The US Market Is Not One Market: What Australian Businesses Must Understand Before Expanding

For Australian businesses with global ambition, the United States often represents the defining opportunity.

It is the world’s largest consumer market, one of the deepest capital markets, and home to many of the customers, investors, strategic partners and industry ecosystems that can transform a company’s trajectory. For businesses in technology, sport, health, consumer products, professional services, education, financial services and advanced manufacturing, the US is often not simply an expansion market. It is the market that determines whether the business becomes regional or genuinely global.

Yet the same qualities that make the US attractive also make it unforgiving.

Australian businesses often approach the US with a degree of familiarity. The language is familiar. The legal heritage feels familiar. The commercial culture is recognisable. The brands, investors and institutions are globally known. On the surface, the US can appear to be a larger version of a market Australian businesses already understand.

That assumption is dangerous.

The United States is not just a bigger market. It is a different legal, tax and regulatory environment altogether. More importantly, it is not one market in any simple sense. It is a federation of states, cities, regulators, courts and commercial norms layered on top of a federal system. A business may enter through California, raise capital in Delaware, hire in New York, sell into Texas, store data in Virginia and use contractors in Florida — and each of those choices can carry different legal and commercial consequences.

This is where many Australian businesses underestimate the challenge. They do not fail because the US opportunity is too difficult. They fail because they treat US expansion as a sales project when it is also a structural, legal, tax and governance project.

The distinction matters.

A company that enters the US with the wrong structure, weak contracts, unprotected intellectual property, inadequate insurance, poor employment processes or unmanaged privacy exposure may still generate revenue. It may even grow quickly. But growth without structure can simply scale the risk. By the time the issue appears — an investor diligence request, a lawsuit, a tax notice, a product complaint, a data incident, a distributor dispute or a regulatory inquiry — the cost of fixing the problem is usually far greater than the cost of preparing properly at the outset.

Structure Is A Strategic Decision, Not An Administrative Step

The first serious question for an Australian business entering the US is not where to sell, but how to exist in the market.

Should the business operate directly from Australia? Should it form a US subsidiary? Should that subsidiary be a corporation or an LLC? Should it be established in Delaware, the state of operation, or somewhere else? Should the group structure be reorganised before a US capital raise? Should intellectual property remain in Australia or be licensed to the US entity? How should intercompany arrangements be documented?

These questions are often treated as technical matters. They are not. They influence tax outcomes, investor appetite, legal liability, operating flexibility, employee equity arrangements, state filing obligations, exit planning and the perceived maturity of the business.

For many Australian companies, a US subsidiary can be a sensible way to separate US operating risk from the Australian parent. But that protection is not automatic. A subsidiary is not a piece of paper that magically insulates the group from all exposure. It must be respected as a real entity. That means separate accounts, proper contracts, appropriate capitalisation, clear decision-making, arm’s-length intercompany arrangements and disciplined corporate governance.

Where the business is a high-growth startup seeking US venture capital, a different issue may arise. US investors, particularly venture funds, often prefer investing into a US parent company, commonly a Delaware corporation. This can lead to a “flip-up”, where the corporate structure is reorganised so that the US company becomes the parent of the group.

For the right business, this may be commercially sensible. It can align the structure with US investor expectations, simplify future funding rounds and position the company for a US exit. But it should never be treated as a cosmetic change. A flip-up can have consequences for Australian tax, US tax, shareholders, employee equity plans, intellectual property ownership and future exit proceeds. It is one of those decisions that looks simple only when viewed from too far away.

The broader point is that structure should follow strategy. A founder-led software company preparing for US venture capital does not necessarily need the same structure as an Australian manufacturer selling through US distributors. A professional services firm establishing a US client base has different issues again. A sports, entertainment or talent-related business may need to think carefully about immigration, state law, withholding, image rights, contracting and agency arrangements.

The correct structure is not the most popular one. It is the one that supports the commercial plan while managing tax, legal and operational risk.

Contracts Are The Operating System Of US Risk

In the US, contracts carry more weight than many Australian businesses expect.

A contract is not merely a record of what the parties agreed. It is a risk allocation tool. It determines who bears responsibility if something goes wrong, whether liability is capped, whether consequential damages are excluded, who owns the intellectual property, how confidential information is protected, which law applies, where disputes are heard, whether arbitration is required, whether legal costs can be recovered and what happens when the relationship breaks down.

This matters because the US litigation environment is expensive. Discovery can be broad and intrusive. Legal fees can escalate quickly. Claims that appear commercially manageable can become financially distracting. Even a strong defence can consume executive time, damage relationships and create pressure to settle.

Australian businesses should therefore treat US contracts as a commercial control system, not as administrative paperwork.

The key clauses are not boilerplate. Indemnities, warranties, limitations of liability, governing law, jurisdiction, dispute resolution, confidentiality, IP ownership, non-solicitation, termination, payment terms, audit rights and insurance obligations all need to be drafted for the transaction and the relevant US context.

This is also where businesses need to be cautious about relying on AI-generated documents or generic templates.

The issue is not that AI has no role. It can be useful for early drafting, issue spotting and helping business owners understand common contractual concepts. The problem is that a contract can sound sophisticated and still be wrong. It can use terminology that appears legal but does not achieve the intended result. It can import concepts from the wrong jurisdiction. It can omit state-specific requirements. It can include a clause that is unenforceable, commercially unrealistic or unsuitable for the industry.

In the US, the difference between a contract that looks right and a contract that works can be very expensive.

Intellectual Property Should Be Protected Before The Business Becomes Visible

For many Australian companies, the most valuable assets entering the US are not physical assets. They are brands, software, product designs, proprietary processes, client data, trade secrets, content, know-how, commercial relationships and reputation.

Those assets need to be protected before the business becomes visible.

Too many companies reverse the sequence. They launch the product, appoint a distributor, speak to investors, hire contractors, share technical information, run a campaign, build a customer base and only then ask whether their intellectual property is protected in the US. By that stage, the business may discover that a similar brand is already registered, a contractor agreement does not properly assign IP, confidential information has been shared too broadly, or a competitor has moved faster.

In the US, trade marks, patents, copyright and trade secrets each require different thinking.

A brand that is available in Australia may not be available in the US. A name that feels distinctive to an Australian founder may already be used by a US company in a related category. A trade mark search and filing strategy should therefore be addressed early, particularly where the US brand will be central to market entry.

For technology and product businesses, patent timing can be critical. Public disclosure, investor presentations, product launches and commercial negotiations can all affect the position if not managed properly. Businesses with potentially patentable technology should obtain advice before they disclose too much.

For software, content and creative assets, copyright protection may be important, but businesses should also ensure that ownership is clean. That means reviewing agreements with developers, agencies, consultants, employees and contractors. It is surprisingly common for companies to assume they own what they paid to create, only to find the legal position is more complicated.

Trade secrets require discipline. Confidential information is not protected merely because the business considers it confidential. Protection depends on practical steps: non-disclosure agreements, access controls, internal policies, employee obligations, contractor restrictions, cybersecurity practices and careful management of commercial discussions.

The principle is simple. If the US market is important enough to enter, the assets being taken into that market are important enough to protect.

Product Liability And Consumer Risk Can Change The Economics Of Expansion

For businesses selling physical products, the US requires particular care.

The US product liability environment can be far more aggressive than Australian businesses expect. Claims may arise from alleged design defects, manufacturing defects, inadequate warnings, poor instructions, breach of warranty, misleading marketing or failure to act once a product risk becomes known. Manufacturers, distributors and retailers can all be drawn into disputes, even where the business believes it acted responsibly.

This can be especially confronting for Australian companies that have strong internal quality standards and assume those standards will be enough. In the US, the question is not only whether the product was made carefully. It is also whether the design was appropriate, whether foreseeable misuse was considered, whether warnings were adequate, whether instructions were clear, whether claims made in marketing were supportable, whether warranties were properly drafted and whether the company had systems to respond to complaints or safety issues.

Before entering the US, product businesses should review packaging, warnings, instructions, safety certifications, warranties, recall procedures, supply chain contracts, distributor obligations and insurance coverage. The insurance point is critical. Australian policies may not provide the protection required for US exposure, or may contain territorial exclusions, product exclusions or limits that are inadequate for the US market.

A business should not ask only whether it can sell the product in the US. It should ask whether it is prepared for the legal consequences of selling the product in the US.

Compliance Is Fragmented, And Fragmentation Creates Risk

One of the defining features of the US market is regulatory fragmentation.

There are federal regulators, state regulators and local authorities. There are national rules, state-specific rules and city-level requirements. There are industry-specific regimes and general consumer laws. There are licensing rules, employment rules, tax rules, privacy rules, advertising rules, import rules and product safety rules.

The relevant obligations depend heavily on what the business does.

A food, cosmetics, health, medical device or pharmaceutical business may need to consider FDA requirements. A financial services or investment-related business may need to consider securities regulation. A company making environmental claims may need to substantiate those claims carefully. A consumer product business may need to consider product safety standards. An online business may need to consider privacy, automatic renewal rules, digital marketing obligations and state consumer protection laws. A business importing goods may need to consider customs, tariffs, sanctions and restricted-party screening.

This is why there is no single US compliance checklist that works for every Australian business. The right analysis depends on the product or service, the states involved, the customer base, the distribution model, the industry and the way the business earns revenue.

The problem is that many compliance risks arise before the company thinks it has “entered” the US in a formal sense. A business may create US exposure by selling online to US customers, engaging US influencers, collecting data from US residents, appointing a US sales agent, attending trade shows, hiring contractors, storing inventory, using a fulfilment provider or raising capital from US investors.

Market entry is not always marked by opening an office. Sometimes it begins with the first US customer.

Marketing, Privacy And Data Practices Need To Be US-Ready

The US is a powerful market for digital growth, but it is also a market where marketing practices, consumer disclosures and data handling can create significant risk.

Advertising must be accurate. Performance claims need support. Pricing needs to be clear. Promotional terms need to be properly disclosed. Influencer relationships need to be transparent. Subscription arrangements and automatic renewals need careful attention. Environmental claims, health claims and financial claims require particular care because they can attract scrutiny if they are exaggerated, vague or insufficiently substantiated.

This matters for Australian businesses because many enter the US digitally. They sell through a website, run paid advertising, use influencers, collect customer information, offer subscriptions, promote through social media and sell across multiple states before building a physical presence.

That model can scale quickly. It can also scale legal exposure quickly.

Privacy is another area where Australian assumptions can be misleading. The US does not operate under one simple, comprehensive national privacy regime that applies uniformly to every business. Instead, it has a patchwork of state privacy laws, federal sector-specific laws, breach notification obligations and industry-specific requirements.

California is often the best-known example, but it is not the only state that matters. Health data, children’s data, biometric information, financial information and sensitive personal information may carry additional obligations depending on how the business operates.

Privacy should therefore be treated as an operational issue, not merely a website policy issue. Businesses need to know what information they collect, why they collect it, where it is stored, who receives it, how long it is retained, how it is protected and what rights customers may have.

A privacy policy that looks acceptable on a website is not enough if the underlying systems do not match it.

Governance Protects The Business When Growth Accelerates

In early-stage expansion, governance often feels secondary to sales. That is understandable, but it is also risky.

A company entering the US needs basic corporate discipline. It should maintain proper records, document key decisions, separate group entities, keep accurate accounts, ensure contracts are signed by the correct entity, manage tax registrations, comply with employment obligations and maintain appropriate insurance.

This is not bureaucracy for its own sake. It is what protects the business when pressure arrives.

If a dispute arises, the company’s documents matter. If an investor conducts due diligence, the records matter. If a regulator asks questions, the systems matter. If a customer makes a claim, the contract and insurance position matter. If the business is eventually sold, the buyer will examine whether the US operations were built properly or improvised.

Poor governance can also create personal exposure for executives in certain circumstances, particularly where there are unpaid taxes, employment law breaches, personal guarantees, fraud, misuse of entities, commingling of funds or serious compliance failures. While corporate structures can provide important protection, they are not a substitute for responsible management.

Insurance is part of this framework. Depending on the business, relevant policies may include general liability, product liability, cyber, directors and officers, employment practices liability, professional liability and workers’ compensation. But insurance should not be treated as a cure-all. Coverage depends on policy wording, exclusions, limits, retentions, notification requirements and the nature of the claim.

Good governance does not slow growth. Done properly, it makes growth more durable.

The Businesses That Succeed Prepare Before The Market Tests Them

The US rewards ambition, but it also tests assumptions.

Australian businesses that succeed in the US usually understand that expansion is not a single event. It is a sequence of decisions that must fit together: structure, tax, contracts, IP, employment, privacy, insurance, regulatory compliance, financing and governance. None of these issues should be considered in isolation because each one affects the others.

The businesses that struggle often follow a familiar pattern. They sell first and structure later. They use Australian contracts in US transactions. They assume a template agreement will be sufficient. They leave IP protection until after launch. They hire contractors without understanding worker classification. They underestimate state taxes and sales tax. They use marketing claims that have not been reviewed. They collect data without mapping their obligations. They discover insurance gaps only after a claim.

None of these mistakes necessarily comes from carelessness. More often, they come from momentum. The company sees an opportunity, moves quickly, wins customers and assumes the infrastructure can catch up later.

In the US, that can be an expensive assumption.

The better approach is not to over-lawyer the opportunity or delay commercial progress. The better approach is to build a practical expansion framework before the business is exposed. That means identifying the highest-risk issues early, prioritising what must be fixed before launch, and creating a structure that can evolve as the US business grows.

A business entering the US does not need perfection from day one. But it does need clarity. It needs to know which entity is contracting, who owns the IP, what taxes may apply, which states matter, what the contracts say, what insurance covers, what employment obligations exist, what data is collected and what regulatory regimes are relevant.

That clarity gives management the confidence to grow without constantly discovering hidden risk.

The Real Opportunity Is Building A US Platform, Not Just Making US Sales

The US can be transformational for Australian businesses. It can provide access to capital, customers, strategic partners, talent, acquirers and industry ecosystems that are difficult to replicate elsewhere.

But the businesses that create lasting value in the US do more than make sales. They build a platform.

A platform has the right structure. It has contracts that allocate risk properly. It protects intellectual property. It understands its tax position. It has employment and contractor processes. It manages privacy and data. It has suitable insurance. It complies with relevant regulation. It keeps records. It can withstand investor diligence, customer scrutiny, regulator questions and commercial disputes.

That is the difference between entering the US and being ready for the US.

For Australian businesses, the message is not that the US is too complex. Complexity is manageable. The real issue is whether the business recognises the complexity early enough to turn it into a competitive advantage.

A well-structured Australian business can enter the US with confidence. It can move faster because the major risks have been considered. It can negotiate better because its contracts are prepared. It can raise capital more effectively because its structure makes sense. It can protect value because its IP is secured. It can respond to disputes because its documents and insurance are in order.

US expansion should not be approached with fear. It should be approached with discipline.

The companies that do this well will not see legal, tax and compliance planning as obstacles to growth. They will see them as part of the architecture of growth.

Because in the US, getting to market is only the first challenge.

The real test is whether the business has been built to survive success.

CHECKLIST: Australia – US Market Entry Checklist

Many SME owners assume that corporate governance is something reserved for listed companies, large boards and institutional investors. In practice, good governance is just as important for SMEs — and often more straightforward to implement. It is about having clear decision-making, accurate records, timely filings, strong financial controls and a business culture that reduces risk.

In Singapore, governance and compliance are not merely administrative obligations. They help SMEs build credibility with banks, investors, suppliers, customers and government agencies. They also reduce the risk of penalties, disputes and operational disruption. For growing businesses, good governance can also make expansion, fundraising and succession planning easier to manage.

From my experience in Singapore, failure to implement a governance framework can lead to compliance failures, such as failing to lodge a report on time, meaning financial penalties.  In extreme cases, I have also seen statutory records not reflecting the commercial position the company is operating under.

1. Start With Director Accountability

In many SMEs, the directors are also the founders, shareholders and day-to-day managers. This overlap can speed up decision-making, but it can also blur the line between ownership and stewardship.  

The corporate regulator, ACRA, highlights that directors remain legally responsible for the company’s affairs, even where tasks are delegated to management, finance teams, corporate secretaries or tax agents.

With effect from May 2026, heavier penalties apply for directors who breach duties such as failing to act in the company’s best interests or to exercise reasonable diligence. Maximum fines have increased from S$5,000 to S$20,000, and serious offences may involve both fines and imprisonment of up to 12 months. 

For SME directors, “reasonable diligence” can include practical steps such as regularly reviewing management reports, understanding major contracts before approval, ensuring tax and regulatory filings are completed on time, and asking questions when financial or operational issues arise.

A practical starting point is to maintain a simple “reserved matters” list. This should identify decisions that require unanimous approval by directors or shareholders, such as taking on significant debt, issuing shares, approving major contracts, entering into related-party transactions, opening overseas entities, changing key bank mandates, or approving dividends.

2. Build A Compliance Calendar Around The Financial Year-End

SMEs should maintain a compliance calendar that works backwards from the company’s financial year-end, to ensure the key compliance due dates are not missed.

Some important deadlines include:

• Annual general meetings (AGM): Non-listed Singapore companies must hold their AGM within six months after the financial year-end, unless exempt or the AGM has been properly dispensed with.
• Annual returns: All Singapore companies, including inactive or dormant companies, must file annual returns with ACRA. The filing deadline is generally within 7 months of the financial year-end. 
• Company secretary appointment: A licensed company secretary must be appointed within six months of registration.
• Auditor appointment: An auditor must be appointed within three months of incorporation unless the company qualifies for an audit exemption. For reference, the small company exemption applies when a private company meets two of the following three conditions: revenue ≤ S$10m, assets ≤ S$10m, and employees ≤ 50.

3. Keep Statutory Registers And Ownership Records Current

Good governance requires accurate records of who owns, controls and manages the company. Any changes to officers and shareholders must be reported within 14 days to avoid late lodgement penalties. 

Companies should also pay attention to beneficial ownership and nominee arrangements to ensure compliance with the Register of Registrable Controllers requirements. 

4. Treat Tax Compliance As A Governance Matter

Tax compliance should not be viewed as a purely accounting function. It is a governance issue because directors remain responsible for ensuring filings are timely and accurate.

I have discussed tax compliance in the past, but a quick summary is as follows:

Income Tax 

The Estimated Chargeable Income (ECI) return is due within three months from the end of their financial year, unless they qualify for an ECI filing waiver or are specifically not required to file. 

The corporate income tax return is due by 30 November each year unless a waiver applies. 

Directors remain responsible for timely and accurate filing even when a tax agent has been engaged, and late filing or non-filing may result in penalties of up to S$5,000 if directors continually fail to manage their compliance obligations. 

GST

A business must register for GST if its taxable turnover is more than S$1 million under the retrospective view at the end of the calendar year, or if it is expected to be more than S$1 million in the next 12 months under the prospective view. 

Businesses should also monitor the GST InvoiceNow requirement. IRAS states that GST-registered businesses are required to use InvoiceNow-ready solutions to transmit invoice data directly to IRAS, with phased implementation beginning from 1 November 2025 for certain newly incorporated companies applying for voluntary GST registration, and from 1 April 2026 for all businesses applying for new voluntary GST registration. 

At the Committee of Supply 2026, the Government further announced that all remaining GST-registered businesses will be required to onboard InvoiceNow progressively between April 2028 and April 2031, with transitional grants of up to S$1,000 for SMEs.

Transfer Pricing

SMEs with cross-border related-party transactions must comply with the arm’s length principle when transacting with related parties and maintain contemporaneous transfer pricing documentation to substantiate their pricing where relevant. 

5. Manage Employment, Payroll And CPF Obligations Carefully

SMEs should maintain proper employment records, issue itemised payslips, process CPF contributions on time, and ensure employment terms are clearly documented.

The Ministry of Manpower (MOM) states that employers must maintain records for all employees covered by the Employment Act. For current employees, employers must keep the most recent 2 years of records. For former employees, the last two years of records must be retained for one year after the employee leaves. 

CPF contributions are due on the last day of the calendar month. In addition to late-payment interest, enforcement action may be taken if employers repeatedly fail to pay by the due date. 

6. Put Data Protection And Cybersecurity On The Agenda

Most SMEs now collect personal data through customer forms, websites, e-commerce platforms, HR records, marketing campaigns or supplier databases. Data protection is therefore a core governance issue.

Under the Personal Data Protection Act, organisations must appoint a Data Protection Officer (DPO) and make the DPO’s contact information publicly available. 

SMEs should not wait for a data incident before assigning responsibility for data protection. Practical steps include maintaining a personal data inventory, limiting access rights, reviewing vendor contracts, training staff, implementing password and access controls, and preparing a data breach response plan. 

7. Make Governance Proportionate, Practical And Repeatable

A SME governance framework should be practical, scalable and easy to maintain. Good governance in key areas should include:

Corporate Compliance

• A compliance calendar tied to the financial year-end
• Clear director and shareholder approval thresholds
• Accurate statutory registers and ownership records

Financial And Tax Controls

• Monthly financial reporting and bank reconciliations
• Documented tax, GST and transfer pricing processes

Employment And Payroll

• Proper employment records and itemised payslips
• Clear payroll and CPF procedures

Data Protection And Operations

• A basic data protection management process
• Regular review with corporate secretarial, tax and accounting advisers

Good governance is ultimately about discipline. It helps SMEs make better decisions, protect value, reduce regulatory risk and build trust with stakeholders. 

In Singapore’s competitive business environment, SMEs that invest early in governance and compliance are better positioned to scale sustainably and confidently. If you’d like to discuss how any of this applies to your business, feel free to reach out.

I was pleased to speak in Washington, DC at the C3 Solutions / E&W Law roundtable on critical minerals policy and America’s economic and national security needs.

My central point was this:

The United States should be country-blind if the country is an ally.

That phrase comes from direct experience. I have been an investor for years in the Cook Islands subsea minerals industry. In February 2026, I spent a week aboard the research vessel Anunua Moana, which gave me deeper insight into the scale, complexity and strategic importance of subsea critical minerals in the Pacific.

The Cook Islands represents one of the world’s most significant subsea polymetallic nodule opportunities. But mineral potential alone does not create supply-chain security. The real challenge is converting that potential into a responsible, investable and strategically aligned supply chain that helps America and its allies reduce dependence on adversarial sources.

The U.S. has already recognized the need to work with partners.

The Minerals Security Partnership, launched in June 2022, was an attempt to accelerate diverse, sustainable and secure critical energy mineral supply chains. With more than 14 countries and the EU involved, it has helped frame the importance of public and private investment in mining, processing and recycling, particularly across minerals such as lithium, cobalt and rare earth elements.

That should be acknowledged.

But it is not enough.

The MSP is primarily a strategic and diplomatic partnership.

What is still missing is an execution platform that helps emerging allied technologies, allied resource projects and allied processing solutions move from concept to deployment.

That gap matters because many allied projects still face practical barriers when they try to access U.S. support.

For example, foreign allied applicants may need to show that the relevant work cannot be performed in the United States and that it directly serves U.S. national security or manufacturing.

Many DOE grants require significant cost-sharing, often at levels that can be unrealistic for emerging technologies or early-stage projects. EXIM financing can involve export-related tests, including requirements tying a portion of domestic production to exports.

These rules may make sense in narrow programmatic terms. But from a critical minerals policy perspective, they can slow down exactly the projects America should be trying to accelerate.

If an allied country has the resource, the technology, the geography, the processing capability or the operating expertise that strengthens America’s supply chain, the policy system should not make that project harder simply because it is not wholly domestic.

That is why I say: be country-blind if it’s an ally.

This does not mean lowering standards. It means applying high standards across the trusted allied world. It means judging projects by whether they strengthen a secure, transparent, responsible and resilient supply chain — not by whether every part of the solution happens to sit within one national border.

From my perspective, three policy objectives are now essential.

First, America Should Adopt A Country-Blind Allied Eligibility Principle.

The test should not simply be: “Is every part of this project physically inside the United States?”

The better test is: “Does this project strengthen a trusted allied supply chain that reduces dependence on adversarial sources?”

If a project in the Cook Islands, Australia, Canada, Norway, Japan, the United Kingdom or another trusted partner country helps America secure critical minerals, then U.S. policy should be capable of supporting it.

Domestic production remains essential. But domestic production alone will not solve the problem quickly enough. The challenge is too large, too urgent and too technically complex.

Second, The United States Should Create An Allied Critical Mineral Technology Hub And Network.

This would be materially different from the MSP.

The MSP is a country-level partnership.

What I am proposing is a physically grounded, execution-focused technology hub and network, ideally based in the United States, close to policymakers, national laboratories, defense users, capital providers, universities, processing facilities and industrial partners.

Its purpose would be proximity, collaboration and speed.

An Allied Critical Mineral Technology Hub should bring together U.S. agencies, national laboratories, allied governments, private capital, subsea technology companies, processing innovators, environmental-monitoring specialists, logistics providers, offtake buyers and strategic end-users.

The goal should be practical: identify the best allied technologies and move them into real projects.

In subsea minerals, this is critical. The issue is not only whether nodules exist. The harder questions are collection, lifting, environmental monitoring, vessel logistics, metallurgy, processing, offtake, financing and regulatory confidence.

No single country has all of the answers. But the allied world has many of the pieces.

Some of the best subsea engineering may sit with allied companies. Some of the best processing innovation may sit in universities, national laboratories or industrial groups. Some of the most important mineral opportunities may sit in Pacific jurisdictions that are strategically aligned with the United States.

America should organize that capability rather than wait for it to form project by project.

Third, The United States Should Create A Cabinet-level Secretary For Critical Minerals.

Critical minerals policy is currently spread across too many departments, agencies, programs and mandates. DOE has an important role, but critical minerals cannot remain treated as a sub-issue inside the energy bureaucracy.

This is a national security issue. But it is also:

• an industrial strategy issue.  
• a defense issue.
• a foreign policy issue.
• a permitting issue.
• a trade issue.
• a finance issue; and
• a technology issue.

The United States needs a senior official with Cabinet-level authority to work across the whole government.

A Secretary for Critical Minerals should have the power to coordinate across DOE, Interior, Defense, Commerce, State, Treasury, EPA, USTR, EXIM, DFC, the national laboratories and the National Security Council.

The role should not and must not be symbolic.

It should align funding, permitting, offtake, allied supply-chain eligibility, processing strategy, defense procurement, environmental standards and international partnerships.

This role could draw on DOE expertise, but it should not be trapped inside DOE.

The supply-chain problem cuts across government and across borders.

The authority to solve it must do the same.

Without that central authority, critical minerals policy risks remaining fragmented. Each agency may do useful work, but no one owns the whole supply chain.

My week aboard the Anunua Moana reinforced this point. The opportunity in subsea minerals is real. But the path from seabed resource to secure supply chain is not automatic. It requires technology, environmental seriousness, processing capability, finance, offtake and policy alignment.

The United States has started the conversation through initiatives such as the Minerals Security Partnership.

But The Next Phase Must Be More Operational.

America now needs to build the machinery to execute.

That means:

1. Be country-blind if it’s an ally.
2. Create a U.S.-based Allied Critical Mineral Technology Hub and network focused on proximity, collaboration and deployment.
3. Establish a Cabinet-level Secretary for Critical Minerals with authority across the whole U.S. Government.

Critical minerals security will not be achieved by admiring the problem. It will be achieved by organizing the trusted world around a serious execution plan.

The IRS enforcement environment in 2026 is moving in two directions at once. On one hand, the agency has publicly committed to higher audit coverage for large corporations, complex partnerships, and very high-income individuals. On the other hand, the IRS is operating with a materially smaller workforce than it had at the beginning of 2025.

This does not mean the IRS is stepping back from enforcement. It means enforcement is becoming more selective, more data-driven, and more focused on taxpayers and transactions that the agency believes offer the highest compliance risk or revenue potential. For many taxpayers, the risk is not simply that the IRS will open more audits. The greater risk is that, when an audit is opened, the IRS may already have substantial third-party data, foreign account information, digital asset reporting, Form 1099 data, K-1 information, and statistical comparisons against similar taxpayers.

The result is a different type of examination environment. Fewer taxpayers may be selected overall, but those selected can expect a more focused and more technically demanding audit.

The IRS’s Stated Enforcement Priorities

The IRS has continued to identify three categories of taxpayers for increased audit coverage: large corporations, large and complex partnerships, and wealthy individuals. At the same time, the IRS has stated that it does not intend to increase audit rates for small businesses and taxpayers making under $400,000, relative to historical levels.

For large corporations with assets over $250 million, the IRS has stated that it intends to increase the audit rate from 8.8% to 22.6% by the 2026 tax year. These examinations are expected to remain specialist-driven and document-intensive, with continued attention on transfer pricing, intercompany transactions, foreign tax credits, basis-shifting transactions, and complex entity structures. The IRS’s own budget materials note that large corporate examinations have an average case cycle time of approximately 36 months, which means staffing and training changes can affect examination capacity over several years.

For large and complex partnerships with assets over $10 million, the IRS has stated that it intends to increase audit rates from 0.1% to 1.0%, a nearly tenfold increase. This remains one of the most significant enforcement developments for pass-through entities. Partnerships have historically been difficult to examine because of tiered ownership, special allocations, partner-level tax attributes, capital account issues, debt allocations, and transfers of partnership interests. The centralized partnership audit regime gives the IRS a more efficient procedural path to examine and adjust partnership items at the entity level.

For wealthy individuals, the IRS has stated that it intends to increase audit coverage for taxpayers with total positive income over $10 million to 16.5% by the 2026 tax year. These examinations often extend beyond the Form 1040 itself and into related entities, trusts, private investment vehicles, foreign accounts, charitable structures, real estate activities, and pass-through income reported on Schedules K-1.

The DOGE Effect: Fewer Agents, Smarter Tools

The IRS’s enforcement plans must be read together with the agency’s staffing reductions. The Treasury Inspector General for Tax Administration reported that between January 2025 and May 2025, the IRS workforce decreased from approximately 103,000 to 77,000 employees, a 25% reduction. Those employees either separated from the agency or accepted deferred resignation or other incentive offers.

Reuters reported that IRS enforcement revenue declined by 5%, or almost $5 billion, in the fiscal year, and that the agency opened more than 120,000 fewer tax audits in 2025 than in the prior year. Reuters also reported that the IRS enforcement function lost roughly 5,000 employees heading into 2026 and is projected to lose another 5,000 in the coming year. Longer term, the agency reportedly aims to employ approximately 69,000 people by fiscal year 2027, compared with a recent peak of 103,000 employees.

Despite these reductions, the IRS has not signaled an end to enforcement. Treasury officials told Reuters that enforcement revenue increased 12% in the first five months of fiscal year 2026, which began October 1. The apparent strategy is to concentrate limited resources on cases that appear more likely to produce significant adjustments.

The mechanism for that recovery is technology. IRS leadership under CEO Frank Bisignano has doubled down on artificial intelligence and data analytics to compensate for lost staffing. The agency now uses AI-powered tools to:

• Cross-match returns against third-party data (W-2s, 1099s, brokerage records, digital asset reports, and international FATCA feeds) at unprecedented scale
• Identify statistical anomalies in deductions, income characterization, and entity allocations relative to peer benchmarks
• Flag mismatches between FBAR/FATCA reporting and income tax return positions
• Prioritize audit case selection by estimated tax recovery potential

The net effect: the IRS is auditing less, but when it audits, it arrives better prepared, with more data, and with enforcement as its objective.

International Reporting Remains A Major Enforcement Risk

Cross-border compliance remains one of the IRS’s highest-priority enforcement areas in 2026. The FATCA network now spans over 110 jurisdictions, and the IRS receives automated account-level data from thousands of foreign financial institutions. Where that data does not reconcile with FBAR filings (FinCEN Form 114) or Form 8938, the IRS’s AI matching tools will surface the discrepancy.

Penalties for FBAR non-compliance are severe. Non-willful violations carry penalties up to $16,536 per annual report (following the Supreme Court’s 2023 Bittner decision, which confirmed the per-report rather than per-account penalty standard). Willful violations carry civil penalties of the greater of $165,353 or 50% of the account balance, plus potential criminal exposure. The IRS has a six-year statute of limitations for FBAR penalty assessments.

Taxpayers with unreported or inconsistently reported foreign accounts should evaluate corrective options before the IRS initiates contact. Once an examination begins, available options may become more limited and the risk profile can change quickly.

Digital Asset Reporting Is Entering A New Phase

Digital asset enforcement is also changing. Treasury and the IRS have issued final regulations requiring brokers to report certain digital asset sale and exchange transactions beginning with transactions that take place in calendar year 2025, reported on Form 1099-DA. Brokers must report gross proceeds for transactions effected on or after January 1, 2025.

The next stage begins with basis reporting. Basis reporting is required by certain brokers for transactions occurring on or after January 1, 2026. The 2026 Form 1099-DA instructions state that, for sales effected on or after January 1, 2026, brokers are not required to report basis information for digital assets that are noncovered securities, although they may voluntarily report that information and receive penalty protection if the appropriate box is checked.

This creates a new matching environment for cryptocurrency and other digital asset taxpayers. Many early digital asset filings were prepared with incomplete cost basis records, inconsistent wallet transfer tracking, exchange migration issues, staking income questions, NFT transactions, stablecoin transactions, or DeFi activity that was not reported consistently. The IRS will now have more third-party reporting to compare against Form 1040 digital asset disclosures, Schedule D, Form 8949, and other return positions.

Taxpayers should not assume that the absence of a Form 1099-DA means there is no reporting obligation. IRS guidance states that decentralized finance brokers and some foreign brokers are not required to file Form 1099-DA or furnish statements to taxpayers. The taxpayer remains responsible for accurate reporting even when no form is issued.

Pass-Through Entities Should Expect More Scrutiny

Partnerships and S corporations remain central enforcement targets because income, deductions, credits, and basis adjustments flow from the entity to the owner. A federal adjustment at the entity level can affect multiple owners, multiple tax years, and state tax reporting.

The IRS’s stated increase in audit coverage for partnerships with assets over $10 million is particularly important for partnerships with contributed property, special allocations, tiered structures, related-party transactions, debt allocations, Section 754 elections, Section 743(b) adjustments, carried interests, or significant capital account activity. The agency’s focus is not limited to whether income was reported. It also includes whether allocations have substantial economic effect, whether basis adjustments are properly calculated, whether liabilities are properly allocated, and whether transfers of partnership interests have been correctly reported.

California taxpayers should also consider state follow-on exposure. A federal partnership adjustment can create California issues involving California-source income, apportionment, withholding, composite filings, and pass-through entity tax positions. For multistate partnerships and owners, the federal audit may be only the first stage of a broader compliance review.

High-Income Individual Examinations Are Broader Than The Form 1040

For individuals with total positive income over $10 million, the IRS’s stated audit-rate increase to 16.5% means return preparation and supporting documentation are increasingly important. High-income examinations often involve more than the individual income tax return. The IRS may examine related entities, family partnerships, trusts, foundations, foreign accounts, private investment structures, aircraft or yacht expenses, real estate losses, charitable contributions, installment sale reporting, and related-party loans.

The IRS is also likely to compare reported income against third-party reporting and broader financial indicators. A taxpayer with significant assets, visible liquidity events, substantial debt service, or large lifestyle expenditures may face questions if the reported income profile does not appear consistent with available data.

For high-income taxpayers, contemporaneous documentation is essential. Large deductions, recurring business losses, nonstandard investment structures, foreign tax credit positions, treaty positions, and related-party arrangements should be supported before the return is filed. Reconstructed records are generally less persuasive than documentation prepared at the time of the transaction.

Employee Retention Credit Claims Remain High Risk

Employee Retention Credit enforcement remains a priority, particularly for claims prepared by promoters or filed late in the program. The IRS has issued FAQs addressing new ERC compliance provisions under the One Big Beautiful Bill. Those provisions affect ERC claims for the third and fourth quarters of 2021 filed after January 31, 2024.

Under Section 70605(d) of the OBBB, effective July 4, 2025, the IRS is prevented from allowing or refunding ERC claims for the third and fourth quarters of 2021 if those claims were filed after January 31, 2024, even if the employer otherwise met the eligibility requirements. The IRS guidance also states that the law strengthens compliance enforcement by imposing penalties on certain ERC promoters who fail to meet due diligence requirements when assisting with claims.

If an ERC claim is disallowed, the IRS states that the taxpayer will receive Letter 105-C, Claim Disallowed. A taxpayer may appeal to the IRS Independent Office of Appeals if the taxpayer believes the ERC claim was timely filed on or before January 31, 2024, and was improperly disallowed under Section 70605(d).

Employers with pending or previously paid ERC claims should review the quarter claimed, filing date, eligibility analysis, payroll records, government order support, gross receipts calculations, promoter involvement, and IRS correspondence. Claims based on broad supply-chain arguments, general economic disruption, or boilerplate shutdown narratives remain especially vulnerable.

Abusive Transactions Remain on the IRS Radar

Syndicated conservation easements, micro-captive insurance arrangements, monetized installment sale structures, and other listed or high-risk transactions remain enforcement priorities. Taxpayers who participated in these arrangements should not assume that the passage of time eliminates risk. Listed transaction reporting failures, promoter investigations, extended statutes, and penalty assertions can significantly increase exposure.

In many of these cases, the IRS may examine not only the claimed tax benefit, but also the taxpayer’s reporting obligations, reliance on professional advice, valuation support, transaction documents, and communications with promoters or advisors. Privilege and document production issues should be considered early, not after the examination is underway.

What Taxpayers Should Expect If Examined

The character of IRS examinations has changed. Audits that once began as broad information-gathering inquiries are now more likely to begin with a defined enforcement objective. Examiners may have already reviewed third-party reporting, foreign account information, digital asset records, K-1 reporting, and peer comparisons before contacting the taxpayer.

Initial Information Document Requests may therefore be more specific and more demanding. Taxpayers should expect requests for original records, contemporaneous workpapers, transaction documents, account statements, basis schedules, foreign reporting support, and communications relevant to the return position. For cross-border taxpayers, an income tax issue can quickly become an information reporting issue, and an information reporting issue can lead to broader questions about unreported income, foreign tax credits, GILTI, Subpart F, PFICs, treaty positions, or FBAR compliance.

Taxpayers should also consider privilege before responding to an IRS notice. Communications with a CPA are generally not protected in the same way as communications with legal counsel. Sensitive matters involving offshore reporting, promoter transactions, digital assets, high-dollar partnership positions, or potential penalties should be reviewed carefully before documents are produced.

Practical Preparation For 2026

The most effective risk management is proactive. Taxpayers in the IRS’s priority categories should review open tax years before receiving an IRS notice. That review should focus on material filing positions, missing or inconsistent information returns, foreign account reporting gaps, digital asset reporting issues, partnership basis matters, large deductions, related-party transactions, ERC claims, and state follow-on exposure.

Taxpayers should also reconcile returns against information the IRS is likely to receive independently. This includes Forms W-2, Forms 1099, Schedules K-1, brokerage statements, Form 1099-DA, FATCA data, mortgage interest reporting, charitable contribution acknowledgments, payroll tax filings, and state tax filings. Because the IRS is using statistical and machine-learning techniques in audit selection, mismatches and outlier positions are more likely to be identified.

International taxpayers should maintain organized workpapers for FBAR filings, Form 8938, Form 5471, Form 8865, Form 3520, Form 3520-A, PFIC reporting, foreign tax credit calculations, GILTI, Subpart F, Section 962 elections, treaty-based return positions, foreign pensions, and foreign trust analysis. The IRS’s active LB&I campaigns show continued attention to FATCA reporting, offshore private banking, foreign earned income exclusion claims, and Forms 5471.

Digital asset taxpayers should review exchange histories, wallet transfers, cost basis records, staking income, airdrops, NFTs, stablecoin transactions, DeFi activity, lost wallets, and prior-year reporting consistency. Gross proceeds reporting began with 2025 transactions, and basis reporting for certain covered digital asset transactions begins with transactions occurring on or after January 1, 2026.

Taxpayers with ERC claims should separately review eligibility and timing. Section 70605(d) prevents the IRS from allowing or refunding ERC claims for the third and fourth quarters of 2021 after July 4, 2025, if the claims were filed after January 31, 2024. Employers should retain payroll records, gross receipts calculations, government order analysis, copies of amended payroll tax returns, IRS correspondence, and any promoter engagement materials.

Final Thoughts

The 2026 enforcement environment is not defined by audit volume alone. The IRS is smaller than it was at the start of 2025, but it is relying more heavily on data matching, artificial intelligence, third-party reporting, and targeted case selection.

Taxpayers with clean records, consistent reporting, and contemporaneous documentation are in a stronger position if selected for examination. Taxpayers with foreign reporting gaps, digital asset reporting issues, unsupported pass-through positions, high-income return anomalies, or promoter-driven ERC claims should evaluate those risks before the IRS contacts them.