Week in Insights: Tax Package’s Timing Could Raise Utility Costs

If you see your electricity bill rise in the coming months, blame a convergence of soaring demand for data centers, aging infrastructure, and the One Big Beautiful Bill Act.

The OBBBA effectively gutted federal tax credits for wind and solar projects. While the wisdom of this move is debatable, the effects will head straight to your utility bill. Without subsidies, renewable energy gets pricier as fewer projects get built. Natural gas, cleaner than coal but more expensive than renewables, fills in the gaps. Increased demand for gas likely will drive prices up.

The issue doesn’t end with generation costs; the timing is also problematic. Utility companies across the country face a demand boom driven by artificial intelligence data centers. Utilities have already requested significant rate hikes to upgrade infrastructure and feed the beast.

When fewer renewables meet more expensive gas and an explosive demand from data centers, an upward pressure on rates is the predictable result. Some estimates suggest electricity bills in parts of the country could jump as much as 60% to 350% over the next decade. For many, that could lead to a choice of whether to keep the lights on or feed their families.

This is a textbook example of how a sprawling omnibus bill can result in slow-motion chaos. A tax tweak today can reshape power markets tomorrow. Before you know it, a homeowner in Oklahoma or a renter in Kentucky is downsizing because they can’t afford to heat and cool their home—all because federal policymakers made clean power more difficult to finance right when demand was set to spike.

—Andrew Leahey

High voltage power lines run through a sub-station along an electrical power grid.

Photographer: Joe Raedle/Getty Images

Welcome to the Week in Insights for Bloomberg Tax’s latest analysis and news commentary. This week, experts analyzed an IRS consent decree allowing political discussion in churches, Canada’s cancellation of its digital services tax, and more.

The Exchange—It’s where great ideas on tax and accounting intersect.

Insights

IRS Proposal to Allow Political Speech in Churches Is Bad Advice

Baptist Joint Committee for Religious Liberty’s Holly Hollman says a proposed IRS consent decree could transform houses of worship into places of partisan warfare—and possibly laundering operations for campaign finance.

New UK Wills Law Would Allow Dynamic, Flexible Tax Planning

Moore Barlow’s Scott Taylor says planned reforms to the UK’s law on wills would mean an opportunity to optimize tax efficiency and flexibility for global families and high-net-worth individuals.

Mapping Risks Helps Multinationals Control Their Tax Narrative

KPMG’s Shaira Nanji outlines five steps multinationals can take to articulate a clear and comprehensive tax story that will garner investor confidence and public support.

IRS’s Penalty Policy for Foreign Gifts Discourages Compliance

Roberts & Holland’s Michael J. Miller says a California federal court ruling illustrates the government’s punitive treatment of taxpayers who receive bad advice about reporting foreign gifts.

Tax Pros Using AI Can’t Keep the Human Element Out of the Loop

Uber’s Flavia Sundfeld says tax firms using AI should maintain focus on necessary critical thinking skills and professional opportunities for employees.

Canada Will Pay the Price for Canceling Its Digital Service Tax

Osler’s Kaitlin Gray and Patrick Marley say Canada’s 11th-hour decision to cancel its digital service tax means Canadian taxpayers will bear the administrative costs of a levy that won’t raise any revenue.

IRS Staffing Cuts Creates Challenges, Opportunities for Tax Pros

Plante Moran’s Brett Bissonnette says that encouraging e-filing, expanding tax services, and showing some kindness can help tax practitioners navigate the large staffing reductions in the IRS’s Taxpayer Services Division.

With Second Tax Bill Possible, Businesses Must Line Up Targets

Squire Patton Boggs attorneys say lessons learned from the process that ushered in the $3.4 trillion tax and policy law this month can help businesses prepare for a possible second tax package before the end of 2025.

State Alternative Apportionment Is Worth Taxpayers’ Attention

Deloitte Tax experts say alternative apportionment can benefit both state taxing authorities and taxpayers, and review developments in South Carolina, Tennessee, and Arkansas.

Columnist Corner

Technically Speaking design by Jonathan Hurtarte/Bloomberg Tax

Restoring immediate expensing for research and development investment was a welcome move, but the US “needs more resilient and forward-looking R&D tax frameworks” to compete globally, Andrew Leahey writes in his latest Technically Speaking column.

Companies that reach commercialization milestones could receive enhanced deductions or other tax advantages, Andrew argues, adding that Congress should make any future attempts to repeal tax code Section 174 subject to economic scoring. Read More

News Roundup

Partnership Tax Break Boost Eyed for Future Bill, GOP Aide Says

A top policy adviser for House Speaker Mike Johnson (R-La.) on Wednesday said Republicans are looking to increase a popular deduction for income from partnerships and trusts and estates in future tax legislation.

Trump Plan to End Paper Tax Refunds This Year to Hit Millions

The Treasury Department is set to realize a long-held goal at the end of September when it stops issuing paper checks for tax refunds, but it may come with unintended consequences.

US Companies Not Fully Exempt From Minimum Tax, Treasury Says

US companies aren’t fully exempt from the global minimum tax and are still subject to some of its provisions, Rebecca Burch, deputy assistant Treasury secretary for international tax affairs, said Thursday.

IRS Opens Path for Churches to Test Political Speech Limits

The IRS’s green light for churches to speak about political campaigns and candidates without losing their tax-exempt status opens the door to new legal tests of two of the strongest Constitutional protections: Free speech and religious liberty.

Tax Management International Journal

The Impact that Digital Service Taxes Have Had on Latin America

Baker McKenzie practitioners discuss the digital services taxation measures some Latin American jurisdictions have taken to safeguard their domestic tax bases.

How the Forthcoming Tariffs Will Impact Transfer Pricing

Due to recent international tariff increases, multinational enterprises are reassessing the resilience of their transfer pricing models and exploring options to mitigate impact, say Loyens & Loeff practitioners.

The OBBBA Changes the Capitalized Interest Rules Under §163(j)

Sam Pollack, a partner in Baker McKenzie’s Chicago office, reviews the three major changes to §163(j) in the One Big Beautiful Bill Act.

How the OBBBA’s International Provisions Interact with Pillar Two

Baker McKenzie practitioners explain what the OBBBA’s international tax changes mean for taxpayers subject to Pillar Two and Inclusive Framework members that seek to deliver on the G7 statement.