How the Trump administration is giving more tax breaks to the wealthy | World news

The primary goal: The administration is quickly working to repeal a 2022 law aimed at ensuring that a slice of the country’s most profitable companies pay at least some federal income taxes. This provision, the alternative minimum corporate tax, was passed by Democrats and signed into law by President Joe Biden.

It sought to prevent companies such as Microsoft, Amazon and Johnson & Johnson from reporting large profits to shareholders with low tax liabilities to the federal government. It was expected to raise $222 billion over a decade.

But a series of notices issued by the Treasury Department and the IRS early this summer means the tax could bring in a fraction of that.

These reliefs come in addition to the nearly $4 trillion tax cut package that President Donald Trump signed into law in July. This legislation, passed entirely by Republicans, greatly benefits corporations and the wealthy. It is expected to add trillions of dollars to the federal deficit, and comes with sharp cuts to health care for the elderly and food stamps for the poorest Americans.

Through various tax relief provisions, the administration is now effectively adding hundreds of billions of dollars in new exemptions for large companies and investors. The Treasury Department has the authority to write rules to help the IRS implement tax laws passed by Congress. But the Trump administration’s aggressive actions raise questions about whether they exceed its legal authority.

Trump and Republicans in Congress have attacked federal employees as tools of the “deep state,” exercising power beyond anything allowed by law. Many tax experts said the administration is now doing the same, undermining laws that hurt big corporations and the super-rich.

“It is clear that the Treasury Department was enacting illegal tax cuts,” said Kyle Pomerleau, a tax economist at the American Enterprise Institute, a right-wing think tank. “Congress determines the tax code. The Treasury Department undermines this constitutional principle when it asserts greater authority over the structure of the tax code than Congress grants.”

The alternative minimum tax is not the administration’s only effort to eliminate taxes on large corporations and wealthy individuals. Last month, the Treasury Department and the IRS granted a new tax break for foreign investors in U.S. real estate. In August, they withdrew regulations that prevented multinational companies from evading taxes by claiming duplicate losses in multiple countries at once.

As The New York Times previously reported, the Treasury Department and the IRS have backed away from a crackdown on aggressive tax shelters used by major companies, including Occidental Petroleum and AT&T. This equates to another $100 billion in cuts, and perhaps much more, according to tax consultants.

Such changes are not widely publicized by the Treasury Department, but are being closely followed by tax planners of the nation’s largest companies — who applaud the new guidelines. In notes to clients, advisers at KPMG celebrated the new “range of options” available to investors seeking to avoid the alternative minimum corporate tax. They noted that the Treasury’s moves provided “considerable flexibility” for customers to reduce their bills, allowing them to “pick and choose” the rules that best suit their needs.

A Treasury Department spokesperson said the new moves were a “practical approach that supports American investment and competitiveness” and are intended to replace the Biden administration’s “maze of compliance that would have buried taxpayers in red tape.” The spokesman did not address the issue of whether the Treasury Department was exceeding its legal authority.

Tax experts said the Treasury Department’s actions may contribute hundreds of billions of dollars to the federal deficit. This is in addition to the trillions that the legislation Trump signed in July is already adding to the deficit. However, unlike laws passed by Congress, the Treasury Department is not obligated to publicly account for lost revenue due to its actions — such as cutting spending to make up for money that is no longer being collected.

Doing so through the Treasury Department means “you can just give the good stuff to one group, without having to take anything back from another group,” said Daniel Himmel, a law professor at New York University. He said that this loophole is one that “previous administrations exploited and which the Trump administration is exploiting more forcefully.”

The actions taken by the Treasury Department over the past few months are an accelerated version of what the agency did during the first Trump administration: Regulators halted efforts to crack down on the lucrative estate tax avoidance strategy, and eased new taxes on multinational corporations in the 2017 Republican tax package.

Big companies actually keep two sets of books — one for investors and one for the IRS. The profits they file with the IRS allow for various deductions that can bring the corporation’s tax rate much lower than the corporate tax rate of 21%.

The holy grail of tax planning is discovering a deduction that companies can claim on their tax returns — but not reported to investors, which would reduce their profits, potentially hurt their stock prices, and thus lead to lower compensation paid to executives.

In 2021, the Biden administration was unable to convince Congress to sign on to an international plan to tax multinational companies. So the Democratic-led Congress has revived an old idea that similar results could be achieved by taxing the same profits that companies make to their investors.

This alternative minimum tax was part of a 2022 domestic policy law called the Inflation Reduction Act. The new tax will apply to large companies whose effective tax rate is less than 15%.

Not everyone viewed the new tax favorably. “But this is something they were able to do at that moment in time,” said Kimberly Klosing, a tax official at the Biden administration’s Treasury Department and now a law professor at the University of California, California.

The original proposal was relatively simple. The order is limited to a small group of companies with average profits of more than $1 billion annually, and will require IRS auditors to look at the income reported to shareholders. If companies pay taxes at a rate of less than 15% on those profits, the new tax will apply. It will include at least 80 companies, according to one study.

Industry lobbyists took action, and Democrats in Congress began creating massive exemptions, allowing deductions, for example, for companies that invest in heavy machinery and wireless spectrum used by the likes of T-Mobile and Verizon.

As a result of such changes, projected revenues from the new tax fell to $222 billion from $319 billion, according to congressional estimates.

Revenues are expected to shrink further, partly due to actions taken by the Treasury.

The big, beautiful bill that Trump signed into law in July provided more than $1 trillion in aid to big corporations when they calculate their income tax bills. But these exemptions did not extend to the separate calculations businesses must make for their alternative minimum tax bill. As a result, many companies’ regular tax bills promise to fall so sharply – below 15% – that they may be newly subject to the alternative minimum tax.

The new law would have swept away two of the largest cryptocurrency companies, Coinbase and Strategy. In response, they sought to change the rules for calculating the minimum tax. Three senior legal advisers — Michael Desmond, who served as chief counsel to the IRS in the first Trump administration; Andrew Strelka, formerly a senior tax adviser in the Biden administration; and Eugene Scalia, the labor secretary in Trump’s first administration — pushed for an exception to the “market-rate” gains reported to investors. These gains reflect the increase in the value of investments held by companies that have not yet been sold.

On September 30, the IRS granted their request, explicitly referring to “digital assets.” Lawyers at Vedder Price wrote that major cryptocurrency companies “got a reprieve.”

Strategy announced within hours that it “no longer expects to become subject” to the minimum tax, after earlier revealing a potential bill of billions of dollars under the new tax.

Coinbase said in a statement that it supports the Trump administration’s approach to minimum tax administration regulations. The strategy did not respond to a request for comment.

Sen. Ron Wyden of Oregon, the ranking Democrat on the tax-writing Senate Finance Committee, complained that cryptocurrency companies “owe taxes, and they’re unhappy about them, so they’re turning to the Trump administration for a special exception.”

Some energy companies are already starting to benefit as well. Cheniere Energy, the natural gas exporting giant, revealed in a securities filing last month that, thanks to a recent Treasury Department notice, it is entitled to a refund of $380 million in alternative minimum taxes previously paid.

Private equity firms are another beneficiary. Beginning in early 2023, industry giant Blackstone has pushed for the inclusion of a number of provisions in regulations to administer minimum taxes.

This summer, Blackstone succeeded. Much of the latest guidance meets Blackstone’s requests, giving private equity firms enormous flexibility to calculate their billing.

A Blackstone spokesman declined to comment.

The regulations also provide new flexibility for insurers in using so-called tax losses. First, the new rules allow some insurers to use those losses to reduce their bills under the minimum tax — even relative to prior years.

“They’re effectively repealing the law,” said Monty Jackel, a tax attorney and former IRS official, referring to the minimum tax law.