Additional Child Tax Credit, Americans Abroad: IRS Is Watching Closely
The Additional Child Tax Credit can provide taxpayers up to $1,700 per qualifying child in 2025 as a refundable credit. The ACTC not only reduces the amount of tax owed but can also result in a refund from the IRS if the credit exceeds the tax liability. Non-refundable credits can only reduce a taxpayer's tax bill to zero. Refundable credits, like the ACTC, can generate a payment if the credit is greater than the amount of tax owed.
For U.S. citizens and resident aliens living abroad, claiming the ACTC is complicated by Internal Revenue Code Section 911, which governs the Foreign Earned Income and Foreign Housing Exclusions. These are significant benefits for overseas taxpayers. The challenge lies in IRC Section 24(d)(3) governing the ACTC which prohibits taxpayers who elect any exclusion under Section 911 for a taxable year from claiming the ACTC.
The IRS is intensifying scrutiny of expat filings claiming the ACTC due to frequent errors and overpayments. Recently, the IRS issued an International Practice Unit specifically addressing the ACTC for U.S. persons abroad. The IPU educates IRS agents on identifying improper ACTC claims, including those involving Section 911 exclusions.
The ACTC is the refundable portion of the Child Tax Credit for each child under the age of 17. Among other requirements, eligibility requires a U.S. citizen or resident alien child with a valid Social Security Number issued before the filing deadline, with the taxpayer providing at least half the child's financial support.
The CTC phases out at higher modified adjusted gross income levels, and the ACTC requires at least $2,500 in earned income not excluded from U.S. taxation. The ACTC equals 15% of earnings that exceed the $2,500 refundability threshold, up to the maximum amount of the refundable credit ($1,700 per child in 2025). Due to the phase out limits, the ACTC won't help taxpayers with high income levels. Nonethless, it can provide a significant financial boost to other taxpayers, especially those with several children.
Assuming certain qualification tests are met, IRC Section 911 provides valuable benefits to taxpayers living and working abroad. It allows expats to exclude up to $130,000 of foreign-earned income in 2025. In addition, it permits the exclusion of certain employer-provided housing costs. The law governing the ACTC states that the ACTC 'shall not apply to any taxpayer for any taxable year if such taxpayer elects to exclude any amount from gross income under section 911 for such taxable year.' Thus, because of the prohibition set out in section 24(d)(3), electing either the FEIE or Foreign Housing Exclusion, or both, will completely disqualify the taxpayer from claiming the ACTC.
To claim the ACTC, expats must forgo Section 911 exclusions entirely. Many will be able to use the Foreign Tax Credit, instead. The FTC offsets the taxpayer's U.S. tax liability on a dollar-for-dollar basis with foreign taxes paid. This keeps the foreign earned income taxable and preserves eligibility for the ACTC. The FTC will not be helpful for taxpayers residing in a foreign country that does not impose an income tax or equivalent (e.g., the United Arab Emirates, or the Kingdom of Saudi Arabia).
Making the choice requires careful planning. Once a taxpayer elects to use the FEIE or foreign housing exclusion, that choice remains effective for all later years unless the taxpayer revokes it. This means the taxpayer must continue to make the same choice each subsequent year or he will be considered to have revoked the Section 911 exclusion election. Switching to the FTC after having made the Section 911 election will be treated as an implied revocation. After a revocation, a taxpayer cannot re-elect use of any Section 911 exclusions for a five- year period without first obtaining IRS approval.
The IRS has heightened oversight of expat CTC and ACTC claims due to widespread errors that resulted in many overseas taxpayers receiving improper payments. The recent IRS IPU addressing the CTC and ACTC for U.S. persons abroad outlines what agents should look for including verifying income, whether the claimed credits exceed the limitations, taxpayer residency, whether the taxpayer is a U.S. citizen, proper tax filing status, and child eligibility. The recent release of the IPU serves as a warning that IRS audits of expatriate tax returns claiming CTC and ACTC are likely to increase.
IRS audits looking for improper ACTC claims made by taxpayers living overseas will likely be on the ... More rise.
In preparation for a possible audit, taxpayers should ensure they have retained necessary tax records. For example, records for at least 3-years regarding income, child support, and foreign tax payments. Given they live and work in a foreign country, such taxpayers most likely have foreign financial accounts. This means they should have records covering 5-years for FBAR-related non-U.S. financial accounts. Increased audit risks are on the horizon; it is best to be well prepared beforehand.
In the meantime, taxpayers may wish to consult their tax advisors to make sure of eligibility before claiming the CTC or ACTC. Once confirmed, the overseas taxpayer can file Form 1040 with Schedule 8812 accurately, leveraging the automatic extension to June 15, 2025, for 2024 returns (or October 15 with Form 4868).
For Americans living abroad, claiming the ACTC involves navigating a maze of tax rules. Electing any Section 911 exclusion whatsoever prevents access to this valuable credit. Choosing the Foreign Tax Credit instead in order to maintain ACTC eligibility requires careful planning within a complicated global tax landscape.
With the IRS' recent release of an International Practice Unit dedicated to educating its agents about the possible invalidity of ACTC claims by U.S. persons living overseas, expats need to proceed very cautiously. The possibility of audits and close regulatory watch means taxpayers must be prepared to demonstrate compliance and should now be reviewing records to make sure all is in order.
Get my take on tax matters around the globe.
Reach me at vljeker@us-taxes.org
Visit my US tax blog www.us-tax.org It is an invaluable guide in all areas of U.S. international tax. Stay informed of legislative developments, tax reform and all things international tax (including ACTC developments with the IRS). Keep ahead of U.S. tax changes impacting your life, family or business.
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Forbes
13 minutes ago
- Forbes
Harvard Vs. Trump: The Battle Over Tax-Exempt Status
In this episode of Tax Notes Talk, Ellen Aprill of UCLA discusses the legal battle between Harvard and the Trump administration over the university's tax-exempt status and the recourses that an exempt organization may have if its status is revoked. Tax Notes Talk is a podcast produced by Tax Notes. This transcript has been edited for clarity. David D. Stewart: Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: status change. Charitable and educational organizations have long enjoyed tax-exempt status as set out in Internal Revenue Code section 501(c)(3). But lately, the tax status of some nonprofits has come under national scrutiny, as the Trump administration has called for Harvard University to lose its tax-exempt status and has cut the institution off from sources of federal funding. Harvard has responded with a lawsuit accusing the administration of violating its First Amendment rights and illegally revoking its grant funding. And now, with Treasury Secretary Scott Bessent as acting IRS commissioner, there are concerns that a member of Trump's cabinet leading the agency could affect its operations and stability. So how does a nonprofit's tax-exempt status get revoked, and what legal recourse might an organization stripped of its status have? Ellen Aprill, a senior scholar in residence at the UCLA School of Law, explores these questions in her recently published paper, "Revoking Tax Exemption for Pursuit of DEI and Other Alleged Forms of Discrimination." She joins me now to delve into that paper and more. Ellen, welcome to the podcast. Ellen Aprill: Oh, thank you so much. It's a pleasure to talk to you. David D. Stewart: So let's start with a base level of knowledge: What does a nonprofit institution need to do to maintain its status, and in general, what are they prohibited from doing? Ellen Aprill: So all tax-exempt organizations, of which there are 29 categories, not just 501(c)(3) charities — although we often talk about nonprofits and mean only 501(c)(3)s — all of them, with some exceptions, such as churches, have to file a [Form]So again, 501(c)(3)s, charities, unlike other categories of tax-exempt organizations, have to apply for exemption and get a determination from the IRS that they qualify for pursuing one of the listed charitable purposes and 501(c)(3), and on their application do not say that they will lobby too much, engage in campaign intervention. And then they have to file the 990 every year. And if they make any major changes, they have to describe them in the 990. There's a favorite old article, "Could Harvard Become a Soup Kitchen?" So they could both be 501(c)(3)s. Would Harvard be able to, over time, change its activities to be a (c)(3) soup kitchen? Not that I'm predicting they will. And something that Congress enacted a few years ago is that entities automatically lose their exemption if they fail to file 990s for three years in a row. This does not generally affect the big, even the medium-sized exempt organizations. Now, even the tiniest ones have to file an electronic postcard called a 990-N, and they can in fact lose exemption if they fail to file 990s for three years. What we often see for revocation is that maybe there's too much campaign intervention, maybe there's more than substantial lobbying, although I haven't seen that one in a while. There may be too much private inurement, too much benefit going to insiders. Under current law, if you're already existing as a 501(c)(3) and your excess benefit to insiders isn't extraordinary, there's only an excise tax. But you still see denial of exemption for insiders getting too much benefit for private inurement. So those are some of the things we would usually see. David D. Stewart: OK. Well, turning to a subject that you mentioned: Harvard. What is the current situation going between Harvard and the Trump administration? Ellen Aprill: Well, there are a bunch of things going on with Harvard and the Trump administration. I think the two biggest ones are not directly having to do with tax exemption; they have to do with cancellation of enormous amounts of funds for scientific research on the grounds of violation of Title VI for antisemitism, and also challenges to visas for their international students. And on the first one, on the funding issue, there was a hearing. David D. Stewart: So did we get a sense of what went on at the July 21 hearing? Ellen Aprill: Based only on media reports, it seemed to me pretty interesting. The government lawyer appears to be making some new arguments — arguments I hadn't seen before. One, that Harvard was obligated to follow President Trump's executive orders. I'm sorry, executive orders are not the law; they are a statement of administration position. They can issue directives to others in the administration, cabinet officers, etc. So that one was a bit of a surprise. And the government lawyer, again, according to press reports, also argued that Harvard should have read the small print — that the government always has the ability to cancel contracts involving funding if the institution is not following the policies of the government. And that's not how I read the law, so I found that interesting. Harvard argued that it had violations of the First Amendment for some of what the government was trying to do, and also argued against the application of Title VI. And the judge — again, according to press reports — seemed to ask several times, "How would accusation of antisemitism be connected to these funds for scientific research?" Because part of the requirements under Title VI is that the cancellation of funding can only apply to matters connected to the violation. So that was a surprise. I didn't see as much in the oral arguments at least about procedures that should be followed when you cancel funding under Title VI — notice and hearings. Didn't see that. And I didn't see any basic questioning about whether Title VI in fact applies to religion. By its terms, Title VI, unlike Title VII for employment, does not include religion as one of the categories for its basis. David D. Stewart: All right, well, turning to the question of tax status. What is the process? How can someone's 501(c)(3) status be revoked? How does that work? Ellen Aprill: So anybody in the public can file a complaint with the IRS if they think that there are violations of the laws applying to tax status. I once was at an ABA tax section meeting, and someone from the IRS at that time — this is six years ago — said they do reserve a certain amount of their audit activity to reply to such public complaints. The other way that it would seem to be most likely is if the IRS finds issues on the 990. But if the IRS decides to start a revocation process, it is a long process involving a lot of give and take between the entity and the IRS. If at the end of that initial process the IRS issues a proposed adverse determination letter, the entity can then go to the IRS Office of Independent Appeals. And if at the end of the appeals process, which would again involve a lot of give and take, if the organization is unhappy, it can ask for a declaratory judgment action, usually from the Tax Court, but also it can file that in the district court of D.C. or in the court of claims. David D. Stewart: So this process doesn't seem to be following that line. What is the effect of having a president come out and say, "We're going to revoke their tax status"? Ellen Aprill: So there is a specific statute that says that can't happen. The IRS cannot respond to any executive department pressure to have revocation. After the president made the statement, White House officials said, "Yes, yes, yes, it's up to the IRS." There is an outstanding question as to whether this statute that applies to the president would still be constitutional after the Trump immunity case. Some people think that that part of it's unconstitutional, but if other members of the executive branch were to pressure the IRS to do revocation, that violates the statute. Disclosing any revocation process violates another statute. But enforcing these statutes require action on a bunch of people: The Treasury Inspector General for Tax Administration has to take action; the Department of Justice has to take action. I don't think I have ever seen an actual case under it, although I have seen interviews, particularly with former Commissioner Rettig, about how important they consider those limitations in the IRS and how everyone was always briefed on those requirements. David D. Stewart: So as we're recording on August 13 in the afternoon, we have seen some reporting this week about a deal potentially in the works between the administration and Harvard. What are we seeing on that? Ellen Aprill: What we are seeing is that — from The New York Times, that's the reporting we know, and other reporting relies on it — that there is a potential deal for Harvard to spend $500 million to get back billions, and that that money would not go directly to the federal government, but to vocational and educational programs and research. We don't know where that stands; there seems to be some sticking point, maybe on how much Harvard would be willing to share admissions data or not. So it may get settled. I think if this gets settled, there is unlikely to be any follow-up with attempt to revoke its exempt status. I think that the threat to revoke exempt status is simply another cudgel to get these universities to settle. David D. Stewart: What would happen to a university that lost its tax-exempt status? Ellen Aprill: Other of my colleagues — Harvey Dale, Jill Manny, and Daniel Hemel — have written a really good article in Tax Notes about what would happen to Harvard. It's surprisingly less than you might think. It is less than most of the media coverage has speculated. For one thing, there's quite good authority that donations, gifts would continue to be nontaxable income to Harvard under section 102, simply as a gift. The other aspect that would be particularly important to Harvard and many other 501(c)(3)s is property tax. And in Massachusetts and many other states, property tax has a long independent history and does not depend on federal exemption. I think a big concern would be whether they still got donations, because if they were no longer tax exempt, donations directly to Harvard would not be deductible as charitable contributions. Some of the superrich seldom take the charitable contribution deduction; their wealth is so much greater than their income that the deduction doesn't work for them. Some very rich donors, again, have private foundations that could still make donations so long as they exercised oversight known as expenditure responsibility. The same would be donations from donor-advised funds. And as was the case with Bob Jones University, Harvard is likely to have other arms that are independently tax exempt, and donations could still be made to them. Exemption also has a bit of a halo. How much that halo would be tarnished in this day and age, I can't say. David D. Stewart: Are there particular areas of Harvard's work that could be more affected than others? Ellen Aprill: I think the big concern is with the scientific funding, and that's somewhat independent from tax exemption. So the case that's going on with the billions and billions of dollars involved in scientific funding is a very big concern. There may be areas — and this I do not know — there may be areas where Harvard's colleges or programs depend in particular on charitable donations from more the middle class and the ordinarily wealthy, not the superwealthy. And if those donations ceased, that could possibly be a very big problem. And there may be very big donors who just don't want to donate anymore, even if there were ways for them to do it, if it was not to a tax-exempt institution. David D. Stewart: So in the case of Harvard, let's say the administration did pursue revoking its 501(c)(3) status. What would that process look like? What arguments would be made internally about why Harvard doesn't deserve this status anymore? Ellen Aprill: So I think that two big arguments would be that it violates fundamental public policy under Bob Jones because Harvard engages in what we might call reverse discrimination — diversity, equity, and inclusion — which would be harmful to students who are not members of a minority. So that would be one. And the other would be substantial illegal purpose, which I think would turn largely on the Title VI arguments we are hearing being made in the funding case. So if Harvard ended up losing that case and they said, "You are violating Title VI," there would be a better argument for revoking Harvard's exemption for substantial illegal purpose. I note that most of the cases involving substantial illegal purpose have involved criminal violations. There is a continuing professional education text from the EO division that says the government is not interested in subsidizing criminals. OK. But the examples were for the most part involving robbing banks, things like that. David D. Stewart: If this went badly for Harvard, is this a permanent decision, or is there a way back? Ellen Aprill: Interesting. Very interesting. First of all, remember that Harvard could challenge it. And even if they lost the declaratory action at the first level, at the trial court level, it could keep appealing if Harvard so chose. In addition, Harvard's arguments that we saw in the hearing said that the government was violating its First Amendment rights. There is a case called Z Street in which a group was told that organizations that took a different position on Israeli policy than the Obama administration — one of the IRS employees told their lawyers they were getting a harder look if they didn't agree with the administration's position. And they took an immediate action, not waiting for a final determination, because of violation of their constitutional rights, and they were able to have the case heard at that point. So depending on what would happen and what Harvard heard about why, they couldn't possibly challenge this decision or this procedure even before they got a final adverse determination letter, and that could slow the process even more. Could they reconstitute and file again? Wow. It would involve a lot. Let me give you an example: the one case we know of of a church having its exemption revoked for too much campaign activity, Branch Ministries. In that case, the church ran ads in two national newspapers saying "Don't vote for Clinton" and accepted charitable contributions at the same time. The D.C. Circuit upheld revocation of its exemption, but at least in the case of a church, we said, so what? They could reconstitute, form a new church. Churches don't have to apply for exemption or file 990s, and they could start all over again. We do get new 501(c)(3) educational institutions all the time. It would be an enormous task to start all over again, but I think it would be possible. I hope they don't ask me to restructure it, which they won't, because I'm no longer a member of the bar. At one point, my former institution, Loyola Law School, for complicated reasons decided it had to have its own exemption and not be part of the Catholic Church's group exemption. And in order to do that, the university had to show it did not discriminate on the basis of race under Bob Jones, and one of my friends in town did that work. And the amount of research and paper that they had to go in to just get their own exemption was incredible and enormous. So if Harvard were to do this, what a good question. My thought is they might do it separately for different parts of it. That would be something that would be more feasible than starting all over for the whole university. David D. Stewart: So coming back to what we expect, what would it look like if Harvard lost its exemptions? What would we see from the outside? Ellen Aprill: We would see an adverse determination letter. They would receive an adverse determination letter. They would be taken off the list of organizations eligible to receive charitable donations that the IRS publishes — it used to be called Publication 78 when it was in hard copy, but nothing's in hard copy anymore, so it would be on the IRS website. So that would be what we would see initially. It would get a lot of press. David D. Stewart: Do you think Harvard would change anything that they're doing in response? Ellen Aprill: Well, part of the argument that we heard is that to the extent that the revocation would be based on antisemitism, Harvard has already undertaken a number of actions and intends to take further actions. Harvard settled two suits that alleged harassment and discrimination against Jewish students, and they have changed their antidiscrimination policy on their web page. They have taken other actions. So part of the difficulty with the argument about revocation is if you're complaining about what Harvard used to do and now it's changed it, why is that not enough? So part of it is the period of time at which the procedure — what they would look at, what years. I personally don't think there's a good argument for revoking Harvard's exemption; I can't guarantee that it wouldn't happen, of course. David D. Stewart: Well, assuming that it did go forward, it would likely end up in the courts. And what do you think would happen if it found its way into litigation? Ellen Aprill: It would take a very, very, very long time. It would go on for years and years and years. Bob Jones went on forever. But part of the reason we now have this way for organizations to quickly file declaratory judgment actions is to avoid the problem that Bob Jones encountered. Bob Jones had to pay a tax and then file for refund before it could get into court to review the revocation of its exemption. It ultimately lost in the case involving fundamental public policy. We don't know what would happen if that reached the Supreme Court. We don't know what the Supreme Court would look like. We don't know what they would say about the Bob Jones case and fundamental public policy. We don't know whether they would read the language in Bob Jones saying no discrimination in education — which at the time clearly meant discrimination against Blacks — whether they would take that more generally and include discrimination against Jewish and Israeli students to already be encompassed by Bob Jones and say they did violate fundamental public policy. David D. Stewart: So Harvard's not the only university dealing with scrutiny from the federal government right now. What is happening with UCLA? Ellen Aprill: So I am now an employee of UCLA — I'm a senior scholar in residence at the nonprofit center — and the administration is asking UCLA for $1 billion to settle. That's a very big number, so much bigger than any other of the numbers we have seen, even for Harvard. We don't know whether UCLA is going to settle; I have no inside information on that. We do know that Governor Newsom has said that he would want to fight. I assume this is a decision for the regents. I do not know what would happen. The consequences for UCLA to lose funding are enormous — all of the medical and scientific research. It is a little different from anything else we have seen because UCLA is a public university and not a private university. All of the UC campuses back to 1939 actually filed and received 501(c)(3) status, so they are currently a 501(c)(3). Their [status] could be revoked. Even if their [status] were revoked, however, they would still be a governmental entity, and governmental entities are not subject to income tax, but losing any funding is still the big issue in front of them. David D. Stewart: So now I understand that this is a unique case, but in this current dynamic of scrutiny for exempt organizations, what should advisers be telling their clients? How should people respond? Ellen Aprill: So one thing that everyone is telling — and indeed, I've had two different organizations ask me to do webinars on this issue — is to make sure they have taken care of all low-hanging fruit, that they are doing all their filings right, that their web page is up to date, that their 990s are being filed timely and are up to date, that they're doing all their state filings appropriately. So that's one thing to do. They then have to decide, some of them, whether they want to make any changes. So one group filed a complaint with the IRS against the Gates Foundation, among others. They said that the Gates Foundation had one scholarship program that was for minority students, and the complaint said that this violated Bob Jones fundamental public policy. And I had trouble with the complaint, myself. So one of the things that Bob Jones said is that we needed long-standing action by all three branches of government before we say something is fundamental public policy, the violation of which would mean no exemption. So this complaint relied in part on Students for Fair Admissions, and it read that case broadly. That case only said no affirmative action in college admissions. If, under Bob Jones, you have to be super clear and super careful before you say something's a fundamental public policy, I would not read the case in that way. And the complaint relied on President Trump's executive orders. Those are too recent; one administration cannot establish fundamental public policy. I used to get questions all the time, every time there was a new administration with a different State Department policy. And they would ask, well, don't all these organizations lose their exemption? No. Administrations are free to establish public policy, but that doesn't mean it becomes fundamental public policy. We cannot have exempt organizations gaining their exemption, losing it when one president is elected, and then gaining it again when another one is elected. So I didn't find that there was enough evidence for fundamental public policy. Maybe by the time it got to a Supreme Court it would. But the Gates Foundation changed its policy. Now they're noticing that they were now going to give these scholarships to all Pell Grant recipients, so not looking directly at race. They said that had been under consideration for quite some time and that the change wasn't because of the filing of this complaint two weeks earlier. So that was something that the Gates Foundation felt they could do in good conscience, staying true to their purpose and mission. And there are groups that may feel that they could do the same. David D. Stewart: Well, Ellen, it's been great talking to you, and I'm sure this is an issue we're going to have to keep an eye on over the next, at least three-and-a-half years. So thank you for being here to talk to us about it. Ellen Aprill: Thank you so much. Such good questions you asked.
The Hill
14 minutes ago
- The Hill
We follow the money in politics, and the trail just keeps getting longer
According to the nature of our economy, it's typical that costs increase over time (hello, inflation). But what we're seeing in elections cannot be considered normal. The Pew Research Center recently asked Americans to list which issues are the biggest problems facing the economy right now. Seventy-two percent said the role of money in politics is a 'very big problem' — landing it the foremost spot above health care costs, inflation, the federal deficit, poverty and every other issue. This is significant. While candidates for Congress and the presidency quibble over who gets access to power, moneyed interests continue to creep into the system, making elections costlier than ever. Sometimes it starts to feel like a contest just for the contest's sake. Let's take a look at the numbers. Just three presidential cycles ago, in 2016, the total cost of all federal elections rang in at $6.5 billion, a (relatively) modest increase from 2012. But four years later, the total cost more than doubled to $15.1 billion and, in 2024, nearly matched that total ($14.8 billion). The U.S. vastly outspends all other nations on elections. The source of money has also changed. Twenty-five years ago, the vast majority of candidates who raised more than $200,000 for general election campaigns collected that money from within their districts from people they would ultimately represent if they won (79 percent of House candidates, 62 percent of Senate candidates). As my organization has reported, congressional elections truly have now become national campaigns, with just 17.6 percent local money in House races and only 27.5 percent in Senate races for 2024. So, while more money is pouring into the U.S. election system than ever before, the traditional relationship between elected officials and those they represent has fallen apart. Thanks to the research done by Unite America, we know that nearly all congressional elections are decided by less than 10 percent of voters. Put those low voter participation rates together with low local fundraising rates, and you end up with elected officials who no longer represent the people. And if our officials are not beholden to their constituents, but rather to partisan forces, we end up with a dysfunctional government. We shouldn't be surprised that the American people have had enough. Amid a more politicized landscape in which partisans are moving increasingly toward the extremes, money in politics is one of the few issues that both sides of the aisle can agree on — with 66 percent of Republicans and 78 percent of Democrats citing it as a very big problem. And yet, our leaders appear uninterested in changing a system that helps them stay in power. In every Congress, a handful of lawmakers have introduced legislation to reform the role of money in politics, but none of those bills have any chance at becoming law. In fact, a meaningful campaign finance law has not been enacted since the Bipartisan Campaign Reform Act was signed in 2002 — nearly a quarter-century ago. Since then, the courts have eaten away at the restrictions created by the law, clearing the way for super PACs and the untraceable ' dark money ' funds that support them. And then there's the Federal Election Commission, which is tasked with regulating campaign fundraising and expenditures in line with current law, enforcing the rules and punishing those who break the law. But even in the best of times, the FEC rarely takes action. When fully staffed, it has three Republican and three Democratic commissioners, leading to partisan gridlock. But deadlocked votes would be a welcome change from what we are facing now. In order to take action, the FEC requires a quorum of four commissioners. Right now it only has three, so it cannot complete most of its core functions. That leaves the judiciary as the only branch of government considering changes to campaign finance laws. All eyes are on Maine, where voters overwhelmingly approved a 2024 ballot measure setting caps on contributions to super PACs. Opponents have sued to overturn the measure, and the case has been teed up for a federal district court's review. It is likely to end up before the Supreme Court in the next couple years, in what will likely be the most significant ruling on money in politics since Citizens United. Before that case makes it to the high court, the justices may consider another campaign finance case. Current law limits how much money party committees can spend in coordination with candidates' campaign committees. That law is being challenged and the case could be heard this fall. While all this is happening (or, at the FEC, not happening), political operatives are already gearing up for the next elections and strategizing how to raise as much money as possible. If nothing changes, the dollars will only get bigger, and voters will be even more dissatisfied. We deserve better.
Business Insider
15 minutes ago
- Business Insider
The US has lost 790,000 workers in the last three months. Here's why this could be a sleeper problem.
Good morning. At BI, we often share stories of people making big changes to chase their dreams. But sometimes, it can be a nightmare. One man moved his family to Hawaii for his wife's career. Six months after he joined them, she lost her job. Now, they're no longer together. In today's big story, an under-the-radar number reveals a huge red flag for America's job market. What's on deck: Markets: The hedge funder who sparked the Opendoor rally sees it surging 2,000% more by end of year. Tech: Anthropic is getting picky about how you can invest in it. Business: Zelenskyy wore an all-black suit to the White House. Stylists say it's crucial to dress up for high-stakes meetings. But first, where is everyone? If this was forwarded to you, sign up here. The big story The scariest job market number It's not a statistic that gets much attention. Not like CPI, core PCE, or PPI — all strutting into the spotlight every month, making headlines and market moves. Lurking under the hood of unemployment data, you'll find it. Look even closer, and you'll see a huge red flag. The official US labor force, which measures the number of working-age Americans actively working or looking for work, is shrinking at a rate usually seen during the throes of economic disaster. The consequences could be perilous, Callie Cox, the chief market strategist at Ritholtz Wealth Management, writes for BI. For years, the number of working-age Americans entering the workforce has outpaced those leaving, helping to fuel economic expansion. Things have changed. Over the last three consecutive months, the US has lost 790,000 workers. One factor is immigration. A 90% drop in border encounters over the past year has cut the influx of foreign-born workers — a group that historically has played a big role in supporting the US labor force, Callie highlights. At the same time, other challenges — such as return-to-office mandates and high childcare costs — have led to fewer women entering or staying in the workforce. Take the AI talent wars. With a tiny pool of elite engineers, tech giants like Meta have spent billions chasing a handful of workers — and competitors like Microsoft are trying to snatch them away. But not every company has pockets as deep as Meta and Microsoft. As labor shortages drag on, many businesses may start to reduce hiring, expansion, and investment. This sends ripples through consumer spending, which drives nearly 70% of the US economy. Fewer workers means less spending, which slows growth. Reversing the trend demands smarter policy and stronger economic momentum, Callie writes. But right now, neither seems in sight. 3 things in markets 1. Jackson Hole and other potential market movers. It's set to be another big week in markets. Here's everything we're watching this week, from Fed Chair Jerome Powell speaking at the central bank's Jackson Hole symposium to the release of new housing data and key retail earnings. 2. Opendoor's great expectations. Hedge fund founder Eric Jackson — aka the guy who sparked the stock's July rally — thinks it has a lot further to climb. Thanks to the CEO's recent exit, Jackson sees the stock surging 2,000% by the year's end. 3. All the smart tech inside JPMorgan's new HQ. From biometric scanners to circadian rhythm lighting and lattes on demand, the bank is leveraging tech to make return-to-office more comfortable for its employees. See the high-tech features going into its new Park Avenue space. 3 things in tech 1. Beggars can't be choosers, but Anthropic is no beggar. In its latest funding round, the AI startup is raising about $5 billion at a $170 billion valuation, and this time, it doesn't want investors using special purpose vehicles, or SPVs, to get in on the action. Anthropic has more leverage to dictate terms because demand is so hot, BI's Ben Bergman exclusively reports. 2. The iPhone manufacturer has a new golden child. Sales from the Cloud and Networking division at Foxconn, the company known for being Apple's factory floor, just surpassed its consumer electronics business. The pivotal moment marks the shift from mobile to AI, writes BI's Alistar Barr, as Foxconn, once the backbone of smartphones, is now building the infrastructure of the AI age. 3. See the pitch deck an AI scribing startup used to raise $243 million. Ambience Healthcare, which uses AI to automate the medical transcription process, counts A16z and Oak HC/FT among its investors. See the 15 slides it used to raise its Series C. 3 things in business 1. Broke: MSNBC. Bespoke: MS NOW. MSNBC is taking a new name, My Source News Opinion World, when it officially spins off from Comcast at the end of the year. Big names like Joe Scarborough and Rachel Maddow are supportive, but company insiders who spoke to BI struck a less effusive chord. 2. A hot new bombshell enters the streaming wars. The world's biggest comics platform, Webtoon, is getting into vertical video with the hopes of wooing Gen Z, BI's Lucia Moses exclusively reports. It's planning on using real actors, not AI. 3. Trump is gutting a policy that supercharged Rivian, Tesla, and Lucid. The EV carmakers make billions of dollars from selling regulatory credits to rivals. Now the Trump administration is repealing those EV regulations, and the carmakers are warning of big losses as a result. In other news Starbucks has a new plan for raises: a flat 2% pay hike for salaried staff. Tesla teases a new Model Y L variant is 'coming soon' in a video posted to Chinese social media. Morgan Stanley sees the AI productivity boom adding $16 trillion to the stock market's value. The AI startup Nominal wants to address the accountant shortage. Read the pitch deck that it used to raise $20 million. What tariffs? S&P 500 companies are wrapping up one of the strongest earnings seasons on record. Boat Trader and YachtWorld owner has a chokehold on the US marine vessel market, an antitrust lawsuit alleges. Ukraine's electronic warfare fight against Russian drones is so chaotic that its own are getting caught in the crossfire. Why yearslong bear market slumps may be a thing of the past. What's happening today Home Depot reports earnings. Hallam Bullock, senior editor, in London. Grace Lett, editor, in New York. Meghan Morris, bureau chief, in Singapore. Akin Oyedele, deputy editor, in New York. Amanda Yen, associate editor, in New York. Lisa Ryan, executive editor, in New York. Dan DeFrancesco, deputy editor and anchor, in New York (on parental leave). Kiera Fields, editor, in London.
