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
That barrel will cost you a Benjamin—oil hits $101 for the first time since May. The price at the pump rose to an average of $4.22 per gallon for unleaded and a record-high of $5.94 for diesel. With prices rising, legislators have been feeling the pressure to address cost of living complaints as the November election draws near. About one-fifth of all U.S. states have introduced gas tax relief this year, whether that’s suspended taxes, tax reductions, or targeted tax relief for farmers, loggers, or other industries that rely on diesel fuel. Georgia was the first state to suspend its gas tax after the conflict in Iran began, and the Peach State just established another 30-day pause this month. Ohio became the most recent state to introduce a gas tax holiday that will last for the remainder of 2026—a move supported by both major party candidates in the governor’s race. On a federal level, the Environmental Protection Agency approved an early switch to winter-blended fuels. This less-expensive option is typically not available until late September and could save taxpayers up to 15 cents a gallon.
Meta collects $3.9 billion in tax credits for its AI data centers. According to a New York Times investigation, Meta was able to increase its federal research tax credits to almost $4 billion with one move: classifying its AI data centers as “pilot models.” From a tax perspective, this term describes test versions of a product used to assess viability and performance before moving onto a full rollout. Since at least 2024, Meta has used that label for the Nvidia chips inside their data centers. Research tax credits have enabled the tech giant to lower its tax bill by $700 million in 2023 and $2 billion in 2024. Under IRS guidelines, these tax credits must cover qualified research—or experiments focused on solving a technical unknown. Typically, companies claim the tax credit to cover salaries for researchers and engineers, but supplies can also count, which is the basis for Meta’s claim. Experts have flagged this issue as likely to end up in tax court as classifications for AI continue to be debated.
Unbanned: A federal judge reverses the White House’s removal of CNN, MS NOW, and Politico from its press pool. US District Judge Tim Kelly presided over an emergency hearing to determine if the Trump administration was within its rights to bar the three news outlets from White House grounds. The Trump-appointed judge ultimately deemed the ban unconstitutional and ordered the reporters’ access to be restored. Kelly also raised concerns about the Justice Department’s argument for banning the news outlets, which mostly centered on national security concerns. The conflict between the White House and the press reached its peak during President Trump’s recent appearance at the United Nations General Assembly and his hosting of Chinese President Xi Jinping. In solidarity with the banned news outlets, none of the White House’s primary television pool covered the meeting, including ABC, CBS, FOX News, and NBC.
What's New In The Tax World?
A new IRS rule just dropped for the Education Freedom Tax Credit scholarship program
Introduced under the “One Big, Beautiful Bill” Act, this new federal program funds scholarships for private school tuition and costs for public school. Reimbursable expenses include books, computers, services for students with disabilities, and tutoring. The program will be funded by taxpayers who make a cash donation to an approved nonprofit Scholarship Granting Organization (SGO). In exchange for this donation, taxpayers will receive a dollar-for-dollar nonrefundable federal tax credit of up to $1,700 per year (or $3,400 for married couples filing jointly). The US Treasury estimates that by 2030 the program will reach about $26 million, amounting to 2.2 million scholarships a year.
This program is set to start on January 1st, 2027. Recently, the IRS released the latest proposed rule: to give states limited power to set specific conditions for how the program would operate in their state. The program is voluntary, and states that opt in would be able to approve the organizations that manage and disburse scholarships. States will need to submit their list of qualifying SGOs by February 15, 2027.
The proposal also includes limits on how states interact with the scholarship-granting organizations. For instance, states cannot impose more operating restrictions on SGOs than federal law. This essentially means that the state cannot restrict the type of school students can attend or the education expenses that can be covered.
Lastly, the proposal introduces certain protections against misuse of the program. SGOs will have to undergo annual independent reviews. Taxpayers will not be allowed to set aside their donations for specific students. Eligibility verification will be in place for families with foster children and for those requesting needs-based services, tutoring, and disability services.
The IRS confirmed that states can rely on this temporary guidance as they start planning their programs. However, this does not mean that the guidance is final. The proposed rule is open for public comments for 60 days. After this, the Treasury Department is tasked with reviewing the comments and issuing a final rule.
However, this program has received significant pushback from critics who have discouraged schools from participating. A major concern is how the program will impact funding for already underfunded public schools. Additionally, advocates for students with disabilities note that those who transfer to private schools will lose access to their federally protected right to a free and appropriate public education. As of mid-September, 30 states had stated they would opt in. Oregon and Wisconsin have said they will not be participating. Others remain undecided.
State-By-State Updates
California gives a boost to local journalism through a new tax credit. Governor Gavin Newsom approved a bill that offers traditional news organizations tax credits for staying well-staffed. Newsrooms can claim:
- $20,000 in tax credits for up to five journalists
- $15,000 for each additional reporter
- $15,000 for every new journalist hired
- $7,500 for each part-time employee
There is currently no limit to how much a news outlet can claim in tax credits. To qualify, the newsroom must produce original reporting and meet state-set editorial standards. Print, broadcast, digital, and nonprofit organizations can all qualify.
Governor Newsom spoke to the need to counteract the decline of quality journalism and the rise of misinformation. Since 2005, about one-third of newsrooms in California have shut down. This is not the first time the Golden State has attempted to counteract these trends. In 2023, legislators created the California Local News Fellowship, which allocated $25 million to offer dozens of journalists two-year contracts.
New York City must revise its controversial pied-à-terre tax. A Staten Island judge recently ruled in favor of a group of homeowners who contested the new tax on second homes in the city. Mayor Zohran Mamdani and Governor Kathy Hochul introduced the tax earlier this year as part of a push to raise taxes on the wealthy and close the gap in New York City’s budget deficit. The homeowners who filed the lawsuit did not question whether the new tax was legal. They did contest the Department of Finance’s approach to determining who owed the tax. The judge agreed that the city had been too hasty in beginning to collect taxes before refining the implementation process. The city has already appealed the decision and will have to wait on an appellate court for reconsideration. While the ruling presents a setback for Mamdani, the tax is still in place and is expected to generate about $500 million per year.
North Carolina voters will decide on a permanent income tax cap. Taxpayers in the Tar Heel State will be tasked with approving or declining three constitutional amendments this November. One amendment would permanently prevent the state legislature from raising the state income tax rate above 3.49%. North Carolina has a flat income tax rate, which currently sits at 3.99%, but the tax rate is set to decrease to 3.49% in 2027. The tax rate would drop further in future years unless previous legislation is overwritten. Personal income tax currently makes up about 29% of state revenue. Opponents of the tax cap argue that the corporate tax rate should be raised to offset the revenue loss. The corporate tax rate stands at 2%—the lowest in the U.S. This means that local businesses contribute just 2.8% of the state’s tax revenue.
A Texas tax break is under revision—and could result in higher wages for workers. The city of Houston is considering stricter requirements for companies hoping to receive property tax abatement. Houston currently offers qualifying companies discounts of up to 90% on property taxes if they invest in new facilities or upgrades and creating jobs.
If the changes are approved by the city council, companies would be required to:
- Allocate 15% of their hours to apprentices
- Pay construction workers wages that meet federal guidelines
- Pay permanent workers $18 per hour or more
- Offer health insurance for both employees and their dependents
- Submit additional data to auditors and a statement explaining why their project needs an abatement
The proposal includes a new abatement focused on increasing density in low-income areas. The new rules would also disqualify companies with a notable history of workers’ rights violations. Dallas and San Antonio already have minimum wage and health insurance requirements built into their tax breaks, as does the county where Houston is located.
Tax Planning Tips
The U.S. Treasury plans a crackdown on exchange-traded funds and their tax loopholes
A new ruling issues a warning to investors that have been using ETFs as a means of avoiding taxes. The Treasury is zeroing in on a tax strategy known as a “351 conversion.” This provision allows investors to move assets into ETFs in exchange for an interest in the ETF without immediately paying capital gains tax. However, the IRS has flagged a trend of abusing this tax perk in a way it was not intended to be used. Investors are swapping out less advantageous stock portfolios for diversified investments and skipping out on the tax bill.
The U.S. Treasury’s new ruling does not do away with 351 conversions, but it does crack down on exchanges that do not follow the rules. This centers around “like kind” exchanges. To avoid capital gains tax, an asset must be exchanged with an essentially similar asset. Investors are not permitted to swap out their stock portfolio for an interest in an ETF with a materially different portfolio. If this is a tax strategy that you have implemented or considered, be sure to orient yourself to the new Treasury rules to make sure you’re in compliance.
End-of-year tax planning looks different for retirees: what should be in your plan?
If you are retired or soon-to-be retired, now is the time to take action on last-minute tax reduction strategies. Between now and December 31st, retired taxpayers need to decide on:
- Roth conversions: When you move funds from a tax-deferred retirement account into a Roth IRA, you will be required to pay tax now, but withdrawals from the Roth IRA will be tax-free later. This can save you on taxes in the future if you anticipate being in a higher tax bracket later on.
- Required minimum distributions: If you are not yet required to take withdrawals from your retirement accounts, planning ahead for those RMDs is the right move. Instead of waiting until the withdrawals are required and your tax rate is locked in, withdraw funds while you can control when that income is recognized. You can withdraw money from a tax-deferred account at age 59 ½ with no penalty. RMDs typically start at age 73.
- Senior deduction for people aged 65 and over: A new tax deduction allows qualifying taxpayers to claim up to $6,000 as long as their modified adjusted gross income does not exceed $75,000 (or $150,000 for married couples filing jointly). If you are eligible for this benefit, this can mean instant tax savings.
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CURRENT EDITION
Assessment Statutes and Document Retention Best Practices
When it comes to document retention, my guiding policy is “If I don’t keep it, it can’t be stolen or subpoenaed.” That sounds cynical, but there’s truth in it. The smaller your data “surface area,” the less you have to manage in the event of a data breach (or, if you hold paper documents, in the event of a fire or break in). And, if a client or former client gets really sideways in divorce or criminal court, being able to say “I have a policy in place and I don’t keep records longer than three years” can provide you with a measure of peace. But what should your policy be? It depends, but relevant assessment statutes are a good place to start. This article reviews the IRS rules for assessing tax and provides some best practices for developing document retention policies for return preparation documents in your practice.
The “Busy Season” Myth: Why Accountants Stay Stuck Waiting for Time That Never Comes
If you’re a CPA, you’ve heard it a thousand times. People outside the industry say it like it’s a weather report: “How was busy season?” Firm owners say it to each other, as if it’s a shared badge of honor: “Just get through April 15.” Then it becomes, “After extensions.” Then, “After we rehire.” And after every “busy season,” there’s the crash. The weeks of 60–70 hours. The nights. The lost family time. The feeling that life is on hold until the deadline passes. Here’s the problem: tax deadlines don’t end—they shift. March 15. April 15. September 15. October 15. Year-end planning. 1099s in January. Treating the calendar like the boss means building firms stuck in constant reaction. The truth is, “busy season” isn’t a season. It’s a mindset. And it’s one of the most expensive mindsets we’ve normalized in public accounting.
The Tips Deduction and the Self-Employed: Potholes Everywhere
By now, tax professionals and taxpayers are familiar with the fact that the One Big Beautiful Bill (OBBBA) created a new tax deduction for tips received. What we want to look at in this article is — how do self-employed taxpayers handle this deduction?
