House Republicans from New York, California and New Jersey unhappy with a cap on state and local tax deductions cast talks on the issue with Donald Trump as “positive” but described no firm commitments from the president-elect.

“He really communicated that he feels for how unaffordable the taxes are for our constituents,” Representative Nick LaLota of New York, who attended the gathering of about 16 House Republicans with Trump at his Mar-a-Lago resort in Florida, said in an interview late Saturday. Trump “is willing to engage in a solution.”

“It was a productive meeting and the president is fully supportive of raising the cap,” Representative Mike Lawler of New York, who also attended, said Saturday. Trump “agrees that the cap on SALT needs to be lifted,” he said on Fox News’ Sunday Morning Futures. 

Trump has expressed interest in reviewing options for adjusting the SALT cap but is not currently advocating for a specific fix, according to a person familiar with his thinking.

The main focus of the face-to-face meeting was the $10,000 cap on the so-called SALT deduction that was a feature of Trump’s 2017 tax cut bill, set to expire for tax years after 2025. The group wants to see the cap raised or eliminated, softening the burden on constituents who live in states like New York and California where the combination of high tax rates and expensive property values make a write-off especially valuable.

Representative Nicole Malliotakis of New York posted on X that the meeting was “productive.”

Lawler wants to raise the cap to $100,000 for individuals and $200,000 for married couples. The current cap is the same for both single and married taxpayers.

Lawler said Saturday that no exact level or approach was determined or agreed upon. “The president wants us to come back with a number,” he said.

Trump’s economic advisors have discussed expanding the cap to $20,000. They’ve been against making the deduction unlimited since a new tax package would contain cuts that need to be offset.

Lifting the cap is unpopular among some conservative Republicans from lower-tax states and nonpartisan analysts, who say the change would benefit mostly high-income households in largely Democratic states. 

“Why should people in South Carolina subsidize California and New York tax policy? You’re going to have a hard time with me on that,” Republican Senator Lindsey Graham of South Carolina said last week on Sunday Morning Futures.

Lawler countered that attitude on Sunday, saying that states like New York and California already contribute more dollars to the federal government that can go to smaller states.

“If you look at South Carolina, for instance, they are one of the biggest recipients of federal dollars in comparison to other states by a percentage,” he told Fox News.

Significant expansion of the SALT deduction cap is emerging as a potential demand by some Republicans, including Lawler, in return for their support of any larger tax-related package.

The new House GOP majority is razor-thin, meaning Speaker Mike Johnson can only absorb a few GOP-vote holdouts or defections to pass any party-line legislation.

A little while ago I was with a friend who is long retired from his business. I don’t know what precipitated it, but he mentioned how his accountant overcharged him for the one tax audit his business ever had (in the 25 years he was in business). I was puzzled that he still remembered this and that it bothered him.

He explained that he felt the accountant did excessive preparation and wanted a ton of data that took quite a while to assemble. The accountant indicated that he might be able to settle the audit for about $20,000 and would target not having it cost more than that. The audit resulted in a “no change” and the fee charged was $8,000. This was about 25 years ago, so these numbers should reflect that they would be much higher today. He told me that he thought the accountant purposely scared him and had all the extra work done to justify the fee he charged.

I was shocked by this. I explained that the preparation the accountant did was likely the reason for the very favorable audit result. I also asked him if the result would have been an additional payment of $12,000 in tax, how would he have felt. He is very smart and a reasonable person. He thought about my question and replied that he probably would have felt good about the fee and result.

His reaction coincides with what I “learned” early in my career. My perception of my clients’ reactions was that they felt my fees were well earned when there was a tax due that was lower than anticipated, but there was always skepticism when there was a “no change.” For that reason, I always targeted a result that had a balance due that was lower than what the client expected, but not a no change. Further no changes led the client to feel they could have “gotten away” with greater deductions and that I was too conservative in what I did. 

I also acquired an outlook that it was important for clients to understand they needed to be responsible in how they conducted their tax reporting and not to try to “beat the system.” I can assure you that none of my clients ever paid more taxes than they were required to pay. At the same time, irrespective of how I managed the legalities of their reporting and taking advantage of every benefit and loophole they were entitled to as well as resolving every gray area to their advantage, they would still try to skirt the law with picayune, and sometimes ridiculous, deductions. I never helped them break the law and, when I noticed some of the more egregious things they did, I stopped it. 

I found out, from real experience, that small tax payments on an audit were much better for the client than a no change. And the client paid my fees more readily and cheerfully, not that this was my motivating factor.

As far as no change results, I had plenty, but they were when the audit involved issues about the application of certain parts of the tax law and not deductions the client was trying to get away with. As I write this, many experiences come to mind. The fees in every one of these situations were quite substantial and I never had the client upset about the fee. Instead, they thanked me for a job well done.

A takeaway is that delivering an invoice for any service, including a tax audit, is a marketing activity, and it cannot be assumed that the client understands the value. It must be explained and shown so the client appreciates the hard work and skill drawing on your knowledge and experience that was employed on their behalf. Work at this, and you will have happier clients and will also be happier. 

Do not hesitate to contact me at [email protected] with your practice management questions or about engagements you might not be able to perform.

The U.S. is moving to curb imports of used cooking oil, preventing foreign supplies used to make biofuels from qualifying for a lucrative tax credit.

In long-awaited guidance, the U.S. Treasury signaled that fuels made with foreign-sourced supplies won’t be allowed under the so-called GREET model, a Department of Energy tool used to determine the full sweep of greenhouse gases emitted from the transportation and energy industries. 

The move comes after a flood of supplies from China reached U.S. shores at cheaper prices than soybean oil produced locally. The decision is a win for American farmers, who have been counting on a boom in soy-heavy biofuels like renewable diesel to sell their crops.

Soybean oil futures for March jumped by the exchange limit in Chicago on Friday, surging 7%, the most since June 2023. 

Shares of Bunge Global SA, the world’s biggest oilseed processor, gained 5%. The joint owners of Diamond Green Diesel, North America’s biggest renewable-diesel maker, jumped, with Darling Ingredients Inc. surging as much as 10% and Valero Energy Corp. climbing as much as 4%. 

“This tax credit is essential to U.S. competitiveness and to reduce emissions in the transportation sector with more affordable, cleaner fuel,” U.S. Deputy Energy Secretary David Turk said in a statement. “The final guidance released today provides clarity and certainty to America’s world-leading biofuel industry.” 

The tax incentive that took effect on Jan. 1 is part of President Joe Biden’s signature climate law, the Inflation Reduction Act. While the guidance gives Donald Trump — a supporter of fossil fuels —something to work from, it’s unclear how far he will take his pledge to roll back the IRA.

U.S. biofuels and corn groups criticized the overall guidance as lacking details on what qualifies for tax credits. 

Geoff Cooper, chief executive officer of ethanol trade group Renewable Fuels Association, said it fell short of expectations and doesn’t give producers of corn-based U.S. ethanol the certainty they seek. Emily Skor, CEO of ethanol lobbying group Growth Energy, said the guidance “still lacks the critical details that are needed to help ensure that American biofuel producers and their farm partners can lead the world in clean fuel production.”

The National Corn Growers Association said more clarity is needed about the specific environmental practices that will be required for accessing the credit. “What a missed opportunity for growers,” said President Kenneth Hartman Jr., an Illinois farmer. 

Ethanol is among the ingredients that can be used in making green jet fuel. The $54 billion industry is counting on new markets like sustainable aviation fuel, or SAF, to boost demand at a time when the rise of electric vehicles poses an existential threat to liquid fuels, especially those used to power light-duty automobiles. 

The issue of foreign used cooking oil has been a growing concern of agriculture groups and lawmakers over the past year. Growers bristled as they saw soybean prices plunge as UCO from Asia flowed into the country for making fuels like renewable diesel and SAF. Fuel made with UCO is highly valued in low-carbon fuel markets like California because of its relatively small carbon footprint. 

Adding to the outcry was suspicion that China shippers were adding fresh palm oil to UCO, making it fraudulent under U.S. renewable fuel law. Palm, the world’s most widely used vegetable oil, is a bane to environmentalists and many countries because the industry is a key driver of deforestation in places like Indonesia and has been tied to labor abuses. 

The Treasury rules issued on Friday allow fuels made with UCO from the U.S. to qualify for the 45Z credit, which provides a per-gallon, or gallon-equivalent, tax credit for makers of so-called clean transportation fuels based on the carbon intensity of production.  

Under a rival model, the globally accepted Corsia standard established by the United Nations’ governing body for aviation, green jet fuel made with foreign feedstocks would have access to the credit.