Jennifer Acuna, principal in KPMG’s Washington National Tax practice, stressed that proactive planning is essential for navigating the complexities of the upcoming tax season, especially given the challenges facing the IRS.
Permanence vs. ‘Tax Cliffs’
Speaking with Checkpoint, Acuna emphasized the significance of permanent tax provisions for long-term business planning, contrasting them with the uncertainty created by temporary changes and “tax cliffs.” The One Big Beautiful Bill (OBBBA) enacted July 4 includes permanent extensions to Tax Cuts and Jobs Act (TCJA) provisions and its own temporary measures.
For major, multi-billion-dollar investments that have long-term horizons, legislative certainty is critical, said Acuna. Without that certainty, there is “this inability to engage in longer-term planning,” as looming cliffs are “infinitely” worse for business planning. The last tax reform package, the Inflation Reduction Act, was signed into law just three years prior to the OBBBA, and five years after the TCJA.
Frequent overhauls to tax laws, especially when there are swings in party control of Congress and the White House, can result “putting all of your hopes into the political fates and expecting Congress to act to provide taxpayer relief,” Acuna explained. “That is not a place you want to be, as we’ve seen in recent years.”
She pointed to the treatment of research and experimentation expenses under IRC § 174 and the business interest limitation under IRC § 163(j), where expired or changing rules made planning difficult. The permanence of many business provisions in the OBBBA, she noted, is a “major benefit to business.”
But the OBBBA also temporarily raises the state and local tax (SALT) deduction cap from $10,000 to $40,000 before it reverts, and introduces income thresholds. This provision “just created a mini cliff in the tax policy space where you’re going to see the significant drop off in the SALT benefit,” Acuna expects.
Guidance Rollout and Engaging With Treasury
Despite a significant reduction in its workforce and the disruption of the longest government shutdown in history, the IRS and Treasury have begun issuing a “steady stream of guidance,” which Acuna called a “relief to taxpayers.”
Yet tax filing season is just around the corner. With that in mind, Acuna’s best advice for taxpayers and practitioners is to act immediately. “What we have been recommending to clients in particular, is … to start modeling sooner rather than later,” she stated. “If you’re waiting for guidance to even start, you’re already many steps behind.”
Acuna explained that Treasury is still drafting rules and taking feedback from the public. “They’re open to discuss potential problems and potential gaps … that need to be filled in upcoming guidance,” she said. “The time is now to … go and speak to Treasury to try to get some clarity,” especially when planning for the new law yields “counterintuitive results.” Put simply, the Department should know about issues taxpayers are facing so guidance can address them sooner rather than later.
Acuna acknowledged that practitioners might hesitate to approach Treasury, fearing an unfavorable interpretation of a rule. However, she advised that the risk of inaction is greater. While there is always an “analysis of whether or not to bring the issue” to regulators, she concluded that “more guidance is always better than less guidance.” She urged practitioners to seek clarity to avoid having their clients’ critical issues lost or unaddressed as Treasury finalizes its rules.
Also worth noting is that a reduced IRS workforce will directly impact the “sheer volume of controversies” the agency can handle, forcing it to prioritize certain issues for examination, she said. “It puts more emphasis on the prioritization of issues at exams.”
Client Education
Given the scale of the legislation, Acuna said the first step for practitioners is always to “analyze exposure.” For example, the law’s changes to the TCJA’s global intangible low-taxed income regime (now referred to as net controlled foreign corporation tested income) will impact taxpayers differently, depending on their unique facts and circumstances.
While the OBBBA is largely an “extenders package” rather than a creator of entirely new tax systems like the TCJA, the technical details and retroactive provisions will still pose challenges, Acuna cautioned. Practitioners should educate clients on the small technical issues, which she said are “usually what gives rise to controversy.” This will be especially true for areas where the IRS is likely to focus its limited examination resources, such as the clean energy sector.
“But fewer exam agents and less capability doesn’t always translate into better results for taxpayers,” Acuna clarified.
Take your tax and accounting research to the next level with Checkpoint Edge and CoCounsel. Get instant access to AI-assisted research, expert-approved answers, and cutting-edge tools like Advisory Maps and State Charts. Try it today and transform the way you work! Subscribe now and discover a smarter way to find answers.
