Timeliness and the Deed-in-Lieu: A Review of Cancellation-of-Indebtedness Income Timing and the Variance Doctrine

When advising clients on complex debt relief transactions, it is crucial to understand not only the substantive law governing the timing of income recognition but also the procedural prerequisites for challenging IRS determinations. The recent Summary Order issued by the United States Court of Appeals for the Second Circuit in Romeo Salta, Jr., Phyllis Polega v. United States of America, 24-2700-cv (Oct. 6, 2025), affirmed the District Court’s finding regarding the proper tax year for cancellation-of-indebtedness (COI) income and provided a stark reminder of the binding nature of the doctrine of variance.

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Tax Exemption Denial for a Gated Community HOA by the Tax Court

This article examines the findings of the United States Tax Court in Mira Vista Homeowners Association, Inc. v. Commissioner of Internal Revenue, T.C. Memo. 2025-102, which addressed a homeowner association’s denial of tax-exempt status under Internal Revenue Code (I.R.C.) § 501(c)(4). The petitioner, Mira Vista Homeowners Association, Inc. (the Association), sought a declaration that the Commissioner’s final adverse determination, issued on April 6, 2022, was erroneous.

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Supervisory Approval, Reasoned Decision Making, and the Limits of APA Review in Tax Court

As tax professionals, we understand the critical procedural requirement of I.R.C. § 6751(b)(1) regarding supervisory approval of penalties. The recent Tax Court opinion in Computer Sciences Corporation v. Commissioner, 165 T.C. No. 8 (Oct. 6, 2025) provides essential guidance on the procedural depth required for this approval, specifically addressing arguments that the Administrative Procedure Act (APA) mandates "reasoned decision making" beyond a timely written signature.

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IRS Revenue Ruling 2025-20: Updated SIFL Rates for Noncommercial Employer-Provided Flights

The Internal Revenue Service (IRS) has issued Revenue Ruling 2025-20 to provide the updated terminal charge and Standard Industry Fare Level (SIFL) mileage rates for valuing noncommercial flights on employer-provided aircraft. This guidance is crucial for tax professionals advising clients on the taxation of fringe benefits under section 61 of the Internal Revenue Code. The Department of Transportation (DOT) calculates these rates, which are reviewed on a semi-annual basis, necessitating periodic updates from the IRS.

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A Tale of Two Opinions: The Tax Court on Substantiation, Reasonable Cause, and Penalties in Green

On October 2, 2025, the U.S. Tax Court released two significant opinions in the consolidated cases involving the shareholders of Hobby Lobby Stores, Inc. (The David and Barbara Green 1993 Dynasty Trust, et al. v. Commissioner). The first, a reviewed opinion by the full court (Green 1993 Dynasty Trust v. Commissioner, 165 T.C. No. 7), addresses complex substantiation issues for noncash charitable contributions and the application of various Code sections governing deductions for trusts. The second, a memorandum opinion (Green 1993 Dynasty Trust v. Commissioner, T.C. Memo. 2025-100), focuses on the procedural requirements for penalty assessments under I.R.C. § 6751(b) and the reasonable cause defense for valuation misstatement penalties.

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District Court Finds IRS Standards for § 501(c)(4) Status Unconstitutionally Vague

In a significant ruling for nonprofit advocacy organizations, the U.S. District Court for the District of Columbia has held that the standards applied by the Internal Revenue Service to determine eligibility for § 501(c)(4) tax-exempt status are unconstitutionally vague. In Freedom Path, Inc. v. Internal Revenue Service, et al., (USDC DC Case No. 20-cv-1349 (JMC)), the court granted partial summary judgment to the plaintiff, finding that both the Treasury Regulation and the IRS Revenue Ruling used to deny its application transgress the heightened vagueness standard applicable to civil regulations affecting First Amendment speech. However, the court stopped short of granting Freedom Path § 501(c)(4) status, finding that neither party had proposed a constitutionally permissible alternative standard grounded in the existing statutory and regulatory framework.

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Eighth Circuit Reverses Tax Court in 3M, Restricting § 482 Allocations of Blocked Foreign Income

The Eighth Circuit Court of Appeals, in 3M Company, and Subsidiaries v. Commissioner of Internal Revenue, has reversed a closely divided U.S. Tax Court, holding that the Internal Revenue Service (IRS) lacks the authority under Internal Revenue Code (IRC) § 482 to allocate royalty income to a U.S. parent company that its foreign subsidiary was legally prohibited from paying under foreign law. This significant decision, one of the first to apply the Supreme Court’s holding in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), reaffirms the "dominion and control" standard established in Commissioner v. First Security Bank of Utah, N.A., 405 U.S. 394 (1972).

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Final Regulations Streamline Interest Capitalization for Property Improvements

On October 2, 2025, the Department of the Treasury and the Internal Revenue Service (IRS) issued final regulations (TD 10034) that significantly alter the interest capitalization rules under Internal Revenue Code (IRC) § 263A(f) for improvements to designated property. The regulations primarily focus on eliminating the complex "associated property rule," updating the definition of an "improvement," and clarifying the treatment of "mid-production purchases". This article provides a technical overview of these changes for tax practitioners.

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IRS Issues Notice 2025-53, Extending Tax Relief for Those Affected by Terroristic Action in Israel

The Department of the Treasury and the Internal Revenue Service (IRS) have issued Notice 2025-53, providing another round of tax relief under § 7508A of the Internal Revenue Code for individuals and businesses affected by the ongoing terroristic action in the State of Israel. This notice extends previously granted postponements and establishes a new relief period, offering crucial deadline extensions for a wide range of tax-related acts. For practitioners with clients impacted by these events, understanding the legal authority, scope of relief, and interaction with prior notices is essential.

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IRS Releases Additional Interim Guidance on the Corporate Alternative Minimum Tax

The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) have issued two significant pieces of interim guidance, Notice 2025-46 and Notice 2025-49, addressing the Corporate Alternative Minimum Tax (CAMT). This guidance responds to numerous comments received on the proposed regulations (REG-112129-23) issued in September 2024 and is intended to reduce compliance burdens and provide clarity on complex areas of the CAMT. The forthcoming proposed regulations are expected to incorporate rules similar to this interim guidance, on which taxpayers may rely immediately.

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Guidance on Rural Qualified Opportunity Zones Provided in IRS Notice 2025-50

The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) have released Notice 2025-50, providing eagerly awaited guidance on provisions introduced by the One, Big, Beautiful Bill Act (OBBBA), Public Law 119-21, 139 Stat. 72. This notice specifically addresses two key areas amended by the OBBBA: a modified "substantial improvement" test for property in certain Qualified Opportunity Zones (QOZs) and the definition of a "rural area" for purposes of applying this new test. The guidance is crucial for practitioners advising clients with investments in Qualified Opportunity Funds (QOFs) that hold property in designated rural QOZs.

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The IRS FY2026 Shutdown Plan: What Happens on October 1 if No Deal is Reached?

As seasoned practitioners, we are all too familiar with the annual drama surrounding federal appropriations and the potential for a government shutdown. This year is no different, with the September 30, 2025, deadline looming. However, the IRS contingency plan for Fiscal Year 2026, released on September 29, 2025, reveals a significant and welcome change from past shutdowns, thanks to the Inflation Reduction Act (IRA). Here’s what you and your clients need to know.

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IRS Reverses Course on Corporate Reorganization Guidance: Withdrawal of Proposed Regulations and Reinstatement of Prior Ruling Procedures

On September 30, 2025, the Treasury Department and the Internal Revenue Service (IRS) took a significant step by withdrawing two comprehensive sets of proposed regulations issued earlier in the year that would have substantially altered the landscape for corporate separations, incorporations, and reorganizations. The first set of proposed regulations, REG-112261-24, provided detailed substantive rules under Internal Revenue Code (the "Code") sections 355, 357, 361, and 368. The second, REG-116085-23, introduced extensive multi-year reporting requirements for corporate separations. The withdrawal came after the IRS received several critical comments from the public.

In conjunction with this withdrawal, the IRS issued Rev. Proc. 2025-30, which supersedes Rev. Proc. 2024-24 and largely reinstates prior procedural guidance for taxpayers seeking private letter rulings (PLRs) on divisive reorganizations. This move signals a return to a more established, case-by-case approach to complex transactions, particularly those involving the satisfaction of distributing corporation debt. This article provides a technical overview of these developments for tax professionals.

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IRS Updates PTIN User Fee Regulations, Reduces Fee to $10

The Department of the Treasury and the Internal Revenue Service (IRS) have once again adjusted the user fee associated with obtaining or renewing a Preparer Tax Identification Number (PTIN). In a dual issuance, the agencies released both interim final regulations (T.D. 10035) and a cross-referencing notice of proposed rulemaking (REG-108673-25), effectively reducing the IRS portion of the fee from $11 to $10 per application or renewal. This adjustment, while minor in amount, is the latest development in a long history of litigation and biennial reviews concerning the statutory authority for and calculation of the PTIN user fee. For practitioners, understanding the legal framework and the IRS’s evolving cost methodology is crucial for appreciating the regulatory landscape in which we operate.

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Employee vs. Independent Contractor: A Common-Law Analysis in Gil v. United States

The distinction between employee and independent contractor status remains a cornerstone of tax practice, impacting everything from payroll tax obligations to the deductibility of business expenses. A recent U.S. District Court case, Francisco J. Gil, et al. v. United States, provides a valuable application of the long-standing common-law tests used to determine worker classification. The court’s memorandum offers a clear, factor-by-factor analysis that reinforces foundational principles for tax professionals advising clients on this critical issue.

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D.C. Circuit Reverses Tax Court Decision in a Reported Whistleblower Award Case

The U.S. Court of Appeals for the D.C. Circuit (In re: Sealed Case, CA DC, Case No. 24-1001, September 24, 2025) recently vacated a Tax Court decision (Whistleblower 8391-18W v. Commissioner, 165 TC No. 5, October 16, 2023) in a significant whistleblower award case, providing insights for practitioners representing clients before the IRS Whistleblower Office (WBO). The appellate court’s opinion hinges on the factual support within the administrative record required for a WBO determination, particularly when the WBO treats a whistleblower’s claims inconsistently across different taxpayers involved in the same scheme. This article will detail the case’s journey from the Tax Court to the D.C. Circuit, focusing on the facts, the legal analysis, and the key differences in judicial interpretation that led to the appellate court’s reversal.

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Constructive Receipt and Excess Benefits in Fumo v. Commissioner

The U.S. Tax Court’s recent memorandum opinion in Vincent J. Fumo v. Commissioner, T.C. Memo. 2025-97, provides an examination of constructive receipt, civil fraud, and the excise tax on excess benefit transactions under I.R.C. § 4958. The case, arising from the criminal conviction of a former Pennsylvania state senator, offers valuable insights for tax professionals on how the IRS and the courts quantify and tax benefits diverted from both governmental and tax-exempt entities. This article will explore the court’s analysis of the facts, legal principles, and conclusions in this complex case.

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Tax Court Again Not Impressed With a Syndicated Conservation Easement Transaction

In a recent memorandum opinion, Jackson Stone South, LLC v. Commissioner, T.C. Memo. 2025-96, the U.S. Tax Court dismantled a syndicated conservation easement transaction, disallowing a deduction for one of the two easements at issue and drastically reducing the value of the other. This case provides a valuable technical review for tax professionals, covering issues from donative intent and baseline documentation to highest and best use (HBU) valuation and penalty application. The court’s detailed analysis reinforces critical substantiation requirements and offers a clear rejection of speculative valuation methodologies in the context of conservation easements.

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IRS to Eliminate Paper Refund Checks for Individuals Beginning on September 30, 2025

On September 23, 2025, the Internal Revenue Service (IRS), in conjunction with the U.S. Department of the Treasury, announced in IR-2025-94 a significant operational change: the phasing out of paper tax refund checks for individual taxpayers. This initiative, marking the first step in a broader transition to electronic payments, is mandated by Executive Order 14247 and will begin on September 30, 2025, to the extent permitted by law. For tax professionals, understanding the specifics of this change, its legal underpinnings, and the guidance for taxpayers is critical for the upcoming filing seasons.

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