A Volvo tax executive made a quietly damning admission at a recent international tax conference: The company no longer factors tax incentives into its geopolitical investment decisions. The shift appears to be largely due to credits’ unreliability in practice.
This seems like basic risk management. A long-term investment model can’t count on green energy tax incentives that can be repealed or defunded as quickly and easily as they’re passed. The implications could be bigger than one automaker or one credit. If multinational companies’ trust in tax incentives collapses, the entire premise of incentive-based industrial policy starts to unravel.
And corporations now have good reason to doubt those incentives’ enduring nature. Companies that bet big on the US clean energy transition during the previous administration lost big in July, when President Donald Trump and congressional Republicans pushed through a tax-and-spending package that clawed back a huge swath of green energy incentives created under the Inflation Reduction Act just three years earlier.
Electric vehicle credits are gone. Subsidies for clean hydrogen, wind, solar, and even nuclear energy are slashed. What was framed in 2022 as a decade-long runway for green investment became a cautionary tale on how quickly industrial policy can be uprooted by shifting political winds.
The short-term consequences of gutting green tax credits are clear: fewer projects, declining deployment of green technology, and lost jobs. The long-term effects may be less obvious and more difficult to fix. Once companies stop believing US tax policy is durable, they’ll stop building around it—reducing tax credits’ effectiveness in spurring investment.
If Volvo’s views are a bellwether, lawmakers soon will realize that they can only push and pull the tax incentive lever so many times before it breaks off in their hands.
—Andrew Leahey
Welcome to the Week in Insights for Bloomberg Tax’s latest analysis and news commentary. This week, experts discussed IRS furloughs, the 3M transfer pricing case, and more.
The Exchange—It’s where great ideas on tax and accounting intersect.
Insights
IRS Furloughs Demand Tax Pros’ Close Documentation and Patience
Tax professionals should use digital options when available, document steps taken to comply with filing requirements, and remain patient during an uncertain period for the IRS.
IRS Focus on Obamacare Enforcement Creates Pitfalls for Employers
If the IRS contacts an applicable large employer about noncompliance or an untimely filed form, speed is necessary to obtain the relevant information to avoid a penalty assessment—or to fight one.
3M’s Transfer Pricing Victory Puts Brakes on IRS Overreach
The Eighth Circuit’s ruling in 3M Co. v. Commissioner reinforces the principle that income blocked by law isn’t taxable—but taxpayers’ transfer pricing documentation must be consistent across jurisdictions and ready to withstand audit scrutiny.
Expiring Home Energy Credits Calls for Urgency From Tax Advisers
Tax practitioners who work with home service providers such as solar installers would be wise to urge their clients to spread the word that numerous home energy tax credits are expiring at the end of the year.
Strong Policies Shield Tax-Exempts From ‘Domestic Terror’ Probes
Nonprofits that strengthen governance, financial tracing, and grant oversight now will be best positioned to withstand heightened scrutiny by the Trump administration, safeguard their tax exemptions, and continue their missions.
Multinationals Need to Get Ready for UAE’s E-Invoicing Rollout
Multinational enterprises in the United Arab Emirates need to start preparing for the rollout of mandatory electronic invoicing and should stay aware of potential changes in the compliance process.
Nonprofits Can’t Afford to Ignore Unrelated Business Income Tax
Nonprofit leaders and professionals can’t afford to overlook revenue-generating activities that could subject their organizations to unrelated business income tax.
EU Energy Tax Reform Shows Green Ambition Tempered by Pragmatism
Recent changes to the EU’s energy taxation directive make clear that, in a quest for economic balance, fossil fuels will become more expensive while clean energy will be rewarded.
It’s Time for Businesses to Get an Unclaimed Property Game Plan
With states ramping up enforcement of unclaimed property, tax and finance departments need to move the issue further up their priority list to avoid a long, costly audit.
Columnist Corner
The Minnesota Supreme Court’s ruling in Humana MarketPoint, Inc. v. Commissioner of Revenue could undermine knowability in corporate tax liability, Andrew Leahey argues in his latest Technically Speaking column, adding that states making the shift to market-based sourcing should codify the practice instead of implying it in court.
“And taxpayers themselves—especially those operating across state lines and with complex transaction chains—must demand that rules be built on ex ante predictability, not ex post inference,” Andrew writes. Read More
News Roundup
IRS Furloughs Could Crimp GOP Tax Law Guidance, Rules Rollout
IRS employees implementing the GOP July tax law are largely exempt from staff furloughs amid the government shutdown, but the shutdown’s impact could still have a ripple effect on the rollout of regulations and guidance to taxpayers.
Treasury Pledges New IRS Chief to GOP Tax Writer After CEO Pick
The Trump administration plans to name a new nominee to be IRS commissioner even as the Treasury Department Monday named a new CEO to lead the agency, according to the office of a key tax writer.
California Ends Long-Standing Tax Break for Solar Power Installs
California Gov. Gavin Newsom (D) signed a bill that confirms the end of a property tax break for solar power projects that’s been on the books since 1980.
Nebraska Falls Back in Compliance With Sales Tax Uniformity Pact
Nebraska enacted a legislative fix that brings it back into compliance with a compact aimed at simplifying sales taxes across 24 states, the Streamlined Sales Tax Governing Board found.
Tax Management International Journal
Customs Enforcement Tightens: Are you Prepared for the Scrutiny?
Strategies for navigating a new era of customs enforcement and the latest developments are discussed.
Are Companies’ Remote Workers Creating Permanent Establishments?
Cross-border telework present employers with heightened risks and require careful handling to avoid unintended tax consequences related to permanent establishment.
Tax Management Memorandum
New Notices Make CAMT Regime More Favorable But More Complex
The IRS issued new guidance that would appear to lessen CAMT burdens for many large corporations, but the book-based tax regime remains exceedingly complex.
Do Tax Rules Still Favor Charity Over Social Welfare Donations?
OBBBA reduces the income tax benefit of claiming a charitable deduction, prompting donors to reconsider tax implications when deciding between making a nondeductible contribution to a social welfare “lobbying” organization or a deductible contribution to a “charity” organization.
Career Moves
Holland & Knight Hires Corporate Tax Partner in Mexico City
Julio Freyssinier Isoard joined Holland & Knight as a partner in its Mexico City office, the firm announced Monday.
Nelson Mullins Brings On Estate Planning Partner in Greenville
Hall Provence IV joined Nelson Mullins Riley & Scarborough as a corporate partner in its Greenville, South Carolina office, the firm announced Tuesday.
Caplin & Drysdale Brings Plambeck to International Tax Group
Charles Plambeck joined Caplin & Drysdale as of counsel in its international tax practice, the firm announced Tuesday.
Baker Botts Hires Two Transactional Tax Partners From Venable
Friedemann Thomma and Becca Chappell joined Baker Botts as transactional tax partners in its San Francisco office, the firm announced Tuesday.
Adler Pollock & Sheehan Hires Kristen Alberione as Tax Counsel
Kristen Alberione joined Adler Pollock & Sheehan as senior counsel in its tax practice in Providence, R.I., the firm announced Friday.
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