There may be errors in spelling, grammar, and accuracy in this machine-generated transcript.

Roger Harris: Hello again everyone. It's another federal tax update. This is Roger Harris and he is on special assignment today. But I have a special guest taking her place. And he's not a stranger to our podcast. He's been here once before but I'm welcoming today. Thad Inge from Van Steenwyk and Associates in Washington, DC. [00:00:30] Thad, welcome. Glad to have you back.

Thad Inge: Thank you. Excited to be here. Lots going on.

Roger Harris: Yeah, lots going on. Uh, for those of you that don't remember Thad, he, uh, his firm, uh, represents us in DC, along with the National Association of Enrolled Agents. And on my trips to DC, Thad and I usually sit through the same IRS meetings and then go up to the Hill and talk about whatever is relevant. And now that the elections are over and thank God [00:01:00] the commercials are over. We thought it was a good time for Thad to come back, and we're going to talk a little bit about the impact that the elections will have or could have. We're not fortune tellers. We're not. We don't know everything. But that's probably more tuned in than most that they'll have on our industry and our clients. So that I'm sure it's been an interesting few weeks in DC.

Thad Inge: Yeah. I mean, you talk about the impact. I think every election has impact, [00:01:30] right? There's always changes and differences, but there's some where it's outsized. And I think that's that's the situation here largely because you've got the Republican trifecta. It looks like that's what it's going to be with Republican House and Senate and and white House, which kind of creates new dynamics, takes away the the need to compromise across party lines, at least in some circumstances. Right. And so, you know, in a divided government, there's always going [00:02:00] to be that sort of check and balance and and you lose some of that. And so the, the, the potential for large impact is real.

Roger Harris: Right. And maybe this has happened before. I can't imagine. But you've got a president who passed a big tax bill in his first term that would have extended beyond a normal second term, but because there was an election in between, he now is in charge when [00:02:30] his first bill is up for, uh, well, I guess it expires technically at the end of next year. And now he gets to be around to try to figure out what happens.

Thad Inge: Yeah, I think it is unique. I think it's unique. And, uh, you know, we in 2012, 2013, um, around around there, at some point in the middle of the Obama Presidency. They had to deal with the Bush tax cuts that [00:03:00] had, you know, were up for extension. Obviously, it was a, you know, a different party in power and a whole different ballgame, but there was still a lot of pressure to to extend those and, you know, not hike up taxes on the majority of Americans. And, um, and so that's sort of the the closest parallel, but it's still a completely different situation.

Roger Harris: Yeah. Because it wasn't it wasn't his tax bill.

Thad Inge: Exactly.

Roger Harris: So he probably didn't feel near as closely to it. So so with all those changes [00:03:30] now again, you just mentioned the Republicans. Looks like they're going to control the white House Senate for sure. And it looks like the House. So theoretically they don't need anybody's permission to do pretty much anything. So what do you think's going to I mean is it just going to be keep it like it is. What do you think? I mean, is there any sense of what's going to happen? I mean, before the election, we didn't know if we were going to have to compromise or what we were going to have to do, what's the sense of. And I [00:04:00] know we're all guessing here, but what do you think?

Thad Inge: Yeah. Well, you know and and in traditionally and not to get too wonky too quick here but traditionally in the Senate you need 60 votes to get something done because, you know, you can filibuster and you need 60 votes to cut that off with cloture. But in recent years, and they used it in 2017 for the Tax Cut and Jobs Act, they used it for the Inflation Reduction Act and a number of other things for ACA when they tried to repeal ACA. They used it [00:04:30] in the budget reconciliation process, which, you know, comes with a lot of rules and sort of strings attached. Um, but the headliner is it allows the Senate to pass a bill with a simple majority. And so Republicans have been preparing for this for really a year. Um, when it sounded crazy that they would win all three, They were saying, we're preparing for this in case we do win all three. And so [00:05:00] they've been putting together, you know, this plan around budget reconciliation that will allow them to pass an extension bill, um, with just Republican votes. Um, now it sounds simple because they don't have to deal with the Democratic White House or deal with the Democratic House. Um, but their margins are pretty narrow. Um, it looks like the Senate, depending on how the final numbers in Pennsylvania, but it looks like it's going to be 53 to 47. And [00:05:30] so that's, you know, a decent cushion. That's pretty good.

Roger Harris: Well that's better than we've seen.

Thad Inge: Yeah, exactly. They've got a few votes that they could even lose on the, um, Republican side. But the real challenge is the House where it's going to be incredibly close. You've had a number of cabinet members already named from Republican House members, so that could hurt with a few seats. Um, but you, um, you're going to have similar to this Congress where they had a 4 or 5 seat majority [00:06:00] and and the House is big enough where you've always got someone that has passed away or is out for some reason or another. So those numbers can fluctuate. But but it's going to be very close. And I think where the big debate is going to come down to is around deficits versus tax cuts. Right. Um, the Wall Street Journal had an article the other day, Richard Rubin, where he talked about the number. And so as part of the reconciliation process [00:06:30] on the front end, before they send the instructions to the committee, they have to assign a number of how much, how much they're willing to go to increase the deficit. And it it can only be within the ten year window under the rule. So which is why we have these expirations we're dealing with now.

Roger Harris: That's why we're here where we are.

Thad Inge: Exactly. And so Last time when they started Tcja, they said, we're going to have this, um, deficit neutral. We're not going to increase the deficits. [00:07:00] And they actually had a surplus of revenue. So they had some money to play with. And if you remember, during the tax, during the Bush tax cuts, there was a big surplus. And that was one of the big issues in the 2000 campaign was how are we going to spend this surplus? And so in the past, when you've had major tax reform, at least in recent years, there have been these surpluses where they've had some money to play with when they started in 2000, you know, for Tcja in 2016, 2017, they [00:07:30] said, um, we're going to do it initially neutral. And then some people said, well, we really would like to cut taxes a little more than that. And so there was a compromise and they agreed to it ended up being 1.8 trillion. Um, I think initially it was it was 1.5 trillion. But they ended up saying, all right, we'll increase the deficit this much after taking into account new revenues and all of that. And so they have to do that again this year. There's not a surplus. [00:08:00]

Roger Harris: And so not even close.

Thad Inge: The Congressional Budget Office has said if you just extend everything that's in place now, both cuts and revenue raisers, that it could cost as much as $5 trillion. Now, some have disputed that number, but it's it's trillions of dollars.

Roger Harris: It's a lot of money. Whatever it is, it's a lot of money.

Thad Inge: And so I think the big battle within the Republican Party, especially in the House, is going to be how [00:08:30] much what is that number? You know, is it 1 trillion? Is it 10 trillion? If you add up everything that Trump promised on the campaign campaign trail, which we.

Roger Harris: We'll get into that.

Thad Inge: We all know that's not all. That would be like $10 trillion and that's not happening. Um, and, and they're going to look at ways to raise revenue. Um, you know, obviously tariffs have have been talked about, but, um.

Roger Harris: That's going to count for something.

Thad Inge: You know, I heard student rolling [00:09:00] back some of the student loan forgiveness stuff. Um, Inflation Reduction Act and some of the climate stuff that that Biden has done. They can get some revenues out of that stuff, but it's generally not in the, you know, trillions and trillions of dollars.

Roger Harris: Yeah.

Thad Inge: Um, and so that's an I think that's going to be the big debate is, is you're going to have some folks that say, hey, these are tax cuts. It's letting people keep more of their money. You shouldn't have to pay for this. But then you're going to have [00:09:30] other, um, deficit hawks, fiscal hawks. Some of them are newer to Congress. They're going to say, what are you talking about? This is why we you know, this is why we didn't like the last administration. The deficits were too high. We got to bring this down. And so it'll be interesting. And and Trump's gonna have a lot of influence in kind of where that number ends up.

Roger Harris: Yeah, I mean, I think a lot of people think just because he's back in power along with his friends, that will just extend this and move on. And and again, reconciliation [00:10:00] allows them to bypass the filibuster, which, uh, I guess is it's it's good if you like it, what they're doing. It's bad if you don't. Yeah. Isn't there some rule? You can't. You can only use reconciliation so many times in some time frame. You can't just use it every time something comes up.

Thad Inge: Yeah. And I mean, they say two bites at the apple. I think they basically could do one for, I guess one for FY 25, one for FY 26. And so, um, [00:10:30] you basically get one a year. But the way the years fall, you can really do it twice a year, you can do it.

Roger Harris: Twice, but you can't use you can't and you can't use it for anything. I mean, it's got to be it's got to have if I remember, it's got to be budget related. It can't be social issues and things such as that.

Thad Inge: So, exactly. So they have this thing called the Byrd rule. Yeah. And so if you put something in there that folks don't think you know fits, then it can get challenged. And then the parliamentarian decides, does [00:11:00] it, does it violate the Byrd Rule which. Right. Which there are a number of things. But the main one being does it have a budget? You know, a direct budget impact. Is it going to raise money or cost money?

Roger Harris: Now, like you said, I mean, they're going to pick some sort of number out of the air and say, this is our target or this is our goal or this is what we have to work with. Yeah. And then that's going to kind of drive what stays, what goes, what's new, what's old. You know, if you think back, uh, gosh, I guess it's been almost two years that when, uh, we were in [00:11:30] a kind of a hearing, it wasn't a formal hearing because there was a couple of committees. It wasn't just one committee, and a lot was discussed, and it was Republicans and Democrats. And of course, nobody knew who was going to be president or what the Senate was going to look like. And there seemed to be this trade off. All right. You know, we'll you know 1999. A the you know, was a big topic even then and God knows what that cost. And we just had a meeting a couple of weeks ago about that, but, yeah, um, you know, you could kind of see some lines being drawn. [00:12:00] Republicans wanted 199 A and R&D. Democrats wanted increased child tax credit. And I those discussions just gone now because do they have to include the Democrats in these discussions? Well, you.

Thad Inge: Know, it's interesting. So I don't think they're gone. Obviously they're going to focus on the Republican priorities. Um, now, I heard Speaker Johnson say the other day that he would like to see an increased child tax credit. I [00:12:30] think he was sort of thinking about the the Wyden and Smith compromise bill. And he said, well, we're still for, you know, we're still for that increased child tax credit. So you do have Republicans that are for some of these, you know, priorities that seem more democratic. But when it gets down to how much are you going to spend on it, what the priority is. The other interesting one is the corporate tax rate. So it obviously went way down from where it was to 2,021% in 2017. Um, [00:13:00] Biden and Kamala Harris had had proposed 28%, which has kind of been the Democratic standard proposal, right? Trump came out and said he at first I think he said 21. Then he said, well, maybe 15, maybe we go down or maybe 20 because I like, you know, round numbers.

Roger Harris: Round numbers. Yeah.

Thad Inge: And then but you've had some House Republicans say, hey, something's got to give. And, you know, the Republican Party is more populous [00:13:30] these days, less corporate. And so some Republicans are saying, if we want all this other stuff, maybe we raise it to, you know, 24, 25%. Now, I don't know if that's going to fly with the Trump White House. Right. Um, but if it had been divided government, that was one that was, you know, you could see maybe giving. And so, you know, another really tricky one is the salt tax.

Roger Harris: The salt. Right. I was going to bring that up.

Thad Inge: So that's that was one of the larger [00:14:00] payfors in Tcja putting in the $10,000 cap. Cap. Right. Um, and Republicans in New York, new Jersey, Illinois, California, um, you had a lot of Republican, moderate Republicans from new Jersey, New York that this is their number one issue. Um, and so, you know, a lot of Republicans from the middle of the country were for this because it didn't impact their constituents, how you [00:14:30] pay, how you paid for everything else. And so these moderate Republicans from high tax states have really pushed this issue and have demanded. You have said, you know, we're not voting for anything unless it fixes this. Um, Trump on the campaign trail when he was in Long Island, said, we're going to get rid of it. There have been lots of proposals to increase it, anywhere from 20,000 to 60,000. You know, up from ten, but it [00:15:00] expires at the end of 25. It's one of the payfors that's expiring, right? So the folks that don't like it have a little bit of leverage, because it's not like the corporate tax, which is permanent. And you have to go in and, you know, proactively change it. This thing is automatically expiring. So it will change. The question is do they just raise it to 20,000 or something like that or, or 40,000. Um, or does it totally go [00:15:30] away. But, but those moderate Republicans from high tax states, they're going to need their votes. And so they're going to be able to say, hey, I'm not voting for a $10,000, you know, salt cap cap.

Roger Harris: Yeah.

Thad Inge: Um.

Roger Harris: And I think that's part of what people forget. It's not just tax policy we're dealing with. When these things happen. We're dealing with the political environment and tax policy because you got to get a certain number of votes. You got to at least get 51. You might not, you know, um, well, I guess you can get 50 if you got in this case because the vice president could break the [00:16:00] tie. But you got to factor in good tax policy and good politics, or at least good politics inside the Capitol.

Thad Inge: Yeah, absolutely.

Roger Harris: So so we got salt. That's a big dish here. So so the reality is is this going to be an all year thing or are we going to learn anything early. We'll get any signals do you think or is this just going to we're going to wait like everything else, wait till the end of the year and then cram something by right at the end of the year.

Thad Inge: If you look at some of the past reconciliation [00:16:30] bills, some of the more recent ones, they've taken anywhere from three months to seven months. And so there is an opportunity if Republicans get on the same page to do this quickly. Um, procedurally, they can do it. And I and they have said they are motivated and motivated to get it done quickly. Um, but getting everybody on the same page is a big if. Right? Right. And I saw Senator Johnson, [00:17:00] who was one of the guys in the hearing that you're talking about, that we did with the finance committee and small business committees. His whole thing has been let's flatten the tax code. Let's get get rid of the complexity. Let's get rid of all these, you know, various breaks. And let's really simplify this thing. And I saw that he was quoted in the last couple of days saying I don't care if it takes all year. Let's get this thing right. Let's do it. Let's do real reform, tax reform. Let's [00:17:30] not just extend what, what's what's out there now. And, you know, I would say he's more of a purist. Um, yeah. And not that's not going to be everyone's take, but there's going to be enough, um, sort of different views in the Republican Party that this thing could take until, you know, it could be Christmas this time, this time next year.

Roger Harris: Or we can do this podcast next year and have the same questions that we got.

Thad Inge: But, you know, if [00:18:00] if Trump presents a clear vision and he can rally people around it and they can figure out the number and and make them come up with some targets, uh, it could also be, you know, if they can make a few compromises on things like salt. It could be, um, it could be, uh, quicker. Um, but, you know, the thing about when you think about these policies like salt and, um, and other revenue raisers, that is what kept the cost down of the [00:18:30] bill. And so you can't be for every cut, but not for any razor, you know. So said, someone is going to feel some pain, right? And, um, and it's unclear yet who it is. I mean, the main thing that Trump has talked about is tariffs and.

Roger Harris: Yeah, right.

Thad Inge: And and then there's been some talk about, you know, rolling back the, the the Biden stuff. But someone's going to feel some pain and that that's obviously to make people uncomfortable.

Roger Harris: Given we just had an election [00:19:00] a obviously the House is still in Republicans. It was Republicans before but the Senate now we're going to have new committee chairs. Obviously, we just as we record this, we just found out who the leader is going to be. Senator Thune yesterday. Yeah. Who are the key players that we should keep an eye out? You know who you know, everybody's going to get on TV and have an opinion. But who are the people in this new or do we know yet? Maybe I should I don't know that we know yet. But who are the players that when we hear [00:19:30] them talking that we should pay attention to because they might actually trump obvious. I mean, we'll just put him aside. I mean, yeah, he is the president, but in particularly the Senate or maybe the House. Yeah.

Thad Inge: I mean, and so you can start with the tax committees, which are relatively stable, at least in terms of the leadership. So in the, in the, in the Senate, you've got Ron Wyden, who's been the chairman from Oregon. Right. He'll be the ranking member. And then you have Mike Crapo, um, from [00:20:00] Idaho, who will become the chairman. He's been the ranking member, and he's considered sort of a, um, he's no pushover. He's the one that, you know, blocked this Wyden and Smith R&D bill, right? Um, but he's pretty, um, even keeled and and he's, you know, it's interesting, like, when I, when I've met with his staff in recent months, he said, we're keeping our powder dry. We're going to see how the election turns out. We're not getting ahead of ourselves. [00:20:30] Where? The House. They were going a million miles a minute and we're definitely getting. You know, it turned out to be right. But they weren't taking that sort of let's wait and see approach. And so but but interestingly, he has said and a lot of senators have said we think these tax cuts kind of pay for themselves. We don't need to be as worried about the the deficit. Well, in the House there there there's a little more sensitivity around that with the Freedom Caucus and others. Um, when you look at the membership of the Finance [00:21:00] Committee, the Republican side stand, stand pretty steady. They might pick up one seat because they won the majority. Right. And then it's not clear if Senator Thune right now is on the finance committee. It's not clear if he's going to keep his committee seats. Um, or give those up. A lot of times, the majority leader gives up their committees and just, you know, runs the body.

Roger Harris: Runs the body. Yeah.

Thad Inge: On the on the Democratic side, there could be as many as if if Casey ends up losing in Pennsylvania, which he's behind [00:21:30] right now they're doing a recount. Right? Um, there could be six seats opening up on the Democratic side because you've got a few retirements. Ben Cardin, Tom Carper, and Debbie Stabenow are all retiring. And then you had Sherrod Brown, um, lose. You've got Casey potentially losing. And. Oh, and then you had Menendez's seat, right. Um, his replacement is on there right now, but he's he's off at the end of the year. [00:22:00] Um, from new Jersey, he of Menendez obviously got convicted and stepped down. And so there's going to be a lot of New Democrats. Now they won't be calling the shots. But it is interesting just that there'll be a lot of new players. Um, yeah. On the house side, Jason Smith from Missouri I think is is likely Ways.

Roger Harris: And Means chairman.

Thad Inge: Of the Ways and Means chairman. You've got Richie Neal from Massachusetts who's former chairman, you know, very well respected and will stay on in that [00:22:30] position. Um, but the minority in the House, you know, will have little say in what's in this bill. And, um, and so those are the tax committees, but this is going to be more than just the tax committees. I mean, you're going to have for for one, the budget committee is important in the reconciliation reconciliation process. Jodey Arrington, congressman from Texas, is the chairman of the Budget Committee. He is also on the Ways and Means Committee. And he's [00:23:00] a big proponent of of let's watch our deficits. And I've heard him say things like, we can't do all this tax reform without entitlement reform. We're going to have to fix Social Security and Medicare. And that.

Roger Harris: Really makes it complicated.

Thad Inge: Politically. It's it's pretty safe to say that's probably not happening because because Trump said we're not doing that. Right. Um, but that's sort of where he's coming from. It's like, hey, we have to if we want to be fiscally responsible, we've got to look at, [00:23:30] you know, where the real revenues are. Yeah. Um, because you.

Roger Harris: Got to eventually get spending in control. I mean, you can't keep having these deficits getting bigger and bigger.

Thad Inge: Yeah, yeah.

Roger Harris: At some point, I don't know.

Thad Inge: Who's going to do it.

Roger Harris: Yeah. They got to reconcile it.

Thad Inge: That's the argument. And then and then of course leadership. You know if we have another speaker Johnson, which it looks like we will. Um, Majority Leader Thune they're going to play a big role. And, um, and then I know you said take Trump off the table, but but everyone's going to be looking for Trump. [00:24:00] All right. What are your real priorities? We know we can't do $12 trillion in spending here. Um, you know, what's what are the the the few things that we really, you know, want to get through.

Roger Harris: You don't think we're going to get taxes removed from tips over time and Social Security?

Thad Inge: Well, you know, I mean, it'll I we we definitely will not get all of those right. I mean they might try to do one of those to a degree, but there's no way that you can [00:24:30] do. You can do all that.

Roger Harris: And extend that. Yeah. Let's talk. You know, let's talk about it from a different perspective. Obviously, the IRS got a lot of money in the Inflation Reduction Act. And you and I have been in plenty of meetings where the IRS is out. I'll use the word celebrating. That's that's my word, not their word, you know, getting funding. And, uh, they've seen a little of it clawed back. But now that the party that gave him the money doesn't control the purse [00:25:00] strings, what do you think's going to happen to IRS funding?

Thad Inge: So that is a great question. And I don't think there's a ton of confidence that, you know, they're going to be able to keep it all. So the Inflation Reduction Act obviously gave 80 billion to the IRS. Right. Um, about 50 billion was earmarked or set aside for enforcement. What they what they call it enforcement. But that's a pretty broad, right.

Roger Harris: That covers a lot more than. And then they had.

Thad Inge: Modernization, customer service. [00:25:30] You know, the, um, the technology money. Republicans always said there should have been more technology, less enforcement. The reason they did it that way is because the enforcement money is what what raised the score. You know, what? What raised the money to pay for the rest of the Inflation Reduction Act. And so when they did the debt ceiling deal, part of what Biden agreed to was to roll back $20 billion, or just over $20 billion of that 80 billion. [00:26:00] And so that has now been rolled back over the last two, um, the last two fiscal year budgets. And so it's down to about 59 billion. Of course, Republicans have pushed to reduce that more. Um, we're now the the FY 25 budget is on a CR until December 20th. They haven't passed the budget yet. Right. Um, it's unclear whether they're going to [00:26:30] try to get something done before the end of the year or punt until March, which will allow Trump to put his imprint on it. Or or they're even talking about punting until September because they don't want to mess up the calendar with tax reform. And so it's a little unclear what's going to happen with with FY 25. But if they're looking to make cuts and to raise money, you and and they have the opportunity, this wouldn't happen [00:27:00] this year with Republicans still in. But if they had the opportunity next year to take some of that call, some of that IRS money back, um, I think that's definitely on the table. Now, of course, with the with these, uh, appropriations budgets, it is 60 votes. This isn't reconciliation. So Democrats still have a say.

Roger Harris: Still have you still have some.

Thad Inge: And so they're they're not just able to, you know, necessarily wipe it all out, but, um, but they're [00:27:30] very much at risk. We all saw what a political football this became over the last few years. Yeah. And, um, and so, you know, it was a favorite talking point of a lot of Republicans to just bash the money going to the IRS. And and if you get if you get these guys privately, most of them will say, yeah, yeah, well, we agree with the modernization. We agree with the customer service. We just don't like the, you know, enforcement stuff. Plus 80 billion seem like way too much, you know. Right. Um. Yeah. [00:28:00] And so how they finagle that, did they say, all right, we'll keep some of it, but it's got to go towards modernization, customer service. You know, it's yet to be seen, but it could have some real impacts. Yeah.

Roger Harris: And it's it's one of those things because it is funny I mean, I don't know anybody that got elected by promising to give the IRS more money, so. Yeah. You're not going to run around and say vote for me and I'll give the IRS extra money. But the reality is, and our audience is primarily tax practitioners, [00:28:30] I think we've all seen in the last few years as the IRS has gotten money. Now, some of it's slow to show an impact, but we're seeing some improvements. And, you know, we all think they need more people and need better training. And, you know, the online accounts are getting better and and all of that takes money. I think if we could have the discussion about spending it wisely and being efficient with the spending instead of whether they get it or not, we'd all be better off. But that's that's not necessarily [00:29:00] how the political winds blow. And, you know, and how do you make plans as an agency that never knows from one day to the next how much money you're going to have?

Thad Inge: And and also, it's not just that inflation Reduction Act money. There's the annual budget, you know. Right. And and they saw they saw cuts during the Trump years. And over the last 25 years that's been cut substantially. And, you know, the number of employees is down substantially at the IRS. [00:29:30] And so yeah, it the the go to answer, as you well know, um, for the last 20 years at IRS when you when, when there have been complaints about a system that's outdated or something that doesn't work because we don't have the funding to fix that or replace that, they kind of ran out of that excuse with this Inflation Reduction Act because you said, wait, you got $80 billion like and so they've, they've they have, you know, and and I think Werfel is was sort of tailor made for this kind of project. [00:30:00] I mean, this is what he did in the private sector and, and in the public sector, but they have been looking to modernize systems. Now, it's never as fast as we would like it to be. And sometimes the the way they go about it isn't the way we like, but but they have been making some progress and and to have that taken away would be, you know, would set all that back.

Roger Harris: Well, and when you need money in the budget to justify the money you want to spend. You need an effective agency to, you know, to try to close the tax gap [00:30:30] and do all the things that are there. And, you know, yeah, the IRS isn't perfect. They're not as bad as they're made out to be publicly, but they're not perfect. But but they do need funds. And and gosh, it's just you know, I know they're in a big hiring, uh, program right now. And because they clearly need people for all of you that call and you have to stay on hold for 90 minutes or however long it is before they cut you off and you know, some of the [00:31:00] problems you experienced. Some of that is lack of funds. Some of it is it's just, guys, come on, you can do better. But, you know, all we hear about is that you can do better. And so we're going to take your money away and then we get worse. You mentioned Commissioner Werfel. Now again there's an interesting dynamic. And I think this goes back to what the Tax act in 98 that gave the commissioner a five year term. Is that or the Restructuring Act or something that that took because it used to be the president came in and appointed an IRS [00:31:30] commissioner. When the president went out, the commissioner went out and we appointed another one. But somewhere back in those days, we gave the commissioner a five year term. So Commissioner Worshipful came in. And during the Biden administration, I know we were talking before we started recording. We're not sure if it's 2 or 3 years, but he's got at least 2 to 3 years left. So Trump can hate him, but he can't get rid of him. Right.

Thad Inge: Well, so some of these positions are a little different. So he's got a five [00:32:00] year term. But if Trump wanted to fire him, he could still fire him. Um, now that was a big rub under Koskinen, because a lot of the Republicans on the Hill said, why don't you fire him? Like. And Trump said, well, I'm going to let him finish his term. It turned out that Koskinen and Trump had a personal relationship back from New York City, which is kind of ironic because everyone, you know was calling for his impeachment. But they had been, you know, the first big hotel deal that [00:32:30] that Trump did. Koskinen had worked on it with him, but.

Roger Harris: Oh, I didn't know that. That's interesting.

Thad Inge: No, it's a there's.

Roger Harris: Always a backstory. Exactly.

Thad Inge: And, um, so but with Werfel, I think the inclination I mean, I haven't heard this directly or anything, but I think the inclination is let him serve out his term. There's, um, and so he does, you know, it is a five year term. Um, but there's still this ability if the if the president wanted to fire, you know, [00:33:00] Jerome Powell people have seen in the news recently that's come up with Jerome Powell because people have said, uh, he said he doesn't have the legal authority to, to fire me, you know, like I can finish out my term. And so, um, there are different positions that sort of are drawn up differently. But but yeah, we expect Werfel to to finish his term. Um, you know, when you think about political appointees and the administration, IRS has two. [00:33:30] There's the, um, the commissioner and the chief counsel are appointed by the president. Everyone else in the whole agency's career. I even looked up the taxpayer advocate yesterday because this came up on another call, and I was was wondering about taxpayer advocate, taxpayer advocates appointed by the Secretary of Treasury in consultation with um, with the IRS commissioner. But but um, other agencies have, you know, lots of presidential appointees, Treasury [00:34:00] being one of them. So the Office of Tax Policy at Treasury, a lot of those folks, they have careers, but a lot of them are politicals, too. Um, so Treasury is filled with political appointees. Um, obviously IRS technically reports into Treasury, right? Um, but the actual staffing of IRS will remain pretty stable, especially if Oracle stays there.

Roger Harris: Yeah. Treasury is going to be interesting because that's where the policy theoretically comes from. You know, they do the policy. The IRS does the administration of all of it. [00:34:30] We're going to get a new secretary of Treasury and a new tax policies. And, uh, then they'll be pushing those down to an IRS. Yep. Uh, to implement. So there's could be some changes of.

Thad Inge: And if.

Roger Harris: If you.

Thad Inge: If you look at the regulations like for example, the Inflation Reduction Act, all these regulations around the the climate tax credits and everything else, it's almost always an IRS and Treasury [00:35:00] joint, you know, regulation. Yeah. Is the way they do it. Um, and so yeah, they work closely on a lot of this stuff. And the political decisions are coming out of or coming out of Treasury.

Roger Harris: Treasury. Treasure. Any. Any inclination. Now you can. I don't know when this podcast is going to air and when somebody's going to listen to it. So you could either be the smartest man ever to be on a podcast or the dumbest. So who's going to be the secretary of Treasury?

Thad Inge: So I walked by at CNBC or Bloomberg or something on [00:35:30] one of our TVs, and I'll just walk by and it said Trump said Jamie Dimon will not serve in his administration. Okay, I think we all heard Jamie Dimon say I'm not touching it. You know. Yeah. And so, um, yeah, I really don't know. I know that there's some people close to, um, to Trump, one of them being Lutnick, who's the Cantor Fitzgerald, uh, CEO who's been running the transition. But I, you know, I really don't know.

Roger Harris: Yeah. Well, and one thing [00:36:00] we've learned as we record today is who he appoints is is hard to predict because there's some that are very predictable and some is like, well, where did that come from. So yeah, who knows?

Thad Inge: Last night we had Matt Gaetz for Attorney General, Tulsi Gabbard for, you know, intelligence. Right. And, um, National Intelligence Agency and, uh, and so and then, um, I was reading that some Trump supporters were upset [00:36:30] with Rubio. And in DC, Rubio was sort of the most welcomed announcement because people were like, oh, we know him. He knows foreign policy. He's been on the national stage. That makes sense. Well, I read that, um, that a lot of sort of the Trump base is upset, like, why would we appoint this guy? He's not one of us. Um, so.

Roger Harris: Yeah, that's what's funny. What the people who are liked in DC or hated outside of DC and vice versa. So, so.

Thad Inge: Exactly. And and you know, it's going to be interesting. Just the confirmation [00:37:00] how confirmations, you know, work because yeah, the first few days it was like we're going to rush through President Trump elect president elect Trump's nominees. He's got the right to his own cabinet, will do everything we can to get them confirmed. And then the second Gateshead, uh, people started walking that back. Now we're going to have a very thorough.

Roger Harris: No, no.

Thad Inge: No, no, these candidates, no one's just walking in here. And so it's, um, it will be, um, you [00:37:30] know, we'll just have to see how it plays out.

Roger Harris: Only in Washington. All right, let's switch topics a little bit to something you and I have spent a lot of time on recently. And that's beneficial ownership because, again, I don't know that the bill that started it was political. It was pretty much bipartisan. So, uh, a change of parties and control shouldn't doesn't change that. There's been a lot of controversy as far as the implementation of it. Yeah. Uh, I think that's where the parties have kind of split at this point. So we're [00:38:00] getting close to our deadline. It doesn't appear that we're getting these massive people complying. I think I saw and I don't know if it was 44 or 55, but there was 44 or 55 congressional Republicans that wrote a letter to FinCEN and said, and I didn't realize this. It said there was a two year period they could delay it, and they've only done one. So go ahead and add another year to it. The new Congress doesn't take over the laughter December 31st, which is when you're supposed to do all this. [00:38:30] Is this going to have any impact at all, do you think on beneficial owners or are we just going to and you and I know there was some undercurrents to make some changes even before the election. Is this going to speed it up, slow it down, do nothing to it.

Thad Inge: You know the issue in obviously there's a lot going on in Congress right now, a lot of competing issues. It hasn't really caught fire recently. Um, that letter did have a lot of signatures, you know. I mean, there's [00:39:00] a lot of congressmen that signed on to that letter. And so I could see the letter getting some traction and that was sent just before the election. But I could see FinCEN either saying, all right, we've got some cover now to to delay this thing because it might be, you know, in their best interest to delay it to. Yeah. Um, or getting the attention, you know, some amendments getting the attention of Congress. I always think back to the 1099 reporting threshold. Right.

Roger Harris: 1099 K yeah.

Thad Inge: 1099 K reporting threshold [00:39:30] a few years ago where they were, you know, reducing it to $600 and that there was no we had a lot of meetings on the Hill. There was no real, you know, effort. And then come Thanksgiving time, a lot of people came out of the woodwork that had not even been engaged on the issue. I remember one was Senator Manchin was like all of a sudden on like the nightly news saying, we gotta end this. And we're like, all right. You know, he he was, where.

Roger Harris: Have you been?

Thad Inge: Yeah, exactly. And so [00:40:00] he proposed, you know, I, um, remember he had a bill for, I think two years and then, uh, Shelley Moore Capito, his his fellow senator from West Virginia, had one for one year, and they couldn't compromise. They both had their bills. They couldn't find a compromise. And um, and so they both failed and didn't get on it. But then they wrote Congress. I mean, then they wrote, um, the IRS and Treasury and said, do it administratively. And no one thought they had the authority to do administratively. And then sure enough, [00:40:30] like they found it Christmas, they came out with it and said, it's delayed and we're going to delay it a few years, and we're going to phase it in over time. And, um, and I know we laughed some because the folks that had been calling for it to be delayed then came out and said, you don't have the authority to do this, right? It's like, yeah, but this is what you're asking us to do. So, uh, um, so, you know, this thing could catch fire and become more of an issue in the last [00:41:00] month or six weeks, you know, especially if there's a bill, bell, if there's a big bell, you can see it getting tacked on. Regardless, there's going to be some kind of. But there's going to be a CR and stuff will get tacked on whether this, you know, would make it on that. I think that, you know, what that letter asked for was a delay. They in some places it said implementation. In some places it said enforcement. Um, I think they would still operate. They just wouldn't, you know, find people. Um, if [00:41:30] you.

Roger Harris: Look because you do have people that have already done it. So you're not going to tell them they have to do it again.

Thad Inge: So if you look at the Affordable Care Act, the employee shared responsibility penalties. What they kept doing for those is they just IRS would say, we're not going to we're not going to send out the penalty notices this year. And because they they just knew compliance and those penalties were really big for ACA. And so they just they delayed it a few years. But people were still supposed to do it. But they just said we're not going to penalize you. So maybe something like [00:42:00] that will happen or maybe not. I mean, maybe, maybe it just goes into effect. It doesn't catch fire. And and then, um, you know, they're not going to have 50% or 75% compliance. I mean, they might. No.

Roger Harris: Not going to be they might get up to.

Thad Inge: You know, I don't know, I think that that letter said they're at about 10% right now. Yeah. You know, maybe they get up to 25, 30% by the end of the year because a lot of people do it at the end of the year. But, um, they're not going to have 100%. But I think that, you know, I know that guys like, you can't bank on this [00:42:30] because you're, um, you don't want to be, you know, your clients to be on the hook or you don't want to be on the hook. But I could see it as, you know, folks, they just encourage people to keep doing it. And they don't send out a bunch of penalties. Penalties, you know.

Roger Harris: Because going back to our earlier thing, I mean, obviously FinCEN is in Treasury. So eventually we'll get a new Treasury secretary that might look at this and go, this is the dumbest thing I've ever seen in my life. And but that's not going to happen till after January [00:43:00] 20th.

Thad Inge: Well, and it is interesting that it's become Partizan, but because it was passed on a bipartisan basis, because, you know, Republicans on Financial Services Committee supported this, the call for complete repeal has still been pretty muted. Right. You had Tommy Tuberville from Alabama in the Senate. He had a bill that he was touting that said, let's completely repeal.

Roger Harris: This, gets rid of it.

Thad Inge: But if you look at that, um, letter that came over from the house, it was let's, you know, let's delay it for [00:43:30] a little while. Let's get more people to comply.

Roger Harris: Yeah, there seems to be and I'm not smart enough to understand it. There seems to be some benefit in the whole trafficking of illegal monies and things that this accomplishes because. Which. Okay, if that's the case, then let's implement it better. That's I think that's kind of been our argument as opposed to saying throw the whole thing out, because quite honestly, I'm not smart enough to know that, you know, the benefits if they're really there. And this [00:44:00] really does help get money laundering out of our system, then yeah, we should do something, but let's do it in the right way. So yeah.

Thad Inge: And I don't think FinCEN has been super easy for stakeholders to work with. I mean, I know people have wanted to kind of work with them on technology solutions or obviously getting more guidance about, um, the whole thing. And they've been kind of, um, you know, difficult to work with.

Roger Harris: So maybe something could happen at the end of the year [00:44:30] in the lame duck, you know, or maybe could something happen after the first of the year when the new administration takes over? But for right now, we've got to all move forward as if it's the law. Well, it is it's the law. And it's due December 31st. And until something changes, that's what we got to go by. So, so so we'll keep trying. I think you've already got me on the meeting next week to talk about it with somebody. So we'll see what happens and see [00:45:00] if there's anything because I mean, again, it certainly can be done better. I don't know that. I don't know how FinCEN can justify some of this stuff, but.

Thad Inge: Well, you know, most regulations exempt small businesses. You know, that's sort of there's the, um, the Regulatory Flexibility Act is this, you know, small business bill that sort of says when you have a big regulation, look for ways to make it easier on small businesses. So sometimes small businesses get a longer phase in period or businesses [00:45:30] under ten employees get exempt. This is the complete opposite because it says if you're over a certain size, you're good to go, you know?

Roger Harris: But if you're the.

Thad Inge: Small mom and pop, that's you. We want you, you know? But if you make more, if you make more than 5 million, you're fine. But if you're if you make under that, we want you. And so um, and so it's targeting those that are least equipped. And so they have to rely on, you know, their, their CPAs, their payroll firms, whoever [00:46:00] it is that they get their business advice for to help them. Um, and if you don't have someone like that helping you, you're just not on top of this stuff.

Roger Harris: No, you don't. Probably don't even know about it, first of all. All right, we got a couple more minutes. This isn't anything to do with taxes, but it's something I always find really interesting after an election. Talk about what? Let's focus on the Senate. Because it went from Democrat control to Republican control. Yep. So that means the winning party gets new, bigger offices and bigger staff. So what's [00:46:30] happening right now in terms of are all the senators running around trying to pick out their new big office or the committees and all this stuff? How when does all that start and how does that happen?

Thad Inge: You know what I always find the funniest is new members of the Senate. They have these little transition offices in the basement. Yeah. And I mean, sometimes they're literally like trailers or like or built out of styrofoam or something. And, um, and they put these new senators in there and [00:47:00] they don't have a lot of they can't really staff up right away because they don't have room for the staff. They have their basic staff, but a lot of times they'll say, we're not hiring until we get till we get a bigger office, because the more senior senators want to take their time to really think about which office they might want to move into. You know, you've got some senior citizens that retired or lost. And so the guys moving up are like, we gotta really think about where we want to go. And, um, and so the, the junior, the brand new [00:47:30] senators, they just have to wait for months in these trailers until, until the offices shake out. So some of that's going on. I think the House might be a little more efficient in terms of how quickly they do it. Just because they've got so many more offices. They have to they have to move around. And then in the Senate, you don't really have this in the House, except maybe with leadership. But in the Senate they have what they call hideaway Space, which is these offices in the Capitol, in the Capitol building [00:48:00] that are kind of like hideaways. And, um, and that's totally based on seniority. And you have some, you know, some very senior senators that like to kind of hoard their real estate that might have multiple hideaways. Um, and so that will, you know, shake up as well. Um, and so and those are unofficial offices. They aren't really staffed or anything, but it's where they can sneak away to or have a meeting there. Um, so yeah, that's, um, you [00:48:30] know, part of the part of the culture, it's.

Roger Harris: Part of the.

Thad Inge: Seniority system.

Roger Harris: It's, you know, it reminds me of the old thing you used to see when people worked in big open settings and somebody quit or got fired. Somebody ran over and got their stapler because it was better than the one they had. You know, this is like everybody trying to go get the best office in the new office. Yeah.

Thad Inge: And Congress is interesting because you have these people that get elected that maybe were CEOs in their past lives or, or, you know, multi multi-millionaires [00:49:00] or, you know, people come in like the, the Mitt Romney's of the world and all of a sudden they're a freshman. So they're at the end of the end of the dais. They have the small little office, you know, and they have to kiss the ring to the, you know, the leader. And it's not it used to be leadership is very powerful these days. It used to be that the chairmen of the committees really had a ton of power that is flattened, you know, flattened out a little bit, and you've got TV and social media and all that stuff has, [00:49:30] um, you know, now you can have some freshmen that like the AOC's of the world, they.

Roger Harris: They, they get famous.

Thad Inge: But, um, but it's yeah, it's it's, um, it's always interesting.

Roger Harris: And I guess the last thing, it's kind of like a football coach getting fired. We all focus on the head coach, but there's assistant coaches that lose jobs too, and staff is going to there's going to be some staff that, you know, worked on the Democratic side that are going to lose their jobs because their committee assignments don't carry as many, and they probably don't get hired [00:50:00] by the Republicans.

Thad Inge: No, absolutely. And you've got you've got the administration folks, the Biden administration folks, um, is where you have a huge influx of people. And then, uh, the Hill can sometimes absorb some of those people. But because, um, Democrats lost seats, you know, there'll be less jobs for Democrats on the Hill. And so, you know, a lot of folks are trying to figure out their next steps. And, um, you know, what makes sense? And so and that can be a [00:50:30] stressful time, obviously. Oh, yeah. And it's coming at the holiday. But people got get good skills when they work in administration. So normally it works out. But it's that period of transition that can be a little time of year for folks. Yeah, yeah.

Roger Harris: All right. Well thank you so much for doing this. We hope everybody enjoyed this. I mean again it's it's a reality. Every four years we have elections. And this was just a little odd because we've got a president coming back. We got a tax bill, uh, expiring or uh, [00:51:00] and we're just in crazy political times. So it's going to be it's going to be an interesting few months and years. So thank you for joining us. And um, I guess I'll see you next week.

Thad Inge: Yep. And we'll have to do this again when we're in the middle of we're in the middle of tax reform reconciliation. We can see what's actually happening.

Roger Harris: Right. Yeah. We'll we'll do this again and look back to this and say did we get anything right. All right Dan, thanks a lot. Uh, again. See you next week. Uh, thanks for all your knowledge [00:51:30] and expertise. We appreciate you sharing it with our audience. Thanks to all of you for listening and tell your friends about the Federal Tax Update podcast, and we'll be back soon with another one. Thanks, everybody.