Key Meetings, Inc. v. United States, Case No. 25-cv-06520-WHO (N.D. Cal. June 26, 2026) and Juggler Dave & Friends, LLC v. United States, 181 Fed. Cl. 52 (2026)

The retroactive termination of the Employee Retention Credit (ERC) for the third quarter of 2021, enacted under the One Big Beautiful Bill Act (OBBBA), has survived two major constitutional challenges in the federal courts. Enacted on July 4, 2025, Section 70605(d) of the OBBBA established a retroactive deadline of January 31, 2024, for all claims seeking the ERC for the third quarter of 2021. Under this provision, notwithstanding Section 6511 of the Internal Revenue Code of 1986, "no credit under section 3134 of the Internal Revenue Code of 1986 shall be allowed, and no refund with respect to any such credit shall be made, after the date of the enactment of this Act, unless a claim for such credit or refund was filed by the taxpayer on or before January 31, 2024" (Pub. L. 119-21, § 70605(d), 139 Stat. 72 (2025)).

This sudden statutory contraction of the filing window has caught many late-filing taxpayers in its net, leading to aggressive litigation under the Due Process Clause of the Fifth Amendment. Two recent decisions—Key Meetings, Inc. v. United States in the Northern District of California and Juggler Dave and Friends, LLC v. United States in the Court of Federal Claims—have solidly rejected these constitutional challenges, establishing a formidable shield for retroactive tax administration.

Besicorp Group, Inc. v. Commissioner of Internal Revenue, Docket Nos. 23-296(L), 23-299 (Con), 23-302 (Con), 23-321 (Con), 23-353 (Con), 23-359 (Con), ___ F.4th ___ (2d Cir. June 29, 2026)

The United States Court of Appeals for the Second Circuit has ruled that an Internal Revenue Service Appeals Officer's failure to verify written supervisory approval for tax penalties during a Collection Due Process (CDP) hearing invalidates the collection of those penalties via federal tax liens and levies, even if the underlying liabilities were previously adjudicated. In Besicorp Group, Inc. v. Commissioner of Internal Revenue, the Second Circuit reversed a series of Tax Court orders that had sustained IRS liens and proposed levies for millions of dollars in outstanding penalty liabilities. The court's decision establishes a critical boundary between the administrative determination of tax liability and the statutory due process required during the collection phase, reminding tax practitioners that the procedural protections enacted under the Internal Revenue Service Restructuring and Reform Act of 1998 (the "Reform Act") are absolute and must be enforced according to their literal text.

This ruling represents a significant victory for taxpayers contesting IRS collections, clarifying that the government's failure to obtain and verify supervisory approval under Internal Revenue Code (I.R.C.) § 6751(b)(1) is a fatal defect that permanently bars the IRS from using its expedited collection tools—namely, liens and levies—to collect the penalty portion of a tax debt.

Rev. Proc. 2026-25 (June 29, 2026), 26 CFR 601.601; IRC §§ 530A, 2010, 2503, 2505, 2642, 2662, 6019

Under Revenue Procedure 2026-25, the Internal Revenue Service (IRS) has established a transfer tax safe harbor for certain individual donors making contributions to "Trump accounts" established under Section 530A of the Internal Revenue Code. This administrative guidance clarifies that qualifying contributions are "treated as completed gifts that are not gifts of future interests in property and to which the annual per-donee gift tax exclusion applies," thereby relieving eligible taxpayers of the obligation to file gift tax returns (Form 709) for these transfers. 

RAAM Construction Inc v. United States of America, Case No. 2:25-cv-04681-SPG-AJR, 2026 WL 18391 (C.D. Cal. June 23, 2026).

The Employee Retention Credit (ERC) codified under Internal Revenue Code Section 3134 remains a significant source of controversy, audits, and high-stakes federal litigation. While taxpayers often focus on demonstrating that they experienced pandemic-related disruptions, a recent summary judgment ruling from the United States District Court for the Central District of California underscores a more formidable evidentiary hurdle: causation. In RAAM Construction Inc. v. United States of America, Case No. 2:25-cv-04681-SPG-AJR (C.D. Cal. June 23, 2026), the court granted the government's motion for summary judgment on both the taxpayer’s refund claim and the government's substantial clawback counterclaim. This decision provides critical guidance for tax practitioners (CPAs and EAs) on the strict "but-for" causation standard required to establish ERC eligibility under the partial suspension pathway.

Tapestry Senior Housing Management, LLC v. United States, Case No. 25-cv-3419 (LMP/EMB), 2026 WL 18388 (D. Minn. June 25, 2026).

The Employee Retention Credit (ERC) under Internal Revenue Code Section 3134 has been one of the most widely claimed and heavily contested tax relief provisions arising from the COVID-19 pandemic. While much of the professional discussion has centered on the substantive eligibility rules—such as the gross receipts test and the partial suspension of operations test—a recent order from the United States District Court for the District of Minnesota highlights a critical procedural hurdle: federal pleading standards. In Tapestry Senior Housing Management, LLC v. United States, Case No. 25-cv-3419 (LMP/EMB) (D. Minn. June 25, 2026), the court granted the government’s motion to dismiss a taxpayer’s $3 million refund suit, providing essential guidance for tax professionals on how ERC eligibility must be pleaded in federal court.

Soroban Capital Partners LP v. Commissioner, 161 T.C. 310 (2023); Soroban Capital Partners LP v. Commissioner, T.C. Memo. 2025-52; Soroban Capital Partners LP v. Commissioner, No. 25-2079 (2d Cir. 2026) (Oral Argument Transcript).

For tax professionals advising private equity funds, hedge funds, and closely held businesses, the ongoing litigation in Soroban Capital Partners LP v. Commissioner represents one of the most critical developments in self-employment tax controversy in decades. At the heart of the dispute is whether active, service-providing individual partners in a state-law limited partnership can utilize the limited partner exception of Internal Revenue Code (I.R.C.) Section 1402(a)(13) to exclude their distributive shares of ordinary partnership income from self-employment taxes under the Self-Employment Contributions Act (SECA). With over $140 million in distributive shares at stake in this single case, the controversy has progressed from foundational battles over Tax Court jurisdiction to a high-stakes appeal before the U.S. Court of Appeals for the Second Circuit. This article provides a highly technical analysis of the two underlying Tax Court decisions, the key items before the Second Circuit appellate panel, the detailed debates and concerns raised by the judges during oral arguments, and the broader compliance and risk mitigation strategies for CPAs and EAs.

Sundancer Pools, Inc. v. United States, No. 25-1291T (Fed. Cl. June 23, 2026).

The Employee Retention Credit (ERC) has been one of the most heavily litigated and audited tax provisions in recent history. Originally enacted under Section 2301 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Pub. L. No. 116-136, 134 Stat. 281 (2020), and later codified as amended at I.R.C. § 3134, the ERC was designed to provide a refundable tax credit against employment taxes for employers facing severe economic hardships during the COVID-19 pandemic. While the statutory framework provides multiple pathways to eligibility, the most contentious has been the "full or partial suspension" prong under I.R.C. § 3134(c)(2)(A)(ii)(I).

In Sundancer Pools, Inc. v. United States, No. 25-1291T, the United States Court of Federal Claims addressed critical threshold issues regarding what constitutes a "full or partial suspension" and the standard of causation required to prove that such a suspension was "due to orders from an appropriate governmental authority." For CPAs and Enrolled Agents (EAs) advising clients, this case serves as an essential case study on the pleading standards necessary to survive government motions and the rigorous legal thresholds that courts are applying to ERC refund suits.

Office of Professional Responsibility, Internal Revenue Service, U.S. Dep't of the Treasury, Alert Issue No. 2026-19, Introductory Guidelines for Responsible AI Use in Federal Tax Practice (June 24, 2026).

The IRS Office of Professional Responsibility on June 24, 2026 issued an Alert dealing with the use of artificial intelligence in tax practice (U.S. Dep't of the Treasury, Alert Issue No. 2026-19, Introductory Guidelines for Responsible AI Use in Federal Tax Practice).

The rapid integration of artificial intelligence ("AI") has transformed modern law and accounting offices. While traditional AI tools—such as advanced legal research products and document review platforms—have been ubiquitous for years, the emergence of generative artificial intelligence ("GAI") introduces a paradigm shift. The Office of Professional Responsibility (OPR) defines AI fundamentally as "the use of machines in a way that mimics human cognitive skills, including judgment, perception, and prioritization". Unlike legacy analytical software, contemporary GAI platforms "have the ability to make discretionary decisions, devoid of any human interaction". This autonomy stems from "GAI’s use of complex pattern-recognition capabilities that continually interact and evolve, allowing the program to learn from itself". Although these tools offer transformative potential—such as "cost savings, rapid data analysis," and advanced government risk assessment applications—they also pose profound ethical, regulatory, and legal hazards for federally authorized tax practitioners.

Tooke v. Commissioner, T.C. Memo. 2026-54, June 23, 2026

The United States Tax Court recently issued a memorandum opinion in Tooke v. Commissioner, T.C. Memo. 2026-54, providing critical guidance on the scope of an Appeals Officer's discretion during Collection Due Process (CDP) hearings, specifically regarding the rejection of Offers-in-Compromise (OIC) and Partial-Pay Installment Agreements (PPIA).

Albert S.N. Hee and Wendy R. Hee v. Commissioner; Waimana Enterprises, Inc. v. Commissioner, T.C. Memo. 2026-53 (June 23, 2026)

In the realm of closely held corporations, the line between personal and business expenses is frequently a focal point of Internal Revenue Service examinations. When a controlling shareholder treats a corporate treasury as a personal pocketbook, the tax consequences can escalate from simple disallowances to civil fraud penalties under Internal Revenue Code Section 6663. The United States Tax Court decision in Hee v. Commissioner, T.C. Memo. 2026-53, serves as an instructive and sobering case study for Certified Public Accountants (CPAs) and Enrolled Agents (EAs) on the critical importance of corporate formalities, the strict substantiation requirements of Section 274(d), and the mechanics of the civil fraud penalty.

Plastic Film, LLC v. United States, Civil No. 5:25-cv-30-DCB-LGI (S.D. Miss. June 22, 2026)

The Employee Retention Credit (ERC) has been one of the most heavily scrutinized tax provisions of the pandemic era. As the Internal Revenue Service (IRS) continues its sweeping compliance and enforcement efforts, a pivotal question has emerged in federal courts: what procedural avenues must the government use to recapture allegedly improper ERC refunds? In Plastic Film, LLC v. United States, the United States District Court for the Southern District of Mississippi addressed this critical issue, holding that the federal government is not restricted to administrative assessment procedures under 26 U.S.C. § 6205 when seeking to recapture improper ERC refunds. Instead, the court affirmed that the government retains its long-standing right to pursue civil recovery actions for erroneous refunds under 26 U.S.C. § 7405(b). At the same time, the court clarified that when the government asserts a civil recoupment counterclaim, it must meet federal plausibility pleading standards by alleging specific facts demonstrating ineligibility rather than merely relying on conclusory statutory recitations.

Sleiman v. Commissioner, No. 19155-24 (T.C. May 6, 2026) (oral findings of fact and opinion rendered pursuant to T.C. Rule 152)

For tax professionals representing clients in joint and several liability disputes, the United States Tax Court’s bench opinion in Sleiman v. Commissioner offers critical guidance on two of the most complex areas of I.R.C. § 6015: nominal business ownership and the application of the domestic abuse exception to the "reason to know" standard. This case highlights how de novo judicial review can successfully look past corporate paperwork and nominal listings to identify the true economic and behavioral realities of a marital household.

Notice 2026-40, Internal Revenue Service (June 2026).

For practitioners advising clients on Qualified Opportunity Zone (QOZ) investments under the Internal Revenue Code (the Code), the regulatory landscape has recently undergone a major transformation. Sections 1400Z-1 and 1400Z-2, originally enacted under the Tax Cuts and Jobs Act (TCJA) of 2017 and subsequently amended by the Bipartisan Budget Act of 2018 (BBA 2018), have been substantially modified by Section 70421 of Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly referred to as the "One, Big, Beautiful Bill Act" (OBBBA).

To address critical timing mismatches and transition issues resulting from these amendments, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) issued Notice 2026-40. This Notice serves as transitional administrative guidance ahead of forthcoming proposed regulations, outlining how both investors and Qualified Opportunity Funds (QOFs) must adjust their compliance and tax planning strategies.

Because this guidance is administrative rather than judicial, there is no presiding judge or court case associated with its release. However, to maintain the rigorous, technical standards of our profession, this article details the facts, statutory mechanics, and administrative determinations set forth in Notice 2026-40, making extensive use of direct quotations from the text of the Notice to illustrate the IRS's formal positions.

United States v. Royce, No. 3:17-CR-158, Memorandum Opinion (M.D. Pa. June 16, 2026)

For tax practitioners, representing clients in federal tax controversies involves navigating not only administrative audits but also, in extreme cases, the federal criminal justice system. When an individual is convicted of tax-related offenses and subsequently sentenced to a term of imprisonment followed by supervised release, the transition back to civilian life is heavily regulated. Understanding the legal mechanism of supervised release and the criteria for early termination is crucial for CPAs and Enrolled Agents (EAs) who advise clients during post-conviction rehabilitation.

In the case of United States v. Donald Royce, 3:17-CR-158 (M.D. Pa. June 16, 2026), the United States District Court for the Middle District of Pennsylvania addressed a motion for early termination of supervised release filed by Donald Royce, a former CPA. The court's memorandum opinion, written by District Judge Robert D. Mariani, provides a meticulous analysis of the statutory factors governing early discharge under 18 U.S.C. § 3583(e). Despite Royce's compliance with his release conditions, the court denied his request, highlighting that mere compliance represents the minimum expected conduct rather than an extraordinary circumstance justifying early termination. This case serves as a poignant reminder of how pre-sentencing behavior, such as malingering and a lack of genuine contrition, can negatively impact a practitioner's standing before a federal court.

Branch v. Commissioner, T.C. Memo. 2026-51, Docket No. 7214-20 (Filed June 17, 2026)

In Branch v. Commissioner, T.C. Memo. 2026-51, the United States Tax Court addressed several critical issues concerning unreported Medicaid gross receipts, the substantiation of Schedule A itemized deductions, the application of the Cohan rule to Schedule C business expenses, and the applicability of late-filed additions to tax. The taxpayer, Colette Branch, operated a sole proprietorship providing personal care and day-care services to Medicaid recipients under the Louisiana New Opportunities Waiver (NOW) program. Despite generating multi-million dollar revenues, the taxpayer failed to file federal income tax returns for the tax years 2015 through 2017.

The Internal Revenue Service (IRS) prepared substitutes for returns (SFRs) under Internal Revenue Code (I.R.C.) § 6020(b) and determined multi-million dollar deficiencies. While the taxpayer conceded the gross receipts, she argued that the IRS failed to account for offsetting business expenses and itemized deductions. The Tax Court’s decision serves as an authoritative reminder of the stringent requirements of I.R.C. § 274(d), the boundaries of judicial notice under Federal Rule of Evidence 201(b), the binding nature of pre-trial concessions, and the established principle that reliance on a tax professional to delay filing during an ongoing audit does not constitute "reasonable cause" under I.R.C. § 6651(a).

Adrian D. Smith and Nancy W. Smith, et al. v. Commissioner, T.C. Memo. 2026-50 (June 16, 2026)

During the 2008, 2009, and 2010 tax years, Adrian Smith, Carlisle Gill, and Robert Forest were the sole partners of Adrian Smith + Gordon Gill Architecture, LLP (AS+GG), an Illinois limited liability partnership. AS+GG is a highly regarded architecture firm that specializes in designing large-scale, highly innovative, and sustainable "supertall" buildings, including the world's tallest structures. The firm's design process is notoriously complex, utilizing a holistic approach that integrates architecture, structure, and mechanical engineering from the project's inception, requiring significant research into thermodynamics, geotechnics, fluid dynamics, and microclimates.

AS+GG claimed substantial research credits under I.R.C. § 41 for activities related to multiple international architectural projects. These credits flowed through to the partners, who claimed them on their joint personal income tax returns. Additionally, for the 2008 tax year, AS+GG claimed wage-related qualified research expenditures (QREs) for the partners and deducted significant guaranteed payments and gross salaries.

Taxpayers' Request for Relief 

The Internal Revenue Service (IRS) audited the partners' returns and disallowed the section 41 research credits for the tax years at issue, subsequently issuing Statutory Notices of Deficiency. The taxpayers petitioned the United States Tax Court for relief. Prior to trial, the parties agreed to limit the scope of the disputed credits to a sample of six massive international projects (including the Atrium City Tower and Kingdom Tower).

Following several pretrial concessions by the IRS—including an agreement that AS+GG's activities generally satisfied the four-part test for qualified research under section 41(d)—only two primary issues remained for the Court to decide: (1) whether the architectural research performed under the six sample contracts constituted excluded "funded research" within the meaning of section 41(d)(4)(H), and (2) whether the 2008 compensation paid to the partners was reasonable under section 174(e).

PLR 202624001, June 12, 2026

The proper administration of retirement accounts upon the death of an owner is a critical area of tax law, particularly when multiple beneficiaries are involved. The Internal Revenue Service’s ruling under PLR 202624001 provides detailed guidance on segregating interests and managing distributions from a decedent’s IRA using modern beneficiary designations and estate administration methods. This discussion details the factual background, the relevant provisions of the Internal Revenue Code (Code), and the resulting interpretive rulings regarding Required Minimum Distributions (RMDs) under Section 401(a)(9).

HB 4168, June 13, 2026 (Signed by Governor Hobbs)

On June 13, 2026, Governor Hobbs signed HB 4168 into law, enacting a comprehensive update to Arizona’s individual and corporate income tax code (Title 43). The legislation synchronizes Arizona’s federal conformity framework with Public Law 119-21, universally recognized as the One Big Beautiful Bill Act (OBBBA), while restructuring key deductions, credits, and economic development incentives.

HB 4168 carries retroactive effective dates for taxable years beginning after December 31, 2024 and December 31, 2025. Practitioners must now focus on 2025 return preparation, updated tax software configurations, carryforward tracking, and 2026+ compliance. Notably, the Arizona Department of Revenue (ADOR) issued pre-enactment filing instructions that treated four OBBBA-aligned subtractions as optional elections. However, the enacted statute mandates these subtractions. ADOR is expected to issue guidance clarifying how it will treat returns filed under the pre-enactment instructions and what corrective actions taxpayers should take. This article provides a statutory-by-statutory analysis, effective dates, and compliance guidance for tax professionals preparing for the 2025 filing season and beyond.

First Source Employee Management, Inc. v. United States of America, Case No. 1:24-cv-02209-CEF, 2026 WL 3589421 (N.D. Ohio June 11, 2026).

The litigation originated from the Plaintiff’s operations as a professional employer organization under Chapter 4125 of the Ohio Revised Code and as a non-certified PEO and third-party payor under federal tax law. The Plaintiff files aggregate Form 941 and Schedule R submissions with the Internal Revenue Service to report quarterly payroll tax liabilities for its client base, which primarily comprises entities providing skilled nursing, assisted living, hospice, and related patient care services. The substantive dispute centers on the Employee Retention Credit program established by the Internal Revenue Service pursuant to the Coronavirus Aid, Relief, and Economic Security Act. The CARES Act created a refundable credit mechanism designed to deliver financial assistance to businesses throughout four calendar quarters of 2020 and the first three calendar quarters of 2021. To operationalize the statute, the IRS issued IRS Notice 2021-20, which consolidated prior frequently asked questions and addressed supplementary interpretive issues regarding credit eligibility and calculation.

The Plaintiff initiated this federal action on December 19, 2024, asserting four distinct claims against the United States and the Internal Revenue Service. The IRS processed and remitted ERC refunds for all quarters claimed in 2020. However, the Service declined to issue payments for the Plaintiff’s ERC claims corresponding to the first and second quarters of 2021, which collectively represent approximately $20.2 million in disputed refunds. Following the filing of the complaint, the Defendants filed a motion to dismiss counts two, three, and four under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) on May 5, 2025. The Defendants subsequently answered count one on May 27, 2025. The Plaintiff opposed the motion on June 4, 2025, and the Defendants filed a reply on June 18, 2025. The Court issued its Memorandum Opinion and Order on June 11, 2026.

IRS Private Letter Ruling 202624006, June 12, 2026.

The matter involves a series of corporate reorganizations and tax elections concerning several entities, primarily a limited liability company (Y) and its parent corporation (X). Initially, Y was organized as an LLC under the laws of State on Date 1. The entity's operating agreement, adopted on Date 2, included provisions for the maintenance of capital accounts in accordance with § 704(b), special allocations, and the issuance of profits interests. Furthermore, on Date 3, Y adopted an equity incentive plan and made various awards of profits interests under that plan.

Y elected to be treated as an S corporation effective Date 4. However, due to the presence of the aforementioned profits interests and other governing provisions, Y possessed more than one class of stock under § 1361(b)(1)(D), rendering the S corporation election ineffective. In an effort to rectify this prior to a planned sale to an unrelated third party, Y amended its operating agreement on Date 5 to remove the partnership and profits interests provisions and to ensure all shares conferred identical distribution and liquidation rights, while also cancelling the outstanding profits interest awards.

In conjunction with a planned sale, a new corporation (X) was formed and organized as a State corporation on Date 6, and X elected to be treated as an S corporation effective Date 6. On Date 7, in a transaction intended to qualify as a reorganization under § 368(a)(1)(F), A transferred all its interests in Y to X. Following this, X filed an election to treat Y as a qualified subchapter S subsidiary (QSub) effective Date 7. However, the QSub election was also technically ineffective because Y did not meet all the requirements of § 1361(b)(3)(B) at the time of the election due to the ineffectiveness of its original S election.