IRS Action on Decision AOD 2026-01, May 15, 2026

As experienced tax professionals, we have closely monitored the evolving interpretations of disaster relief deadlines under I.R.C. § 7508A(d). The recent release of the IRS’s Action on Decision (AOD) regarding the Tax Court’s unanimous holding in Abdo v. Commissioner, 162 T.C. 148 (2024), provides critical insight into the Service’s litigation strategy. While the AOD offers a nominal concession, a close reading reveals that the IRS is firmly entrenched in its position—a reality that directly explains its recent decision to appeal the expansive taxpayer victory in Kwong v. United States, No. 23-267 (Fed. Cl. Nov. 25, 2025).

Here is a breakdown of the AOD, the precise boundaries of the IRS's acquiescence, and what it means for practitioners navigating pandemic-era deadline extensions.

Notice 2026-33, May 20, 2026

The enactment of the SECURE 2.0 Act of 2022 (Division T of the Consolidated Appropriations Act, 2023, Pub. L. 117-328) introduced several sweeping changes to retirement plan administration, notably creating a new framework for funding long-term care insurance using retirement assets. Specifically, Section 334 of the SECURE 2.0 Act amended the Internal Revenue Code by adding I.R.C. § 401(a)(39), I.R.C. § 72(t)(2)(N), and I.R.C. § 6050Z to permit defined contribution plans to distribute funds for certified long-term care insurance without triggering the 10% early withdrawal penalty.

Notice 2026-33 recently provided long-awaited administrative and procedural guidance to tax professionals, plan administrators, and insurance issuers regarding these provisions. This article provides a comprehensive summary of the key provisions, the IRS’s stated justifications, the interplay with relevant Code sections, and the effective dates practitioners must monitor.

HR 6506, Passed by the US House of Representatives, May 19, 2026

On May 19, 2026, the House of Representatives passed H.R. 6506, the Taxpayer Due Process Enhancement Act. For tax practitioners who represent clients in Collection Due Process (CDP) proceedings, this legislation is a welcome and highly necessary development. The bill was drafted as a direct congressional override of the Supreme Court’s controversial June 2025 decision in Commissioner v. Zuch, which severely curtailed the jurisdiction of the U.S. Tax Court and created dangerous procedural traps for taxpayers fighting IRS collection actions.

If fully enacted into law by the Senate and signed by the President, H.R. 6506 will substantially alter the Internal Revenue Code (IRC) to protect taxpayer rights, ensure the Tax Court remains an accessible forum, and prevent the IRS from weaponizing taxpayer overpayments to moot ongoing litigation.

Below is a detailed analysis of the bill’s individual provisions, how they specifically respond to the Zuch decision, and the exact legal citations for how they will modify the existing IRC.

United States v. Estate of Richard T. Cole, Jr., et al., United States District Court for the Eastern District of Michigan, (Case No. 22-cv-12916, May 15, 2026)

For tax professionals representing corporate officers, few provisions in the Internal Revenue Code present a more formidable challenge than the Trust Fund Recovery Penalty (TFRP) under Internal Revenue Code Section 6672. A recent decision from the United States District Court for the Eastern District of Michigan, United States v. Estate of Richard T. Cole, Jr., et al. (Case No. 22-cv-12916, May 15, 2026), serves as a stark reminder of the absolute risk corporate officers face when employment taxes are withheld but not remitted.

This case underscores how difficult it is for co-owners and officers to escape joint and several liability by pointing fingers at co-officers, invoking third-party administrative failures, or claiming that their active role was merely nominal. For CPAs and Enrolled Agents, the court's rigorous application of the "responsible person" and "willfulness" tests provides essential lessons in risk management and administrative defense.

TD 10048, May 20, 2026

Under section 741 of the Internal Revenue Code (Code), "gain or loss recognized by a transferor partner upon sale or exchange of a partnership interest is considered as gain or loss from the sale or exchange of a capital asset, except as provided in section 751". Section 751(a) mandates that amounts received by a transferor partner attributable to unrealized receivables or inventory items of the partnership "will be considered as an amount realized from the sale or exchange of property other than a capital asset". The regulations designate these specific transactions as a "section 751(a) exchange" under § 1.6050K-1(a)(4)(i).

To ensure proper reporting of these transactions, "Section 6050K(a) requires a partnership to file a return if there is a section 751(a) exchange of any interest in the partnership during any calendar year". Under the prior regulatory framework, § 1.6050K-1(c)(1) required partnerships to furnish a statement to both the transferor and transferee by January 31 of the year following the exchange, or 30 days after the partnership receives notice of the exchange, whichever is later. Furthermore, prior to its removal by these final regulations, § 1.6050K-1(c)(2) "required a partnership to furnish to a transferor partner the information necessary for the transferor to make the transferor partner’s required statement in §1.751-1(a)(3)". Section 1.751-1(a)(3) compels the transferor to separately state the date of the exchange, the amount of gain or loss attributable to section 751 property, and the amount attributable to capital gain or loss. This granular data reporting aligned directly with Part IV of Form 8308, Report of a Sale or Exchange of Certain Partnership Interests.

Catherine L. LaRosa v. Commissioner of Internal Revenue, CA 4, Case No. 24-2034 (May 18, 2026) vacating and remanding 163 T.C. No. 2 (July 17, 2024)

The availability of equitable relief under Internal Revenue Code (I.R.C.) § 6015(f) is a critical safeguard for innocent spouses facing joint and several liability. However, whether an erroneous refund consisting solely of previously paid interest revives a "tax liability" eligible for such relief has been a matter of significant dispute. The recent Fourth Circuit Court of Appeals decision in LaRosa v. Commissioner completely reshapes the landscape on this issue, vacating a prior Tax Court ruling and determining that an erroneous refund of underpayment interest does indeed give rise to a liability for unpaid tax eligible for equitable relief.

This article details the intricate factual background of the LaRosa case, explores the initial legal reasoning of the United States Tax Court, and analyzes the Fourth Circuit’s textual approach in reversing that decision.

Dillon Trust Company LLC v. United States, No. 2024-1314 (Fed. Cir. May 14, 2026)

For tax professionals handling the sale of closely held C corporations with highly appreciated assets, balancing the desire for single-level taxation against the risks of transferee liability is a familiar challenge. A recent decision by the United States Court of Appeals for the Federal Circuit, Dillon Trust Company LLC v. United States, serves as a critical cautionary tale. This decision highlights the severe consequences of willful blindness in stock sales to intermediary entities utilizing abusive tax shelters, underscoring that sellers cannot turn a blind eye to economically irrational bids without risking exposure to massive transferee tax liability, penalties, and interest.

Clint L. Martin and Jenifer Martin v. Commissioner of Internal Revenue, T.C. Memo. 2026-40 Stephen Martin and Amanda Martin v. Commissioner of Internal Revenue, T.C. Memo. 2026-39, May 14, 2026

The cases of Martin v. Commissioner center on a pair of cousins, Clint and Stephen Martin, who jointly owned a parcel of land and attempted to donate it to a local municipality. In 2014, Clint Martin successfully bid $22,000 to purchase 13.33 acres of property located in Highland City, Utah. He funded the purchase through Litefoot Investments, LLC, a Utah limited liability company whose members consisted of himself and his cousin, Stephen. In 2016, Clint executed a warranty deed that formally transferred the property into the joint ownership of himself and Stephen.

In 2018, the cousins resolved to donate the property to Highland City. On November 21, 2018, they sent a letter to the mayor and City Council offering the donation. The Highland City Council subsequently voted to accept the property on December 4, 2018. Following this approval, Clint, Stephen, and the mayor of Highland City signed a "Joint Letter" on December 21, 2018. The Joint Letter indicated that the Martins offered "a donation of land" for "[t]he purpose of . . . a conservation contribution" and established an intent for the city "to maintain th[e] property in perpetuity as preserved open space". Furthermore, the letter declared that the property "will be donated" with "all taxes paid and current through the end of 2018" and "all costs associated with said donation . . . paid by the donors".

On December 27, 2018, Clint and Stephen executed a warranty deed conveying the property to Highland City, which was formally recorded alongside the Joint Letter the next day. Crucially, the 2018 deed contained boilerplate language stating that the property was conveyed "for and in consideration of the sum of Ten and no/100 Dollars ($10.00), and other good and valuable consideration in hand paid by" Highland City.

For the 2018 tax year, the property was appraised by Todd Gurney at a valuation of $665,000. On their respective 2018 joint income tax returns, both Clint and Stephen claimed massive charitable contribution deductions—Clint claiming $339,400 (with $332,500 attributable to his 50% interest) and Stephen claiming $332,500 for his 50% interest. Both taxpayers attached Form 8283, Noncash Charitable Contributions, signed by the appraiser, the donors, and the Highland City Administrator, listing their respective bases in the property as $35,000.

“IRS announces terms of a time-limited settlement opportunity for eligible taxpayers involved in conservation easement disputes,” News Release IR-2026-65, May 13, 2026

On May 13, 2026, the Internal Revenue Service issued News Release IR-2026-65, announcing a "time-limited settlement opportunity for eligible taxpayers involved in conservation easement or historic preservation easement disputes with the IRS". As practitioners representing partnerships and investors in these transactions are acutely aware, the scrutiny surrounding deductions for qualified conservation contributions—governed by I.R.C. § 170(h)(1)—has intensified. This settlement initiative alters the landscape for resolving protracted disputes, offering structured terms that diverge from prior IRS settlement programs.

REG-118484-25, May 11, 2026

The Department of the Treasury, the Internal Revenue Service (IRS), the Department of Labor, and the Department of Health and Human Services recently issued proposed regulations to amend 26 CFR Part 54, as well as corresponding regulations under ERISA and the Public Health Service (PHS) Act. The primary objective of these proposed rules is to establish specific fertility benefits as a new classification of "limited excepted benefits". By classifying these benefits as excepted benefits, they become "generally exempt from the market requirements" found in Chapter 100 of the Internal Revenue Code, Part 7 of ERISA, and Title XXVII of the PHS Act.

The rationale for this regulatory action is deeply rooted in demographic trends and recent executive policy directives. The preamble explicitly highlights a demographic shift, noting that the United States is currently experiencing a declining fertility rate where the "general fertility rate declined by 14 percent" between 2014 and 2024, remaining "below replacement level for over a decade". The total fertility rate has dropped to 1.6 births per woman in 2023, which is below the 2.1 replacement level necessary for a population to sustain itself.

Furthermore, the regulations are a direct response to Executive Order 14216, "Expanding Access to In Vitro Fertilization," which established that "as a Nation, our public policy must make it easier for loving and longing mothers and fathers to have children". The Executive Order seeks to ensure reliable access to in vitro fertilization (IVF) by "easing unnecessary statutory or regulatory burdens to make IVF treatment drastically more affordable". Separately, the regulations align with Executive Order 14192, "Unleashing Prosperity Through Deregulation," which prioritizes efforts to "alleviate unnecessary regulatory burdens placed on the American people".

Historically, most employer-sponsored major medical health plans have not covered fertility treatments, and where employers do offer such coverage, "many have claims for such benefits administered under a separate contract from their major medical coverage". The Departments recognize that "coverage for the diagnosis, mitigation, or treatment of infertility or infertility-related reproductive health conditions" is lacking and hope that creating this new limited excepted benefit will "reduce the regulatory burden for employers seeking to offer fertility benefits to their employees".

The State of Oregon, et al. v. United States, and Burlap and Barrel, Inc., et al. v. United States, Slip Op. 26-47 (Ct. Int'l Trade May 7, 2026).

For certified public accountants (CPAs) and enrolled agents (EAs) advising clients engaged in international commerce, sudden shifts in trade policy and the imposition of import surcharges present significant tax and cash-flow implications. The United States Court of International Trade (CIT) recently addressed the legality of a broad 10 percent ad valorem tariff imposed by the Executive Branch. This article provides a technical analysis of the CIT's opinion, detailing the factual background, the plaintiffs' request for relief, the court's statutory interpretation, the application of the law, and the ultimate conclusions regarding the President's authority under Section 122 of the Trade Act of 1974.

Dunlap v. United States, US District Court, Southern District New York, No. 1:25-cv-02942, (May 6, 2026)

For tax practitioners, the intersection of timely filing rules and federal court jurisdiction is a critical area of tax administration. The recent decision in Dunlap v. United States serves as a stark reminder of the evidentiary burdens taxpayers face when relying on the "timely mailing treated as timely filing" rule under Internal Revenue Code (IRC) § 7502. This article examines the facts, legal analysis, and conclusions of the United States District Court for the Southern District of New York regarding jurisdictional time bars for refund claims.

Revenue Procedure 2026-21, May 5, 2026

For tax practitioners handling complex corporate transactions, securing a Private Letter Ruling (PLR) from the Internal Revenue Service (IRS) is often a critical step in managing tax risk. Recently, the IRS released Revenue Procedure 2026-21, 2026-22 I.R.B. 1, which establishes "a program for letter rulings with respect to certain issues solely under the jurisdiction of the Associate Chief Counsel (Corporate)". This article analyzes the purpose of this newly reinstated significant issue program, its historical context, the taxpayers it impacts, and the procedural mechanics and limitations governing its use.

Daines v. IRS, No. 24-CV-1057 (E.D. Wis. May 4, 2026)

The dispute in this case centered around the implementation and operation of an employee stock ownership plan (ESOP). The individual plaintiffs, Jeffrey and Elisha Daines and Jeffrey and Stephanie Federwitz, alongside their corporate entities Solid Ground Inc. and Solid Ground Transportation, Inc., sought to establish an ESOP to take advantage of specific tax benefits. To execute this strategy, the taxpayers enlisted Lex J. Byers and his company, who aggressively marketed "a proprietary system that would afford certain tax benefits". This arrangement created the seventh plaintiff in the case, the Solid Ground Transportation Inc. Employee Stock Ownership Plan.

Xavier Garcia-Rojas et al. v. Franchise Tax Board, A172054, California Court of Appeal, First Appellate District, Division Three, May 1, 2026

On May 1, 2026, the California Court of Appeal, First Appellate District, delivered a significant decision impacting nonresident taxpayers in Xavier Garcia-Rojas et al. v. Franchise Tax Board. The court evaluated whether a nonresident independent contractor operating as a sole proprietor constitutes a unitary business subject to California income apportionment.

Kimberly Road Fulton 25, LLC v. Commissioner and South Fulton Parkway 58, LLC v. Commissioner, T.C. Memo. 2026-36, May 4, 2026

The United States Tax Court recently handed down a memorandum decision in the consolidated cases of Kimberly Road Fulton 25, LLC v. Commissioner and South Fulton Parkway 58, LLC v. Commissioner, T.C. Memo. 2026-36. Governed by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), this case highlights the critical importance of a realistic Highest and Best Use (HBU) analysis and the limits of the comparable sales method when appraising properties for Internal Revenue Code (IRC) § 170(h) charitable deductions. While the taxpayers successfully defended the procedural validity and conservation purposes of their easements, they were ultimately defeated by vastly overstated appraisals that resulted in severe valuation misstatement penalties.

Executive Order, “Promoting Retirement-Savings Access For American Workers By Establishing TrumpIRA.gov,” April 30, 2026

On April 30, 2026, the Executive Order "Promoting Retirement-Savings Access for American Workers by Establishing TrumpIRA.gov" was signed to address a significant coverage gap in the United States retirement system. For tax professionals, understanding the mechanisms of this order is critical, as it directly bridges gaps in retirement planning for self-employed and gig-economy clients by utilizing the Federal Saver’s Match enacted under the SECURE 2.0 Act.

The stated reason for the order is straightforward: "Tens of millions of Americans lack access to employer-sponsored retirement plans". The administration notes that "Workers in small businesses, part-time workers, independent contractors, and self-employed workers face unnecessary barriers to saving for retirement". The explicit policy goal is to "establish an easy and transparent way for eligible workers to obtain up to a $1,000 match for their savings", offering these workers "portable savings vehicles that offer access to low-cost investments similar to those offered to Federal workers in the Thrift Savings Plan".

Proposed Regulations (REG-119294-25) and Temporary Regulations (T.D. 10047), April 30, 2026

The enactment of the One, Big, Beautiful Bill Act (OBBBA) introduced Internal Revenue Code (IRC) Section 6435, providing a mechanism for recovering the Section 4081 excise tax paid on diesel fuel or kerosene that subsequently qualifies as exempt under Section 4082(a). Recently, the Department of the Treasury and the Internal Revenue Service (IRS) issued temporary regulations (T.D. 10047) and cross-referenced proposed regulations (REG-119294-25) addressing these payments. The IRS also issued a corresponding news release, IR-2026-59, to announce "a new method for recovering federal excise tax paid on dyed fuel established under the One, Big, Beautiful Bill".

“Treasury, IRS Announce Process for Tax Guidance Following DOJ Final Order on Medical Marijuana Rescheduling,” US Treasury Website, April 23, 2026

Following the final order issued by the Department of Justice (DOJ) and the Drug Enforcement Administration (DEA) to reschedule certain marijuana products from Schedule I to Schedule III of the Controlled Substances Act (CSA), the U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued a press release on April 23, 2026, detailing the forthcoming tax guidance. This administrative shift carries substantial tax implications for clients operating in the cannabis space, directly impacting the application of the deduction disallowance under Section 280E of the Internal Revenue Code (I.R.C.).

For tax practitioners, analyzing the Treasury's initial statements against the DEA’s regulatory recommendations is critical for effective tax planning in the coming filing seasons.

House Floor Action Passing Bills, April 27, 2026

As tax professionals, staying abreast of statutory changes to the Internal Revenue Code (IRC) is essential for accurate advisory and compliance work. On April 27, 2026, the House of Representatives advanced a suite of nine bipartisan tax administration bills. 

The nine bills passed by the House are as follows:

• H.R. 6495, titled the Taxpayer Notification and Privacy Act.

• H.R. 227, titled the Clergy Act.

• H.R. 6431, titled the New Opportunities for Business Ownership and Self-Sufficiency Act.

• H.R. 6956, titled the Barcode Automation for Revenue Collection to Organize Disbursement and Enhance Efficiency Act (or the BARCODE Efficiency Act).

• H.R. 2347, titled the Survivor Justice Tax Prevention Act.

• H.R. 5366, titled the Doug LaMalfa Federal Disaster Tax Relief Certainty Act.

• H.R. 5334, titled the Supporting Early-childhood Educators’ Deductions Act (or the SEED Act).

• H.R. 7971, titled the Taxpayer Experience Improvement Act.

• H.R. 7959, titled the IRS Whistleblower Program Improvement Act.

According to a Tax Notes article authored by Katie Lobosco and Cady Stanton, these bills were passed through a fast-track procedure typically reserved for noncontroversial legislation requiring a two-thirds majority vote. However, the Tax Notes authors also observed that the fate of these bills remains unclear in the Senate, where taxwriters have introduced a broader tax administration package (S. 3931).