Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for May 7, 2026 – May 18, 2026.
May 13, 2026: The IRS announced a time-limited settlement initiative for eligible conservation easement and historic preservation easement cases, offering taxpayers an opportunity to resolve disputes on terms the agency described as more favorable than recent US Tax Court outcomes. Under the initiative, taxpayers generally must concede the charitable contribution deduction but may receive an “other deduction” approximating out-of-pocket costs, with reduced gross valuation misstatement penalties of 10% (or 20% after 90 days) instead of the 40% penalties frequently sustained in litigation.
The IRS stated that recent Tax Court decisions have, on average, allowed only about 6% of claimed deductions while often sustaining 40% penalties and emphasized that the initiative is intended to resolve a substantial backlog of easement cases. The settlement program applies only to eligible cases and includes special procedures for both Tax Equity and Fiscal Responsibility Act of 1982 and Bipartisan Budget Act of 2015 partnership proceedings.
May 15, 2026: The IRS issued Notice 2026-31, providing updated corporate bond yield curves, segment rates, and Treasury rates used for pension funding and minimum present value calculations under §§ 417, 430, and 431. The notice sets the April 2026 spot segment rates at 4.27%, 5.34%, and 6.22% and provides adjusted 24-month average segment rates applicable for May 2026 plan years.
The notice also provides the 30-year Treasury rate for April 2026 (4.91%) and the weighted average Treasury rate used for multiemployer plan funding calculations, along with the full monthly corporate bond yield curve derived from April 2026 data.
The IRS also released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums, and Chief Counsel Advice).
Recent Tax Court decisions
May 7, 2026: In Sanders Creek Owner, LLC v. Commissioner, pursuant to a stipulated Tax Court decision, the IRS disallowed a $43.8 million charitable contribution deduction claimed in connection with a conservation easement transaction that resulted in an imputed underpayment of approximately $16.2 million. The Court also sustained a 10% gross valuation misstatement penalty under § 6662(h) while declining to impose other asserted accuracy-related penalties.
May 12, 2025: In Stokey v. Commissioner, T.C. Memo. 2025-44, the Tax Court dismissed a taxpayer’s deficiency petition as untimely, holding that the taxpayer failed to establish entitlement to equitable tolling under the US Court of Appeals for the Third Circuit’s decision in Culp v. Commissioner. Although the taxpayer asserted that he did not receive the notice of deficiency until after the filing deadline because he had moved, the Court found that the IRS properly mailed the notice to the taxpayer’s last known address and that the taxpayer failed to demonstrate either diligent pursuit of his rights or extraordinary circumstances preventing timely filing.
The Court emphasized that equitable tolling applies sparingly and requires taxpayers to show both diligence and circumstances beyond their control. Even assuming delayed receipt of the notice, the taxpayer waited approximately 95 days after allegedly receiving the notice before filing his petition and failed to provide supporting evidence or a declaration explaining the delay.
Case to watch: McKesson Corp. v. United States
May 8, 2026: In McKesson Corp. v. United States, the plaintiff filed a motion for summary judgment in federal district court that the IRS’s transfer pricing regulations requiring inclusion of stock-based compensation costs in cost-sharing agreements are invalid under the Supreme Court of the United States’ 2024 Loper Bright decision. McKesson contends that the regulations conflict with the arm’s-length standard under § 482 because unrelated parties would not share such costs and asserts that courts are no longer required to defer to the US Department of the Treasury’s interpretation of the statute following the end of Chevron deference.
The challenge revisits the holding in Altera Corp. v. Commissioner, where the Court of Appeals for the Ninth Circuit upheld IRS regulations as valid under Chevron and under the Administrative Procedure Act. McKesson argues that the Supreme Court’s Loper Bright decision fundamentally changes the standard of review and permits courts to independently evaluate whether the Treasury’s regulations improperly impose a non-arm’s-length result “by regulatory fiat.”
A threshold issue raised by the government is whether McKesson’s lawsuit is timely under the general six-year statute for claims against the United States. 28 U.S.C. § 2401. McKesson’s motion for summary judgment also addresses this issue.
