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).

“IRS announces new option for certain taxpayers to request more time after ERC claim disallowance,” IR-2026-58, April 27, 2026

As tax professionals are well aware, when the Internal Revenue Service disallows an Employee Retention Credit (ERC) claim, the taxpayer receives either a Letter 105-C for a full disallowance or a Letter 106-C for a partial disallowance. Upon receipt of these legal notices, affected taxpayers "generally have two years from the date of that letter to resolve their claim administratively or to file a refund suit in Federal court if they disagree with the IRS's decision". However, practitioners must caution their clients that electing to protest the disallowance with the IRS Independent Office of Appeals "does not extend this statutory two-year deadline". By statute, the Service notes that it "can't issue a refund or allow a credit after the two-year period unless you file suit during that period". Consequently, the IRS emphasizes that "If you do not file suit within the 2-year period, or do not enter into a written extension agreement before it expires the IRS cannot issue a refund or credit, even if Appeals later issues a favorable decision". Without a formal extension, the taxpayer's only recourse to preserve their claim is to "File suit with the U.S. District Court that has jurisdiction or with the U.S. Court of Federal Claims".

Chief Counsel Advice 202617012 (Apr. 24, 2026).

For tax practitioners advising foreign-owned domestic corporations, the reporting and record-maintenance requirements of I.R.C. § 6038A represent a critical compliance area with severe financial consequences for failures. Under I.R.C. § 6038A(a) and (b), any domestic corporation that is at least 25-percent foreign-owned must file an information return (Form 5472) to report transactions with related parties and must maintain records appropriate to determine the correct tax treatment of those transactions. If a reporting corporation fails to furnish this information or maintain these records, I.R.C. § 6038A(d)(1) mandates that "such corporation shall pay a penalty of $25,000 for each taxable year with respect to which such failure occurs".

Taxpayers may be excused from these penalties under the reasonable cause exception found in I.R.C. § 6038A(d)(3) and Treas. Reg. § 1.6038A-4(b). Generally, an affirmative showing must be made under penalties of perjury that the taxpayer acted in good faith and had reasonable cause for the failure. Recognizing that these requirements may disproportionately impact smaller entities, the Treasury Regulations contain a specific small-corporation provision (SCP). Treas. Reg. § 1.6038A-4(b)(2)(ii) instructs that the IRS "shall apply the reasonable cause exception liberally in the case of a small corporation".

Chief Counsel Advice (CCA) 202617012 was issued by the Office of Associate Chief Counsel (International) in response to a request from the Independent Office of Appeals. Because it is a CCA rather than a judicial court opinion, it does not adjudicate a specific taxpayer's dispute; rather, the memorandum is meant to address the administrative situations in which IRS personnel must evaluate a small corporation's claim for penalty relief under the SCP.

Department of Justice, Drug Enforcement Administration, 21 C.F.R. Parts 1300, 1301, 1308, 1312, Docket No. DEA-XXXX, Attorney General Order XXXX-XXXX, Schedules of Controlled Substances: Rescheduling of Food and Drug Administration Approved Products Containing Marijuana and Products Containing Marijuana Subject to a Qualifying State-issued License From Schedule I to Schedule III; Corresponding Change to Permit Requirements (effective Apr. 22, 2026).

For tax professionals advising clients in the cannabis industry or individual taxpayers with substantial medical expenses, the April 22, 2026, final order by the Drug Enforcement Administration (DEA) represents a seismic shift in the application of federal tax law. By transferring specific marijuana products from Schedule I to Schedule III of the Controlled Substances Act (CSA), the order bifurcates the tax treatment of state-legal marijuana businesses and opens new avenues for individual medical deductions.

This article examines the technical application of I.R.C. § 280E and I.R.C. § 213 following this final order.

Estate of Kurt A. Amplatz v. Commissioner, T.C. Memo. 2026-35.

In 2014, Kurt A. Amplatz formed KA Medical, LLC (KA Medical), a medical device company. Through the Medical Trust, Mr. Amplatz contributed $500,000 for 500,000 membership units. Furthermore, a separate entity, the Funding Trust, transferred approximately $19 million to KA Medical for research and development in exchange for promissory notes. Between 2015 and 2018, KA Medical generated no revenue, and no principal or interest payments were made on the promissory notes.

Mr. Amplatz passed away on November 6, 2019. Less than a year later, in July 2020, the company received a nonbinding letter of intent from a buyer to purchase KA Medical for $15 million. However, relying on an independent appraisal from Value Consulting Group dated July 20, 2020, the Estate filed Form 706, selecting an alternate valuation date of May 6, 2020, and reported the value of its membership units in KA Medical at zero and the promissory notes at $1 million. In November 2020, the Estate formally sold all membership units in KA Medical to the buyer for $15 million.

The Internal Revenue Service (IRS) subsequently examined the Estate's Form 706 and adjusted the value of KA Medical to $15,145,000, while alternately valuing the promissory notes at either zero (treated as equity) or $17,686,508. The IRS issued a Notice of Deficiency determining an estate tax deficiency of $5,686,714 and assessed accuracy-related penalties under I.R.C. § 6662 totaling $2,423,200.

Hyatt Hotels Corporation & Subsidiaries v. Commissioner of Internal Revenue, No. 24-3239 (7th Cir. Apr. 22, 2026)

Hyatt Hotels Corporation operates a global hospitality brand that encompasses owned, managed, and franchised properties. During the 2009 through 2011 tax years under scrutiny, Hyatt operated a customer loyalty program known as the Gold Passport Program, which was mandatory for all Hyatt-branded hotels, including the 75-80% of properties owned by third-party franchisees. Members earned reward points that could be redeemed for hotel stays, perks, or airline miles.

To fund the costs of this program, Hyatt maintained the Gold Passport Fund (the Fund). Third-party hotel owners were required to remit 4% of qualifying purchases into the Fund when points were issued, or the actual cost of airline miles if the guest elected that reward. The Fund additionally accumulated revenue from investments in securities and from the direct sale of reward points to customers. Hyatt utilized the Fund to compensate hotel owners when points were redeemed and to cover administrative and advertising expenses. Historically, since the program's inception in 1987, Hyatt essentially disregarded the Fund for tax purposes. However, in March 2017, the IRS issued a notice of deficiency, contending that the payments remitted to the Fund by third-party owners, as well as revenue from direct point sales and investment holdings, should have been reported as gross income to Hyatt. The IRS took the position that Hyatt could only deduct the costs of redeemed points in the year of actual redemption.

Cathryn A. Simmons v. Commissioner, T.C. Memo. 2026-34 (April 22, 2026)

In a recent memorandum decision, the United States Tax Court addressed recurring substantiation issues surrounding closely held entities, commingled funds, and rental real estate deductions. The taxpayer, Cathryn A. Simmons, petitioned the Tax Court to challenge deficiency determinations issued by the Internal Revenue Service (IRS) for the 2017 and 2019 tax years, alongside a 20% accuracy-related penalty assessed under Internal Revenue Code (I.R.C.) section 6662(a) for the 2017 tax year. Following several IRS concessions prior to and following trial, the remaining issues centered on whether Ms. Simmons adequately substantiated business deductions for a partnership she co-owned, deductible expenses associated with two rental properties, and whether she qualified for the reasonable cause exception to negate the accuracy-related penalty.

Liberty Global, Inc. v. United States, No. 23-1410 (10th Cir. Apr. 21, 2026)

For tax practitioners navigating the complex landscape of international tax provisions under the Tax Cuts and Jobs Act (TCJA), the recent Tenth Circuit decision in Liberty Global, Inc. v. United States, No. 23-1410 (10th Cir. Apr. 21, 2026), serves as a crucial warning. The case centers on a highly sophisticated tax planning strategy, codenamed "Project Soy," and addresses a fundamental question of tax law: whether technical, mechanical compliance with the Internal Revenue Code can shield an economically meaningless transaction from the codified economic substance doctrine under 26 U.S.C. § 7701(o). The court ultimately affirmed the district court’s ruling, disregarding the taxpayer's manufactured earnings and profits and denying a massive deduction under § 245A.

Marie M. Kanda v. Commissioner, T.C. Summary Opinion 2026-3 (Docket No. 3772-24S. Filed April 20, 2026)

Between 2015 and 2023, Marie M. Kanda suffered from several serious health conditions, including breast cancer and severe osteoarthritis, which led to her doctor determining she was disabled and unable to work. During these years, she collected Social Security disability payments and notably never contracted COVID-19. Despite her medical status, Kanda claimed that she worked part-time on weekends cleaning and vacuuming vehicles for two to three hours a day. She failed to maintain contemporaneous business records for this activity, relying instead on her husband to keep track of limited customer invoices and handwritten monthly expense reports that were never recorded in a formal ledger. Furthermore, while Kanda and her husband signed a written partnership agreement in November 2020 to operate "Kanda Auto Service," they never filed a partnership tax return for 2021.

Kanda's tax reporting history was highly inconsistent. On her 2020 joint return, Kanda and her husband reported zero self-employment income, showing only $21,100 in unemployment income. For the 2021 tax year—the year at issue—Kanda filed married filing separately, reported her occupation as "childcare," but attached a Schedule C for an "auto mechanic" business showing $19,865 in gross receipts and $10,190 in net business income. Alongside this, she claimed $28,000 in refundable COVID-19-related sick and family leave credits ($12,900 under the Families First Coronavirus Response Act (FFCRA) and $15,100 under the American Rescue Plan Act of 2021 (ARPA)). Kanda did not include Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, with her original return. When audited, she submitted the form claiming $80,650 in net earnings from self-employment, electing to use her prior year (2020) net earnings, an amount drastically contradicting her filed 2020 return. She also provided an unsigned alternative 2020 return listing $6,700 in self-employment income, demonstrating three entirely different positions taken regarding her 2020 self-employment income.

Jonathan D. Sawyer v. Commissioner of Internal Revenue, T.C. Memo. 2026-33 (April 16, 2026)

Jonathan Sawyer was the owner and chief executive officer of Henry N. Sawyer (HNS), a family printing business that operated from 1835 until its liquidation in 2010. In 1982, Mr. Sawyer purchased a $200,000 life insurance policy on himself through Northwestern Mutual Life Insurance Co. (Northwestern) to provide for his wife in the event of his death. Due to occasional liquidity issues, Mr. Sawyer elected an automatic premium loan option, allowing Northwestern to secure premium payments by borrowing against the policy's cash surrender value to prevent the policy from lapsing.

Over the years, HNS experienced significant financial volatility, forcing Mr. Sawyer to repeatedly inject personal funds into the business to keep it afloat. In May 2009, Mr. Sawyer borrowed $80,000 from Northwestern, secured by the cash surrender value of the life insurance policy, and deposited the funds directly into HNS's business bank account. Despite these efforts, HNS liquidated in 2010. In 2015, the combined balances of the $80,000 policy loan and the accumulated premium loans eclipsed the policy's cash surrender value. Consequently, Northwestern automatically terminated the policy.

At the time of cancellation, the cash surrender value was $205,433.81, which Northwestern used in its entirety to satisfy the outstanding principal and interest of the loans. Mr. Sawyer's investment in the contract was $44,533.42, resulting in a taxable distribution of $160,900.39 reported on a Form 1099-R. Believing the Form 1099-R to be inaccurate, Mr. Sawyer did not file a 2015 federal income tax return, prompting the Internal Revenue Service (IRS) to prepare a substitute for return (SFR) pursuant to I.R.C. § 6020(b) and issue a Notice of Deficiency.

Drake Plastics Ltd. Co. v. Internal Revenue Service, Civil Action No. H-25-2570, S.D. Tex., April 16, 2026)

Micro-captive insurance transactions allow corporate entities to claim payments made to their affiliated captive insurers as business expenses under 26 U.S.C. § 162(a). Concurrently, if the captive insurer meets diversification requirements and keeps its written premiums below a statutory cap, it can elect under 26 U.S.C. § 831(b) to be taxed only on its investment income, meaning the premium income is entirely excluded from taxation. To combat perceived tax abuse where affiliated companies claim this benefit but merely move money "from one pocket to another" without genuinely distributing risk, the Department of the Treasury promulgated a final rule (the Final Rule) adding 26 C.F.R. § 1.6011-10 and 26 C.F.R. § 1.6011-11.

Under the Final Rule, the IRS designated two distinct categories of micro-captive arrangements subject to strict disclosure:

• Transactions of Interest (26 C.F.R. § 1.6011-11): Transactions requiring disclosure if a captive has a "loss ratio of 'less than 60 percent'" or satisfies a financing factor where untaxed premiums are returned to the insured.

• Listed Transactions (26 C.F.R. § 1.6011-10): A more severe classification applying to captive insurers operational for at least ten years with an adjusted loss ratio of "less than 30 percent," triggering heightened penalties for non-disclosure.

The plaintiffs in this case are Drake Plastics Ltd. Co., an ultra-high-performance polymer company; Drake Insurance Co., its affiliated micro-captive providing coverage to Drake Plastics and related entities; and Strategic Risk Alternatives, LLC, a firm that creates and manages micro-captives for closely held businesses.

TD 10045, REG-108706-25, April 17, 2026

The Internal Revenue Service (IRS) and the Department of the Treasury recently issued interim final regulations (TD 10045) and a concurrent notice of proposed rulemaking (REG-108706-25) amending 26 CFR Part 300. These regulatory updates relate specifically to the imposition and reduction of user fees associated with the Special Enrollment Examination for Enrolled Agents (EA SEE). For tax professionals monitoring procedural costs and credentialing requirements under Treasury Department Circular No. 230 (31 CFR, Subtitle A, part 10), these amendments reflect favorable downward adjustments to the cost of admission to practice before the IRS.