July 28, 2025 • 27 mins
In this week’s Tackling Tax, we examine the changing landscape of tariffs and how we've gotten here.
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Episode Transcript
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(00:00):
On this episode, we'll look into the changing landscape
of tariffs and how we've gotten here.
We welcome our colleagues, Michael Cornett,
from our Washington National Tax Office here in the U.S.
and Eline Polak from Forvis Mazars in the Netherlands
for an international perspective on the global impact
of tariffs and how to mitigate them.From your one stop
(00:22):
for tax updates and analysis., I'm Iris.
And I'm Devin. It's Tuesday, May 13th,
and this is Tackling Tax.
(00:48):
Welcome, everyone, to the first episode of Tackling Tax.
We are so excited to get this kicked off.
It's been a bit of a passion project for us,
and I know we look forward to its introduction.
So what can you expect from this show?
Our hope is that we'll bring you the latest on tax policy
and strategies, but in a way that you can actually use
(01:11):
and understand, talking about things like the reconciliation
package, tariffs, pillar two, new proposed
tax bills, impactful regs, things like that.
So every other week we'll start our episode with a recap
of what's going on in the tax world, followed
by various segments featuring some of our guests
(01:33):
that we have lined up.
These folks are everyone from university scholars
to industry experts and legislative consultants in D.C.
and, of course, some of our firm's leaders.
But before we dive into the content for today, I did want
to take the time to introduce ourselves.
Again, my name is Iris Laws.
(01:54):
I am a senior manager here in our
Washington National Tax Office.
I've been with the firm my whole career,
but have shifted into this role by way
of our real estate tax team
and then our professional standards group.
I've served as one of the firm's subject matter specialists
for partnerships and administrative adjustment requests,
and have chaired our Inflation Reduction Act committee.
(02:16):
Now I focus on tax policy and providing you guys actionable
and strategic tax content, but possibly the most important.
I am a proud demon deacon getting both my undergraduate
and master's degrees in tax from Wake Forest University here
in the great state of North Carolina.
So, Devin, care to introduce yourself next?
(02:39):
Sure, and thank you Iris. Hi, everyone, I'm Devin Tinney.
I'm a director on Iris' team,
our Washington National Tax Office.
Unlike Iris, I'm a relatively new addition to the firm,
but I must say there really is something special about
Forvis Mazars, and our team in particular.
So I am very excited
and fortunate to be here. On the technical side,
(03:00):
I specialize in executive compensation
and employee benefits. Throughout my career,
I really have had a wonderful opportunity to publish content
and present on these topics,
and it has been incredibly rewarding,
so I am very, very excited about kicking off this series.
As for my education, I earned degrees in finance,
accounting, and law from the University of Kansas, where,
(03:21):
unlike other universities, which I won't name,
that have particularly unique, creepy old man mascots,
Okay? Mm-hmm.
Mm-hmm. We have two of the best in Big J
and Baby Jay Rock Chalk J Hawk.
And so with that, let's dive right into our Fast Four
stories of the episode.
(03:45):
First, we're talking timing
of the tax reconciliation package.
Treasury Secretary Scott Bessant recently told reporters
that he's shooting for a July 4th target date
to get the new tax package completed.
Now, this is an update to the previous Memorial Day target
as publicized by Speaker Mike Johnson and Ways
and Means Chair Jason Smith.
That being said, some say the true deadline
(04:08):
or X date is when the Extraordinary Measures funding
for the government run out.
The Congressional Budget Office has estimated this could be
in August or September.
But tell me, though,
what happens if the House takes longer
than Memorial Day, right?
Like that X date could be whenever,
but what happens if the House takes longer
(04:30):
and then that might cramp the Senate
or how does that work? Well,
I mean, that's a very good question.
What could happen is that the later the House goes
to pass their version, the more tempted the Senate will be
to get their own version drafted
and then essentially send it back to the House with it,
take it or leave it attitude.
So the House might be shooting themselves in the foot if
they take much longer than Memorial Day.
Now, with all that being said, the House Ways
(04:52):
and Means is currently working on getting their portion
of the reconciliation bill to the broader house floor.
Does that mean we'll have specifics?
I mean, I know my clients, right,
are all talking about will this provision be in, you know,
they have special interests that they're curious about
that we haven't been able to tell them one way or the other.
Does that mean we will have specifics yet
(05:14):
for either pay fors or other proposals?
We'll, theoretically,
no more soon, all I can really say.
Okay. The committee's total appropriations
for tax cuts is somewhat contingent on other house
committees' ability to find spending cuts totaling
2 trillion, yes, with a T, as anything less than
that reduces the House allocation dollar
for dollar according to House instructions
(05:35):
and the budget resolution.
Great. So that's our first story.
Our second, we're going to talk a little bit about
how we were able to gain some insight into the priorities
of President Trump
and a list that he sent last week
to Republican leadership in the house.
So some of these things, what is a little interesting,
(05:58):
they have a four-year window on them.
So this is not, you know, an indefinite period,
but it's looking at temporary through the end
of his presidential term for some of these things.
So take that for what you will.
But here's the listing of the things that were included in
that. A lower tax rate for FDII, again,
(06:19):
that's from fiscal year 25 to 29, 15% tax rate
for corporations that manufacture in the U.S.
So that's down from the 21% rate.
That was something that was floated in his
a election, right,
and what the different things that he wanted
to get done in his presidency.
And we're kind of reading between the lines there of
(06:41):
how would that potentially actually get implemented.
And our thought is, well, is that D pad coming back?
You know, we don't know for sure,
but that could be one way that, that gets done.
Next, full deductions immediately when businesses
buy short-term assets.
So that's looking to a hundred percent bonus depreciation,
(07:01):
which is also something that they're looking at
for reconciliation already.
A new tax deduction for interest payments on auto loans.
Again, that was part of his platform.
President Trump's platform in the election. No tax on tips,
overtime pay, and social security benefits.
That's possibly one of his most widely publicized
(07:24):
proposals on the campaign.
And then here are some of the pay fours
that he's talked about, right?
Like on top of TCJA extenders
and all of that good stuff that we'll be talking
about on this show,
how are we gonna pay for it? That's kind of the bottom line.
So repealing clean energy tax credits on the IRA is
something that he is blessed.
(07:45):
That is no surprise.
We've talked about this for a while. Which credits
and to what extent
or how we, how he proposes to change them.
That's really what's up in the questions.
And then raising taxes on university endowments.
I know that's a hot button topic in the news currently.
And then last but not least, reforming
(08:07):
or limiting carried interest.
So that's not, I'm sure everyone's favorite thing to hear
who are in the private equity space.
But all of that being said, that is our second story.
So I'll kick it to you, Devin, next.
Now, there's been a lot of talk about reconciliation,
but there's also been some chatter about a so-called
rescission bill, now, which could be used to cut spending.
(08:28):
Both Ron Estes, member of the Ways
and Means committee and Senate Finance Committee member Tom
Tillis have gone on record acknowledging the possibility
of a rescissions package.
Now this is further underlined
by President Trump's fiscal year 2026 budget proposal,
which has some people questioning when
and how Congress might try and cut IRS funding.
(08:48):
The timing of this rescissions package is the big question.
Does it make sense to pursue
with the continuing resolution expiring in September
or what, you know, should they wait
until the next continuing
resolution and then pursue it then?
So we're just gonna have to wait to find out.
Yep. And our fourth
and final story, the exodus continues at the IRS. According
(09:10):
to Liz Aske, chief of the IRS Independent Office of Appeals,
over 300 staffers have accepted the deferred
resignation offer.
This represents nearly a 20%
decrease in their staffing levels.
But why do we care?
What does that mean for you as a taxpayer?
Will you have a harder time being able to appeal?
(09:32):
What happens to those with appeals already underway?
I got with our Controversy team here at Forvis
Mazars for their perspective.
Bottom line, they said, and I quote, be prepared to wait.
They said that while they're seeing cases still being
assigned to appeals, it's not a total shutdown,
in recent weeks, they have had several cases
(09:54):
where an appeals officer has been assigned,
but later accepted
or received approval of their deferred resignation.
And so this has resulted in cases having to be reassigned
and experiencing delays.
Ultimately, this means that taxpayers need to be prepared
for lengthy waiting periods between filing their protests
and being assigned an appeals officer.
(10:17):
With interest rates remaining high, taxpayers may want
to consider making a deposit towards any potential tax owed
to stop the accrual of interest.
Alright, and so that wraps up today's Fast
Four. Stick around,
'cause now we have some really exciting guests
talking about tariffs.
(10:40):
This segment we call Planning Insights,
where we examine current events in the tax world
and some of the resulting strategies.
Today's insight is all about tariffs,
and we are lucky to have Michael Cornett
and Eline Polak join us as our guests
this episode. Michael is a managing director in our
Washington National Tax Office.
(11:01):
He's an attorney and CPA that focuses on federal tax policy
and international tax topics.
Eline is a partner in the firm's indirect tax practice
sitting in our Amsterdam office.
She specializes in national and global international VAT
and international trade and customs.
Welcome to Tackling Tax, Michael and Eline.
(11:21):
Thank you, Iris. So Mike, let's start with you.
Could you give us just an update on the current state
of tariffs today?
Yeah, well, it has definitely been an interesting few
months here in the United States with tariffs.
A lot has happened since
President Trump has taken office.
Right now, you know, on a global scale,
(11:45):
we're having a kind of a flat 10% tariff rate imposed on just
about every country except for China, which is
That's different right?
Because it historically has been on
the product. Is that right?
Well, it's all on the product.
Let me maybe take a step back.
Tariffs, you know, are based upon
the value of imported goods.
That's what they're imposed upon generally.
(12:05):
So right now, as an example,
if you imported a good from any country other than China,
there'd be a 10% tariff based upon the value.
You know, China right now, it would be 145%.
These tariffs are in effect right now up
through July 9th, at which time they're scheduled to go up
unless the president decides to
(12:27):
keep them where they're at.
Right now there are several negotiations going on
between the Trump administration and countries.
Last count I had is there are 17 countries Oh, wow.
That have come to the table. Okay.
And have started negotiations very far along.
There's other countries waiting in the wings
and they're waiting to see if, you know, where China
(12:49):
and the U.S. are gonna start their negotiations.
So that's kind of the high-level current state.
Great. So do you, any countries you wanna mention
that you think are especially good targets for
reaching lower tariff rates?
Do you have those top of mind?
Yeah, the ones that are kind
of coming up here in the first 17, India
(13:12):
has been having several discussions.
Vietnam is also come to the table of discussions,
which are, you know, two big countries where a lot
of production has moved out of China
or people are thinking of moving their production outta
China to those countries.
So those I think are very important players.
Other countries that have sort of had some discussions,
Italy's had some discussions on its own.
(13:34):
While the EU is not a country, it's a group
of countries, they have also started
to have some discussions with
the Trump administration as well.
So you did mention China, though, right?
There used to be, I believe a de minimus rule,
meaning anything under, was it $800, right?
You didn't have to pay a tariff. Yes.
(13:56):
What, what's different with that now?
Well, in his last
executive order dealing with tariffs, he upped the
rates on diminished products, which
as you said is $800 or less.
And now there's a 90%
tariff rate based upon value
or fixed rates that can go as high as up to $200 here,
(14:19):
you know, by the end of, or beginning of June.
So on a product shipped over,
there is still a little uncertainty about maybe
how they apply, whether it's the 90% of value
or the flat rate, but they are significantly much higher now
and on de minimis products coming through the system.
Does that mean, in theory,
I think I read this somewhere, in theory, a product
(14:40):
that costs $30, you could pay a $200 tariff. Is that right?
That is possible.
And, you know, once June 1st comes around.
Wow. Okay.
Well, great background.
That's kind of current U.S. policy.
Let's shift to Eline real quick.
You're from the Netherlands.
What are you hearing from clients abroad?
(15:00):
Yeah, well, we hear a lot, of course.
And, first, panic, I guess that was the first
word that came into mind.
But then very quickly
the European Commission started with a delay.
So a three month delay.
(15:22):
So that I think for the European exporters,
that gave them some comfort that negotiation
with the European Union might start.
But, yeah, as you mentioned, yeah, maybe Italy
did some on their own.
(15:43):
But in trading in products,
the European member states are all one European union,
so they need to make one approach
with all the 27 member states.
But I think now what we hear from clients
is they will wait and see. Well,
that was gonna be my next question, right?
(16:04):
These rates are changing a lot.
So how does the fact that, you know,
you hear one rate one day
and it changes the next, does
that play into their plans at all?
Yes. Well, no, changes are never good for clients.
They don't like it. Even if it changes for the better,
but change gives uncertainty
(16:27):
and clients want to know what they,
what they're heading to.
But I think it is good on one hand
that the entire customs
and tariff situation is now on board level
because it was already present all along.
And it's good that you can tell
(16:51):
where entities and clients
and companies are globally operating
and have diversified their markets
and their sourcing countries, that they feel more comfort
because they can easily change.
You cannot, if you have only one market, if you are one
client, one customer in the U.S., it is very difficult
(17:13):
to change your entire supply chain to
avoid tariffs in one country.
Absolutely. So I guess that kind of plays into,
is it too soon to say, yes, we're gonna move all
of our manufacturing to the U.S. for those that might not be
as diversified?
Have you seen that at all?
I know that that has been a publicized goal
(17:36):
of President Trump's,
but I didn't know if you had seen evidence of that to date.
Yeah, we see questions, but not all our clients source
and manufacture their products in the European Union.
We could also have the situation that
the European client sources everything in Vietnam
(17:59):
and exports to the U.S.
So it is more complicated than two country
contracts.
Absolutely. So we, we get all different questions
for all different supply chains
and, yeah, they're all looking
for an optimized way for the future.
(18:19):
Right. And Mike, I've heard you
before point out that, you know, it could take up five,
10 years to establish a plant in the U.S. regardless.
So that's a factor as well, correct.
Yeah, I mean, you're just not gonna immediately open up a
new plant in the United States if that's
what you chose to do.
Well, it will take some time to do that.
And just to even do some of the simple things like trying
(18:41):
to move your supply chain around from one country
to another, even if you already have it established,
can also take time, as well as have additional costs,
whether it be other tax costs,
labor costs, things of that nature.
So there's a lot of things that go into that decision.
If I'm gonna try to move production from one country
to another, it's just not about, Hey, I,
(19:02):
let's just pick it up and do it.
Right. So let's say Eline for the companies
that aren't manufacturing themselves, let's say
you're just an importer of record in the U.S.
and you have a vendor
that you're purchasing from, you know, I don't know
what kind of appetite there is abroad
(19:22):
to negotiate contracts to say the vendor will bear part
of the cost from the purchaser so that they're maintaining
that relationship and they're not losing,
you know, customers that way.
Are there negotiations going on?
Is that a consideration?
Yes. That, this is a very good point,
and that is the first thing you hear.
(19:46):
The standing contracts are, yeah, clients
try to open up that contract
and renegotiate the inco terms, the terms
and conditions and who pays the tariffs in the end
because that is the easiest way, like Michael explained,
you cannot just start a plant in the
(20:08):
U.S. tomorrow, right?
That is not the possibility. So.
Good to know. So I think, you know,
that's the background on tariffs both here and abroad.
I think folks are excited to hear about opportunities
and what they can do in this landscape.
I know a lot of companies in the U.S. maybe not be importers
(20:29):
of record, but they're still impacted.
Um, or maybe they are the importers of record
and they're looking for different ways to strategize outside
of just traditional customs consulting.
Mike, what can you offer for those companies?
What are some strategies that they can implement?
Yeah, Iris, I mean, as you just talked about
(20:50):
for a minute, you know, the contract's obviously the easiest
way to do that, you know,
and you know, there are other things that look at, I mean,
when you're in a related party context, you know,
you may look to see, okay, well I have to be dealing
with my related party at an arm's length price
for income tax purposes,
or, you know, what is referred to as transfer pricing.
(21:12):
And so some people are now looking at the strategies of,
can I adjust my transfer price to account
for these additional costs of the tariffs?
'cause again, as you know, the tariff goes up,
depending on who absorbs it, you know,
somebody's profit on either side
is probably going to go down.
So can we share the burden of that tariff cost
through transfer pricing to try to minimize the value
(21:37):
for customs purposes and for income tax purposes?
So I'd say for those related party contacts,
looking at the transfer pricing is, you know,
one way to do that.
Another way is, you know, are there any ways to,
you know, defer or account for those in your respective,
you know, here in the U.S. you know, how do you account
(21:58):
for it in your inventory just at a very high level,
you know, is, is there a way you can take advantage
of different accounting methods to deal
with inventory costing,
which may give you a short-term benefit.
Other ways, you know, I'll get,
and you know, one of the big things that's really coming up
now is, you know, and Eline
and I have talked about, you know, as first sale,
(22:20):
the concept of first sale.
And people are exploring that, which is, you know, again,
where you generally have a related party middleman buying
from that producer of the good,
and you're trying to look at
that very first sale on the chain of ownership
or custody, I should say, as the product moves to the U.S.
to try to point to a lower customs value as well.
So those are some things there.
(22:41):
And I, Eline were you any thoughts on first sale,
what you're seeing on your side?
Yeah, we see an increase in questions on that,
but um, in, in, in, in lots of situations,
that is a fair, yeah, the companies have a fair chance
that there is an optimization in the first sale,
but in some situations it just doesn't apply
(23:04):
because there is no sale.
And, it is more complex.
The customs valuation
method is different from the transfer pricing methods.
And the main issue is that there is a binding sequence
of methods to be used.
So you cannot easily say, oh,
(23:25):
I copy my transfer pricing method by
tweaking the pricing.
Because if the transfer pricing, uh, methodology
does not, cannot be mirrored
to the customs valuation methods,
then you will end up in a different price.
(23:46):
But in the situation that there is a first sale
possibility, then it is, it's very good to, yeah,
to analyze that and seek for optimization.
Well, that's a great lead in Eline.
What other strategies, I mean,
you have customs practices there abroad, right?
(24:09):
With Forbes Mazars.
So what are the types
of things you could traditionally consider when you're
advising your clients about tariffs?
I mean, this is not new, right?
So what are the types of things that you're,
you traditionally talk about?
And then has anything changed recently
with the different fluctuation in rates
and all of this uncertainty?
We have the holistic approach; you have
(24:32):
to look at at everything.
You have to look at the tariffs, meaning
the classification of products.
Does the product attract a duty?
Some products are still exempt.
You have to look at the origin of the product,
look at if there is free trade possibilities,
and you have to look at the value of the products.
(24:54):
And last but not least, the licensing.In some situation,
the supply chain is just that a product is moved into the US
to be exported to another region
and just for some repair of or last stage.
And there are several possibilities with the customs license
(25:15):
to prevent payment of duties
or have a duty drawback.
So that is what we merely advise on
those four different topics.
Well, you know, I think all
of this has been wonderful conversation.
I know both of you have so much you could go into,
(25:37):
we could be here for an hour,
but I really appreciate you guys joining us
for our very first episode of Tackling Tax.
I would encourage anyone listening who would like
to hear more about tariffs and specifically what Mike
or Eline could do to help to reach out on our website,
our Washington National Tax Office website.
(25:59):
There is a contact us form for Tackling Tax,
and we would love to hear from you.
Thank you, Mike and Eline.
Thank you. Thank you.
Each episode will bring you
what we call a Focused Forsight of the week, an article
or recording that might be of interest to you.
This week's Focused Forsight is called "Tariff Mitigation in
(26:21):
an Evolving Landscape."
It's an article authored by Mike,
you heard from earlier today, in conjunction
with Richard Mojica
and Julia Herring, customs attorneys with Miller Chevalier.
They take a deeper dive into planning strategies
with tariffs and go into topics that you might have heard
of, like bonded warehouses, duty drawbacks,
tariff exclusions, and tariff engineering.
(26:42):
You can always access our Forsights on the WNTO website
or the Forvis Mazars US website more broadly.
And that's our show. Thanks for joining.
Remember to subscribe and listen in for the next episode
of Tackling Tax on May 27th.
Until next time.
On this episode, we'll look into the changing landscape
of tariffs and how we've gotten here.
We welcome our colleagues, Michael Cornett,
from our Washington National Tax Office here in the U.S.
and Eline Polak from Forvis Mazars in the Netherlands
for an international perspective on the global impact
of tariffs and how to mitigate them.From your one stop
(00:22):
for tax updates and analysis., I'm Iris.
And I'm Devin. It's Tuesday, May 13th,
and this is Tackling Tax.
(00:48):
Welcome, everyone, to the first episode of Tackling Tax.
We are so excited to get this kicked off.
It's been a bit of a passion project for us,
and I know we look forward to its introduction.
So what can you expect from this show?
Our hope is that we'll bring you the latest on tax policy
and strategies, but in a way that you can actually use
(01:11):
and understand, talking about things like the reconciliation
package, tariffs, pillar two, new proposed
tax bills, impactful regs, things like that.
So every other week we'll start our episode with a recap
of what's going on in the tax world, followed
by various segments featuring some of our guests
(01:33):
that we have lined up.
These folks are everyone from university scholars
to industry experts and legislative consultants in D.C.
and, of course, some of our firm's leaders.
But before we dive into the content for today, I did want
to take the time to introduce ourselves.
Again, my name is Iris Laws.
(01:54):
I am a senior manager here in our
Washington National Tax Office.
I've been with the firm my whole career,
but have shifted into this role by way
of our real estate tax team
and then our professional standards group.
I've served as one of the firm's subject matter specialists
for partnerships and administrative adjustment requests,
and have chaired our Inflation Reduction Act committee.
(02:16):
Now I focus on tax policy and providing you guys actionable
and strategic tax content, but possibly the most important.
I am a proud demon deacon getting both my undergraduate
and master's degrees in tax from Wake Forest University here
in the great state of North Carolina.
So, Devin, care to introduce yourself next?
(02:39):
Sure, and thank you Iris. Hi, everyone, I'm Devin Tinney.
I'm a director on Iris' team,
our Washington National Tax Office.
Unlike Iris, I'm a relatively new addition to the firm,
but I must say there really is something special about
Forvis Mazars, and our team in particular.
So I am very excited
and fortunate to be here. On the technical side,
(03:00):
I specialize in executive compensation
and employee benefits. Throughout my career,
I really have had a wonderful opportunity to publish content
and present on these topics,
and it has been incredibly rewarding,
so I am very, very excited about kicking off this series.
As for my education, I earned degrees in finance,
accounting, and law from the University of Kansas, where,
(03:21):
unlike other universities, which I won't name,
that have particularly unique, creepy old man mascots,
Okay? Mm-hmm.
Mm-hmm. We have two of the best in Big J
and Baby Jay Rock Chalk J Hawk.
And so with that, let's dive right into our Fast Four
stories of the episode.
(03:45):
First, we're talking timing
of the tax reconciliation package.
Treasury Secretary Scott Bessant recently told reporters
that he's shooting for a July 4th target date
to get the new tax package completed.
Now, this is an update to the previous Memorial Day target
as publicized by Speaker Mike Johnson and Ways
and Means Chair Jason Smith.
That being said, some say the true deadline
(04:08):
or X date is when the Extraordinary Measures funding
for the government run out.
The Congressional Budget Office has estimated this could be
in August or September.
But tell me, though,
what happens if the House takes longer
than Memorial Day, right?
Like that X date could be whenever,
but what happens if the House takes longer
(04:30):
and then that might cramp the Senate
or how does that work? Well,
I mean, that's a very good question.
What could happen is that the later the House goes
to pass their version, the more tempted the Senate will be
to get their own version drafted
and then essentially send it back to the House with it,
take it or leave it attitude.
So the House might be shooting themselves in the foot if
they take much longer than Memorial Day.
Now, with all that being said, the House Ways
(04:52):
and Means is currently working on getting their portion
of the reconciliation bill to the broader house floor.
Does that mean we'll have specifics?
I mean, I know my clients, right,
are all talking about will this provision be in, you know,
they have special interests that they're curious about
that we haven't been able to tell them one way or the other.
Does that mean we will have specifics yet
(05:14):
for either pay fors or other proposals?
We'll, theoretically,
no more soon, all I can really say.
Okay. The committee's total appropriations
for tax cuts is somewhat contingent on other house
committees' ability to find spending cuts totaling
2 trillion, yes, with a T, as anything less than
that reduces the House allocation dollar
for dollar according to House instructions
(05:35):
and the budget resolution.
Great. So that's our first story.
Our second, we're going to talk a little bit about
how we were able to gain some insight into the priorities
of President Trump
and a list that he sent last week
to Republican leadership in the house.
So some of these things, what is a little interesting,
(05:58):
they have a four-year window on them.
So this is not, you know, an indefinite period,
but it's looking at temporary through the end
of his presidential term for some of these things.
So take that for what you will.
But here's the listing of the things that were included in
that. A lower tax rate for FDII, again,
(06:19):
that's from fiscal year 25 to 29, 15% tax rate
for corporations that manufacture in the U.S.
So that's down from the 21% rate.
That was something that was floated in his
a election, right,
and what the different things that he wanted
to get done in his presidency.
And we're kind of reading between the lines there of
(06:41):
how would that potentially actually get implemented.
And our thought is, well, is that D pad coming back?
You know, we don't know for sure,
but that could be one way that, that gets done.
Next, full deductions immediately when businesses
buy short-term assets.
So that's looking to a hundred percent bonus depreciation,
(07:01):
which is also something that they're looking at
for reconciliation already.
A new tax deduction for interest payments on auto loans.
Again, that was part of his platform.
President Trump's platform in the election. No tax on tips,
overtime pay, and social security benefits.
That's possibly one of his most widely publicized
(07:24):
proposals on the campaign.
And then here are some of the pay fours
that he's talked about, right?
Like on top of TCJA extenders
and all of that good stuff that we'll be talking
about on this show,
how are we gonna pay for it? That's kind of the bottom line.
So repealing clean energy tax credits on the IRA is
something that he is blessed.
(07:45):
That is no surprise.
We've talked about this for a while. Which credits
and to what extent
or how we, how he proposes to change them.
That's really what's up in the questions.
And then raising taxes on university endowments.
I know that's a hot button topic in the news currently.
And then last but not least, reforming
(08:07):
or limiting carried interest.
So that's not, I'm sure everyone's favorite thing to hear
who are in the private equity space.
But all of that being said, that is our second story.
So I'll kick it to you, Devin, next.
Now, there's been a lot of talk about reconciliation,
but there's also been some chatter about a so-called
rescission bill, now, which could be used to cut spending.
(08:28):
Both Ron Estes, member of the Ways
and Means committee and Senate Finance Committee member Tom
Tillis have gone on record acknowledging the possibility
of a rescissions package.
Now this is further underlined
by President Trump's fiscal year 2026 budget proposal,
which has some people questioning when
and how Congress might try and cut IRS funding.
(08:48):
The timing of this rescissions package is the big question.
Does it make sense to pursue
with the continuing resolution expiring in September
or what, you know, should they wait
until the next continuing
resolution and then pursue it then?
So we're just gonna have to wait to find out.
Yep. And our fourth
and final story, the exodus continues at the IRS. According
(09:10):
to Liz Aske, chief of the IRS Independent Office of Appeals,
over 300 staffers have accepted the deferred
resignation offer.
This represents nearly a 20%
decrease in their staffing levels.
But why do we care?
What does that mean for you as a taxpayer?
Will you have a harder time being able to appeal?
(09:32):
What happens to those with appeals already underway?
I got with our Controversy team here at Forvis
Mazars for their perspective.
Bottom line, they said, and I quote, be prepared to wait.
They said that while they're seeing cases still being
assigned to appeals, it's not a total shutdown,
in recent weeks, they have had several cases
(09:54):
where an appeals officer has been assigned,
but later accepted
or received approval of their deferred resignation.
And so this has resulted in cases having to be reassigned
and experiencing delays.
Ultimately, this means that taxpayers need to be prepared
for lengthy waiting periods between filing their protests
and being assigned an appeals officer.
(10:17):
With interest rates remaining high, taxpayers may want
to consider making a deposit towards any potential tax owed
to stop the accrual of interest.
Alright, and so that wraps up today's Fast
Four. Stick around,
'cause now we have some really exciting guests
talking about tariffs.
(10:40):
This segment we call Planning Insights,
where we examine current events in the tax world
and some of the resulting strategies.
Today's insight is all about tariffs,
and we are lucky to have Michael Cornett
and Eline Polak join us as our guests
this episode. Michael is a managing director in our
Washington National Tax Office.
(11:01):
He's an attorney and CPA that focuses on federal tax policy
and international tax topics.
Eline is a partner in the firm's indirect tax practice
sitting in our Amsterdam office.
She specializes in national and global international VAT
and international trade and customs.
Welcome to Tackling Tax, Michael and Eline.
(11:21):
Thank you, Iris. So Mike, let's start with you.
Could you give us just an update on the current state
of tariffs today?
Yeah, well, it has definitely been an interesting few
months here in the United States with tariffs.
A lot has happened since
President Trump has taken office.
Right now, you know, on a global scale,
(11:45):
we're having a kind of a flat 10% tariff rate imposed on just
about every country except for China, which is
That's different right?
Because it historically has been on
the product. Is that right?
Well, it's all on the product.
Let me maybe take a step back.
Tariffs, you know, are based upon
the value of imported goods.
That's what they're imposed upon generally.
(12:05):
So right now, as an example,
if you imported a good from any country other than China,
there'd be a 10% tariff based upon the value.
You know, China right now, it would be 145%.
These tariffs are in effect right now up
through July 9th, at which time they're scheduled to go up
unless the president decides to
(12:27):
keep them where they're at.
Right now there are several negotiations going on
between the Trump administration and countries.
Last count I had is there are 17 countries Oh, wow.
That have come to the table. Okay.
And have started negotiations very far along.
There's other countries waiting in the wings
and they're waiting to see if, you know, where China
(12:49):
and the U.S. are gonna start their negotiations.
So that's kind of the high-level current state.
Great. So do you, any countries you wanna mention
that you think are especially good targets for
reaching lower tariff rates?
Do you have those top of mind?
Yeah, the ones that are kind
of coming up here in the first 17, India
(13:12):
has been having several discussions.
Vietnam is also come to the table of discussions,
which are, you know, two big countries where a lot
of production has moved out of China
or people are thinking of moving their production outta
China to those countries.
So those I think are very important players.
Other countries that have sort of had some discussions,
Italy's had some discussions on its own.
(13:34):
While the EU is not a country, it's a group
of countries, they have also started
to have some discussions with
the Trump administration as well.
So you did mention China, though, right?
There used to be, I believe a de minimus rule,
meaning anything under, was it $800, right?
You didn't have to pay a tariff. Yes.
(13:56):
What, what's different with that now?
Well, in his last
executive order dealing with tariffs, he upped the
rates on diminished products, which
as you said is $800 or less.
And now there's a 90%
tariff rate based upon value
or fixed rates that can go as high as up to $200 here,
(14:19):
you know, by the end of, or beginning of June.
So on a product shipped over,
there is still a little uncertainty about maybe
how they apply, whether it's the 90% of value
or the flat rate, but they are significantly much higher now
and on de minimis products coming through the system.
Does that mean, in theory,
I think I read this somewhere, in theory, a product
(14:40):
that costs $30, you could pay a $200 tariff. Is that right?
That is possible.
And, you know, once June 1st comes around.
Wow. Okay.
Well, great background.
That's kind of current U.S. policy.
Let's shift to Eline real quick.
You're from the Netherlands.
What are you hearing from clients abroad?
(15:00):
Yeah, well, we hear a lot, of course.
And, first, panic, I guess that was the first
word that came into mind.
But then very quickly
the European Commission started with a delay.
So a three month delay.
(15:22):
So that I think for the European exporters,
that gave them some comfort that negotiation
with the European Union might start.
But, yeah, as you mentioned, yeah, maybe Italy
did some on their own.
(15:43):
But in trading in products,
the European member states are all one European union,
so they need to make one approach
with all the 27 member states.
But I think now what we hear from clients
is they will wait and see. Well,
that was gonna be my next question, right?
(16:04):
These rates are changing a lot.
So how does the fact that, you know,
you hear one rate one day
and it changes the next, does
that play into their plans at all?
Yes. Well, no, changes are never good for clients.
They don't like it. Even if it changes for the better,
but change gives uncertainty
(16:27):
and clients want to know what they,
what they're heading to.
But I think it is good on one hand
that the entire customs
and tariff situation is now on board level
because it was already present all along.
And it's good that you can tell
(16:51):
where entities and clients
and companies are globally operating
and have diversified their markets
and their sourcing countries, that they feel more comfort
because they can easily change.
You cannot, if you have only one market, if you are one
client, one customer in the U.S., it is very difficult
(17:13):
to change your entire supply chain to
avoid tariffs in one country.
Absolutely. So I guess that kind of plays into,
is it too soon to say, yes, we're gonna move all
of our manufacturing to the U.S. for those that might not be
as diversified?
Have you seen that at all?
I know that that has been a publicized goal
(17:36):
of President Trump's,
but I didn't know if you had seen evidence of that to date.
Yeah, we see questions, but not all our clients source
and manufacture their products in the European Union.
We could also have the situation that
the European client sources everything in Vietnam
(17:59):
and exports to the U.S.
So it is more complicated than two country
contracts.
Absolutely. So we, we get all different questions
for all different supply chains
and, yeah, they're all looking
for an optimized way for the future.
(18:19):
Right. And Mike, I've heard you
before point out that, you know, it could take up five,
10 years to establish a plant in the U.S. regardless.
So that's a factor as well, correct.
Yeah, I mean, you're just not gonna immediately open up a
new plant in the United States if that's
what you chose to do.
Well, it will take some time to do that.
And just to even do some of the simple things like trying
(18:41):
to move your supply chain around from one country
to another, even if you already have it established,
can also take time, as well as have additional costs,
whether it be other tax costs,
labor costs, things of that nature.
So there's a lot of things that go into that decision.
If I'm gonna try to move production from one country
to another, it's just not about, Hey, I,
(19:02):
let's just pick it up and do it.
Right. So let's say Eline for the companies
that aren't manufacturing themselves, let's say
you're just an importer of record in the U.S.
and you have a vendor
that you're purchasing from, you know, I don't know
what kind of appetite there is abroad
(19:22):
to negotiate contracts to say the vendor will bear part
of the cost from the purchaser so that they're maintaining
that relationship and they're not losing,
you know, customers that way.
Are there negotiations going on?
Is that a consideration?
Yes. That, this is a very good point,
and that is the first thing you hear.
(19:46):
The standing contracts are, yeah, clients
try to open up that contract
and renegotiate the inco terms, the terms
and conditions and who pays the tariffs in the end
because that is the easiest way, like Michael explained,
you cannot just start a plant in the
(20:08):
U.S. tomorrow, right?
That is not the possibility. So.
Good to know. So I think, you know,
that's the background on tariffs both here and abroad.
I think folks are excited to hear about opportunities
and what they can do in this landscape.
I know a lot of companies in the U.S. maybe not be importers
(20:29):
of record, but they're still impacted.
Um, or maybe they are the importers of record
and they're looking for different ways to strategize outside
of just traditional customs consulting.
Mike, what can you offer for those companies?
What are some strategies that they can implement?
Yeah, Iris, I mean, as you just talked about
(20:50):
for a minute, you know, the contract's obviously the easiest
way to do that, you know,
and you know, there are other things that look at, I mean,
when you're in a related party context, you know,
you may look to see, okay, well I have to be dealing
with my related party at an arm's length price
for income tax purposes,
or, you know, what is referred to as transfer pricing.
(21:12):
And so some people are now looking at the strategies of,
can I adjust my transfer price to account
for these additional costs of the tariffs?
'cause again, as you know, the tariff goes up,
depending on who absorbs it, you know,
somebody's profit on either side
is probably going to go down.
So can we share the burden of that tariff cost
through transfer pricing to try to minimize the value
(21:37):
for customs purposes and for income tax purposes?
So I'd say for those related party contacts,
looking at the transfer pricing is, you know,
one way to do that.
Another way is, you know, are there any ways to,
you know, defer or account for those in your respective,
you know, here in the U.S. you know, how do you account
(21:58):
for it in your inventory just at a very high level,
you know, is, is there a way you can take advantage
of different accounting methods to deal
with inventory costing,
which may give you a short-term benefit.
Other ways, you know, I'll get,
and you know, one of the big things that's really coming up
now is, you know, and Eline
and I have talked about, you know, as first sale,
(22:20):
the concept of first sale.
And people are exploring that, which is, you know, again,
where you generally have a related party middleman buying
from that producer of the good,
and you're trying to look at
that very first sale on the chain of ownership
or custody, I should say, as the product moves to the U.S.
to try to point to a lower customs value as well.
So those are some things there.
(22:41):
And I, Eline were you any thoughts on first sale,
what you're seeing on your side?
Yeah, we see an increase in questions on that,
but um, in, in, in, in lots of situations,
that is a fair, yeah, the companies have a fair chance
that there is an optimization in the first sale,
but in some situations it just doesn't apply
(23:04):
because there is no sale.
And, it is more complex.
The customs valuation
method is different from the transfer pricing methods.
And the main issue is that there is a binding sequence
of methods to be used.
So you cannot easily say, oh,
(23:25):
I copy my transfer pricing method by
tweaking the pricing.
Because if the transfer pricing, uh, methodology
does not, cannot be mirrored
to the customs valuation methods,
then you will end up in a different price.
(23:46):
But in the situation that there is a first sale
possibility, then it is, it's very good to, yeah,
to analyze that and seek for optimization.
Well, that's a great lead in Eline.
What other strategies, I mean,
you have customs practices there abroad, right?
(24:09):
With Forbes Mazars.
So what are the types
of things you could traditionally consider when you're
advising your clients about tariffs?
I mean, this is not new, right?
So what are the types of things that you're,
you traditionally talk about?
And then has anything changed recently
with the different fluctuation in rates
and all of this uncertainty?
We have the holistic approach; you have
(24:32):
to look at at everything.
You have to look at the tariffs, meaning
the classification of products.
Does the product attract a duty?
Some products are still exempt.
You have to look at the origin of the product,
look at if there is free trade possibilities,
and you have to look at the value of the products.
(24:54):
And last but not least, the licensing.In some situation,
the supply chain is just that a product is moved into the US
to be exported to another region
and just for some repair of or last stage.
And there are several possibilities with the customs license
(25:15):
to prevent payment of duties
or have a duty drawback.
So that is what we merely advise on
those four different topics.
Well, you know, I think all
of this has been wonderful conversation.
I know both of you have so much you could go into,
(25:37):
we could be here for an hour,
but I really appreciate you guys joining us
for our very first episode of Tackling Tax.
I would encourage anyone listening who would like
to hear more about tariffs and specifically what Mike
or Eline could do to help to reach out on our website,
our Washington National Tax Office website.
(25:59):
There is a contact us form for Tackling Tax,
and we would love to hear from you.
Thank you, Mike and Eline.
Thank you. Thank you.
Each episode will bring you
what we call a Focused Forsight of the week, an article
or recording that might be of interest to you.
This week's Focused Forsight is called "Tariff Mitigation in
(26:21):
an Evolving Landscape."
It's an article authored by Mike,
you heard from earlier today, in conjunction
with Richard Mojica
and Julia Herring, customs attorneys with Miller Chevalier.
They take a deeper dive into planning strategies
with tariffs and go into topics that you might have heard
of, like bonded warehouses, duty drawbacks,
tariff exclusions, and tariff engineering.
(26:42):
You can always access our Forsights on the WNTO website
or the Forvis Mazars US website more broadly.
And that's our show. Thanks for joining.
Remember to subscribe and listen in for the next episode
of Tackling Tax on May 27th.
Until next time.
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