IRS Notice of Partial Withdrawal of Notice of Proposed Rulemaking, Guidance Under Section 355 Concerning Device and Active Trade or Business, REG-134016-15, RIN 1545-BN47, 91 Fed. Reg. 68420 (scheduled publication Oct. 21, 2026) (partially withdrawing REG-134016-15, 81 Fed. Reg. 46004 (July 15, 2016); codified at 26 C.F.R. pt. 1).

Under the general rules of Subchapter C of the Internal Revenue Code, corporate distributions of appreciated property trigger gain recognition at the corporate level under Section 311(b), while distributee shareholders are taxed on the receipt of property as dividend income under Section 301(c)(1), basis recovery under Section 301(c)(2), or capital gain under Section 301(c)(3). Section 355 provides a vital exception to these general dividend and recognition rules, permitting a distributing corporation (Distributing) to distribute stock and securities of a controlled corporation (Controlled) to its shareholders and security holders without triggering corporate-level gain or shareholder-level income recognition.

To prevent tax-free corporate separations from being converted into mechanisms for avoiding dividend taxation on corporate earnings and profits (E&P), Section 355 imposes stringent statutory requirements. Principally, Section 355(a)(1)(B) mandates that the transaction must not be used “principally as a device for the distribution of the earnings and profits of the distributing corporation or the controlled corporation or both.” Concurrently, Section 355(a)(1)(C) and Section 355(b) require that both Distributing and Controlled be engaged, immediately after the distribution, in the active conduct of a five-year active trade or business (Active Business) that was not acquired in a taxable transaction within the preceding five-year period under Section 355(b)(2)(B)-(D).

The statutory device prohibition and active business requirement have evolved through decades of judicial interpretation, legislative amendments, and administrative guidance. Following early abuses where corporations transferred cash and liquid surplus into new subsidiaries prior to spin-offs—prompting the Supreme Court’s seminal decision in Gregory v. Helvering, 293 U.S. 465 (1935)—Congress re-authorized spin-offs in Section 317(a) of the Revenue Act of 1951 (65 Stat. 452, 493) with strict device and active business safeguards. As noted in the congressional record during debate on the 1951 Act, Senator Hubert Humphrey emphasized that “[u]nless strictly safeguarded, [a spin-off provision] can result in a loophole that will enable a corporation to distribute earnings and profits to stockholders without payment of the usual income taxes.”

Watson Lake Investments, LLC, Terry J. Heath, Tax Matters Partner v. Commissioner, consolidated with Meadow Lake Investments, LLC, Terry J. Heath, Tax Matters Partner v. Commissioner, T.C. Memo. 2026-106, Docket Nos. 13696-20, 24239-22 (filed October 19, 2026).

Del Monte LLC, Dev X Investment 2015, LLC, Tax Matters Partner v. Commissioner, consolidated with Continental Downtown Properties, LLC, Historic Preservation Fund 2016, LLC, Tax Matters Partner v. Commissioner, T.C. Memo. 2026-107, Docket Nos. 3411-21, 6084-21 (filed October 19, 2026).

The United States Tax Court recently issued a pair of landmark memorandum opinions addressing syndicated conservation easement tax shelters: Watson Lake Investments, LLC v. Commissioner, T.C. Memo. 2026-106, and Del Monte LLC v. Commissioner, T.C. Memo. 2026-107. Decided on the same date, these decisions underscore the Tax Court’s unwavering scrutiny of transactions wherein real estate partnerships claim multi-million-dollar charitable contribution deductions under Internal Revenue Code (I.R.C.) § 170(h) based on speculative development schemes that dramatically inflate property values far beyond historical acquisition costs.

In Watson Lake Investments, LLC v. Commissioner, Judge Lauber evaluated syndicated conservation easement donations over two unimproved, rural land parcels in Emanuel County, Georgia. Writing for the Court, Judge Lauber framed the central issue succinct:

“These syndicated conservation easement (SCE) cases have a familiar fact pattern, and this Opinion will have a familiar denouement... Petitioner’s appraiser calculated these values on the assumption that the highest and best use (HBU) of each tract was mixed-use development, supposedly including 66 to 69 single-family lots, 35 to 45 acres of multifamily and senior housing, and numerous commercial and office sites. These back-of-the-envelope development schemes were wholly unrealistic in a rural county with a total population of roughly 22,000. We conclude that the HBU of each tract was its current use—for low-density, single-family residences, with agriculture, recreation, and timber harvesting as complementary uses.”

In Del Monte LLC v. Commissioner, Chief Judge Urda analyzed syndicated historic façade preservation easement donations and relinquished vertical air development rights over two commercial office buildings in downtown Columbus, Ohio. Chief Judge Urda similarly rejected the taxpayers’ multi-million-dollar valuation theories:

“In these syndicated conservation easement cases, we return to ground previously plowed by this Court and by the U.S. Court of Appeals for the Sixth Circuit in Corning Place Ohio, LLC v. Commissioner... Once again, owners of historic buildings in Ohio... claim entitlement to tens of millions of dollars in charitable contribution deductions following the donations of easements placed over the buildings’ façades. The cheap sophistry at the heart of these positions remains empty and unconvincing. We conclude that the easements are not protected in perpetuity, as the statute requires, and therefore a deduction is not allowed. We further conclude that the actual easement values are a tiny fraction of the amounts claimed and that penalties for gross valuation overstatements are richly deserved.”

Together, these two cases provide tax practitioners, CPAs, and Enrolled Agents with a comprehensive roadmap of the legal standards governing highest and best use determinations under Treasury Regulation § 1.170A-14(h)(3)(ii), judicial extinguishment formulas under Treasury Regulation § 1.170A-14(g)(6)(ii), appraiser qualification rules, partnership syndication expense disallowances under I.R.C. § 709(a), and the mandatory application of the 40% gross valuation misstatement penalty under I.R.C. § 6662(h).

IRS Newsroom, “IRS has begun issuing automatic refunds to individuals who claimed Adoption Tax Credit carryforward from prior years,” IR-2026-123 (Oct. 16, 2026).

The Internal Revenue Service has announced a significant administrative shift regarding the treatment of the adoption tax credit carryforward. This development follows a clarification from the Treasury Department regarding the interpretation of the Working Families Tax Cuts and its specific impact on the adoption tax credit. For tax professionals managing client files for the 2025 tax year, this represents a critical departure from standard carryforward mechanics, specifically regarding the availability of refundable credits.

Treasury Decision 10060, Update of Regulations Regarding Payment of Tax by Commercially Acceptable Means, 91 Fed. Reg. [page] (Oct. 19, 2026) (codified at 26 C.F.R. § 301.6311-2)

The Department of the Treasury and the Internal Revenue Service (IRS) have promulgated final regulations under Treasury Decision 10060 (RIN 1545-BP66), adopting without substantive change the proposed regulations issued under REG-120137-19 (89 FR 54746). These regulatory actions overhaul 26 C.F.R. § 301.6311-2 to implement statutory amendments enacted under section 2303 of the Taxpayer First Act (TFA), Public Law 116-25, 133 Stat. 981, 1013 (July 1, 2019). The statutory amendments modify section 6311(d)(2) of the Internal Revenue Code (Code) to grant the Secretary of the Treasury discretionary authority to enter into contracts providing for the payment of fees related to receiving payments of tax by credit card or debit card, provided that any such fee paid by the IRS is fully recouped from the taxpayer making the card payment.

Under prior statutory law and existing Treasury Regulations—promulgated via Treasury Decision 8969 (66 FR 64740, Dec. 14, 2001)—Internal Revenue Code section 6311(d)(2) authorized the Secretary to enter into contracts for credit and debit card processing services but strictly contained a “prohibition on the payment of any fee by the IRS under any contracts related to payment of taxes by credit, debit, or charge card.” Concurrently, existing 26 C.F.R. § 301.6311-2(e) mandated that the IRS “may not impose any fee or charge on persons making payment of taxes by credit card or debit card.” Consequently, the IRS was required to route taxpayers wishing to pay by credit or debit card to independent third-party payment processors. Under that administrative framework, taxpayers paid processing fees directly to third-party processors—typically structured as a variable percentage fee for credit card transactions and a flat fee for debit card transactions—while the IRS received no portion of the fee and incurred no direct fee liability.

The statutory shift under Section 2303 of the TFA, and its administrative implementation through REG-120137-19 and T.D. 10060, fundamentally alters this operational constraint. By removing the blanket prohibition on IRS fee payments, Congress and Treasury have enabled the IRS to directly accept tax payments by credit or debit card without requiring taxpayers to be redirected or connected to external third-party processing portals.

Southern Arizona Health Services Phoenix, LLC v. United States, No. 25-62T, Fed. Cl. , 2026 WL 29374 (Oct. 14, 2026)

The United States Court of Federal Claims has issued a published opinion granting summary judgment to the government in Southern Arizona Health Services Phoenix, LLC v. United States, reinforcing strict judicial standards for Employee Retention Credit (ERC) eligibility under Section 2301 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act (codified as amended at 26 U.S.C. § 3134). Addressing a refund claim brought by a healthcare staffing agency operating during the COVID-19 pandemic, the court held that compliance with the Occupational Safety and Health Administration (OSHA) Healthcare Emergency Temporary Standard (Healthcare ETS) does not satisfy the statutory “suspension-of-business” eligibility test under 26 U.S.C. § 3134(c)(2)(A)(ii)(I).

For tax practitioners representing clients in ERC controversies, the decision written by Judge Armando O. Bonilla highlights three essential principles: (1) workplace safety standards and protective protocols (such as wearing PPE, physical distancing, and health screenings) do not constitute government orders that limit commerce or group meetings; (2) mandatory exclusion of COVID-19-positive or exposed personnel does not amount to a partial suspension of business operations under the statute; and (3) operational disruptions or increased work difficulty during a pandemic cannot support an ERC claim where the taxpayer’s core revenue-generating operations continued unabated.

Internal Revenue Service, IRS Announces Tax Relief for Taxpayers Impacted by Hurricane Isaias in Alabama; Various Deadlines Postponed to Feb. 4, 2027, News Release AL-2026-01 (Oct. 14, 2026), https://www.irs.gov/newsroom/irs-announces-tax-relief-for-taxpayers-impacted-by-hurricane-isaias-in-alabama-various-deadlines-postponed-to-feb-4-2027.

Internal Revenue Service, IRS Announces Tax Relief for Taxpayers Impacted by Hurricane Isaias in Florida; Various Deadlines Postponed to Feb. 8, 2027, News Release FL-2026-07 (Oct. 14, 2026), https://www.irs.gov/newsroom/irs-announces-tax-relief-for-taxpayers-impacted-by-hurricane-isaias-in-florida-various-deadlines-postponed-to-feb-8-2027.

Following severe weather conditions attributed to Hurricane Isaias in October 2026, the Internal Revenue Service issued administrative tax relief announcements for affected individuals and business entities in Alabama and Florida. Released as IRS News Release AL-2026-01 and IRS News Release FL-2026-07 on October 14, 2026, the guidance exercises administrative authority under Internal Revenue Code § 7508A to postpone specific federal tax filing and payment obligations. For tax practitioners, Certified Public Accountants (CPAs), and Enrolled Agents (EAs), advising affected clients requires a precise technical understanding of the statutory framework, state-specific geographic scopes, postponed acts, unique deposit abatement rules, casualty loss election mechanics, and recent statutory amendments regarding refund limitations.

Treasury Decision, Non-Applicability of Section 357(c) to Consolidated Groups, T.D. 10059, RIN 1545-BJ87, 91 Fed. Reg. 21253 (Oct. 16, 2026); codified at 26 C.F.R. § 1.1502-80(d)

For corporate tax practitioners advising consolidated affiliated groups, intercompany transfers of operating assets accompanied by assumed liabilities represent a routine yet highly technical area of subchapter C and consolidated return tax practice. Under general separate-return principles governed by Internal Revenue Code (I.R.C.) § 351 and § 357(c)(1), if the sum of liabilities assumed by a transferee corporation exceeds the total adjusted tax basis of property transferred in an exchange, the transferor must recognize gain equal to such excess. However, Treasury Regulation § 1.1502-80(d) explicitly overrides this general statutory rule, providing that I.R.C. § 357(c) does not apply to intragroup transfers governed by the intercompany transaction rules of Treas. Reg. § 1.1502-13.

While the turning off of I.R.C. § 357(c) prevents immediate gain recognition within a consolidated group, it historically introduced a significant statutory coordination glitch regarding the timing and mechanics of stock basis adjustments under I.R.C. § 358. Specifically, practitioners faced ambiguity over whether deductible liabilities described in I.R.C. § 357(c)(3)(A)—which normally do not reduce stock basis under I.R.C. § 358(d)(2) in a separate-return exchange—should reduce stock basis upon the initial asset transfer (a “front-end adjustment”) or only when absorbed as a deduction under the investment adjustment provisions of Treas. Reg. § 1.1502-32 (a “back-end adjustment”).

To eliminate lingering uncertainty resulting from the regulatory withdrawal of earlier proposed rules, the Department of the Treasury and the Internal Revenue Service (IRS) issued Notice of Proposed Rulemaking REG-134420-10 (89 Fed. Reg. 106884, Dec. 30, 2024), reproposing consolidated § 357(c) regulations in modified form. Subsequently, Treasury promulgated Final Regulations under Treasury Decision (T.D.) 10059 (91 Fed. Reg. 21253, Oct. 16, 2026). This article provides a comprehensive technical analysis of the reasons for these regulations, the Treasury’s statutory rationale under I.R.C. § 1502, the specific structural revisions to Treas. Reg. § 1.1502-80(d), comprehensive numerical illustrations, and practitioner reliance guidelines.

Department of the Treasury, Internal Revenue Service, Premium Tax Credit, Notice of Proposed Rulemaking and Notice of Public Hearing, REG-101576-26, RIN 1545-BS15, 26 CFR Part 1, FR Doc. 2026-21056, scheduled for publication in the Federal Register on Oct. 15, 2026

The Department of the Treasury and the Internal Revenue Service have issued a Notice of Proposed Rulemaking (REG-101576-26, RIN 1545-BS15) amending the Income Tax Regulations (26 CFR Part 1) under Section 36B of the Internal Revenue Code. These proposed regulations implement significant statutory amendments enacted under sections 71119 and 71301 through 71305 of Public Law 119-21, 139 Stat. 72, 306–315, 321–325 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA).

This article provides tax practitioners—specifically Certified Public Accountants (CPAs) and Enrolled Agents (EAs)—with a comprehensive technical breakdown of the proposed amendments, the IRS’s legal justification, statutory effective dates, and taxpayer reliance rules.

MD M. Rahman & Syeda Momotaz v. Commissioner, Docket No. 8286-23 (T.C. Oct. 7, 2026) (Bench Op. by Nega, J.)

In MD M. Rahman & Syeda Momotaz v. Commissioner, Docket No. 8286-23 (T.C. Oct. 7, 2026), the United States Tax Court delivered a bench opinion under Tax Court Rule 152 providing critical practical guidance for tax practitioners representing sole proprietors under audit. Presided over by Judge Joseph W. Nega, the decision addresses core procedural and substantive tax issues: the Commissioner’s authority to reconstruct gross income via the bank deposits method under Internal Revenue Code (I.R.C.) § 446(b), the strict evidentiary limits of the Cohan rule for Schedule C expenses where records are alleged to have been destroyed, and the mandatory burden of production placed on the Service under I.R.C. § 7491(c) and I.R.C. § 6751(b)(1) regarding written supervisory approval for accuracy-related penalties.

This technical article analyzes the factual matrix, the procedural history, the statutory framework, the judicial reasoning, and the practical takeaways for CPAs and Enrolled Agents managing examination and litigation strategies.

Rev. Rul. 2026-18, October 9, 2026

Under Section 61 of the Internal Revenue Code (I.R.C. § 61), gross income includes all income from whatever source derived, specifically encompassing fringe benefits provided to employees or independent contractors. When an employer provides noncommercial flights on employer-provided aircraft for personal purposes, the value of the flight must be included in the recipient’s gross income unless a statutory exclusion applies. To reduce administrative friction and valuation disputes regarding fair market value, the Internal Revenue Service provides a safe-harbor valuation methodology under Treasury Regulation Section 1.61-21(g).

Revenue Ruling 2026-18 sets forth the updated Standard Industry Fare Level (SIFL) cents-per-mile rates and terminal charges required to value noncommercial flights taken on employer-provided aircraft during the second half of calendar year 2026 (July 1, 2026, through December 31, 2026). This article examines the factual backdrop of the ruling, the administrative rationale for its publication, the underlying statutory and regulatory rules, the mathematical application of the SIFL formula, and key compliance considerations for tax professionals representing corporate clients and executive taxpayers.

In the Matter of the Consolidated Appeals of J. Burch, J. Carden, and K. Carden, OTA Case Nos. 230112266 & 230112267, 2026-OTA-28622 (Cal. Off. Tax App. July 24, 2026)

In a landmark decision for pass-through entity taxation and state income tax sourcing, the California Office of Tax Appeals (OTA) issued a consolidated opinion in the Appeals of J. Burch, J. Carden, and K. Carden (OTA Case Nos. 230112266 & 230112267, July 24, 2026). The OTA explicitly rejected the Franchise Tax Board’s (FTB) long-standing audit position—and its controversial FTB Legal Ruling 2022-02—which attempted to bifurcate the sale of a partnership interest by a nonresident into a deemed sale of underlying “hot assets” (unrealized receivables and inventory items under Internal Revenue Code (IRC) Section 751(a)) and a remaining sale of an intangible partnership interest under IRC Section 741.

Writing for a unanimous panel, Administrative Law Judge Kenneth Gast held that IRC Section 751(a) functions strictly as an anti-abuse characterization provision converting capital gain to ordinary income, rather than a sourcing provision that recasts a sale of an intangible partnership interest into an operational sale of underlying business assets. Aligning state tax jurisprudence with the U.S. Court of Appeals for the District of Columbia Circuit’s ruling in Rawat v. Commissioner, 108 F.4th 891 (D.C. Cir. 2024), the OTA held that California nonresident sourcing must follow California Revenue and Taxation Code (R&TC) Section 17952. Consequently, gains realized by nonresidents from the disposition of partnership interests are sourced to their state of domicile under the common law doctrine of mobilia sequuntur personam, unless the partnership interest itself acquired a business situs in California.

For tax practitioners representing nonresidents, partners in multi-tier structures, and private equity investors with California partnership holdings, this ruling provides crucial clarity and substantial precedent to challenge FTB audit assessments based on Legal Ruling 2022-02.

West v. Commissioner, T.C. Memo. 2026-105, Oct. 7, 2026

The petitioner, Andrew B. West, was an entrepreneur involved in various commercial activities during the 2015 and 2016 taxable years, operating primarily in Texas. During these years, Mr. West owned three limited liability companies: MPC Equipment, LLC; ABW Equipment Rentals, LLC; and Tilden Operating Management, LLC. On his federal individual income tax returns (Forms 1040), Mr. West reported these business activities across three separate Schedules C: Schedule C-1 for “Management Services,” Schedule C-2 for “MPC Equipment LLC,” and Schedule C-3 for “ABW Equipment Rentals LLC.” In addition to his own entity operations, Mr. West was employed by Oscar Leo Quintanilla to manage Mr. Quintanilla’s extensive business interests, which spanned oil and gas, cattle operations, and real estate development. Under a 2011 employment agreement with Paloma Cattle Co. Ltd., Mr. West served as president and CEO of several Quintanilla-owned entities and was entitled to an “Operating Bonus” equal to 6% of aggregate business profits.

The financial relationship between Mr. West and Mr. Quintanilla was highly intertwined and characterized by informal, centralized accounting. Mr. Quintanilla’s accountants managed a centralized bill-paying apparatus that paid expenses for Quintanilla entities as well as personal and business expenses incurred directly by Mr. West or his LLCs. Expenses paid on Mr. West’s behalf were centrally billed to him via intercompany invoices, which Mr. West then settled from his personal or LLC bank accounts. Under his employment agreement, Mr. West was entitled to full reimbursement for out-of-pocket expenses incurred on behalf of Quintanilla entities; the court found that this centralized payment structure ensured that reimbursable employment expenses were paid directly by Quintanilla entities and were not borne by Mr. West personally.

Rev. Proc. 2026-20, October 6, 2026

On October 6, 2026, the Internal Revenue Service (IRS) and the Department of the Treasury issued Revenue Procedure 2026-20, which describes an administrative safe harbor for State law trusts holding digital assets. Under this guidance, an arrangement formed as a trust under applicable State law that otherwise qualifies as an investment trust under Treas. Reg. § 301.7701-4(c) and as a grantor trust under I.R.C. §§ 671 and 677 may stake its digital assets without jeopardizing its classification as a trust for Federal income tax purposes.

Revenue Procedure 2026-20 expressly “clarifies, modifies, and supersedes Rev. Proc. 2025-31, 2025-48 I.R.B. 743, to address requests received by the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) for additional guidance on certain aspects of Rev. Proc. 2025-31.” Following the release of the 2025 safe harbor, taxpayers and practitioners sought crucial technical clarifications regarding:

• The specific proof-of-stake protocols covered under the safe harbor;

• The requirement that the Securities and Exchange Commission (SEC) approve trust disclosures;

• The utilization of multiple custodians in the staking workflow;

• The required scope and extent of contractually mandated slashing protection;

• The operational unstaking and sale of digital assets in anticipation of trust distributions;

• The requirement for consistent tax treatment of staking rewards;

• Whether liquidity transactions treated by the trust as borrowing digital assets qualify as contingent liquidity arrangements; and

• The exact scope of the safe harbor and the operational application of the transition grace period for existing trusts that had previously authorized staking activities.

In response, Rev. Proc. 2026-20 provides an updated, definitive regulatory roadmap while extending a limited six-month grace period from October 6, 2026, for existing trusts to amend their governing instruments and operational procedures to align with the revised safe harbor requirements.

End Tax Penalties on American Hostages Act, H.R. 9496, 119th Cong. (2026)

On September 30, 2026, Congress completed final passage of H.R. 9496, titled the “End Tax Penalties on American Hostages Act,” sending the measure to the President for signature. Passed by the House of Representatives under suspension of the rules on September 15, 2026, and subsequently passed by the Senate without amendment by unanimous consent on September 30, 2026, H.R. 9496 enacts significant statutory relief for U.S. nationals wrongfully detained or held hostage abroad.

The primary structural mechanism of H.R. 9496 is the addition of Section 7511 to Chapter 77 of the Internal Revenue Code of 1986 (IRC). Under new IRC § 7511, federal tax filing and payment deadlines are retroactively postponed, and associated interest, penalties, and additions to tax are systematically abated or refunded for individuals verified as hostages or wrongful detainees. Furthermore, the legislation establishes an administrative refund program allowing released captives, their spouses, or their dependents to claim refunds of penalties and interest paid for taxable years dating back to January 1, 2021, supported by dedicated extensions of the IRC § 6511 period of limitations.

For Certified Public Accountants (CPAs), Enrolled Agents (EAs), and tax controversy professionals, IRC § 7511 introduces a standardized administrative paradigm that removes affected taxpayers from traditional IRS penalty collection procedures, aligns Treasury databases with interagency intelligence lists, and creates a specialized refund remedy for historic tax liabilities.

Trump Accounts, 91 Fed. Reg. 63200 (Sept. 30, 2026) (codified at 26 C.F.R. pt. 1) (TD 10056)

Trump Accounts, 91 Fed. Reg. 63215 (proposed Sept. 30, 2026) (to be codified at 26 C.F.R. pt. 1) (CC-00226466-26)

U.S. Dep’t of the Treasury, Press Release SB-0642: Treasury Announces the Completion of Automatic Enrollment Today for Trump Accounts (Oct. 1, 2026)

Executive Summary and Scope of Treasury Announcement

On October 1, 2026, the Department of the Treasury issued Press Release SB-0642, officially announcing the nationwide completion of automatic enrollment for Trump accounts under Internal Revenue Code (IRC) Section 530A. Enacted pursuant to Section 70204 of Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA), Section 530A establishes specialized, tax-advantaged traditional Individual Retirement Accounts (IRAs) maintained for eligible minors during a statutorily defined growth period ending on December 31 of the calendar year in which the beneficiary attains age 17.

The October 1 announcement marks a historic operational milestone in federal wealth-building policy. Through a single nationwide bulk election, Treasury successfully established auto accounts for more than 60 million American children who had not previously enrolled via manual opt-in elections, bringing total program coverage to approximately 73.3 million eligible minors across 44 million families. In announcing the completion of funding and account setup, Treasury Secretary Scott Bessent emphasized:

“Millions of children have already enrolled in Trump Accounts. With automatic enrollment, over 60 million more eligible children now have an account ready to be claimed... This is a transformative milestone in the Trump Administration’s effort to give every American child the opportunity to build generational wealth and jump-start their financial future.”

For tax practitioners, CPAs, and Estate Planning attorneys, the announcement shifts focus from initial account establishment to the technical administrative procedures governing how authorized parties claim these auto accounts, unlock the one-time $1,000 government seed contribution under IRC Section 6434, enable tax-free employer contributions under IRC Section 128, and navigate the dual regulatory framework created by Treasury Decision 10056 (26 CFR §§ 1.530A-1T, 1.530A-7T) and Notice of Proposed Rulemaking CC-00226466-26.

Federal Scholarship Tax Credit, Temporary Regulations, TD 10057, RIN 1545-BS17, 91 Fed. Reg. [page] (published Oct. 2, 2026) (codified at 26 C.F.R. pt. 1).

Federal Scholarship Tax Credit, Notice of Proposed Rulemaking and Notice of Public Hearing, REG-117199-25, RIN 1545-BR97, 91 Fed. Reg. [page] (prop. Oct. 2, 2026) (to be codified at 26 C.F.R. pt. 1).

On October 1, 2026, the Department of the Treasury and the Internal Revenue Service released a comprehensive regulatory package implementing the new nonrefundable Federal Scholarship Tax Credit under Internal Revenue Code (Code) Section 25F. This statutory credit was enacted by Section 70411 of Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA). Section 25F allows individual taxpayers a nonrefundable tax credit of up to $1,700 annually for qualified cash contributions made to certified scholarship granting organizations (SGOs) in taxable years ending after December 31, 2026. Concurrently, OBBBA Section 70411(b) enacted Section 139K, which excludes from gross income any scholarship amounts received by eligible students or their dependents from SGOs.

To establish the necessary administrative, operational, and procedural infrastructure prior to the January 1, 2027 effective date for taxpayer contributions, Treasury and the IRS simultaneously published Temporary Regulations under Treasury Decision 10057 (TD 10057, RIN 1545-BS17) and a Notice of Proposed Rulemaking under REG-117199-25 (RIN 1545-BR97). Published pursuant to the mandatory cross-referencing requirement of Code Section 7805(e)(1), the temporary and proposed regulations establish binding guidelines for individual contributors, SGOs, and participating States.

This technical article provides tax practitioners—CPAs, Enrolled Agents, and tax attorneys—with an exhaustive analysis of the regulatory framework. It examines the legal justifications articulated by Treasury, the structural additions and modifications to the Income Tax Regulations (26 CFR Part 1), the economic and administrative rationale underlying key choices, proposed effective dates, taxpayer reliance provisions, and a subsection-level analysis of each regulatory provision.

Title: National Taxpayer Advocate Enhancement Act of 2025
Bill Number: H.R. 997 (119th Congress)
Primary IRC Code Section Affected: 26 U.S.C. § 7803(c)(2)(D)(i)

Executive Summary & Legislative Status

On September 28, 2026, the United States Senate passed H.R. 997, the National Taxpayer Advocate Enhancement Act of 2025, by Unanimous Consent without amendment. This followed unanimous passage in the House of Representatives on March 31, 2025 by a roll call vote of 385–0 (Roll No. 85), following favorable reporting by the House Committee on Ways and Means (H. Rept. 119-46). The legislation has been cleared for enrolled print and sent to the President for signature.

Sponsored by Rep. Randy Feenstra (R-IA-4), H.R. 997 enacts targeted statutory amendments to Internal Revenue Code (IRC) § 7803. The primary purpose of the Act is to establish independent statutory authority for the National Taxpayer Advocate (NTA) to appoint dedicated legal counsel within the Taxpayer Advocate Service (TAS) who report directly to the NTA, thereby removing TAS legal personnel from the supervisory chain of the Treasury Legal Division and IRS Chief Counsel.

IRS Notice 2026-63, 2026-42 I.R.B. ___ (Sept. 30, 2026)

On September 30, 2026, the Internal Revenue Service released Notice 2026-63, granting comprehensive administrative tax relief under Internal Revenue Code (I.R.C.) § 7508A to individuals and entities impacted by the ongoing terroristic action in the State of Israel throughout calendar years 2025 and 2026. This administrative guidance extends statutory deadlines for time-sensitive tax compliance obligations that were due to be performed on or after September 30, 2026, and before September 30, 2027, postponing the required performance date to September 30, 2027.

The notice addresses an evolving humanitarian and security crisis, serving as the latest installment in a sequence of relief measures. The IRS previously issued Notice 2023-71, Notice 2024-72, and Notice 2025-53 to assist taxpayers affected by terroristic actions in the region. Notice 2026-63 formally bridges these prior grants of relief, establishing that for eligible taxpayers, acts previously postponed through September 30, 2026, under Notice 2025-53 are further postponed through September 30, 2027.

Fine v. Commissioner, 167 T.C. No. 13 (2026)

When representing taxpayers in protracted IRS examinations, tax practitioners frequently confront statute of limitations extensions under Internal Revenue Code (I.R.C.) § 6501(c)(4). A common procedural question arises when settlement negotiations fail: Can a taxpayer who previously executed a fixed-date extension on IRS Form 872 (Consent to Extend the Time to Assess Tax) unilaterally terminate that extension prior to its stated expiration date by sending IRS Form 872-T (Notice of Termination of Special Consent to Extend the Time to Assess Tax)?

In Fine v. Commissioner, 167 T.C. No. 13 (2026), the United States Tax Court answered this question with an emphatic “no.” Addressing an open issue in the U.S. Court of Appeals for the Eleventh Circuit, Judge Ashford held that Form 872-T applies exclusively to open-ended waivers executed on Form 872-A (Special Consent to Extend the Time to Assess Tax) and has no legal effect on a properly executed, fixed-date Form 872. Consequently, a Form 872 remains binding until its negotiated expiration date unless the IRS issues a Notice of Deficiency or the parties execute a subsequent written agreement.

For Certified Public Accountants (CPAs) and Enrolled Agents (EAs), Fine v. Commissioner serves as a critical procedural precedent. It underscores the binding nature of fixed-term waivers, highlights the strict contractual interpretative rules applied to IRS consent forms, and reinforces that strategic unhappiness with Appeals settlement progress does not permit taxpayers to alter agreed-upon extension terms.

Sevillo Fine Foods LLC v. United States, Case No. 2:25-cv-00273-DBP, 2026 U.S. Dist. LEXIS _____ (D. Utah Sept. 28, 2026)

As tax practitioners evaluating Employee Retention Credit (ERC) refund claims, CPAs and Enrolled Agents (EAs) face heightened scrutiny from both the Internal Revenue Service and federal courts regarding claims grounded in the “Suspension Test.” A significant subset of ERC claims filed during the pandemic relied on indirect supply chain disruptions, arguing that upstream bottlenecks—such as maritime port congestion—constituted a partial suspension of business operations.

In Sevillo Fine Foods LLC v. United States, Case No. 2:25-cv-00273-DBP (D. Utah Sept. 28, 2026), Magistrate Judge Dustin B. Pead granted the government’s partial motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, dealing a decisive blow to supply chain ERC claims predicated on generalized port delays and indirect workplace safety regulations. The District Court articulated three independent, legal grounds for dismissal:

1. Identification of a qualifying governmental order: Advisory documents and workplace safety mandates that regulate conditions of operation rather than capping throughput do not constitute orders “limiting commerce.”

2. Standard of causation: The statutory phrase “due to” in Section 2301(c)(2)(A)(ii)(I) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) requires both factual (but-for) and proximate cause, barring claims linked through an attenuated supply chain.

3. Definition of partial suspension: Supply delays, increased costs, and capacity reductions do not equate to an operational suspension, particularly where a taxpayer maintains its workforce and revenues.