proposals or start from scratch. To complicate matters, Alaska will likely need to contribute at least $4 billion to keep its 25% ownership stake in the project and profit from the pipeline. Assuming the pipeline stays within budget, the state could earn over $21 billion from the gas sales through 2062.
Connecticut imposes a new $10,000 tax on commercial solar facilities. Starting in July, large solar arrays will pay $10,000 per megawatt per year in taxes. As a reference point, an averaged-sized facility might have an installed capacity of 6 megawatts. These installations have become increasingly common across the state over the last decade. Previously, tax assessors were allowed to determine the value of solar panels and other equipment. Developers had a number of tax exemptions they could take advantage of to reduce and even eliminate local taxes. To solve this problem for local governments, a new omnibus energy bill was passed in 2025 changing the way large solar arrays are taxed. The new tax only applies to commercial solar facilities that begin operations after July 1, 2026. Most residential rooftop systems are exempt from property taxes and would not be affected.
Illinois’ new cryptocurrency tax will hit investors even if they lose money. In 2027, Illinois will become the first state to introduce its own 0.2% tax on digital asset transactions, including exchanges, transfers, and storing assets through a broker. This tax is expected to raise $60 million yearly tax revenues for the state. However, there is one nuance to the new law that could pose problems for taxpayers. Because the tax is imposed at the transaction level, the activity will be taxed whether there is a profit or a loss. This means that if a taxpayer sells Bitcoin for $75,000 it does not matter if they originally purchased it for $50,000 (turning a profit) or $100,000 (incurring a loss)—the tax will be $150 all the same. Brokers will be required to register with the Illinois Department of Revenue, collect the taxes, and remit the money to the state.
This fall, Washington voters must decide whether to repeal the state’s millionaires tax. Opponents of the tax have successfully collected over 500,000 signatures in their petition to put a decision to repeal on the November ballot. The current tax applies a 9.9% levy on individual income over $1 million. Its opponents argue that the state government has been overspending and are concerned that the tax could eventually expand to lower incomes. Some also fear that the tax will cause high earners, including tech executives, to leave Washington. Supporters, including Governor Bob Ferguson, argue that the wealthiest taxpayers can afford the increase. They also note that the money goes toward free school meals for K-12 students, tax credits for working families, and tax cuts for small businesses. The governor has emphasized that he would veto any bill that attempted to lower the threshold below $1 million in income.
Tax Planning Tips
Claiming the Federal Scholarship Tax Credit is a more narrow road than some imagined
A new tax break is coming on January 1, 2027 to those who want to support children’s educational futures. This federal program allows taxpayers to receive a dollar-for-dollar tax credit for scholarship donations of up to $1,700. However, there are a few caveats to who can benefit. First, the donation must be made to a Scholarship Granting Organization (SGO). Second, the taxpayer’s state must choose to participate in the program and must provide a list of SGOs in that state. So far, 29 states have opted in: Alabama, Alaska, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, and Wyoming.
The good news is that everything from private schooling to public school tutoring could potentially qualify. A potential obstacle is the question of whether taxpayers will take advantage of it. To help, some have suggested allowing employers to fold the contribution into benefit packages. A second potential obstacle is the unfamiliarity of SGOs and their ability to build trust with prospective donors.
Are you prepared for the tax consequences of selling a high-value home?
As property values rise and capital gains tax policies shift, homeowners may find themselves unsure how to plan for the sale of their homes. A recent survey conducted by MetLife found that most sellers are uncomfortable making complex tax decisions on their own and are looking to professionals for help. Though taxpayers may initially try to lean on real estate professionals for advice, 85% of brokers and agents recommend their clients work with trained tax professionals. This is because a sale is not simply a sale. Selling a home can bring up issues with lifestyle adjustments, retirement funding, succession planning, and of course, high taxes. Property value spikes have made strategies like 1031 exchanges more popular. This tax rule allows homeowners to defer paying capital gains taxes on a sale if they immediately reinvest the proceeds in a “like-kind” property. Another alternative is a structured installment sale, which allows sellers to spread payments over time and use this to help defer taxes.
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CURRENT EDITION
Lessons Learned from the Tax Court: What’s at Stake?
Astute readers of this publication may recognize that I frequently write on Cryptocurrency and also on Tax Court cases. It feels like Christmas to me to be able to write about a tax court case about crypto. This is only the Third Tax court case to even mention crypto, and the first to look at the underlying principles of taxation. (The other two were about including crypto assets in a CDP hearing and a frivolous tax protester argument). Today’s case, Paschall v. Commissioner, is about the taxation of staking income.
What’s New With Hobby Loss: Recent Developments in Section 183
Recent developments in the Section 183 (Hobby loss) area have not led me to change my basic conclusions. Taxpayers who have a sincere objective of ultimately making a profit should not hesitate to claim losses from the underlying activities. That is so even if you believe that profits are improbable. It is critical that they meet the standard of behaving in a businesslike manner. The other regulatory factors should not be ignored, but often there is not that much you can do about them. Reilly’s 18th Law of Tax Planning – Honest objective trumps realistic expectation.
The Art of Income Shifting: Powerful Planning Strategies That Stand Up to Scrutiny
Income shifting strategies address taxation at its most fundamental level by directing income to taxpayers in lower brackets or with offsetting deductions. Unlike many tax strategies that merely time recognition or enhance deductions, effective income shifting can permanently reduce the tax burden on a given dollar of income—often creating tax savings that compound year after year. In this article, we’ll explore systematic approaches to income shifting that create extraordinary value for clients while maintaining impeccable compliance.
