Tax Bill Seeks to Permanently Increase Gift, Estate, and Generation-Skipping Transfer Tax Exemptions
On May 14, the House Ways and Means Committee approved the Make American Families and Workers Thrive Again Act, which would preserve and expand provisions of the 2017 Tax Cut and Jobs Act (TCJA). The bill contemplates a permanent increase in the estate, gift, and generation-skipping transfer (GST) tax exemptions.1
Under TCJA, the gift, estate, and GST exemptions were increased from $5 million per person plus annual inflation adjustments to $10 million per person plus annual inflation adjustments.
Given the inflation adjustment, the exemptions are currently $13,990,000.
If Congress does not act, the exemptions are slated to be reduced to their pre-TCJA levels after Dec. 31, 2025, i.e., $5 million plus an inflation adjustment (approximately $7 million). Unused exemption over the reduced amounts would be permanently lost.
The bill would permanently increase the gift, estate, and GST exemptions to $15 million in 2026.
Annual inflation adjustments would begin to apply in 2027.
Considerations for Estate Planning Strategy
Lifetime gifting to properly structured trusts to which GST exemption is allocated may preserve assets without incurring gift, estate, or GST tax for multiple generations.
Lifetime gifting is commonly used in connection with estate planning freeze techniques, the limits of which, in some respects, depend on the amount that can be gifted as “seed capital” for those structures.
A permanent increase in the exemption amounts may permit those with available assets to commit more value to those structures and eliminate the need for those contemplating gifting to rush to complete those transactions before sunsetting under existing law would apply.
1 As of the publication date, the House Ways and Means Committee has approved this version of the bill. The text remains subject to change during the Senate process and potential conference negotiations.
Cira Luo contributed to this article
“Big, Beautiful Bill”: Federal Tax Bill Would Restrict the Employee Retention Credit
A sweeping federal tax bill that is currently under consideration in the US House of Representatives contains provisions that would significantly change the administration and enforcement of the Employee Retention Credit (ERC).
The ERC was enacted in 2020 as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide financial relief to businesses affected by the COVID-19 pandemic by incentivizing employers to retain employees on payroll and rehire displaced workers. The ERC allowed employers that experienced significant disruptions due to government orders or a substantial decline in gross receipts to claim a tax credit equal to a percentage of qualified wages paid to employees. Millions of employers have filed refund claims seeking ERC for periods in 2020 and 2021. Since the enactment of the CARES Act, the Internal Revenue Service (IRS) has issued roughly $250 billion in ERC. More than 500,000 claims remained pending as of April 2025.
The federal tax bill, dubbed the “Big, Beautiful Bill” by US President Donald Trump, would prevent the IRS from allowing ERC that was claimed by a taxpayer on or before January 31, 2024. The deadline to claim ERC for taxable quarters in 2020 was April 15, 2024, and the deadline to claim ERC for taxable quarters in 2021 was April 15, 2025. The tax bill would thus appear to render ineligible all pending claims that were made after January 31, 2024, which are likely to be considerable in number. The bill is ambiguous as to whether taxpayers who have already been allowed ERC would need to repay those amounts to the extent their claims were made after January 31, 2024.
The tax bill would also extend the statute of limitations on the IRS’s ability to assess amounts attributable to ERC. Presently, the IRS has three years to assess amounts associated with ERC for all periods in 2020 and for Q1 and Q2 of 2021. The IRS has five years to assess amounts associated with ERC for Q3 and Q4 of 2021. The proposed legislation would extend both of these limitations periods to six years. This change would be significant, especially because the IRS is authorized to assess and collect erroneously allowed ERC by notice and demand.
Practice Point: Taxpayers with pending ERC claims should be alert to ongoing legislative developments – as this area continues to be a prominent focus of federal tax policy – and prepare now to defend ERC claims (even those filed after the potentially new deadline of January 31, 2024). Enactment of the changes proposed in the tax bill could dramatically restrict the amount of ERC currently eligible to be paid or credited and may empower the IRS to recapture a greater amount of claims already allowed. But considerable uncertainties remain as to the scope of the changes proposed in the bill. In the face of this uncertainty, taxpayers should consult experienced counsel who can assist them in preparing to defend ERC claims to which they are entitled.
The One Big Beautiful Bill: Tax Reform 2025
On May 18, 2025, the House Budget Committee approved the legislation entitled, “The One, Big, Beautiful Bill” (the “House Bill”). The bill is expected to be revised by the House Rules Committee before being sent to the House floor for a vote.
The House Bill extends a number of provisions from the 2017 Tax Cuts and Jobs Act (“TCJA”) and enacts a number of new provisions. The following is a summary of some of the key provisions from the currently available version of the House Bill:
Business Provisions:
163(j) Deductions. The definition of “adjusted taxable income” under section 163(j) is based on EBITDA (which is more favorable for taxpayers than EBIT under current law) for taxable years 2025 to 2028.
Section 199A. The deduction for qualified business income under Section 199A is increased to 23% (from 20%) for an effective rate of 28.49% (from 29.6%) and made permanent. Section 199A is also expanded to apply to the portion of dividends representing net interest income paid by a “business development company” (“BDC”) taxable as a regulated investment company. This expansion will reduce the effective rate of interest income earned through a BDC from 37% to 28.49% and will increase the attractiveness of BDCs as vehicles for credit funds. Dividends from real estate investment trusts (“REITs”) have had the benefit of Section 199A deductions.
GILTI Provisions Made Permanent. The global intangible low-taxed income (“GILTI”) and foreign-derived intangibles income (“FDII”) provisions are made permanent at the current rate of 10.5% (instead of increasing to 12.5% after 2025).
BEAT Made Permanent at Lower Rate. The current tax rate on the base-erosion and anti-abuse tax (“BEAT”) is made permanent at the current rate of 10.5% (instead of increasing to 12.5% after 2025).
Qualified Production Property Deductions. Taxpayers can deduct 100% of “qualified production property” costs immediately for certain newly constructed or acquired nonresidential real property in the United States. These properties must be in connection with the manufacturing, agricultural and chemical production, or refining of a qualified product.
Opportunity Zones Reestablished. A second round of Opportunity Zones (“OZs”) are established for taxable years 2027 through 2033, with similar but modified benefits in temporary deferral of capital gains taxes, basis step-up, and exclusion of taxable income on new gains. The first round of OZs is set to expire in 2026. There is a greater focus on rural areas, such as the offer of higher basis step-up of 30% for investments in qualified rural opportunity funds (as opposed to 10% from the first round of OZs).
Limitation for Qualified Depreciable Property Deductions. The deduction limitation from qualified depreciable property as business assets is increased to $2.5 million (from $1 million). The phase-out threshold is raised from $2.5 million to $4 million.
Deduction for Excessive Employee Compensation. An aggregation rule is added to the 162(m) limitation for executive compensation so that compensation paid by all entities within a covered corporation’s “controlled group” is counted for purposes of the $1 million limit.
Limitation of Amortization Deductions for Sports. The 15-year amortization of a professional sports franchise and related intangible assets is limited to 50% of the adjusted tax basis of those assets. This change is effective for assets acquired after the date of the enactment of the tax legislation. Please see this blogpost for more information..
Excess Business Losses Extended. The limitation on excess business losses for noncorporate taxpayers is made permanent and are carried forward to future taxable years. The maximum amount of business loss taken in a year is based on an inflation adjusted threshold, with $313,000 for single filers and $626,000 for joint filers in 2025.
Charitable Donation Limitation. A C corporation’s charitable contributions are subject to a 1% floor.
Increased Taxes on Residents of Countries Imposing a UTPR. The individuals, entities, and governments of countries that impose an undertaxed profits rule (“UTPR”), digital services tax, diverted profits tax, and, (subject to regulations) an extraterritorial tax, discriminatory tax, or any other “unfair” foreign tax enacted with a public or stated purpose that the tax will be economically borne, directly or indirectly, disproportionately by U.S. persons are subject to an increased rate of U.S. taxes, generally increased by 5% for each year of the unfair foreign tax up to 20% maximum.
Clean Energy Credits Rolled Back. The IRA clean electricity tax credit will begin to phase out after 2028 and finish by the end of 2031, including clean electricity production tax credits, clean electricity investment tax credits, and nuclear electricity production tax credits. Hydrogen production credits will be repealed for facilities beginning construction after 2025.
Taxable REIT Subsidiary Asset Test. Taxable REIT subsidiaries may represent 25% of the value of the REIT’s total assets (rather than 20% under current law).
No Carried Interest Provision. There is no provision affecting carried interest.
Tax-Exempt Provisions
Increased Excise Tax on Private University Endowments and Private Foundations. The current 1.4% excise tax on net investment income of private colleges and universities is replaced with a tiered system based on an institution’s “student-adjusted endowment”. For such schools with a student-adjusted endowment of more than $2 million, the excise tax is increased to 21%. The scope of “net investment income” would also be expanded. Additionally, the current 1.39% excise tax on private foundations is replaced with a tiered system based on the foundation’s total size of assets. For purposes of calculating a private foundation’s assets for purposes of this test, the assets of certain related organizations are treated as assets of the private foundation. The excise tax rate would be 5% for private foundations with gross assets of at least $250 million but less than $5 billion, and 10% for private foundations with gross assets equal to or more than $5 billion.
UBTI for qualified transportation fringe benefits. UBTI is increase by any amount incurred for any qualified transportation fringe benefit or any parking facility that is not directly connected to any unrelated trade or business that is regularly carried on by the organization.
Tax on Excessive Employee Compensation. The $1 million limit applies to any employee or former employee of a tax-exempt organization, and for purposes of determining the $1 million limit, all compensation paid to a related person (including a related taxable entity) is included. The change applies to taxable years beginning after December 31, 2025.
For more information on provisions that affect tax–exempt taxpayers, please see this blogpost.
Individual Provisions
Ordinary Income Tax Rates. The maximum rate of 37% for individuals is made permanent.
Standard Deductions. For tax years of 2025 to 2028, the standard deduction is increased to $26,000 for joint filers (from $24,000), to $19,500 for head of household filers (from $18,000), and to $13,000 for all other filers (from $12,000).
Personal Exemption Elimination. Thepersonal exemption is repealed permanently.
Section 199A. As mentioned above, the deduction for qualified business income is increased to 23% for an effective rate of 28.49% and made permanent. Individuals may also benefit from these lowered effective rates for dividends representing net interest income from BDCs.
Itemized Deduction Limits. Itemized deductions (which were disallowed under the TCJA) are allowed and made permanent and the “Pease rule”,whichitemized deductions, is replaced by a rule that reduces itemized deductions by 2/37 of the lesser of 1) the amount of itemized deductions and 2) the amount of taxable income of the taxpayer for the taxable year that exceeds the dollar amount at which the 37% bracket begins with respect to such taxpayer (the 37% bracket begins at $751,600 for married couples filing joint returns in 2025). Effectively, this rule creates an additional 39% tax bracket equal to itemized deductions in excess of the 37% bracket threshold.[1]
SALT Deduction Cap Increased; SALT Denied for Various Service Professionals. The SALT deduction cap is made permanent and raised to $30,000, going down to $10,000 at a rate of 20% beginning at income of $200,000 for single filers and $400,000 for joint filers. Certain House Republicans voted no during the House Budget Committee vote as they support raising the cap significantly. Pass-through entity tax (“PTET”) deductions are denied for individuals who perform services in the fields of health, law, accounting actuarial science, performing arts, consulting, athletics, financial services, brokerage services, investing services, investment management services, and trading or dealing in securities, partnership interests, or commodities, or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees. Therefore, under the House Bill, asset managers who are partners in partnerships will not be permitted to deduct their share of state and local taxes. In addition, the House Bill seems to disallow deductions for taxes imposed on the partnership (such as the New York City unincorporated business tax. Please see this blogpost for more information.
Deductions for Tips. Taxpayers earning $160,000 or less in 2025 (adjusted in the future for inflation) are permitted a deduction for cash tips from an occupation that “traditionally and customarily received tips” to the extent the gross receipts of the taxpayer from the trade or business of receiving the tips exceeds the sum of the cost of goods sold allocable to the receipts and other expenses, losses, or deductions properly allocable to those receipts. This deduction is allowed for tax years 2025 through 2028.
Overtime Compensation Deductions. Deductions are allowed for overtime compensation for itemizers and non-itemizers for tax years 2025 through 2028.
Deductions for Car Loan Interest. Deductions (up to $10,000) of interest payments on car loans from 2025 through 2028. These deductions are allowed for itemizers and non-itemizers. The deduction phases out for single taxpayers earning $100,000 ($200,000 for joint returns).
Expansion of Childcare Credits. Employer-provided childcare credits are further expanded from 25% to 40% (and up to 50% for eligible small businesses). The maximum annual credit is also increased from $150,000 to $500,000 for employers (up to $600,000 for eligible small businesses).
Family and Medical Leave Credits Expanded. Employer-provided paid family and medical leave credits are expanded by giving employers the option to choose between credit paid for wages paid during the employee’s leave or credit for insurance premiums paid on policies that provide paid leave. The family and medical leave cannot be already mandatory from state and local laws.
Adoption Tax Credits. Up to $5,000 of adoption tax credits are refundable, which makes the credit available to lower-income families who do not earn sufficient income to pay tax.
Scholarship-Granting Tax Credits. Tax credits are allowed for contributions by individuals to scholarship-granting organizations. The credits may not exceed the greater of 10% of the taxpayer’s adjusted gross income for the taxable year, or $5,000.
Expansion of Qualified Tuition Programs. Qualified tuition programs that are exempt from federal tax are expanded to include tuition and material expenses for elementary, secondary, and home school expenses. Qualified higher education expenses are also expanded to include tuition and expenses in connection with a recognized postsecondary credential program.
Extension of Increased Alternative Minimum Tax Exemption from TCJA. The increased exemptions and increased exemption phase-outs from the individual alternative minimum tax are made permanent.
The $750,000 Limitation on Qualified Residence Interest Deduction Is Made Permanent. The $750,000 limitation on deductions for qualified residence interest is made permanent.
Personal Casualty Loss Relief Further Extended. The requirement that personal casualty loss deductions exceed 10% of adjusted gross income for taxpayers to benefit from deductions is waived for qualified disasters that occurred between December 2019 until 2025 (extended from 2020) and allows taxpayers to claim both a standard deduction and qualified disaster-related personal casualty losses.
Qualified Bicycle Commuting Reimbursements Are Taxable. Reimbursements of bicycle commuting expenses are subject to income tax. Before the TCJA, the reimbursements were not taxable.
Reimbursements for Personal Work-Related Moving Expenses Are Taxable. Before the TCJA, deductions were given to certain personal moving expenses for employment purposes and gross income did not include qualified moving expense reimbursements from employers. The deductions are permanently repealed, and the reimbursements are permanently taxable.
Student Loan Discharged on Death or Disability Made Tax-Free Permanently. Discharged student loans on the account of death or disability is extended permanently.
Child Tax Credits Made Permanent. The child tax credit is made permanent, and the maximum child tax credit is temporarily increased to $2,500 (from $2,000) from 2025 to 2028 (subsequent years will be $2,000). Social security numbers for the child will be required to qualify for child tax credit benefits.
Creation of “MAGA” Accounts. Money Account for Growth Advancement (“MAGA”) accounts are tax-exempt trust accounts that can be created for U.S. citizens under age 18. The funds from the MAGA accounts can be used for qualified expenses of the beneficiary such as higher education and first-time home purchases. The House Bill provides a one-time $1,000 federal credit per eligible child born between 2025 and 2028, which will be deposited directly into the child’s MAGA account.
[1] Assume a married couple filing jointly has taxable income of $851,600 ($100,000 more than the 37% bracket threshold and a charitable deduction of $100,000 (and no other itemized deductions). The House Bill reduces the couple’s deduction by $5,405.41 (2/37*$100,000) and increases the couple’s tax bill by $2,000 ($5,405.41*37%, which is equal to an additional 2% tax (i.e., total of 39%) on the couple’s incremental $100,000 over the 37% bracket threshold.
Seo Kyung (Rosa) Kim, Martin T. Hamilton, Christine Harlow, Muhyung (Aaron) Lee & Amanda H. Nussbaum also contributed to this article.
IRS Roundup May 2 – May 13, 2025
Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for May 2, 2025 – May 13, 2025.
IRS GUIDANCE
May 2, 2025: The IRS issued Revenue Procedure 2025-20, providing guidance on the domestic asset/liability percentages and domestic investment yields used by foreign life insurance companies and foreign property and liability insurance companies to compute their minimum effectively connected net investment income under Section 842(b) of the Internal Revenue Code (Code) for taxable years beginning after December 31, 2023.
May 5, 2025: The IRS released Internal Revenue Bulletin 2025-19, which includes Revenue Ruling 2025-10 and Revenue Procedure 2025-18.
Revenue Ruling 2025-10 provides various prescribed rates for federal income tax purposes for May 2025, including:
The short-, mid-, and long-term applicable federal rates for purposes of Code Section 1274(d).
The short-, mid-, and long-term adjusted applicable federal rates for purposes of Code Section 1288(b).
The adjusted federal long-term rate and the long-term tax-exempt rate from Code Section 382(f).
The appropriate percentages for determining the low-income housing credit from Code Section 42(b)(1) (but only for buildings placed in service during May 2025).
The federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of Code Section 752.
Revenue Procedure 2025-18 provides issuers of qualified mortgage bonds (defined in Code Section 143(a)) and mortgage credit certificates (defined in Code Section 25(c)) with guidance related to nationwide purchase prices for residences, as well as the average area purchase price for residences located in statistical areas in each US state, the District of Columbia, Puerto Rico, the Northern Mariana Islands, American Samoa, the Virgin Islands, and Guam.
May 6, 2025: The IRS issued Revenue Procedure 2025-21, modifying Section 12 of Revenue Procedure 2024-32.
Executive Order 14219, issued through the Department of Government Efficiency’s deregulatory initiative, directed agencies to initiate a review process for identification and removal of certain regulations and guidance. Pursuant to Executive Order 14219, the US Department of the Treasury and the IRS identified Section 12 of Revenue Procedure 2024-32 as a regulation needing modification.
Revenue Procedure 2024-32 specifies the procedure by which the sponsor of a defined benefit plan, which is subject to the funding requirements of Code Section 430, may request approval from the IRS for the use of plan-specific substitute mortality tables. Section 12.02 of Revenue Procedure 2024-32 specifies that if a plan sponsor wishes to use plan-specific mortality tables, it must develop and request approval for the use of new plan-specific mortality tables for plan years beginning on or after January 1, 2026. Revenue Procedure 2025-21 provides immediate relief for some of those plan sponsors by narrowing the category of plan sponsors that must request approval of new plan-specific substitute mortality tables.
May 12, 2025: The IRS issued Revenue Ruling 2025-11, determining the interest rates on overpayments and underpayments of tax under Code Section 6621. For corporations, an overpayment rate of 6% and an underpayment rate of 7% is established for the calendar quarter beginning July 1, 2025. Where a portion of a corporate overpayment exceeds $10,000 during the calendar quarter beginning July 1, 2025, the overpayment rate is 4.5%. For large corporate underpayments, the underpayment rate for the calendar quarter beginning July 1, 2025, is 9%.
May 12, 2025: The IRS released Internal Revenue Bulletin 2025-20, which includes Notice 2025-25 and Notice 2025-26.
Notice 2025-25 publishes the inflation adjustment factor for credits under Code Section 45Q on carbon oxide sequestration, which is used to determine the amount of the credit allowable under Section 45Q for taxpayers that make an election under Code Section 45Q(b)(3) to have the dollar amounts applicable under Code Section 45Q(a)(1) or (2) apply.
Notice 2025-26 publishes the reference price under Code Section 45K(d)(2)(C) for calendar year 2024. The reference price applies in determining the amount of the enhanced oil recovery credit under Code Section 43, the marginal well production credit for qualified crude oil production under Code Section 45I, and the applicable percentage under Code Section 613A used in determining the percentage of depletion in the case of oil and natural gas produced from marginal properties.
The IRS also released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums, and Chief Counsel Advice).
THE “BIG, BEAUTIFUL BILL”
A recent tax bill, which some practitioners are calling the “Big, Beautiful Bill,” is currently being deliberated in Congress. As of the publication date of this edition of the IRS Roundup, a few of the notable provisions in the Big, Beautiful Bill include:
A proposed disallowance of “substitute payments” related to state and local taxes.
The proposal of a 23% pass-through business deduction, up from the current deduction of 20%.
The renewal of a research and development expensing provision through 2029, including a 100% bonus depreciation.
A phaseout of certain clean electricity credits, marking a notable change to the Inflation Reduction Act of 2022.
The reinstatement of a partial charitable contribution deduction for nonitemizers.
The proposed disallowance of certain amortization deductions for sports franchises.
An extension of various provisions expected to sunset in 2026.
Big Financial Mistakes Wealthy Americans Are Making
It seems logical that wealthy individuals reached their lofty financial status by making numerous smart decisions. We assume people with seemingly no money worries don’t make blunders like the average earner does. Yet it’s common to hear about rich people who lost it all or took a big hit because of major mistakes they made.
Maybe they knew all the in’s and out’s of managing their wealth but took undue risks. Perhaps, lacking knowledge about various aspects of investing or taxes, they acted on poor advice or didn’t seek competent outside expertise. Or they just figured that having tons of money meant they didn’t have to worry about it, and they contentedly and cluelessly sat on their big pile of money until it started crumbling.
An analogistic quote about losing wealth is a phrase about lost love written by poet Alfred Lord Tennyson: “Tis better to have loved and lost than never to have loved at all.” That’s wrong. For some people who have had money and then had it taken away, it was catastrophic for their lives and egos. Some of those people never get their wealth back, and it kills them with regret and remorse for the rest of their lives. They’re miserable.
Costly financial mistakes can be avoided with the right planning and discipline. Let’s take a look at some of the reasons these mistakes happen.
Hubris – From Staying Ahead of the Joneses to Sheer Stubbornness
One of the biggest problems you see with a wealthy person is hubris. Let’s assume we’re talking about a high-status person such as a doctor, attorney, or other highly accomplished professional who earns well into six figures. In their social circle, they have more education than most of their friends. They drive the nicest cars, own the nicest houses, and have clout where they work. They’re compelled to showcase their status and wealth. They take on too much debt to buy those fancy cars, buy a house that’s bigger than they need, or buy a jet to fly privately with their family. They feel that they have to look like this successful, high-status person, and lean all-in to that lifestyle that’s going to end up costing them much of their wealth.
I had a call with a lady who said she had been offered $18 million for medical offices she owned. She was the most arrogant person I’ve ever had a call with. We started narrowing down what her lifestyle looked like. I determined she spent over $2 million a year on her lifestyle. She had no other savings and assets outside of the $18 million someone was going to pay her for the medical practice.
I said, “You can’t retire. You’re not even close.” I advised her that she needed to cut her lifestyle expenses in half. Well, she got mad at me for telling her the truth.
Hubris comes in many forms, especially in terms of stubbornness when wealthy people think they know better than financial professionals. For example, there are a bunch of high earners today who want to invest in things outside of the stock market. Their friends are starting businesses or buying businesses or doing real estate deals. They think, because they’re smart, rich, and have a formal education from a big-time school, that they can figure all of it out on their own.
But I’ve seen these accomplished, educated, wealthy people who get into private investments with friends, family, or work colleagues lose a ton. I knew a data scientist who had been referred to an investment opportunity by people in their professional circle. He lost about $1 million in what turned out to be two separate Ponzi schemes. People had come into his workplace and explained these investment ideas, telling the employees they didn’t need to hire a financial advisor because they were smart and could do their own due diligence. But they got scammed.
Poor Tax Planning
There’s a common misconception that CPAs are planning-focused when, in reality, most are compliance-focused.
Most people assume their current tax-focused compliance person is doing everything they can to reduce their tax bill. That is not true. Folks would get a better outcome from a tax planning perspective if they would request that for a separate fee, and on a dedicated basis, their CPA would review their situation to see if there’s anything that could be done to substantially reduce their taxes for future years from a planning perspective. This could include having the CPA review how their entities are structured, review their expenses and deductions they may be eligible to take, or explore more exotic strategies that may be a good fit for their particular situation. If people would take that approach and pay the CPA an extra $2,000 to do that detailed planning, I’ll bet you they could reduce their taxable income significantly.
High earners who are building long-term wealth typically have more complicated tax returns. It helps greatly to have a professional who can find strategies that can reduce taxes. Keep in mind that mainstream tax strategies aren’t always optimized for high-income earners.
There are so many tax scenarios that can come into play as one acquires more wealth, and if not planned for wisely, they can result in huge tax hits. Among those tax situations: failing to plan for a sudden spike in income; missing one-time planning opportunities such as when selling a business, executing stock options, or realizing significant capital gains; overconcentration in a single tax-advantaged investment like Roth IRAs, life insurance, or municipal bonds; failing to consider private partnerships, which can provide capital appreciation and tax benefits like deductions, credits, or passive losses.
Knowing When It’s Prudent for Concentration, Then Diversification
Nobody gets rich from diversification. People get rich from concentration.
Understanding everything there is to know about a single idea and concentrating your attention and focus on it is a huge factor in getting wealthy. If you’re right, it can take you from a zero to a hero almost overnight. Concentration will get you rich; diversification will keep you rich.
Markets change and cycle. I don’t know anybody who got rich purely in the stock market. I know people who worked for successful companies and were granted stock options, and those options grew to millions in value. But they understood their company and its wealth in a concentrated way. Competitors in your field, however, will come along and chisel away at parts of your company’s value over time, so to keep your wealth, that’s when you should start to diversify.
One area where it pays to stay concentrated is real estate. Some people have their whole portfolio in owning real estate. It will always be appealing because real estate does three things: It appreciates in value over time, there are tax efficiencies associated with owning real estate, and it also generates cash flow.
The more you have, the more there is to lose. It takes years, decades, to build dream-come-true wealth, but not staying on top of it can quickly lead to financial nightmares. We all make mistakes, even the wealthiest and seemingly smartest among us, and to protect and grow their wealth, it’s important to be open to education and collaboration, just as they were when building it.
This article is subject to the disclaimers found here.
The One Big Beautiful Bill: Relevant Provisions for Nonprofits
On May 12, 2025, the House Ways and Committee released an updated text of draft tax legislation (the “House Draft Bill”). Amongst the proposed provisions are a few significant changes that could particularly affect nonprofits and individuals working with or for nonprofits:
Nonprofits would be required to pay tax on the sale or license of any name or logo of the organization (generally at the corporate rate of 21%). Under current law, nonprofits do not ordinarily pay tax on royalties from an unrelated payor—the House Draft Bill would specifically identify gain and royalty income from the name or logo as “unrelated business taxable income.” This provision could have a material impact on sports-related tax exempts and private universities that license their name or logo in connection with collegiate sports activities.
For private colleges and universities, the current excise tax on net investment income (generally taxed at 1.4%) would be replaced with a multiple-tier tax on net investment income based on the college’s or university’s “student-adjustment endowment”. The tax rate scales up to 21% for a sufficiently large endowment. Additionally, for such colleges and universities, the definition of net investment income would be expanded (to include, for instance, interest on student loans and “Federally-subsidized royalty income”). The provision grants the Treasury with specific authority to prescribe regulations or other guidance, as necessary, to prevent the avoidance of this excise tax.
For private foundations, the current 1.39% tax rate would be replaced by a tiered tax on net investment income based on the total gross value of the assets held by the foundation—the top rates reaching 10%.
Nonprofits (other than “churches” or certain “church-affiliated organizations”) would have to pay tax (generally at the corporate rate of 21%) on parking facilities and transportation fringe benefits. The Tax Cuts and Jobs Act of 2017 had originally included similar provisions imposing taxes on such facilities and benefits, but these provisions had been retroactively repealed in 2019.
The excise tax imposed on significant compensation paid to the 5 highest-compensated employees of an applicable tax-exempt organization would be expanded to all employees of the organization or any related person or governmental entity.
A 1% floor would be added for charitable contribution deductions made by corporations.
All of these provisions would generally come into effect after 2025. It is, of course, possible that the above changes will not be included in the final tax legislation, or that material modifications could be made to such provisions before they are voted upon. The Ways and Means Committee held its markup session on May 13, 2025, and it voted to advance the House Draft Bill to the House floor. The full panoply of further legislative steps (such as Senate consideration, and any reconciliation between Senate and House versions) are to come, although Congressional leadership has stated that the goal is to finalize the legislation by July 4, 2025.
Major Changes to Expenditure Rate of LIT in SEA 1 (2025)
Indiana Governor Mike Braun signed Senate Enrolled Act 1 (SEA 1) into law last month, introducing a number of changes to the state’s property tax and local income tax system. Most of these changes will take effect July 1, 2027, to enable the new rates to be effective January 1, 2028, subject to certain exceptions. Barnes & Thornburg LLP is closely reviewing the provisions of SEA 1 and will continue to provide additional guidance on how this new legislation affects our municipal clients. This alert summarizes the major changes to local income taxes (LIT) and provides a timeline of those changes:
Summary of Major Changes
Expiration of Existing Expenditure Rate: All expenditure LIT rates imposed in a county under IC 6-3.6-6 expire on December 31, 2027, unless the adopting body (the fiscal body of the county) adopts an ordinance to renew the expenditure tax rate beginning on January 1, 2028. The ordinance renewing the expenditure tax rate must be adopted by October 1, 2027.
Entirely New Structure: The existing structure with component rates and additional revenue being allocated to public safety, economic development and certified shares is being replaced with an entirely new structure with a maximum expenditure rate of 2.9%. More details on the new structure are available below.
Annual Renewal Starting in 2031: Beginning after December 31, 2030, expenditure tax rates expire on December 31 of each year unless renewed by an ordinance of the adopting body by October 1 of each year.
Change in Adopting Body: Local income tax councils are eliminated effective July 1, 2027 and the fiscal body of the county will become the adopting body for the county.
Municipal Tax Rate: Cities and towns with at least 3,500 residents will be able to adopt their own local income tax rate beginning January 1, 2028.
October 1 Deadlines (starting 2027): Adopting bodies must adopt an ordinance by October 1 to adopt, increase, decrease, or rescind a LIT tax, or to grant, increase, decrease, rescind, or change a distribution or allocation. These ordinances take effect on the immediately following January 1. If the ordinances are adopted after October 1, they take effect on the second succeeding January 1 (i.e., an ordinance adopted October 2, 2027, takes effect January 1, 2029); provided, however, ordinances to impose a tax rate under IC 6-3.6-6-2(b)(3) or (4), must be adopted on or before October 1 of a calendar year.
Timeline
Beginning May 10, 2025, through and including July 1, 2027, a unit may not pledge to the payment of bonds, leases or obligations, LIT received under IC 6-3.6 in an amount that exceeds twenty-five percent (25%) of the taxing units certified distribution under IC 6-3.6.
Effective for 2026 and 2027: A county fiscal body may adopt a local income tax to reduce the property tax liability for homesteads (terminates on December 31, 2027)
Effective July 1, 2027:
Following tax rates/allocations repealed:
Allocation of Additional Revenue to Public Safety (IC 6-3.6-6-8)
Allocation of Additional Revenue to Economic Development (IC 6-3.6-6-9)
Allocation of Additional Revenue to Certified Shares (IC 6-3.6-6-10, 11, 12, 14 and 15)
Distribution for Property Tax Relief Credit (IC 6-3.6-6-20)
Local Income Tax Councils are eliminated and the fiscal body of the county becomes the adopting body for all county expenditure tax rates
Effective December 31, 2027: Property tax relief credit expires (IC 6-3.6-5)
Effective January 1, 2028:
Following tax rates/allocations repealed:
PSAP (IC 6-3.6-6-2.5)
Acute Care Hospital (IC 6-3.6-6-2.6)
Correctional Facilities and Rehabilitation Facilities (IC 6-3.6-6-2.7)
Emergency Medical Servies (IC 6-3.6-6-2.8)
Courtroom Costs (IC 6-3.6-6-2.9)
New expenditure rate structure is effective (details below)
After December 31, 2030, the expenditure tax rate expires on December 31 of each year unless the adopting body adopts an ordinance to readopt the tax rate.
New LIT Expenditure Rates (Effective January 1, 2028)
An entirely new LIT structure will be replacing the existing LIT structure with rates effective January 1, 2028. The new rate structure along with the corresponding maximum rate, the adopting body, details of each component are described below.
The total expenditure rate may not exceed 2.9%. The total rates for County Services, Fire Protection and EMS, and Nonmunicipal Civil Taxing Unit may not exceed 1.7%. After December 31, 2030, all expenditure rates expire on December 31 of each year unless renewed by ordinance of the adopting body by October 1 of each year. All population requirements are determined by the most recent federal census.
County Services Rate (IC 6-3.6-6-2(b)(1))
Rate: not to exceed 1.2%
Adopting Body: fiscal body of county
Taxpayer: all individuals residing in the county (including any municipality within the county)
Distribution: retained by county
Uses of Revenue: general purpose revenue for any purpose of the county, including PSAP, economic development, acute care hospitals, correctional facilities and rehabilitation facilities, county judicial staff expenses, and homestead property tax replacement credits (expires on December 31, 2027).
Fire Protection and EMS Rate (IC 6-3.6-6-2(b)(2))
Rate: not to exceed 0.4%
Adopting Body: fiscal body of county
Taxpayer: all individuals residing in the county (including any municipality within the county)
Distribution: revenue shall be distributed by the county to each fire protection district, fire protection territory, and municipal fire department within the county. At the discretion of the fiscal body of the county, the county may distribute this revenue to township fire departments, volunteer fire departments and EMS providers that apply for distribution. The allocation for each provider is determined by a formula based on service population and square miles of service territory for each provider.
Uses of Revenue: fire protection and emergency medical services
Nonmunicipal Civil Taxing Unit Rate (IC 6-3.6-6-2(b)(3))
Rate: not to exceed 0.2%
Adopting Body: fiscal body of county
Taxpayer: all individuals residing in the county (including any municipality within the county)
Types: nonmunicipal civil taxing unit means townships, libraries, and other civil tax units that imposed an ad valorem property tax levy preceding the distribution year and those civil taxing units whose budgets require binding review by another local unit. It does not include counties, cities, towns, schools, or fire protection districts. It does not include a solid waste management district or a joint solid waste management district unless a majority of the members of the county fiscal bodies of the counties within the district adopts a resolution approving the distribution.
Distribution: the fiscal body of the county may adopt a tax rate for each type of nonmunicipal civil taxing unit not to exceed 0.05% per type. Each type is allocated on a pro rata per capita basis. Each nonmunicipal civil taxing unit wanting a distribution must adopt a resolution by July 1 of the year preceding the year of distribution. The county must distribute revenue to each nonmunicipal civil taxing unit that requested distribution. If
One (1) or more, but not all, nonmunicipal civil taxing units request a distribution, then the fiscal body of the county may either distribute the total amount of revenue to (a) only those that requested a distribution or (b) all of the nonmunicipal civil taxing units.
If no nonmunicipal civil taxing unit requests a distribution, then the county may retain the revenue and use it as general purpose revenue.
Uses of Revenue: general purpose revenue
Small Cities and Towns Rate (IC 6-3.6-6-2(b)(4))
Rate: not to exceed 1.2%
Adopting Body: fiscal body of county
Taxpayer: all individuals within the county except for individuals residing in a municipality that is eligible to adopt the municipal tax rate under IC 6-3.6-6-22 (cities and towns with at least 3,500 residents)
Eligible City or Town: means cities or towns
with population less than 3,500; or
with population of at least 3,500, but that have made an election to be treated as a city or town with a population less than 3,500.
Distribution: if the fiscal body of the county imposes a County Services rate of 1.2%, then the fiscal body of the county may elect to retain up to 75% of the revenue under this subsection. Each eligible city or town wanting a distribution must adopt a resolution by July 1 of the year preceding the year of distribution. The revenue not retained by the county must be distributed to each eligible city or town that requested distribution. Revenue is distributed to eligible cities and towns based upon the population of the applicable city or town compared to all of the eligible cities and towns receiving a distribution. If:
One (1) or more, but not all, eligible cities and towns request a distribution, then the fiscal body of the county may either distribute the total amount of revenue to (a) only those that requested a distribution or (b) all of the eligible cities and towns.
If no eligible city or town requests a distribution, then the county may retain the revenue and use it as general purpose revenue.
Uses of Revenue: general purpose revenue for any purpose of the unit, including public safety and economic development
Municipal Tax Rate (Cities and Towns with 3,500 residents or more) (IC 6-3.6-6-22)
Rate: not to exceed 1.2%
Adopting Body: fiscal body of applicable city or town
Taxpayer: all individuals residing in the applicable city or town
Distribution: to the applicable city or town that imposed the tax
Uses of Revenue: general purpose revenue for any purpose of the city or town
Not all LIT changes are included in this summary. There are certain exceptions and rules for Marion County, Hancock County, Grant County, Lake County, Porter County, LaPorte County, and political subdivisions located within such counties. For more information, please contact the Barnes & Thornburg attorney with whom you work.
NJ Man Admits Tax Fraud, Cost IRS Over $550K
NJ Man Admits Tax Fraud, Cost IRS Over $550K. A Somerset man who ran a local tax preparation business pleaded guilty Thursday to knowingly filing false federal tax returns on behalf of his clients, deceit that federal prosecutors say racked up more than $550,000 in losses for the IRS. Vito A. Pascarella, whose company offered […]
Section 899: Proposed Legislation Would Increase US Tax Rates on Many Foreign Individuals, Companies, and Governments
Under the proposed Defending American Jobs and Investment Act, introduced in the House of Representatives and approved by the House Ways and Means Committee on May 14, 2025, as part of the Trump administration’s tax package known as “The One, Big, Beautiful Bill,” a new Section 899 would be added to the Internal Revenue Code. This proposed provision—titled “Enforcement of Remedies Against Unfair Foreign Taxes”—represents a significant new international tax enforcement measure.
According to the administration, the proposed Section 899 is intended to serve as a strong legislative response to the growing use of foreign tax regimes that, in its view, unfairly target and burden U.S. businesses and individuals operating abroad. The provision would authorize countermeasures against persons and companies located in jurisdictions that impose what the legislation defines as an “unfair foreign tax.”
The bill is expected to be considered by the full House next week as part of the reconciliation measure. Presuming it passes the House, this portion of the reconciliation measure will then be considered by the Senate Finance Committee, where provisions of the House measure could be changed, and then the full Senate.
Go-To Guide
Proposed Section 899 would significantly increase U.S. federal income tax rates—by 5% to 20%—on certain types of income earned by non-U.S. individuals and entities that are tax residents of, or are established or effectively managed in, “discriminatory foreign countries.” These jurisdictions are defined as those that impose an “unfair foreign tax” under the proposed legislation.
These elevated rates would apply to passive U.S. source income (such as dividends, interest, royalties, and rents), as well as income effectively connected with a U.S. trade or business (ECI).
The legislation defines “unfair foreign taxes” broadly, encompassing digital services taxes and other measures that have been widely adopted by foreign jurisdictions. As a result, a large number of non-U.S. individuals and entities could fall within the scope of the increased tax rates.
These higher rates would apply across a broad spectrum of existing tax provisions and would affect nonresident individuals, foreign corporations, and even sovereign entities.
If enacted, Section 899 would introduce substantial economic and compliance challenges, particularly for foreign governments, multinational enterprises, and investors with connections to jurisdictions that impose taxes perceived to disproportionately impact U.S. interests—such as digital services taxes or global minimum tax regimes.
Taxpayers potentially impacted by this proposal should carefully assess how their U.S. tax exposure could change under the new rules and evaluate possible strategies to mitigate adverse effects.
Click here to continue reading the full GT Alert.
McDermott+ Check-Up: May 16, 2025
THIS WEEK’S DOSE
Key House Health Committees Advance Reconciliation, Bill Held Up in Budget Committee. The Energy and Commerce Committee and Ways and Means Committee passed their recommendations for reconciliation out of committee, but the Budget Committee failed to advance the bill today and is currently scheduled to reconvene at 10pm on Sunday, May 18, 2025.
HHS Secretary Kennedy Testifies in Congress. The House Appropriations Committee and Senate Health, Education, Labor, and Pensions (HELP) Committee held hearings on the US Department of Health and Human Services (HHS) budget.
Senate Judiciary Committee Discusses PBM Reform. Committee members widely agreed on the need for pharmacy benefit manager (PBM) policy change.
House Judiciary Subcommittee on Administrative State, Regulatory Reform, and Antitrust Holds Hearing on Medical Residency. The hearing examined the structure and legal implications of the National Resident Matching Program and evaluated its antitrust exemption.
Senate Finance Committee Advances Trump HHS Nominees. The nominations for deputy secretary of HHS and assistant secretary of legislation of HHS now move to the Senate floor.
Trump Signs EO on Drug Prices. The executive order (EO) seeks to implement most-favored nation pricing.
CMS Releases Proposed Rule on MCO Taxes. The Centers for Medicare & Medicaid Services (CMS) proposal would address state-imposed “provider taxes” on managed care organizations (MCOs).
HHS Agencies Issue RFIs. The requests for information (RFI) focus on possible deregulatory actions and the health technology ecosystem.
HHS Identifies Documents for Recission. The recission was enacted upon publication.
CMS Innovation Center Releases Strategic Framework. The strategy outlines how the center intends to structure current and future value-based care models.
CONGRESS
Key House Health Committees Advance Reconciliation, Bill Held Up in Budget Committee. On May 13, 2025, and into the next afternoon, the House Energy and Commerce Committee held a 26.5 hour markup of its budget reconciliation committee print, which included sweeping policy changes to Medicaid enrollment process, eligibility, and financing, as well as a Medicare physician payment adjustment, PBM reform, and changes to the Medicare prescription drug negotiation program and the Affordable Care Act (ACA). At the same time, the House Ways and Means Committee held a 15.5 hour markup of its budget reconciliation committee print. The Ways and Means package included provisions related to paid leave, CHOICE health plans (now called ICHRAs), health savings accounts, and research, as well as significant changes to ACA Exchange enrollment. Both committees successfully advanced their committee prints along party lines and did not adopt any amendments.
Energy and Commerce Committee: The House budget resolution instructed the House Energy and Commerce committee to find a minimum of $880 billion in savings. On May 11, 2025, Democrats released a memo from the Congressional Budget Office (CBO) estimating that the Energy and Commerce reconciliation recommendations related to Medicaid, the expiration of expanded premium tax credits, finalizing the 2025 Marketplace Integrity and Affordability Proposed Rule, and the Marketplace provisions that extend beyond codifying the proposed rule would increase the number of people without health insurance by at least 13.7 million by 2034. CBO noted on May 12, 2025, that the budget reconciliation text would exceed the savings target and reduce deficits by more than $880 billion over 10 years. On May 13, 2025, CBO released a new set of preliminary scores for certain Medicaid provisions listed in the bill, which in total would save $625 billion over 10 years. The scores also estimate that a total of 7.6 million individuals would become uninsured by 2034, including 1.4 million people without verified citizenship, nationality, or satisfactory immigration status. These are the figures congressional Republicans have cited. CBO has not yet provided final scoring for the package, and particular provisions are still without a score as well. That analysis is expected in the coming days.
During the Energy and Commerce Committee the markup, Democrats offered 246 health-related amendments, many of which were ultimately withdrawn. They largely focused on extending the enhanced advanced premium tax credits (APTCs), preventing the Medicaid policies that would reduce coverage from going into effect, addressing prescription drug prices, and preserving access to home- and community-based services. Republicans did not offer any amendments. The amendments can be found here, and the committee’s section-by-section summary can be found here.
Ways and Means Committee: The budget resolution instructed the House Ways and Means Committee to produce policies that would not raise the federal deficit by more than $4 trillion if the spending cuts in the overall bill totaled less than $1.5 trillion, or by more than $4.5 trillion if the bill achieved $2 trillion in savings. The Joint Committee on Taxation found that the Ways and Means Committee’s proposed tax provisions would increase the deficit by $3.18 trillion, meeting the goals stated in the resolution.
Throughout the markup, Democrats spoke out against the Medicaid provisions being considered in the House Energy and Commerce Committee and encouraged the Ways and Means Committee to extend the enhanced APTCs. Democrats argued that if the bill was supposed to help working Americans, healthcare improvements needed to be a key part of the legislation and tax breaks for the wealthy shouldn’t be financed by taking healthcare away from lower- and middle-class working Americans. Republicans offered no amendments. Their talking points focused on how the tax package was designed to limit tax liability of working Americans and restrict provision of government benefits to US citizens only, not individuals in the country illegally.
Budget Committee: Speaker Johnson (R-LA) aims to pass the reconciliation package on the House floor before Memorial Day. Once all the committees of jurisdiction have completed their work, the House Budget Committee is tasked with pasting together the various committee prints into a single reconciliation package. That is largely a perfunctory role as they have no authority to make any changes. The Budget Committee met today, May 16, 2025, to do that work. Ultimately, a vote was held to decide if the committee should vote on the package, which failed in a 16–21 vote due to a hardline conservative push to enact larger spending cuts. When voting no, Reps. Clyde (R- GA), Roy (R-TX), Brecheen (R-OK), and Norman (R-SC) cited concerns that the federal spending reductions, particularly the Medicaid cuts, do not go far enough. Rep. Smucker (R-PA) also voted no, clarifying that the no vote was so that the committee could procedurally bring the bill back up later. Specifically, conservatives are unhappy about the Medicaid work requirement provisions. As written, the work requirements do not begin until 2029, and conservatives want to shorten that timeline.
The Budget Committee is currently scheduled to reconvene at 10pm on Sunday, May 18, 2025, to vote on the bill, and the Rules Committee is expected to meet on Wednesday, May 21, 2025, to prepare the bill for floor debate. Republican leadership continues to work behind the scenes to resolve remaining differences related to Medicaid and other issues, such as disagreement on the state and local tax deduction (SALT).
HHS Secretary Kennedy Testifies in Congress. In the House Appropriations Committee hearing, Kennedy defended the cuts outlined in President Trump’s skinny budget request and heard concerns from both Republicans and Democrats about some of his policies, such as removing fluoride from drinking water. In the Senate HELP Committee hearing, Kennedy faced questions from a bipartisan group of senators about his previous statements on vaccine safety and efficacy. In both committees, Kennedy defended workforce and program cuts from the Department of Government Efficiency.
Senate Judiciary Committee Discusses PBM Reform. The hearing examined the role of PBMs and how current practices impact drug pricing, access to medication, and local pharmacies. Republican and Democratic senators expressed concerns over low reimbursement rates to local pharmacies, lack of transparency, and the impact of vertical integration on drug affordability. Several witnesses emphasized the need to reform PBMs and recommended that future policies prioritize patients over profit.
House Judiciary Subcommittee on Administrative State, Regulatory Reform, and Antitrust Holds Hearing on Medical Residency. The hearing examined the structure and legal implications of the National Resident Matching Program and evaluated its antitrust exemption. The hearing also explored the role of the Accreditation Council for Graduate Medical Education (ACGME) in shaping residency program standards and access, and how the residency placement and accreditation system affects medical graduates and the broader physician labor market. Republicans portrayed the matching program and ACGME accreditation as monopolistic, opaque, hospital-centric, and contributing to physician shortages, wage suppression, and lack of resident autonomy. Democrats defended the matching program as an imperfect but functional solution to manage medical residency placements. They emphasized the need for increased public investment, particularly in expanding residency slots, supporting international medical graduates, and protecting research funding.
Senate Finance Committee Advances Trump HHS Nominees. The executive session considered the nominations of James O’Neill to be deputy secretary of HHS and Gary Andres to be assistant secretary of legislation of HHS. Both nominees advanced (see vote outcomes below), and their nominations will now move to the Senate floor.
James O’Neill’s nomination to be deputy secretary of HHS advanced by a vote of 14 – 13, along party lines.
Gary Andres’ nomination to be assistant secretary of legislation of HHS advanced by a vote of 19 – 8. Sens. Warner (D-VA), Whitehouse (D-RI), Hassan (D-NH), Warnock (D-GA), and Welch (D-VT) joined Republicans in voting yes.
ADMINISTRATION
Trump Signs EO on Drug Prices. President Trump’s “most-favored nation” EO seeks to equalize drug prices between the United States and other developed countries. It instructs federal agencies to take the following actions:
The US trade representative and the secretary of commerce will ensure foreign countries are not engaged in practices that lead to high drug prices in the United States.
The HHS secretary will facilitate direct-to-consumer purchasing programs for drug manufacturers that sell their products to US consumers at the most-favored nation price.
The HHS secretary, in coordination with other relevant agencies, will have 30 days to bring prices for pharmaceutical drugs in the United States in line with comparable developed nations. If significant progress toward most-favored nation pricing is not delivered at that time, HHS in conjunction with CMS must develop rulemaking to impose most-favored-nation pricing.
HHS and the US Food and Drug Administration (FDA) must consider certifying that the importation of certain prescription drugs from other developed countries is safe, and if such certification is made, FDA must create a waiver process to allow for the importation of prescription drugs.
Several federal agencies, including the Federal Trade Commission, the Office of the Attorney General, and the US Department of Commerce, are instructed to investigate any anticompetitive practices leading to higher prices.
FDA is instructed to review and potentially modify or revoke approvals granted for drugs that maybe be unsafe, ineffective, or improperly marketed.
A fact sheet can be found here. While EOs typically lay out the administration’s policy priorities, effectuating such policies requires additional actions, including potential rulemakings.
CMS Releases Proposed Rule on MCO Taxes. Federal law requires state-imposed “provider taxes,” which include MCO taxes, to be uniform and broad based, meaning it must be applied at the same level and to all MCOs in the state, not just Medicaid MCOs. However, a state can apply to CMS for a waiver from this requirement if the net impact of the tax is generally redistributive and the amount of the tax is not directly correlated to Medicaid payments. With its proposal, CMS aims to close what it considers a loophole to prohibit states from taxing Medicaid MCOs at a higher rate than non-Medicaid MCOs. CMS identified eight taxes in seven states that would be affected by this proposal, if finalized. We understand those states to be California, Illinois, Massachusetts, Michigan, New York, Ohio, and West Virginia.
Key proposals include:
Prohibiting states from explicitly taxing Medicaid units at higher tax rates than units of other payors and better implementing the mandate that a tax be generally redistributive.
Defining terms used in the regulation, including “Medicaid taxable unit” and “non-Medicaid taxable unit” to prohibit states from using overly vague language.
Specifying that noncompliant states that received their most recent waiver approval within two years of the effective date of the final rule would not be eligible for a transition period. Noncompliant states that received waiver approval more than two years prior to the effective date of the final rule would have a transition period of at least one full state fiscal year to adjust the tax to come into compliance.
Read the press release here and the fact sheet here. Comments are due on July 14, 2025.
The House reconciliation bill reported by the Energy and Commerce Committee includes a similar but not identical provision.
HHS Agencies Issue RFIs.
In conjunction with FDA, HHS asked the public to help identify any opportunities to produce cost savings, increase efficiency, and catalyze health and economic innovation through deregulation, with the goal of addressing regulations that are “unnecessary, inconsistent with the law, overly burdensome, outdated, out of alignment with current EOs, or otherwise unsound.” Read the press release here. Comments are due on July 14, 2025.
CMS and the Assistant Secretary for Technology Policy/Office of the National Coordinator for Health IT requested input from the public regarding the digital health products market for Medicare beneficiaries, as well as the current state of data interoperability and the broader health technology infrastructure. Responses may be used to further efforts to cultivate this market, increase beneficiary access to effective digital capabilities, and increase data availability. Read the press release here. Comments are due on June 15, 2025.
HHS Identifies Documents for Recission. In a final rule, HHS rescinded the following four documents, effective immediately:
“Extension of Designation of Scarce Materials or Threatened Materials Subject to COVID-19 Hoarding Prevention Measures; Extension of Effective Date with Modifications” (86 FR 35810, July 7, 2021), which designated health and medical resources in scare supply and necessary to respond to the spread of COVID-19.
“Opioid Drugs in Maintenance and Detoxification Treatment of Opiate Addiction; Repeal of Current Regulations and Issuance of New Regulations: Delay of Effective Date and Resultant Amendments to the Final Rule” (66 FR 15347, March 19, 2001).
“Practice Guidelines for the Administration of Buprenorphine for Treating Opioid Use Disorder” (86 FR 22439, April 28, 2021), which provided eligible physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and certified nurse midwives, who are state-licensed and registered by the DEA to prescribe controlled substances, an exemption from certain statutory certification requirements related to training, counseling, and other ancillary services.
“Notification of Interpretation and Enforcement of Section 1557 of the Affordable Care Act and Title IX of the Education Amendments of 1972” (86 FR 27984, May 25, 2021), which clarified that ACA Section 1557’s prohibition on discrimination included discrimination based on sexual orientation and gender identity.
CMS Innovation Center Releases Strategic Framework. The strategy outlines how the Innovation Center intends to structure current and future value-based care models, with an emphasis on prevention, individual engagement, and market-based mechanisms. The framework highlights the center’s plans related to:
Promoting evidence-based prevention.
Increasing model activity in Medicare Advantage, Medicaid, and prescription drug pricing.
Focusing on cost savings and financial accountability.
Expanding access to consumer-facing tools and data.
Increasing the role of independent and rural providers.
Emphasizing choice and competition.
QUICK HITS
CMS Releases Draft Guidance for Third Medicare Drug Price Negotiation Cycle. The guidance seeks to improve program transparency, further prioritize selection of prescription drugs with high costs to Medicare, and minimize any negative impacts of the negotiated maximum fair price on pharmaceutical innovation. Read the press release here and the fact sheet here. Comments are due on June 26, 2025.
FDA Begins Process of Removing Ingestible Fluoride Prescription Drug Products for Children. The agency has set a goal date of October 31, 2025, for completing a safety review and public comment period.
GAO Releases Reports on Caregiving, TRICARE. The first US Government Accountability Office (GAO) report recommends that HHS clarify when youth may qualify for support services. The second report provides information on the US Department of Defense’s processing of TRICARE claims from behavioral health providers.
NEXT WEEK’S DIAGNOSIS
Both chambers will be in session next week, as the House works to pass its budget reconciliation package before the Memorial Day recess. Budget hearings will continue, with HHS Secretary Kennedy testifying in front of the Senate Appropriations Labor-HHS Subcommittee. The House Oversight and Government Reform Economic Growth, Energy Policy, and Regulatory Affairs Subcommittee and Health Care and Financial Services Subcommittee will hold a joint hearing on the Inflation Reduction Act. Meanwhile, we await the president’s full budget request for FY 2026.
Feeling the Heat: Renewable Energy Under the Microscope
This article is based on a May 5th Womble Bond Dickinson webinar featuring Kristina Moore and Veronica Renzi.
The temperature is rising for the Renewable Energy Sector as well as related funding sources, such as green banks. The heat is coming from several sources, including:
An expansive fight over obligated federal funding.
Congressional investigations into companies receiving federal financial support.
The potential elimination of tax incentives augmented under the Inflation Reduction Act (IRA).
Rising tariffs.
All these issues are significant factors impacting the renewable energy sector. The IRA, passed under the Biden Administration, remains a particular target for Republican lawmakers, who seek to reclaim as much funding as they can.
Congressional Investigations Ramping Up the Temperature
Comparing it to “Gold bars sliding off the side of the Titanic,” Congressional Republicans have voiced strong objections to the rapid pace that IRA renewable energy funds were allocated.
On Jan. 27, the White House ordered the EPA to halt the spending of IRA obligated funds. Then, a little over a month later, the EPA formally referred the alleged financial mismanagement, conflicts of interests, and oversight failures regarding the Greenhouse Gas Reduction Funds to the Office of Inspector General.
In response, several IRA funding recipients have sued the EPA, seeking the release of already allocated funds. A federal judge issued a temporary restraining order barring the EPA from freezing Greenhouse Gas Reduction Fund allocations, at least until a court can consider the dispute.
However, the D.C. Court of Appeals reversed that decision, restoring the freeze to $20 billion in Greenhouse Gas Reduction Fund allocations. Arguments will be heard May 19 about the future of these funds.
On March 20, the House Oversight Committee sent a letter to the EPA indicating its intention to investigation the policies and IRA funding allocation during the Biden Administration. The letter requested a briefing with committee staff.
Various grant recipients have also received letters from Congressional committees requestion answers to questions about the Greenhouse Gas Reduction Fund.
Many have compared the current Congressional oversight climate to the Solyndra investigations in 2011. The Solyndra investigation focused on a $535 million loan guarantee issued by the U.S. Department of Energy to Solyndra, Inc. Led by the House Oversight and Energy and Commerce Committees, the inquiry sought to assess whether the government’s decision to approve the loan was warranted and to investigate whether Solyndra’s executives had misrepresented the company’s financial stability. No one wants to be that next household name because of a Congressional investigation.
Budget Reconciliation Could Change IRA Support for Sustainable Energy
Based on a budget resolution passed by both houses of Congress, Budget Reconciliation is a process by which lawmakers can avoid a Senate filibuster and pass spending measures with just 51 votes—a key tactic in this closely divided Congress.
Such a bill would include President Trump’s top priorities. These include extending the Tax Cuts and Jobs Act, which passed during his first administration and is set to expire this year.
For Congress to move forward with tax cuts, they also must find cost savings. Such offsets could target IRA sustainable energy-related production tax credit (45Y and 48E) and manufacturing tax credits (45X).
However, industries in that sector are pushing back, making their case for keeping these incentives to bolster domestic energy production to meet the rapidly growing needs of AI data centers. They also point to the need for a predictable investment climate. Companies brought jobs and investments to the U.S. based in part on these IRA tax incentives.
Even if these tax credits survive, they are likely to be modified by Congress moving forward. In terms of timeline, President Trump has requested that the Budget Reconciliation bill be on his desk by July 4. That would require the House to finish their work around Memorial Day and for the Senate to complete its steps by the end of June.
What’s Next: Challenges and Opportunities
In light of these developments, the future of renewable energy funding and the associated legislative landscape remains uncertain. The intense scrutiny from Congressional investigations, coupled with potential policy changes through budget reconciliation, has created a precarious environment for green energy stakeholders.
What happens in the coming months could determine the trajectory of renewable energy in the United States for years to come.
Holland & Knight Adds Tax Partner Jennifer Karpchuk in Philadelphia
Holland & Knight Adds Tax Partner Jennifer Karpchuk in Philadelphia. Holland & Knight has welcomed tax attorney Jennifer Karpchuk as a partner in its Philadelphia office, where she will co-chair the firm’s State and Local Tax (SALT) Team. Ms. Karpchuk’s arrival marks a significant step in the firm’s ongoing effort to deepen its national tax […]