Retroactive Social Security payments could get a tax reprieve. A new bipartisan House bill would exempt certain retroactive lump-sum Social Security payments from federal income tax. Last year’s Social Security Fairness Act (SSFA) repealed two provisions that reduced or eliminated the benefits for some public-sector retirees, with retroactive payments made in 2025. Tax Notes reports (paywall) that the No Tax on Restored Benefits Act (H.R. 7361), introduced by Rep. Lance Gooden (R-TX) and cosponsored by Rep. Chellie Pingree (D-ME), would exclude those retroactive payments from income taxes. About 40 percent of Social Security recipients pay taxes on their benefits, and the SSFA benefit changes could cost an estimated $196 billion over 10 years and accelerate trust fund insolvency by about six months.
Amicus brief warns of conflicts in Trump’s $10 billion tax data lawsuit. The brief, filed by former IRS Commissioner John Koskinen, former Assistant Attorney General for the US Department of Justice Kathryn Keneally, former National Taxpayer Advocate Nina Olson, former Chief of the US DOJ’s Tax Division Gilbert Rothenberg, Common Cause, and the Project On Government Oversight, argues that President Trump’s $10 billion lawsuit against the Treasury and IRS over leaked tax return information raises concerns about conflicts of interest and judicial integrity. It warns that the president’s effective control of both sides of the litigation raises the risk of collusive behavior and inadequate defense of taxpayer funds. The filing urges the court to proactively manage the case by, for example, scrutinizing its jurisdiction, addressing conflicts of interest, and considering a pause until Trump leaves office.
Pennsylvania looks to skill games and cannabis for new revenue. Pennsylvania Gov. Josh Shapiro (D-PA) is again asking lawmakers to regulate and tax gaming machines that involve skill and to legalize and tax cannabis as part of his fiscal 2027 budget proposal. The plan would tax cannabis at 20 percent of the wholesale price, with budget estimates projecting $36.9 million from the first six months of that wholesale tax (assuming legalization by January 1, 2027), plus $32.9 million from sales and use tax on retail cannabis sales and $659.6 million from license fees. The proposal would also tax skill games in the same manner as existing video terminal revenues, which are taxed at 52 percent, and the administration estimates that would raise $743.1 million in fiscal 2027.
Idaho Supreme Court upholds a private education tax credit. The Idaho Supreme Court unanimously upheld the state’s Parental Choice Tax Credit, rejecting arguments that it violates the state constitution’s mandate to fund public schools. The refundable credit is Idaho’s first private school choice program and has a pool of nearly $50 million. Families can claim up to $5,000 per student, or up to $7,500 for students with special needs, and the state had received 5,056 applications covering 9,341 students as of the day before the ruling. The court also granted attorney fees to the Idaho State Tax Commission, which defended the program.
Georgia House shifts focus from rebates toward property tax relief. Georgia lawmakers may be steering surplus dollars away from another round of income tax rebates and toward property tax relief instead. Gov. Brian Kemp (R-GA) had proposed $1.2 billion in rebates, structured as $250 for single filers and $500 for married couples, but the Georgia House budget bill removes the rebates and recommends using surplus funds to lower property taxes, including $850 million for the Homeowner Tax Relief Grant program. The story notes the Senate could still add rebates back when it takes up its own budget version, setting up a possible back-and-forth between the chambers.
Itemized: Fact of the Week. In 2023, approximately 1.85 million tax-exempt organizations were registered with the Internal Revenue Service. These nonprofits accounted for approximately 5.6 percent of US gross domestic product in 2022. About 35 percent of registered nonprofits are required to file annual returns (Form 990, 990-EZ, or 990-PF); other organizations with gross receipts less than or equal to $50,000 must file a simpler information return known as the 990-N (e-postcard). All private foundations are required to file the 990-PF. Exempt from annual filing: Churches, some church-affiliated organizations, and some other types of organizations.
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