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USA
2nd October 2026
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THE HOT STORY

Senate unanimously approves bipartisan taxpayer service reforms

The U.S. Senate has unanimously approved the Taxpayer Assistance and Service Act, a bipartisan package containing 65 provisions intended to modernize the IRS, strengthen taxpayer rights, and improve administration of the tax code. Measures supported by AICPA include expanding electronic access to taxpayer information, digitizing correspondence and returns, improving online account functionality, increasing callback technology, and providing greater visibility into IRS processing backlogs. The legislation also includes measures aimed at addressing abusive practices in the tax preparation industry. AICPA described Senate passage as a significant achievement for taxpayers and tax professionals, while lawmakers said the reforms would improve service and protect taxpayer rights. The bill now moves to the House, which is not expected to return from recess until November.

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TAX

Treasury outlines rules for nationwide tax-credit scholarship program

The Trump administration has released proposed regulations for the Federal Tax Credit Scholarship program, which is scheduled to launch on January 1st 2027. The IRS estimates that the program could grow to $26bn annually by 2030, funded by 11m taxpayers, with 2m K-12 students potentially receiving scholarships worth $12,000 each for full-time private schooling. Another 5m students could receive scholarships for part-time private education, while 600 to 700 scholarship-granting organizations could participate. Taxpayers will receive dollar-for-dollar federal tax credits for qualifying donations, capped at $1,700 for individuals and $3,400 for married couples filing jointly. Families earning up to 300% of their area’s median income can qualify, although students must live in participating states. As of October 1st, 31 states had opted in or were on track to participate. 

NYC presses ahead with pied-à-terre tax while appealing court ruling

New York City is continuing to implement its pied-à-terre surcharge while appealing a judge’s decision ordering the administration of Mayor Zohran Mamdani to restart the rollout process. The city’s appeal triggered an automatic stay of the ruling, which found that initial notices sent to owners of high-value second homes were arbitrary and capricious, legally erroneous, and violated their due process rights. The judge also ordered the city to remove an online list of property owners potentially subject to the surcharge. The tax, which took effect in May, applies to certain secondary properties valued above $5m and co-ops and condos with a market value above $1m, subject to exceptions. Separate lawsuits have challenged the legality of the tax itself, arguing that it discriminates against property owners who contribute to public services they rarely use. Mr. Mamdani has said the city will seek to defend the law, describing the surcharge as a way to increase contributions from owners of luxury second homes.

INDUSTRY

PCAOB updates standard-setting, research, and rulemaking agendas

The PCAOb has released updated agendas for its standard-setting, research, and rulemaking projects following its first public consultation on where it should focus its efforts. Standard-setting priorities include negative assurance related to comfort letter engagements, auditor independence, fraud, noncompliance with laws and regulations, and going concern. The PCAOB also plans to develop a conceptual framework for standard setting, conduct research on data and technology, firm and engagement performance metrics, and communications with audit committees, and pursue rulemaking for a permanent broker-dealer inspection program. Chair Demetrios Logothetis said stakeholder feedback helped refine the board’s priorities, with the updated agendas focused on practical projects intended to advance audit quality and investor protection.

FIRMS

EY launches framework to quantify financial impact of sustainability risks

EY has launched its Sustainability Value Bridge, a framework designed to help companies quantify how climate, nature, and broader sustainability risks and opportunities affect financial performance and enterprise value. The framework identifies potential sources of value erosion, including raw material volatility, supply chain disruption, higher capital and compliance costs, and reputational risks, before assessing actions that could protect value or generate new revenue. Potential value drivers include operational efficiency, supply chain resilience, capital optimization, regulatory proficiency, product innovation, and new business models. EY said the framework is intended to bring sustainability considerations more directly into financial and strategic decision-making as their potential business impacts become increasingly material.

ECONOMY

U.S. manufacturing expansion continues as costs and supply pressures rise

U.S. manufacturing activity continued to expand in September, although at a slightly slower pace, as strong demand was accompanied by rising costs and supply chain pressures. The Institute for Supply Management’s manufacturing index slipped 0.1 point to 54.5, remaining above the 50 level that indicates expansion for a ninth consecutive month. New orders increased, order backlogs reached their highest level since February, and production continued to grow, although at a slower pace. Factory employment also expanded for a third consecutive month, the longest run of employment growth since 2022. However, manufacturers faced renewed cost pressures, with raw material prices reaching their highest level since May and supplier delivery times continuing to lengthen. Twelve manufacturing industries reported growth during September, including electrical equipment, primary metals, and machinery, while printing and textile mills contracted. Relatedly, the S&P Global U.S. Manufacturing PMI rose to 55.9 from 53.9 in August. The final reading was revised down from the preliminary estimate of 57, despite expectations for no revision. S&P Global reported growth across all five components of the index, with new orders and output recording particularly strong rates of expansion.

Construction spending surged 0.9% in August

U.S. construction spending rose a stronger-than-expected 0.9% in August, the Commerce Department reported on Thursday, following a revised 0.1% decline in July, as increased investment in offices, power plants, and other nonresidential projects helped drive growth. Economists had expected spending to remain unchanged. Private construction spending increased 1.1%, including a 1% rise in nonresidential investment. Office construction jumped 4.6%, while spending on power plants increased 0.9%. Residential investment also rose 1.1%, although the increase likely reflected renovation activity, with single-family construction up just 0.2% and down 3.5% from a year earlier. Despite the monthly increase, overall construction spending was 1.7% lower than a year earlier. Higher mortgage rates continued to weigh on homebuilding, while public construction spending rose 0.2%, supported by state and local government projects.

Jobless claims fall to lowest level since July

U.S. applications for unemployment benefits declined to their lowest level since July, according to the Labor Department, signaling continued resilience in the labor market. Initial jobless claims fell by 1,000 to 197,000 in the week ended September 26, below economists’ median forecast of 200,000. The four-week moving average of initial claims fell to a seven-week low of 200,000, while continuing claims, reported with a one-week lag, decreased by 11,000 to 1.7m, their lowest level since March 2023. Claims have remained near historically low levels in recent months, suggesting employers remain reluctant to cut workers despite more restrained hiring. Economists expect September’s employment report to show payrolls increasing by about 85,000, with the unemployment rate holding at 4.1%.

LEGAL

Court rules tax estimate error did not invalidate filing extension

The U.S. Court of Federal Claims has ruled that a married couple’s incorrect estimate of their total tax liability on Form 4868 did not invalidate their automatic six-month filing extension, allowing them to claim a refund for their 2016 tax overpayment. Selwyn Karp and Barbara Adams-Karp reported zero total tax liability when requesting an extension, despite having an actual gross liability of $131,201. However, previous overpayments and other tax payments more than covered what they owed. The court found that while the couple mistakenly reported their net rather than gross liability, their estimate that no additional tax was due was reasonable. The court concluded that technical errors should not generally invalidate an extension when they do not delay money owed to the government. It granted the taxpayers’ motion for summary judgment, rejected the government’s motion, and determined that the couple was entitled to a refund of their 2016 overpayment.

Bessent settles tax dispute over hedge fund Medicare taxes

Treasury Secretary Scott Bessent has settled a tax dispute stemming from a strategy he used while managing a hedge fund to avoid paying a 3.8% Medicare-related tax on much of his income. The approach involved channeling earnings through a limited partnership, a practice the IRS has challenged. The amount Bessent ultimately paid as part of the settlement has not been disclosed. During Bessent’s confirmation process, Senate Democrats estimated that the strategy had allowed him to avoid $910,000 in taxes over three years, although Bessent disputed that figure and said he would reserve funds for a potential payment while related litigation continued. The issue resurfaced after the Second Circuit upheld the IRS’s position that whether partners qualify for the relevant tax exemption depends on their management and control activities, rather than simply their designation as limited partners. Senate Democrats subsequently pressed Bessent over whether he would pay the disputed taxes.

Second judge blocks Trump's H-1B visa fee

A second judge has blocked a $100,000 fee imposed by President Donald Trump on new H-1B visas for skilled foreign workers. The ruling from U.S. District Judge Haywood Gilliam came after a coalition of unions, employers, and nonprofits challenged the fee, arguing that the U.S. Citizenship and Immigration Services and the State Department did not follow proper rule-making processes. Gilliam's decision follows a similar ruling in June by a federal judge in Boston. The fee, originally set to expire on September 21, was extended by Trump for another year. Steve Bressler, a lawyer with Democracy Forward, said: "Today's decision . . . protects a system that was thrown into chaos overnight." The H-1B program allows U.S. employers to hire foreign workers in specialty fields, with 65,000 visas available annually. Trump's fee sharply increased costs, which previously ranged from $2,000 to $5,000.

RISK

Gavin Newsom signs laws to protect workers from AI risks

California Gov. Gavin Newsom has enacted laws to protect workers from the potential threats posed by artificial intelligence, including job losses and workplace surveillance. "Artificial intelligence (AI) should expand opportunity - not come at the expense of workers and families," Mr. Newsom said. He criticized President Donald Trump for failing to implement comprehensive federal AI regulations, and emphasized the need for state-level oversight. The new laws require AI chatbot operators to conduct risk assessments before deployment and mandate consultations with experts to enhance industry oversight. Mr. Newsom also hinted at the possibility of a special legislative session to address these issues further, saying: "We have to do a lot more in the absence of federal leadership."

CYBERSECURITY

AI threats emerge as biggest cybersecurity preparedness gap, PwC finds

More than half of business and technology leaders see attacks targeting artificial intelligence (AI) systems as their biggest cybersecurity preparedness gap, according to PwC’s 2027 Global Digital Trust Insights survey of 3,934 executives across 71 countries. The report found that 52% identified adversarial AI attacks as the leading gap, while organizations also face unclear accountability, data protection weaknesses, and shortages of AI security skills. Despite these concerns, 84% of security and finance leaders expect cybersecurity budgets to increase, and 58% rank AI among their top five cyber spending priorities, with responsible AI governance, platform hardening, and supply chain security among the leading areas for investment. Organizations are also deploying AI defensively, particularly for threat detection and alerting, fraud detection, and phishing detection and response.

AND FINALLY...

Night owls face greater risk of disability retirement

People who prefer working and sleeping later may face a higher risk of leaving work because of ill health, according to Finnish research. A 12-year study of 5,679 people found evening types were 1.7 times more likely to receive a disability pension than morning types, even after socioeconomic factors were considered. Researchers suggested poorer health choices and misalignment between natural sleep patterns and conventional working hours could contribute to the increased risk. "Although traditional working hours may be too early for late chronotypes, most of them need to work during regular office hours," the authors of the study wrote. "In the current study, more than 70 per cent of [evening types] who had reported their work schedule worked in a day job. People who are [evening types] represent a significant proportion of the population and their health and ability to continue working until retirement age pose challenges for sustainable economies."
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