Michael Gray, CPA's Blog

Tax and financial advice from the Silicon Valley expert.

Project 2025 and Women’s Rights

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  • mike   

2025: Mandate for Leadership provides the agenda for President Trump’s presidency and the Republican leadership in Congress. Although the agenda claims to support equal rights for women, it actually appears to be an attempt to return women’s status to the 1950s.

The status of women during the 1950s and before was documented in The Feminine Mystique by Betty Friedan.

During the 1950s, the role of American women was to be mothers and housewives. Women went to college to find a husband and often dropped out before graduation. The proportion of American women attending college dropped from 47% in 1920 to 35% in 1958. By the mid-1950s, 60% of women dropped out of college to marry, or because they were afraid too much education would be a marriage bar.

During the 1950s, the average marriage age of women in America dropped to 20. Fourteen million girls were engaged by age 17. American families had an average of 3.7 children.

Almost all articles in women’s media related to marriage, relationships and the family.

Many women sought psychological therapy because they found they were losing their individual identity and weren’t achieving self-actualization goals. Psychologists suggested they work on their marriages and not on themselves. Alcoholism was rampant among American housewives.

Women who achieved professional success were social outcasts. They didn’t fit the social norms of the time.

The 1960s and 1970s were a sea change for women in the U.S. Women joined together to fight for women’s rights. Contraceptives, especially the contraceptive Pill became widely available. The Supreme Court ruled in Roe v. Wade that women had the right to safe abortions. Women gaining control over their own bodies gave them the freedom to pursue professional and self-actualization goals.

With high inflation and slow wage growth, American families found both spouses had to work to keep up with the cost of living.

The age for a first marriage for a woman in 2024 was 28.6. The average number of children for American families was 1.9.

Women comprised 58% of all college students in 2020. In 1979, about 200,000 more women were enrolled in college than men. By 2021, the difference had grown to about 3.1 million more women than men in college. For 2022, the graduation rate was 67.9% for women and 61.3% for men for first-time, full-time degree-seeking students who entered a degree-granting four-year institution in the fall of 2016.

52% of J.D. recipients today are women, v. 30% in 1980. 51% of Doctor of Dental Surgery or Doctor of Dental Medicine recipients are women, v. 13% in 1980. 50% of MD recipients are women, v. 23% in 1980.

In 2024, women made up about 47.2% of all employed workers in the U.S. The labor force percentage rate for women was about 57.6%.

The strategy of Project 2025 was to identify initiatives in advance and identify people loyal to Donald Trump to replace those who were not loyal to him to adopt changes quickly. You’ll notice the early months of Trump’s second term felt like a blitzkrieg of change. This was largely accomplished with a rash of executive orders, bypassing Congress. The Republicans wanted to accomplish as many initiatives as possible before the mid-term elections, in case the Democrats got control of either the House of Representatives, the Senate, or both, possibly blocking further initiatives.

One of the purposes of 2025: Mandate for Leadership and Project 2025 is an attempt to impose Christian Fundamentalist religious values on Americans, returning women to a subservient role.

Contraception, such as the contraceptive pill would no longer be widely available. Safe abortions would be outlawed.

“Pro-Life” initiatives would be adopted. Health and Human Services would be renamed “Department of Life.”

Employer-provided health insurance would be prohibited from providing “anti-pro life” (contraception and abortion) benefits.

Marriage is promoted and alternative sexual lifestyles are condemned. “Men and women are biological realities that are crucial to the advancement of life sciences and medical care and that married men and women are the ideal, natural family structure because all children have a right to be raised by the man and woman who conceived them.” (Even if they are abusive parents.)

The Trump Administration has attacked Diversity, Equity and Inclusion initiatives in the Federal government, in states and communities receiving federal funding, universities, and corporations.

The DOGE initiative has resulted in massive layoffs in the Federal workforce, disproportionately eliminating jobs for women and people of color.

Corporations that are requiring employees to return to the office after remote work during the COVID pandemic are disproportionately laying off women who can’t get child care and people of color.

A Baylor study found that 46% of women employees ordered to spend more time in the office negotiated taking on lower-level positions that allowed them to maintain their flexible working arrangements. Those moves involved women employees taking paycuts.

Since January 2025, more than 450,000 women have left the U.S. labor force. There was a net increase of men joining it.

In government agencies with a predominantly female workforce, such as the Social Security Administration (66% women), layoffs and cuts were widespread.

Even the right for married women to vote is under threat. The House of Representatives has passed the Safeguard American Voter Eligibility (SAVE) Act. Under the SAVE Act, anyone registering to vote or changing their registration would have to appear in person at an election office with original or certified documents proving identity and citizen status, usually with a passport or a birth certificate. A state-issued drivers license wouldn’t be adequate on its own. The passport or record of naturalization and the birth certificate would have to have a matching name. Since most married women change their last name to their husband’s at marriage, processing their voter registration would be complicated. Only half of U.S. citizens currently have a passport.

The bill includes a provision ordering states to allow registrants to provide “additional documentation” to prove their citizenship when discrepancies arise, but it does not specify what types of documents states could accept.

Making this change could prevent millions of women from voting until they can document their identities. It could also result in changing the custom of adopting a partner’s name at marriage to avoid the hassle of documenting your identity to vote.

Adopting the SAVE Act also would create an inconvenience for all voters whenever they change their address. They would have to visit a voter registration office to make the change.

The SAVE Act hasn’t been passed in the Senate. Maybe some “bugs” can be worked out when and if it is adopted.

Most of the initiatives in Project 2025 have not become laws yet, and lawsuits are in process for some, like defending diversity, equity and inclusion. The Supreme Court has been inclined to disregard precedent rulings and support President Trump and Project 2025, even when their initiatives appear on their face to be unconstitutional.

What can women do to defend their rights?

  1. Vote in the upcoming 2026 midterm election for candidates (preferably women) who support women’s rights, and do not support President Trump and Project 2025. (President Trump won the last election because fewer Democrats voted in 2016, probably because they were unhappy with how President Biden handled Israel’s war on Gaza.) (If you are in a relationship where your partner is dictating how you vote, consider asserting yourself or getting out of it. Look for local support resources online.)
  2. Join protests against the Trump Administration. www.nokings.org
  3. Call or write representatives in Congress to express your opposition to Project 2025 initiatives and the SAVE Act. https://www.congress.gov/members/find-your-member
  4. Attend local Town Hall meetings of representatives in Congress to express your opposition to Project 2025 and the SAVE Act.
  5. Donate to the American Civil Liberties Union to support litigation defending women’s rights. https://www.aclu.org/
  6. Join with other women in the National Organization for Women to fight for women’s rights. https://now.org/
  7. Start your own business or seek employment of women-led businesses or organizations. More women are educated than men, and they have the skills or can get the skills they need to run successful businesses. Women-led business often do better than business led by men. https://www.stash.com/learn/why-companies-led-by-women-may-do-better/
  8. Re-examine the tradition of paternalism and consider adopting the philosophy of partnership of the sexes. https://breakingdownpatriarchy.com/

Do you have more ideas? Please send me your suggestions.

Who was the main author of the New Deal?

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  • mike   

Frances Perkins became the first woman to serve in a U.S. Presidential cabinet (in 1933) and the fourth longest-serving cabinet secretary. She is also recognized as the principal author of Franklin Roosevelt’s New Deal.

She was highly educated for that time, with a bachelor’s degree in chemistry and physics earned at Mount Holyoke College in 1902 and a master’s degree in social economics received in 1910 after studies at the Wharton School of Finance and Commerce of the University of Pennsylvania, and Columbia University.

She became concerned about women’s safety in the workplace when she witnessed the Triangle Shirtwaist Factory fire in 1911. The factory employed hundreds of workers, mostly women, and lacked fire escapes. The owner kept the doors and stairwells locked to keep employees from taking breaks. When the building caught fire, many workers couldn’t use the doors and tried to escape through the windows. 146 workers died.

After Perkins worked as a New York state commissioner overseeing New York’s industrial code and as the inaugural New York state industrial commissioner under then-governor Franklin Roosevelt, Roosevelt asked her to join his presidential cabinet and serve as the Secretary of Labor in 1933.

Perkins agreed to serve, provided Roosevelt would accept her policy priorities: a 40-hour work week; a minimum wage; unemployment compensation; worker’s compensation; abolition of child labor; direct federal aid to the states for unemployment relief; Social Security; a revitalized federal employment service; and universal health insurance.

She was successful in implementing all of those goals, except universal health insurance.

Perkins was also an advocate for massive public works programs, including implementing the Civilian Conservation Corps., to bring the nation’s unemployed back to work during the Great Depression.

Perkins also created the Immigration and Naturalization Service. Her goal was to humanize the treatment of immigrants in the U.S. She opposed restrictive immigration practices, abolishing the Bureau of Immigrations “Section 24” squad, known for illegal apprehension tactics which violated due process. (Sounds like ICE?)

Ironically, President Trump has been “undoing” these reforms and dismantling the Department of Labor.

American workers and retirees should honor Frances Perkins for the workplace protections and retirement security that she was instrumental in creating and that we benefit from, today.

Investors! – You might be losing vital protection

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  • mike   

Public Company Accounting Oversight Board Chair Erica Williams has resigned at the request of Securities and Exchange Commission Chair Paul Atkins. Atkins has said he wants to terminate the PCAOB as a separate body and incorporate it into the SEC.

This action reflects the big-business friendly orientation of the Trump administration and the abandonment of regulations created to protect American consumers and investors.

Of course big businesses would prefer to have the freedom of eliminating regulation. It would be great if business leaders behaved like the demigods in Atlas Shrugged but they don’t. They misbehave, resulting in the injury and death of consumers and financial losses to investors.

What was the scandal that inspired Congress to create the PCAOB?

Enron was the darling of Wall Street during the 1990s and early 2000s. It was the largest natural gas provider in North America in 1992. In 1999, the company’s stock increased 56%, and in 2000, it increased an additional 87%.

The CEO of Enron was Kenneth Lay, who was a charismatic leader and close friend of the (Presidents) George Bush family. The “whiz kid” brains of Enron was Jeffrey Skilling, who had previously worked at McKinsey & Company.

Skilling introduced a number of innovations at Enron.

One was adopting mark-to-market accounting. Revenue was recognized for contracts when they were accepted, based on the total management estimate of revenue for the contracts before the services were performed. Skilling was able to get SEC approval for this method, so the auditors accepted it.

Although the company reported substantial profits, it never had positive cash flow.

In order to avoid having debt disclosed on the corporate balance sheet, the debt was incurred by “special purpose vehicle” subsidiaries of Enron, secured by Enron stock and recorded as related party transactions.

The company got control of a trading market for energy. The traders were able to manipulate the energy market in California with the cooperation of the switching stations, dramatically increasing the price paid by California utilities for energy and resulting in brownouts or shortages of energy provided within the state.

In the early stages of the internet, Enron introduced a broadband service that generated significant losses and eventually was closed. The Broadband Services department reported a financial loss of $102 million for the second quarter, 2001.

Kenneth Lay and Jeffrey Skilling continously encouraged employees to invest in Enron stock in their 401(k) accounts, while Lay, Skilling, and other Enron executives were selling their shares.

Enron acquired Portland General Electric (PGE) in a stock-for-stock exchange. PGE stock held in the 401(k) accounts of PGE employees was replaced with Enron stock.

Sherron Watkins, a Vice President for Enron, expressed concerns about Enron’s accounting practices, and wrote an anonymous letter to Kenneth Lay explaining her concerns. She presented a six-page report of her concerns to Lay and to the company’s lawyers and accountants. They didn’t agree with her concerns.

By October, 2001, Enron reported a third quarter loss of $618 million and announced it would restate its financial statements from 1997 to 2000 to correct accounting violations.

On November 28, 2001, credit rating agencies reduced Enron’s credit rating to junk status, leading to its $63.4 billion bankruptcy, the biggest on record at the time.

Arthur Andersen, the company’s auditor, was fired. The auditors shredded evidence in their possession. The scandal led to Arthur Andersen losing its license to practice public accounting, destroying the fifth largest CPA firm in the United States. (In addition to its audit work, Arthur Andersen had several consulting assignments with Enron.) (The surviving piece of Arthur Andersen is Accenture, renamed from Andersen Consulting.)

Kenneth Lay was convicted of six counts of securities and wire fraud, subject to a maximum sentence of 45 years in prison. He died before being sentenced.

Jeff Skilling was convicted of 19 counts of securities fraud and additional charges of insider trading. He was sentenced to 24 years and four months in prison, later reduced by 10 years in a deal with Department of Justice.

You can watch a documentary of the Enron story, Enron: The Smartest Guys In The Room, for free on YouTube here. https://www.youtube.com/watch?v=7tx9B53s5XU

In Congressional hearings, it was revealed that the bankers, securities brokerages, utilities regulators, auditors, and the SEC were all complicit in the Enron scandal. Nobody wanted to question the honesty of the corporate officers.

As a result of the Enron scandal and other scandals, like Worldcom and Tyco, Congress passed the Sarbanes-Oxley Act of 2002, including the creation of the PCAOB for the oversight of the public accounting profession. The Financial Accounting Standards Board also adopted rules to curtail the use of questionable accounting practices.

The PCAOB had it most effective enforcement year to date in 2024. The agency made public 51 settled orders, compared to 40 settled orders each year for 2022 and 2023. KPMG Netherlands was fined $25 million, the highest civil money penalty in PCAOB history. Most of the PCAOB’s audit activity and penalties relate to international operations.

Without the continued oversight of the PCAOB, it seems likely that investor risk of fraud will increase and we will see more of the scandals experienced during the 1990s and 2000s.

One Big, Beautiful Bill Act tax provisions effective 2025

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  • mike   

President Trump signed the One Big, Beautiful Bill Act of 2025 (OBBBA), H.R. 1, on July 4, 2025.  Republicans in Congress responded to President Trump’s request for urgency, enacting it mid-year.  Usually, major tax laws are passed at the end of the year.  The Act was narrowly approved, by 51 – 50 in the Senate and 218-214 in the House of Representatives.

The principal part of the Act was to extend most of the cuts in the Tax Cuts and Jobs Act of 2017.

The Act is huge – over 900 pages.  In order to make it more digestible and so you will be aware of items requiring attention soon, this article will mostly focus on the provisions taking effect during 2025.

Remember these are federal tax changes.  Check whether your state will conform to them.

You can access the complete law at https://www.congress.gov/bill/119th-congress/house-bill/1/text

1. SALT cap.   The itemized deduction ceiling for state and local taxes (SALT cap) has been increased from $10,000 ($5,000 for married, filing separately) to $40,000 ($20,000 for married, filing separately), effective for 2025, and $40,400 ($20,200 for married, filing separately) for 2026.  The ceiling will be increased by 101% of the amount for the previous year from 2027 through 2029.  After 2029, the ceiling will revert to $10,000 ($5,000 for married, filing separately.)

The SALT cap is reduced to no less than $10,000 ($5,000 for married, filing separately) by 30% of the excess of the taxpayer’s modified gross income over $500,000 ($250,000 for married, filing separately) for 2025, and $505,000 ($252,500 for married, filing separately) for 2026.  The SALT cap phaseout threshold will be increased by 101% of the dollar amount in effect for the previous year from 2027 through 2029.  (Act § 70120.)

2. Section 529 changes. Effective for distributions after July 4, 2025, additional items qualify for tax-free distributions from §529 plans to educational expenses at an elementary or secondary public, private, or religious school, including:

  • curriculum and curricular materials;
  • books or other instructional materials;
  • online educational materials;
  • tutoring or educational classes outside the home;
  • certain testing fees;
  • fees for dual enrollment in an institution of higher education; and
  • certain educational therapies for students with disabilities.  (Act § 70413.)

3. Section 529 plan distributions.  Effective for distributions after July 4, 2025, post-secondary credentialing expenses qualify for tax-free distributions from Section 529 plans (qualified tuition programs.)  Post-secondary credentialing expenses include books, tuition, equipment, and testing fees for a course of study to obtain and continuing education to maintain an industry credential.  (Act § 70414.)

4. Senior deduction.  To satisfy President Trump’s promise to make Social Security income tax-exempt, Congress enacted an enhanced deduction for seniors of $6,000 for taxpayers who have attained age 65 by the year-end.  For joint returns, each spouse may claim $6,000 provided both spouses have attained age 65 by the year-end.  The individuals filing the income tax return must have and report Social Security numbers.  Married persons must file a joint return to claim the deduction.  No Social Security income is required to claim the deduction.

The deduction is treated as a personal exemption (not an itemized deduction), although personal exemptions have been repealed.

The senior deduction is phased out by 6% of modified adjusted gross income over $75,000 ($150,000 for a joint return.)

The deduction applies for tax years 2025 through 2028.  (Act § 70103.)

5. Tip income deduction and employer credit.  A deduction is available for up to $25,000 of qualifying tips received by an individual.  The deduction is not an itemized deduction.  The deduction applies for both employees receiving Form W-2 and independent contractors receiving Forms 1099-K, 1099-NEC, or reported by the employer on Form 4317, Social Security and Medicare Tax on Unreported Tip Income. 

Qualified tips are cash tips received by an individual who customarily and regularly received tips on or before December 31, 2024.  A list of those occupations is to be published by the Secretary of the Treasury (IRS) within 90 days after July 4, 2025.  Qualified tips are paid voluntarily, are not subject to negotiation and are determined by the payor.  Qualified tips do not include any amount received in the course of a specified trade or business (professionals).  The individuals filing the income tax return must have and report Social Security numbers.  Married persons must file a joint return to claim the deduction.

For self-employed persons, the deduction is limited to the net business income.

The deduction for qualified tips phases out by $100 for each $1,000 over $150,000 ($300,000 for joint returns.)

Tips that are excluded from income of a self-employed person aren’t eligible for the qualified business income deduction.

The IRS has published a list of occupations that qualify for the deduction.  https://home.treasury.gov/system/files/136/Tipped-Occupations-Detailed-8-27-2025.pdf

The deduction applies for 2025 through 2028. 

Effective for tax years beginning after December 31, 2024, the tax credit for employer social security taxes paid on tips for restaurant and food delivery workers has been extended to the following services: (1) barbering and hair care; (2) nail care; (3) esthetics; and (4) body and spa treatments.  Only employer social security for tips exceeding any amount to reach the federal minimum wage qualify for the credit.  (Act 70201.)

6. Overtime deduction.  A deduction of up to $12,500 ($25,000 for a joint return) may be claimed for qualified overtime compensation received by an individual during a tax year.  The deduction is not an itemized deduction.

Qualified overtime compensation is compensation paid in excess of the regular rate where the individual is employed.  Tips are excluded from compensation when computing this deduction.  The amount of overtime compensation must be reported on the employee’s Form W-2. 

The deduction is phased out by $100 for each $1,000 that modified adjusted gross income exceeds $150,000 ($300,000 for a joint return.) 

The individuals filing the income tax return must have and report Social Security numbers.  Married persons must file a joint return to claim the deduction.

The overtime deduction applies for 2025 through 2028 (Act § 70202.)

7. Car loan interest deduction.  A deduction may be claimed for up to $10,000 paid for qualifying car loan interest.  The deduction is not an itemized deduction.

Qualified passenger vehicle loan interest is interest paid or accrued during the tax year on indebtedness incurred by the taxpayer after December 31, 2024 for the purchase of, and secured by a first lien on, an applicable passenger vehicle for personal use.  Interest paid on loans from related parties don’t qualify for the deduction.

An applicable passenger vehicle is any vehicle  (1) the original use of which commences with the taxpayer; (2) which is manufactured primarily for use on public streets; (3) which has at least two wheels; (4) which is a car, minivan, van, sport utility vehicle, pickup truck or motorcycle; (5) which is treated as a motor vehicle for title II of the Clean Air Act; (6) the final assembly of which occurs in the United States; and (7) which has a gross vehicle weight of less than 14,000 pounds.

The IRS has updated its FAQ at FS-2025-03 to explain how to find out if a vehicle qualifies for the new vehicle interest deduction for personal use vehicles purchased after December 31, 2024 and before January 1, 2029.

In order to qualify, the vehicle must be new and assembled in the United States.

Taxpayers may rely on either:

(1) The window sticker of a new vehicle, which should identify where it was assembled. (Keep it as documentation.)

(2) Confirmation of the point of assembly using the vehicle identification number (VIN) for the vehicle. You can do this at the U.S. Department of Transportation’s website:  https://vpic.nhtsa.dot.gov/decoder.

https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors

(There may be a question whether a vehicle that is initially leased and later purchased from a lessor qualifies as “original use” by the taxpayer.)

Lenders are required to issue information returns for the amount of interest exceeding $600 paid for vehicle loans that could qualify for a deduction.

The deduction is phased out by $200 for each $1,000 modified adjusted gross income exceeds $100,000 ($200,000 for a joint return.)

The vehicle identification number of the financed vehicle must be reported on the income tax return to claim the deduction.

The deduction is effective for tax years 2025 through 2028.  (Act § 70203.)

8. Child Tax Credit.  The Child Tax Credit is permanently increased to $2,200 per child, effective for 2025 and indexed for inflation after 2025.

The refundable $1,400 child tax credit, indexed for inflation at $1,700 for 2025, is made permanent, with the income threshold amounts of $200,000 ($400,000 for a joint return.)  The $500 nonrefundable credit for a dependent other than a qualifying child is also made permanent.

The requirement that the child’s Social Security number must be provided to claim the credit is made permanent.  The work-eligible Social Security number of a single taxpayer or at least one spouse on a joint return must also be reported on the income tax return to claim the credit.  (Act § 70104.)

9. Adoption Tax Credit.  Effective for tax years beginning after December 31, 2024, up to $5,000, indexed for inflation, of the Adoption Tax Credit is refundable.  The refundable amount may not be carried forward.  (Act § 70402.)

10. Safe Harbor as a High-Deductible Health Plan.  Effective for plan years beginning after December 31, 2024, the safe harbor providing a health plan won’t fail to be treated as a high-deductible health plan because it doesn’t have a deductible for telehealth and other remote-care services.  (Act § 71306.)

11. Casualty Loss Addition to Standard Deduction Extended.  The option to claim casualty losses attributable to a Presidentially-declared federal disaster as an addition to the standard deduction has been extended from disasters occurring after December 27, 2019 and declared before February 11, 2025 to disasters declared before July 5, 2025.  (Parker’s Federal Tax Bulletin, Issue 362, July 8, 2025, “Casualty Loss Deduction”.  (Act § 70109.)

12. IRS Direct File replacement.  The IRS Direct File program has been discontinued.  A task force has been established to deliver a report to Congress within 90 days after July 4, 2025 about replacing the Direct File program with a public-private partnership between the IRS and private sector tax preparation services.  (Act § 70607.)

13. Bonus depreciation.  Bonus depreciation is available in the year of acquisition for MACRS property with a recovery period of 20 years or less, provided the property isn’t required to be depreciated using the alternative depreciation system.  Bonus depreciation is also available for specified plants when they are planted or grafted.  Qualified real property and off-the-shelf computer software that is otherwise depreciable over 3 years also qualifies for bonus depreciation.  The first-year depreciation cap for luxury vehicles is increased by $8,000.  Before OBBBA was enacted, bonus depreciation was 40% of the basis of property for 2025 and 20% for 2026, and would expire after 2026.

OBBBA extends bonus depreciation permanently and increases the rate to 100% for property acquired and placed in service on or after January 19, 2025 and for specified plants planted or grafted on or after January 19, 2025.  (Act § 70301.

14. Section 179 expensing.  Tangible new or used section 1245 property that is depreciable under the Modified Accelerated Cost Recovery System (MACRS) that is acquired by purchase for use in the active conduct of a trade or business and used predominantly in the United States and predominantly (more than 50%) for business purposes), is eligible for Section 179 expensing in the year acquired.  The maximum amount eligible for section 179 expensing for an SUV with a gross vehicle unloaded weight of 6,000 pounds and exempt trucks with an interior cargo bed length of less than six feet and exempt passenger vans that seat fewer than ten persons behind the driver’s seat is $31,300 for 2025.  Qualified real property and off-the-shelf computer software that is otherwise depreciable over 3 years also qualifies for Section 179 expensing.  When an election is made to claim section 179 expensing for qualified real property, all qualified real property acquired that year is treated as section 179 property. The deduction is limited to taxable income before the deduction.

Before OBBBA was enacted, the maximum basis eligible for section 179 expensing was $1,250,000 for 2025, with a phase out for the basis of qualifying property exceeding $3,130,000.

Effective for property placed in service placed in service in tax years beginning after December 31, 2024, OBBBA increases the maximum Section 179 deduction to $2.5 million, with a phase out when the basis of property acquired exceeds $4 million.  The thresholds are adjusted for inflation for tax years beginning after 2025.  (Act §70306.)

15. Research and experimentation expenses expensing.  Effective for tax years beginning after December 31, 2024, domestic research and experimentation expenses that were required to be amortized over 15 years may be expensed.

Research and experimental expenses for work done outside the United States must still be amortized over 15 years.

Under a transitional rule, small business taxpayers with average gross receipts of $31 million or less may apply this change retroactively to tax years beginning after December 31, 2021. 

Under another transitional rule, all taxpayers that made domestic research or experimental expenses after December 31, 2021 and before January 1, 2025 may elect to either amend tax returns to change the deductions from amortization to expensing or accelerate the remaining deduction for those expenses over one-year or two-year periods.

On August 28, 2025, the IRS issued Revenue Procedure 2025-28, providing guidance about the procedures for making the change.  The Revenue Procedure indicates at Section 3.03 that a small business taxpayer may make the election to currently deduct domestic research expenses on an originally-filed 2024 income tax return.  Taxpayers who already filed income tax returns and didn’t apply for an extension of time to file are automatically granted a six-month extension of time to file a superseding income tax return and issue corrected Schedule K-1s.  (Section 2.08(8).) https://www.irs.gov/pub/irs-drop/rp-25-28.pdf

Rules are provided to coordinate the immediate deductibility of domestic research and experimental expenditures with the research credit.  (Act § 70302.)

16. Cap on deducting business interest.  A taxpayer’s deduction of business interest expense paid or incurred for the tax year is generally limited to the sum of:

  • the taxpayer’s business interest income for the tax year (excluding investment income);
  • 30% of the taxpayer’s adjusted taxable income, but not less than 0; and
  • the taxpayer’s floor plan interest.

The limit doesn’t apply for businesses that meet a small business test if their average annual gross receipts for the three prior years doesn’t exceed a threshold amount, $31 million for 2025.

The limit also doesn’t apply for certain specified businesses.

Effective for tax years beginning after December 31, 2025, under OBBBA, the limit is increased by adding back deductions for depreciation, amortization and depletion to compute adjusted taxable income.  (Act §70342.)

Effective for tax years beginning after December 31, 2024, the definition of “motor vehicle” is changed to include trailers and campers designed to be towed or affixed to a motor vehicle, allowing the interest paid for flooring these items to the taxpayer’s floor plan interest.  (Act §70303.)

17. First-year depreciation for Qualified Production Property.  Effective for qualified production property placed in service after July 4, 2025, a first-year depreciation allowance is allowed of 100% of the adjusted basis of “qualified production property.”

Qualified production property is nonresidential real property (1) which is used by the taxpayer as an integral part of a qualified production activity, (2) which is placed in service in the United States or a possession of the United States, (3) the original use of which begins with the taxpayer, (4) of which the construction, reconstruction or erection by the taxpayer begins after January 19, 2025 and before January 1, 2029 and (5) is placed in service after July 4, 2025 and before January 1, 2031, except in cases of Acts of God, in which case the Secretary of the Treasury can extend the date up to two years.

Qualified production property does not include the portion of any nonresidential real property used for offices, administrative services, lodging, parking, sales activities, software development or engineering activities, or other functions unrelated to manufacturing, production or refining of tangible property.  Qualified production activity also does not include any property to which the alternative depreciation system applies, or any food or beverage prepared in the same building as a retail establishment in which the property is sold.

A ”qualified production activity” is the manufacturing, production or refining of a qualified product.  The activities of the taxpayer must result in a substantial transformation of the property comprising the product.

Under a special acquisition rule, a taxpayer may claim the qualified production property deduction for nonresidential real property (1) which is acquired by the taxpayer after January 19, 2025 and before January 1, 2029, (2) which was not used in a qualified production activity at any time during the period beginning January 1, 2021 and ending on May 12, 2025, (3) which was not used by the taxpayer or a related party at any time prior to such acquisition, (4) which is used by the taxpayer as an integral part of a qualified production activity, (5) which is placed in service in the United States or a possession of the United States, and (6) is placed in service after July 4, 2025 and before January 1, 2031, except in cases of Acts of God in which case the Secretary of the Treasury can extend the date by up to two years.

Recapture rules apply when the use of the property changes during the 10-year period after the qualified production property is placed in service.  (Act § 70307.)

18. Employer-provided Child Tax Credit.  Effective for tax years beginning after December 31, 2024, the percentage of employer-provided child care expenses allowed as a tax credit is increased from 25% to 40%, and the maximum credit is increased from $150,000 to $500,000, to be adjusted for inflation after 2026.  For 2025, a business must spend at least $1.25 million on child care related expenses to receive the full credit.

For small businesses, the percentage of employer-provided child care expenses allowed as a tax credit is increased to 50% and the maximum credit is increased to $600,000, to be adjusted for inflation after 2026.  To receive the maximum credit for 2025, a small business must spend at least $1.2 million on child care related expenses.  An eligible small business must meet a gross receipts test, $31 million for 2025, based on the 5-year period (increased from a 3-year period) preceding the tax year.

Small businesses are allowed to pool their resources to provide childcare to their employees and may use a third-party intermediary to facilitate child care services on their behalf.  (Act § 70401.)

19. Qualified Small Business Stock gain exclusion.  Before the adoption of OBBBA, noncorporate taxpayers could exclude from gains gross income for the sale or exchange of qualified small business stock held for more than five years.

The exclusion is

  • 100% of the gain for qualified stock acquired after September 27, 2010;
  • 75% of the gain for qualified stock acquired after February 17, 2009 and before September 28, 2010; and
  • 50% of the gain for qualified stock acquired before February 18, 2009 (increased to 60% of the gain attributable to periods before 2019 if the stock was issued by a corporation in an empowerment zone and acquired after December 21, 2000.)

For stock acquired before September 28, 2010, 7% of the excluded gain is a tax preference item for alternative minimum tax reporting.

Excludable gain on dispositions of qualified stock from any single issuer for a tax year is limited to the greater of (1) $10 million, reduced by the aggregate amount excluded for the issuer’s stock in prior years ($5 million for married, filing separately); or (2) 10 times the taxpayer’s adjusted basis in all of the issuer’s stock disposed of during the tax years.

Gains on dispositions of qualified stock held by a pass-through entity for more than five years is passed through to partners, shareholders and participants who held interests in the entity when it acquired the stock and at all times thereafter.  The exclusion can’t reflect any increase in the person’s share of the entity after the entity acquired the stock.

Qualified small business stock is stock issued after August 10, 1993, and acquired by the taxpayer at the original issue, directly or through an underwriter, in exchange for money or property, or as compensation for services provided to the corporation.  The issuing corporation must be a domestic C corporation other than a regulated investment company, cooperative, or other pass-through corporation.

Both before and immediately after the qualified stock is issued, the corporation’s aggregate gross assets must not exceed $50 million, with parent-subsidiary controlled groups treated as one corporation.  During substantially all of the taxpayer’s holding period, at least 80% of the value of the corporation’s assets must be used in the active conduct of qualified trades or businesses.

A qualified business does not include the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business if its principal asset is the reputation or skill of employees.  Hospitality, farming, insurance, finance and mineral extraction also are not qualified businesses.

OBBA changes the gain exclusion by creating tiers, effective for stock issued or acquired and to tax years commencing after July 4, 2025.  The exclusion ratios are 50% after three years, 75% after four years, and 100% after five years.  The per-issue dollar cap for post-enactment shares is increased from $10 million to $15 million, indexed for inflation after 2026.  The post-enactment aggregate-asset ceiling is increased from $50 million to $75 million, indexed for inflation after 2026. 

There is no alternative minimum tax preference for the excluded gains for these shares.  (Act § 70431.)

20. Third party network information reporting.  Effective as if included in §9674 of American Rescue Plan Act, information reporting (Form 1099-K) for transactions of participating payees isn’t required for third-party network businesses (like PayPal or Venmo) unless they have earned more than $20,000 on more than 200 separate transactions in an applicable tax period, reversing a $600 with no minimum on the number of transactions reporting threshold that was enacted in 2021 and delayed by the IRS.  (Act § 70432.)

21. Qualified Sound Recording Production expensing.  Effective for sound productions commencing in tax years ending after July 4, 2025, qualified sound production costs are added to the list of qualified film, television and live theatrical productions eligible for current expensing.

Aggregate qualified sound recording production costs of up to $150,000 may be elected to be currently deducted.  The deduction only applies to qualified sound recordings that commence before January 1, 2026.

Qualified sound recording production is a sound recording produced and recorded in the United States.

The definition of qualified property eligible for bonus depreciation is also expanded to include qualified sound recording productions.  (Act § 70434.)

22. Exclusion of interest for loans secured by rural or agricultural real property.  Effective for original debt incurred in tax years ending after July 4, 2025, banks and insurance companies may permanently exclude 25% of interest income from qualified real estate loans.

Qualified real estate loans are the following types of loans made after July 4, 2025 to a person other than a specified foreign entity: (1) loans secured by domestic real property that is substantially used to produce agricultural products or a leasehold mortgage on such property; (2) loans secured by domestic real property that is substantially used in the trade or business of fishing or seafood processing or a leasehold mortgage on such property; and (3) loans secured by any domestic aquaculture facility or a leasehold mortgage on such property.

Qualified leasehold loans are treated as tax-exempt obligations for the purpose of disallowing interest expense deductions for indebtedness incurred by qualified lenders to purchase or carry those loans.  (Act § 70435.)

23. Installment payment of income taxes for sale of farmland property.  Effective for sales or exchanges in tax years beginning after July 4, 2025, capital gains taxes from the sale or exchange of qualified farmland property to a qualified farmer may be paid in four equal annual installments, starting on the unextended due date of the tax return for the tax year in which the sale or exchange occurred.

Qualified farmland property generally means real property located in the United States which has been used by the taxpayer as a farm for farming purposes during substantially all of the 10-year period ending on the date of the sale or exchange. 

A qualified farmer means any individual who is actively engaged in farming.  (Act §70437.)

24. Payments by partnerships to partners for property or services.  Effective for services performed and property transferred after July 4, 2025, with no inference for the treatment of prior transactions, IRC §707(a)(2) is changed from “under regulations prescribed” to “except as provided.”  Under §707(a), transactions between a partner and a partnership for property and services are generally treated the same as between a partnership and a person who isn’t a partner.  (Act § 70602.)

25. Employee Retention Credit.  OBBBA imposes a penalty of $1,000 per failure on any COVID-ERTC promoter which provides aid, assistance or advice for any COVID-ERTC document which fails to comply with the IRS’s due diligence requirements.

A COVID-ERTC promoter is any person which provides aid, assistance or advice relating to a COVID-ERTC document based on the amount of refund or credit when the aggregate gross receipts of the promoter relating to aid, assistance and advice with respect to all COVID-ERTC documents exceeds 20% of the gross receipts of the promoter for the taxable year or the preceding taxable year; the aggregate gross receipts for aid, assistance and advice with respect to all COVID-ERTC documents exceeds 50% of the promoter for the taxable year; or both (1) the such aggregate gross receipts exceed 20% of the gross receipts of the promoter for the taxable year and (2) such aggregate gross receipts exceed $500,000.

Certified professional employer organizations are not COVID-ERTC promoters subject to the penalty.

A COVID-ERTC document means any return, affidavit, claim or other document to recover a credit or advance payment of an employee retention credit.

No refund or credit will be allowed after July 4, 2025 for wages paid after June 30, 2021 unless a claim for the refund or credit was filed on or before January 31, 2024.

The statute of limitations for IRS adjustments relating to an ERTC is 6 years after the latest of (1) the date on which the original return which includes the calendar quarter with respect to which the credit is determined is filed; (2) the date on which the return is treated as filed under Internal Revenue Code §6501(b)(2), or (3) the date on which the claim for credit or refund for the credit is made.

The same statute of limitations applies to the income tax deduction for wages taken into account to determine an improperly claimed credit.  (Act § 70605.)

26. Exempt facility bonds for spaceports.  Effective for obligations issued after July 4, 2025, Spaceports are treated like airports under the exempt facility bond rules.  (Act § 70309.)

27. Residential housing exception to percentage of completion accounting.  Effective for contracts entered into in taxable years beginning after July 4, 2025, an exception from the requirement to use percentage of completion accounting is changed from “home construction” to “residential housing construction.”  The maximum estimated time when the contract is entered into is increased from 2 years to 3 years.  (Act § 70430.)

28. Firearms transfer tax.  Effective for calendar quarters beginning more than 90 days after July 4, 2025, the federal transfer tax rate for most firearms is reduced from $5 to zero, except the rate for machine guns and “destructive devices” is $200.  (Act § 70436.)

29. Payments to persons who dye fuel.  Effective for indelibly dyed kerosene or diesel fuel removed on the date 180 days after July 4, 2025 for which a fuel tax was previously paid, the IRS will refund the tax paid.  (Act § 70525.)

30. Accelerated sunset for clean energy provisions.  Most of the clean energy provisions enacted by the Inflation Reduction Act of 2022 have been repealed by moving up their expiration dates.  Most of them were scheduled to expire at the end of 2032 or 2034.

  • The previously-owned clean vehicle credit is terminated for vehicles acquired after September 30, 2025.  (Act § 70501.)
  • The clean vehicle credit is terminated for vehicles acquired after September 30, 2025.  (Act § 70502.)
  • The qualified commercial clean vehicle credit is terminated for vehicles acquired after September 30, 2025.  (Act § 70503.)
  • The alternative fuel vehicle efueling property credit is terminated for property placed in service after June 30, 2026.  (Act § 70504.)
  • The energy efficient home improvement credit is repealed for any expenditures made after December 31, 2025.  (Act § 70505.)
  • The residential clean energy credit is terminated for any expenditures made after December 31, 2025.  (Act § 70506.)
  • The energy efficient commercial buildings deduction is terminated for property the construction of which begins after June 30, 2026.  (Act § 70507.)
  • The new energy efficient home credit is terminated for homes acquired after June 30, 2026. (Act § 70508.)
  • Special five-year cost recovery for certain energy property is terminated for property the construction of which begins after December 31, 2024.  (Act § 70509.)
  • The clean hydrogen production credit is terminated for facilities the construction of which begins on or after January 1, 2028.  (Act § 70511.)

31. Carbon sequestration credit.  Effective for taxable years beginning after July 4, 2025, the carbon sequestration credit isn’t allowed for certain foreign entities.

Effective for facilities and equipment placed in service after July 4, 2025, parity rules are adopted for different uses and utilizations of qualified carbon oxide.

The “applicable dollar amount” of the credit for any taxable year beginning in a calendar year after 2024 and before 2027 is $17 and for any taxable year beginning in a calendar year after 2026, the $17 credit is indexed for inflation.

The “applicable dollar amount” for direct air capture facilities is $36 for taxable years beginning in a calendar year after 2024 and before 2027, indexed for inflation after 2026. (Act § 70522.)

32. Zero-emission nuclear power production credit.  Effective for tax years beginning after July 4, 2025, the zero-emission nuclear power production credit will be disallowed for taxpayers that are specified foreign entities.

Effective for any tax year beginning after July 4, 2027, the credit will be disallowed for taxpayers that are foreign-influenced entities.  (Act § 70510.)

33. Repeal one-month deferral.  Generally, a foreign corporation that has a majority U.S. shareholder must adopt the tax year of its U.S. shareholder.  An election was available for specified foreign corporations to adopt a tax year ending one month earlier than its U.S. shareholder.  Effective for taxable years beginning after November 30, 2025, the one-month deferral election is repealed.  (Act § 70352.)

34. Nonprofit Alaskan remote native village community development.  Effective July 4, 2025, provisions are enacted for qualification of fishing activities in the Bering Sea and Aleutian Islands as nonprofit.  (Act § 70428.)

35. Restriction on the Extension of the Advanced Energy Project Credit Program.  Effective July 4, 2025, any funds that were allocated to a § 48C certified advanced energy project and returned to the Secretary of the Treasury after a project’s certification is revoked may not be reissued to another project.  (Act § 70515.)

Heard of the Kent State Massacre on May 4, 1970?

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  • mike   

The Kent State Massacre on May 4, 1970 is an example of how a protest can escalate with unintended results when a National Guard is deployed in response.

Students at Kent State University in Kent State, Ohio, staged a protest, along with many other U.S. universities, during May, 1970. President Nixon expanded the Vietnam war to Cambodia and announced college students would no longer qualify for draft deferment. Students could be called for military service after completing the current semester of studies at their college or university. Students felt President Nixon broke a promise made July 25, 1969 to withdraw troops from Vietnam.

The Kent State University protests started with about 500 students on May 1, 1970.

About midnight, people left a bar and began throwing beer bottles at police cars, injuring five police officers, and broke windows at business storefronts. They broke a bank window, activating the alarm.

The entire Kent police force was called to duty. Kent Mayor LeRoy Satrom declared a state of emergency and asked Ohio Governor Jim Rhodes for assistance.

On May 2, Mayor Satrom asked Governor Rhodes to deploy the National Guard to Kent. His request was granted immediately.

That night, there was a large demonstration on the Kent State University campus, and the ROTC building was burned down. Kent firemen and police officers were struck by rocks and other objects while attempting to put out the fire. The fire engine hose was slashed by protestors.

On May 3, some students came to downtown Kent to help with clean-up efforts. They weren’t all welcomed by local business people

At about 8 p.m., there was another rally held on the campus Commons. At 8:45 p.m., the National Guard used tear gas to disperse the crowd. At 11:00 p.m., the National Guard announced that a curfew had gone into effect. A few students were bayoneted by Guardsmen.

On May 4, a protest was scheduled to be held at noon. University officials tried to ban the gathering, and about 2,000 people gathered on the university’s Commons. The National Guard attempted to disperse the students. They used a bullhorn to ask the students to disperse, and were ignored. The crowd threw some rocks at the Guardsmen. Tear gas grenades were fired by the Guardsmen, which fell short of the crowd.

Students retreated over Blanket Hill and cleared the Commons area. The protesters threw rocks and other objects at the Guardsmen. More tear gas was fired.

After reaching the crest of Blanket Hill, the Guardsmen fired at the protesters. They gave no verbal warning.

At 12:24 p.m., Sergeant Myron Pryor turned and began firing at the crowd of students with his .45 pistol. Several other Guardsmen also turned and fired their rifles at the students. At least 29 of the 77 Guardsmen fired their weapons, using about 67 rounds of ammunition.

The protesters were shocked because they didn’t believe the Guardsmen would fire live ammunition at them. The students were unarmed, except for the rocks they threw.

Some of the students were shot while running away from the Guardsmen. Of those shot, none was closer than 71 feet from the Guardsmen. Of those killed, the nearest was 265 feet away. The furthest victim was 750 feet away.

Although the Guardsmen claimed they thought a sniper was shooting at them, it appears they were triggered by their own people shooting.

If you’ve ever played laser tag or a paintball battle, you know a “battle” can induce panic and friendly fire injuries.

Only one Guardsman was injured enough to require medical attention, 10 to 15 minutes before the shootings.

Four protesters were killed and nine were injured, all students in good standing at the university.

A subsequent investigation of the shootings by the President’s Commission on Campus Unrest found the Ohio National Guard shootings on May 4, 1970 were unjustified. There were no criminal convictions relating to the incident.

As a result, some new crowd control measures, such a rubber bullets, have since been adopted.

A photo of a 14-year old runaway, Mary Ann Vecchio, screaming over the dead body of Jeffrey Miller, who was shot in the mouth, won a Pulitzer Prize and became one of the enduring images of the ant-Vietnam War Movement.

The shootings lead to protests on college campuses throughout the United States and a student strike, causing more than 450 campuses across the country to close with both violent and nonviolent demonstrations. Over 4 million students protested.

Five days after the shootings, 100,000 people demonstrated against the war and the killing of unarmed student protestors in Washington, D.C.

In 1973, U.S. government and the North Vietnamese signed a peace treaty ending the Vietnam War.

“Big, Beautiful Bill” isn’t a slam-dunk

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  • mike   

The House Ways and Means Committee has released “The One Big Beautiful Bill” that includes a “wish list” of President Trump’s tax legislation proposals. On Friday, May 16, conservative Republicans joined Democrats on the House Budget Committee to block the legislation, 16 voting in favor and 21 against, from reaching the House floor for a general vote.

The bill would extend most the tax cuts enacted in the Tax Cuts and Jobs Act of 2017 that would otherwise expire after 2025. In addition, the bill includes tax breaks for some tips, overtime and Social Security for four years. The Social Security break would be a $4,000 tax deduction for seniors making less than $75,000 per year.

The bill would also restore 100% bonus depreciation and the expense election for research and experimentation expenses.

In order to partially compensate for the tax cuts, the bill includes about $715 billion in cuts to Medicaid and the Affordable Care Act. States would implement work requirements in 2029 for childless adults on Medicaid who don’t have a disability, requiring them to work for 80 hours per month. Beneficiaries who earn above the federal poverty limit would make co-payments of up to $35 for doctor visits.

The Congressional Budget Office estimates about 8.6 million people could lose their insurance coverage.

Other compensating items include repealing Biden’s student loan forgiveness plans, so more student loan borrowers would be required to repay their loans, and repealing energy incentives (including the $7,500 credit for certain new electric vehicles), enacted under the Biden Administration.

Ironically, conservative Republicans on the House Budget Committee voted against the proposal because they wanted bigger cuts for Medicaid, joining Democrats, who oppose the Medicaid cuts.

Representatives from states that impose income taxes and those from states that don’t impose income taxes are also arguing about how much the ceiling for the itemized deduction for state taxes should be. The limit would be increased from $10,000 to $30,000 under the Ways and Means Committee proposal.

Remember tax legislation is a negotiation with some constraints. House representatives will continue to negotiate the details of the “One Big Beautiful Bill”. None of the Republicans want the 2017 tax cuts to expire, so it’s likely tax legislation will be enacted this year.

Write your representatives in Congress to let them know your concerns for the tax and budget process. https://www.congress.gov/members/find-your-member

Greatest scientist of her time slain by a “Christian” mob

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  • mike   

The city of Alexandria in Egypt was one of greatest centers of learning in the ancient western world.

The city was founded by Alexander the Great, and the family of his named successor, Ptolemy, became the rulers of Egypt until the death of Cleopatra VII, so the culture of the city was a mixture of Greek, Egyptian and Roman.

The Library of Alexandria contained all of the known “books” of that time. Scholars came from all over the world to study there. The Library was accidentally burned by Julius Caesar during his conquest of Egypt and most of the books were moved to the Seraphium. The Alexandran Museum, a type of university, was housed in the Library and, later, the Seraphium.

The Seraphium was destroyed in 391 AD by Theophilus, the archbishop of Alexandria, under orders from the Roman emperor to destroy all pagan temples. (The Emperor Constantine adopted Christianity as the religion of the Roman Empire.) The Seraphium was destroyed because it included a temple of Serapis. Theophilus later built a church on the site.

Hypatia was the daughter of Theon of Alexandria, an eminent mathematician and astronomer, and author of a student edition of Euclid’s Elements. Theon was the last known member of the Alexandran Museum. Hypatia succeeded her father as the leading teacher of science, mathematics and philosophy of her time, and one of the first women to teach those subjects. Her lessons included how to design an astolabe, a portable astronomical calculator, that would be used until the 19th century.

Hypatia was a philosopher in the Neoplatonic school, a belief system in which everything emanates from the One.

Her lectures became immensely popular, including attracting Christian students. Some of those students became leaders in the early Christian church and incorporated her ideas into their Christian faith. Her student, Synesius, became a bishop in the Christian church and incorporated Neoplatonic principles into the doctrine of the Trinity.

Hypatia became very influential in Alexandria’s politics, and was often consulted by the city’s leaders. She was a close friend of Orestes, the governor of Alexandria. Although Orestes was a Christian, he didn’t want to cede power to the church.

Theopolis was succeeded as archbishop in 412 AD by his nephew, Cyril. Cyril continued his uncle’s attacks on other faiths. Cyril competed with Orestes for control of Alexandria. The struggle for power came to a peak following a massacre of Christians by Jewish extremists. Cyril led a crowd that expelled all Jews from Alexandria and looted their homes and temples.

Orestes refused Cyril’s attempts at reconciliation and Cyril’s monks were unsuccessful in an attempt to assassinate Orestes.

Hypatia was an easier target. She didn’t have guards protecting her. She was a pagan who publicly spoke about a non-Christian philosophy. A rumor spread that she was preventing Orestes and Cyril from settling their differences.

In March, 415 AD, Peter the Lecter and his mob captured Hypatia, dragged her into a church, stripped her naked, and hacked her to pieces. To avoid having her venerated as a martyr, they cremated her remains.

Despite those efforts, Hypatia was remembered and revered as a martyr by the Christians of Byzantium, and today she is a symbol of Enlightenment values.

The story of Hypatia is still important today. Some fundamentalist Christians and other groups reject science. The Trump administration is withdrawing funding from scientific research at the National Science Foundation and the National Institutes of Health, and attacking academic freedom. We are also seeing a resurgence in censorship and book banning.

The abandonment of freedom of thought and expression could lead to a new dark age for the United States.

No taxation without representation!

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  • mike   

On December 16, 1773, in Boston, Massachusetts, American colonists dumped 342 crates of tea in Boston Harbor to protest a tax on tea and the monopoly of the British East India Company on the tea trade.

The Boston Tea Party is an example of the tradition of resisting tyranny and defending human rights in America.

The English Parliament believed it had the authority to impose a tax on the residents of its American colonies. It relented and eliminated taxes previously imposed under the Stamp Act and the Townshend Acts. The Tea Act was passed on May 10, 1773, principally to bail out the British East India Tea Company, which was on the edge of bankruptcy after experiencing financial setbacks in India.

Parliament didn’t expect any resistance, because the tax was only three pennies per pound of tea (remember a penny was worth something back then), because the tea would be much cheaper than any alternative, including the tax.

American colonists resented the tax, because they had no representation in Parliament. They declared, “No taxation without representation!”

On November 29, 1773, Samuel Adams invited “every friend to his country, himself, and posterity” to attend a meeting at Boston’s Faneuil Hall to discuss how to best face this threat to American liberty. 5,000 out of a total population of 16,000 attended the meeting.

When Governor Hutchinson refused an appeal by the owner of the ship, Dartmouth, to return to England, members of a crowd proceeded to the ships to dump the tea.

The Boston Tea Party was one of a series of events that led to the American Revolution and, eventually, the United States Constitution.

Today, many Americans, including (Republican) Senator Paul Ryan, are expressing outrage that President Trump is imposing worldwide tariffs by Executive Order, without enabling legislation being enacted in Congress. (Remember tariffs aren’t paid by foreign exporters, but by United States importers, and are likely to be passed through to consumers.)

Under the United States Constitution, the “power of the purse”, including enacting tax legislation, is supposed to reside in Congress. Tax legislation is initiated in the House of Representatives to assure representatives close to their constituents will debate tax proposals. Although U.S. Presidents have imposed tariffs in the past, they have been targeted to certain imports, not broad based tariffs on virtually every country in the world.

President Trump has “paused” most of his proposed tariffs for 90 days, except a 10% tariff on all imports and a 145% tariff on imports from China. China has imposed a retaliatory tariff of 125% on imports from the United States.

Trade between the United States and China has virtually stopped.

President Trump claims to have the authority to impose broad-based tariffs because he has declared a national emergency under the International Emergency Act. (The power to impose tariffs isn’t specifically stated in the International Emergency Act.)

Also, the current situation it doesn’t seem to be a sudden, unforeseen crisis that Congress cannot act quickly or flexibly enough to address that is a true emergency. Although Congress has been debating whether to adopt a resolution declaring there is no emergency, it seems the Republican majority will support President Trump and won’t adopt the resolution.

A dozen states, including Oregon, Arizona, Colorado, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, New Mexico, New York and Vermont, have filed a joint lawsuit in the U.S. Court of International Trade in New York to stop President Trump’s tariff policy, saying it is unlawful and has brought chaos to the American economy. We’ll eventually find out what the courts say and, if they rule against President Trump, whether he follows their ruling.

We are already seeing large protests across the United States. If President Trump’s tariff policies continue, existing inventories of imported goods will be exhausted and American consumers will find they can’t find the clothing, toys, sports equipment, furniture and other imported products they are accustomed to buying on the shelves, which could lead to bigger crowds at protests and Town Hall meetings.

More unhappy voters seem to increase the possibility of “flipping” seats in Congress in the 2026 mid-term election and the Republicans losing their control of the House of Representatives.

Will Christmas be cancelled this year?

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  • mike   

(What about back-to-school shopping?)

Maybe you should take care of back-to-school and holiday shopping now, while retailers have merchandise to sell.

Toymakers, children’s shops and specialty retailers have paused orders for the winter holidays in response to President Trump’s 145% tariff on imports from China.

Almost 80% of all toys and 90% of Christmas decorations sold in the United States are made in China.  97% of clothing sold in the United States is imported, with about 27% imported from China.

Shipments from China have virtually stopped.

Retailers need to place their orders several months in advance in order for merchandise to arrive in time for the holiday season.

Unless President Trump relents on his tariff proposals, there might be very few items on the shelves of retailers for back-to-school and holiday shopping.

Since most retailers earn their profits during the holiday season, the retail outlook for 2025 seems bleak.  Some retailers are consulting bankruptcy attorneys.

The United States Senate voted down a Democratic resolution to block the tariffs, 49 – 49, on April 30, 2025, so the decision is now solely President Trump’s.

(San Jose Mercury News, May 1, 2025, Section A, p. 3, “Senate votes down resolution to block Trump’s global tariffs”, Section C, P. 9, “Retailers fear tariffs will affect Christmas toy sales.”)

Will U.S. income tax laws become suggestions?

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  • mike   

There are a lot of reasons to question the viability of the federal income tax system during the Trump administration.

President Trump HATES the federal income tax system and suggested he might repeal it during his 2024 Presidential campaign. He would prefer to replace it with “simple” tariffs. But tariffs simply can’t generate as much revenue as the income tax system for funding the federal government. The federal government collects about $2.2 trillion in income taxes. Imports to the U.S. for 2023 were about $3 trillion. When tariffs are imposed, that import number will fall. There isn’t enough scope to raise the same revenue with tariffs. (And, incidentally, tariffs shift the tax burden from high income individuals, who spend less of their income, to the poor and middle class, who spend most of their income.)

Meanwhile, Trump’s speeches have confused many taxpayers about their obligations. While working at a CPA firm this year, I heard some of the clients thought the IRS was being disbanded and they no longer had to file an income tax return.

That simply isn’t true. If you study the budget proposals in Congress, income taxes are still scheduled to provide most of the revenue for federal programs, notably the Department of Defense.

The IRS is one agency that hasn’t been eliminated by the Trump’s Department of Government Efficiency (DOGE), although it has been seriously wounded.

With additional funding enacted by Congress, the IRS grew from about 79,431 employees to 102,309 during the Biden administration. With increased staffing, taxpayers who called the IRS saw a decrease from 28-minute wait times a few years ago to about 3 minutes during the 2025 tax season.

That additional $80 billion funding has since been cut to $40 billion, most of it already spent.

DOGE layoffs plus about 20,000 IRS employees who accepted the administration’s deferred resignation offer will reduce the IRS’s staffing to about 60,000 to 70,000 employees.

Three IRS Commissioners have resigned since the beginning of the year, most recently because of disagreement with the Trump administration’s plan to use IRS records to track undocumented aliens living in the United States for deportation.

When they learned that IRS records were no longer confidential, some undocumented aliens decided not to file a 2024 federal income tax return.

The leadership for modernizing the IRS has also resigned, since funding for their efforts has been eliminated.

Decreased staffing means decreased enforcement. Decreased enforcement leads to decreased compliance and decreased tax collections.

Taxpayers see less risk of not complying with the tax laws.

This year, federal income tax return filings fell by nearly 1 million (about 1.1%) and about 200,000 more taxpayers have filed extension forms, compared to last year. (Natural disasters, including the Los Angeles wildfire, also contributed to the decrease in 2024 income tax returns filed by April 15.)

Decreased staffing also leads to more frustrated taxpayers, who won’t be able to get their IRS questions answered and problems resolved.

On February 19, 2025, President Trump issued Executive Order 14219, Ensuring Lawful Governance and Implementing the President’s “Department of Government Efficiency” Deregulatory Initiative, which suspended issuing new regulations by government agencies, including the IRS.

The IRS recently issued Notice 2025-23, withdrawing final regulations issued during January, 2025, making basis-shifting via partnerships “transactions of interest” and requiring special disclosure of these transactions. These transactions are a way to shift the tax basis (cost for sold assets or tax deductions) from non-deductible items, such as corporate stock, to tax deductible items, such as equipment.

The American Institute of Certified Public Accountants complained the regulations were too complicated. Of course, these artful tax-dodging structures are also complicated, generating substantial fees for tax advisors.

Instead of cleaning up the regulations, the IRS is withdrawing them, so these transactions no longer have to be disclosed, and these abusive taxpayers can go on their merry way, avoiding paying income taxes. The Treasury estimated last year that the transactions could potentially cost taxpayers more than $50 billion over a 10-year period.

The withdrawal of these regulations is an indication of a reduced IRS commitment to enforcing our tax laws. In other words, our tax laws might become merely “suggestions”, inviting “aggressive” tax positions and “substantial compliance” for matters such as properly documenting charitable contributions and business expenses.

After all, no one is looking!

Michael Gray, CPA's Blog

Tax and financial advice from the Silicon Valley expert.