TAX CONTROVERSY 360

IRS roundup: December 15 – December 22, 2025

by Matthew J. Blaney | Jan 6, 2026 | IRS Guidance, Tax Reform, Tax Refunds

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for December 15, 2025 – December 22, 2025.

December 15, 2025: The IRS issued Notice 2026-2, providing an update on weighted average interest rates, yield curves, and segment rates. The notice specifically focused on the corporate bond monthly yield curve, corresponding spot segment rates used for purposes of Internal Revenue Code (Code) Section 417(e)(3), and 24-month average segment rates for purposes of Code Section 430(h)(2). Notice 2026-2 also provides the interest rate for 30-year Treasury securities for purposes of Code Section 417(e)(3)(A)(ii)(II), as in effect for plan years beginning before 2008, as well as the 30-year Treasury weighted average rate for purposes of Code Section 431(c)(6)(E)(ii)(I).

December 15, 2025: The IRS issued Revenue Ruling 2026-2, providing various prescribed rates for federal income tax purposes for January 2026. The prescribed rates include:

Short-, mid-, and long-term applicable federal rates for certain debt instruments in the Code.
Section 42(b)(1) housing credit appropriate percentages.
The deemed rate of return for calendar year 2026 transfers made to pooled income funds, as described in Section 642(c)(5).
The average of the applicable federal mid-term rates for the 60-month period ending December 31, 2025.

December 19, 2025: The IRS issued Notice 2026-1, providing interim guidance related to the credit for carbon oxide sequestration under Code Section 45Q pending the forthcoming proposed regulations removing reporting obligations related to the geological sequestration of carbon dioxide imposed under subpart RR of 40 CFR part 98. The notice specifically provides a safe harbor for determining eligibility for qualified carbon oxide, captured and disposed of in secure geological storage and not used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project, during calendar year 2025. Notice 2026-1’s safe harbor applies if the US Environmental Protection Agency does not launch the electronic Greenhouse Gas Reporting Tool for filers to prepare and submit information required under subpart RR by June 10, 2026. Taxpayers can rely on the safe harbor to demonstrate compliance with subpart RR requirements when determining the Code Section 45Q credit related to the 2025 Calendar Year Secure Geological Storage.

December 19, 2025: The IRS issued Notice 2026-6, extending the transition period in Revenue Ruling 2025-4 for states administering paid family and medical leave (PFML) programs and employers participating in PFML programs. The extension is for an additional year and only as it relates to the medical leave benefits a state pays to an individual that can be attributed to employer contributions.

December 22, 2025: The IRS issued Notice 2026-3, providing relief from Code Section 6654 and 6655 additions of tax for underpayments of estimated income tax by taxpayers making valid Code Section 1062(a) elections.

December 22, 2025: In Announcement 2026-1, the IRS declared its intent to issue guidance related to Code Section 6435. That guidance, intended for taxpayers that paid Code [...]

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IRS roundup: November 25 – December 10, 2025

by Evan Walters, Samuel F. Hamer, Edward L. Froelich, Michael J. Scarduzio and Matthew J. Blaney | Dec 16, 2025 | Court Procedure Matters, IRS Guidance, Significant Court Decision, Tax Reform

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for November 25, 2025 – December 10, 2025.

November 25, 2025: The IRS released Notice 2025-70, requesting comments on the implementation of a new individual tax credit under the newly enacted Section 25F under the One Big Beautiful Bill Act (OBBBA). Beginning in 2027, taxpayers may claim up to $1,700 under Section 25F for contributions to Scholarship Granting Organizations that provide scholarships for elementary and secondary school students from low- and middle-income families. Comments are due by December 26, 2025.

November 25, 2025: The IRS released Notice 2025-72, providing guidance on the OBBBA’s repeal of the one-month deferral election under Section 898(c)(2) for specified foreign corporations (SFCs), effective for taxable years beginning after November 30, 2025. For SFCs that previously elected a one-month deferral, the first required tax year will be a short period ending on the same date as their majority US shareholder’s tax year. The notice addresses administrability concerns and provides a method for allocating foreign income taxes between this short year and the next year for subpart F, global intangible low-taxed income (GILTI), and foreign tax credit purposes. The notice also previews proposed Section 987 regulations that would modify the 10-year transition election for recognizing pre-transition gain or loss, allowing ratable recognition over 120 months. Comments are requested by January 24, 2026, particularly on the allocation rule and other multiyear provisions affected by short tax years.

December 2, 2025: The IRS released Notice 2025-68, which addresses the new Trump Accounts. Created by the OBBBA, Trump Accounts are a type of traditional individual retirement account for individuals under 18 years of age who have a social security number issued before the date of the election. The notice provides initial guidance on the potential benefits of these accounts and outlines details of the pilot program under Section 6364. Comments on the guidance are due by February 20, 2026, though the IRS notes that proposed regulations governing the election to open a Trump Account and the pilot program contribution election under Section 6434 may be issued before the comment period closes.

December 3, 2025: The IRS released Announcement 2025-22 and Announcement 2025-23, identifying taxpayers and the amounts of Section 48C credits allocated for projects that received certifications under the Section 48C(e) advanced energy project program. Section 48C(e)(1) directs the secretary of the treasury to establish a program to award certifications for qualified investments eligible for Section 48C credits. The US Department of the Treasury and the IRS provided two allocation rounds. Announcement 2025-22 lists Round One taxpayers and allocations, and Announcement 2025-23 lists Round Two taxpayers and allocations.

December 4, 2025: The IRS released Notice 2025-75, which provided a transition rule and proposed regulations that modify the application of Section 951(a)(2)(B) following the OBBBA changes for certain controlled foreign corporation (CFC) taxable years beginning [...]

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Potential refund opportunity of buyback excise tax based on § 4501 final regulations

by Shawn O’Brien, Brian H. Jenn, Edward L. Froelich, Nick Ryan and Matthew J. Blaney | Dec 15, 2025 | IRS Guidance, Tax Refunds

Taxpayers who paid the stock repurchase excise tax based on prior guidance provided in Notice 2023-2 and the proposed regulations under Internal Revenue Code (IRC) § 4501 may be entitled to a refund based on changes made in the recently issued IRC § 4501 final regulations.

On November 21, 2025, the US Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) issued final regulations under IRC § 4501, which took effect on November 24 and significantly narrowed the applicability of the stock repurchase excise tax compared to prior guidance provided in Notice 2023‑2 and the April 9, 2024, proposed regulations (collectively, the prior guidance). As a result, many transactions that were previously treated by the prior guidance as “repurchases” subject to the 1% stock repurchase excise tax are now no longer taxable. Taxpayers who paid the excise tax based on the prior guidance may be eligible for a refund.

The final regulations eliminated the prior guidance’s broad “funding rule,” which treated a US affiliate that was considered to have “funded” a foreign publicly traded parent (or its foreign affiliates), including via distributions or capital contributions, as having engaged in a covered stock repurchase. The final regulations also significantly narrowed the proposed regulations’ expansive treatment of transactions as “economically similar” to a stock repurchase by specifically excluding leveraged buyouts and other take-private transactions, complete liquidations, and tax-free acquisitive reorganizations under IRC § 368 from being subject to the excise tax. Moreover, the final regulations narrowed what qualifies as “stock” for IRC § 4501 purposes, specifically excluding certain preferred stock described in IRC § 1504(a)(4) (e.g., “plain vanilla” non-voting, non-participating preferred stock) and certain mandatorily redeemable or puttable stock issued before August 16, 2022 (i.e., the date of enactment of IRC § 4501).

The changes in the final regulations have potentially sweeping implications for taxpayers who paid the IRC § 4501 stock repurchase excise tax based on the prior guidance. The narrower scope of the applicability of stock repurchase excise tax under the final regulations creates a substantial opportunity to seek a refund of stock repurchase excise tax previously paid under the now-obsolete prior guidance.

To seek a refund, taxpayers should file Form 720-X, Amended Quarterly Federal Excise Tax Return, for each quarter they filed an original Form 720 reporting and paid the stock repurchase excise tax and attach a Form 7208 (with “Amended” at the top of each form) to each quarterly Form 720-X. Both Form 720-X and amended Form 7208 should be completed, and the excise tax recomputed, based on the final regulations. Because Form 720-X will serve as the taxpayer’s refund claim, it is critical that Form 720-X contains a detailed explanation of the legal basis for the adjustments to the original Forms 720 and 7208 to meet regulatory requirements imposed by the Treasury on refund claims. See Treas. Reg. § 301.6402-2 (setting forth the basic requirements for refund claims).

Taxpayers considering this refund opportunity should be aware that the statute of limitations deadline for filing a refund [...]

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Major update: Potential refund opportunity for interest and penalty amounts accrued during COVID-19 federally declared disaster

by Shawn O’Brien and Samuel F. Hamer | Dec 8, 2025 | Court Procedure Matters, IRS Appeals, IRS Audits, Penalties, Settlements, Significant Court Decision, Tax Refunds

The US Court of Federal Claims’ (CFC) recent decision in Kwong v. United States, No. 23-267 (Fed. Cl. Nov. 25, 2025), provides significant support for the potential refund opportunity we identified in a previous blog post titled, “Refund opportunity for interest and penalty amounts accrued during COVID-19 federally declared disaster.” The refund opportunity applies to taxpayers who made payments to the Internal Revenue Service (IRS) that included underpayment interest and/or failure-to-file/failure-to-pay penalties that accrued during all or part of the period from January 20, 2020, through July 10, 2023.

Although the CFC’s holding in Kwong addressed whether Internal Revenue Code (IRC) § 7508A provided the taxpayer an extension of the two-year statute of limitations deadline for filing a refund suit (in IRC § 6532(a)) that fell after the COVID-19 disaster was declared, Kwong answered important questions for those taxpayers pursuing refunds for underpayment interest and/or failure-to-file/failure-to-pay penalties that accrued during COVID-19. The CFC held that the 2019 version of IRC § 7508A applies to the COVID-19 federally declared disaster. This is a significant holding because Congress amended IRC § 7508A in 2021 to significantly limit the IRC § 7508A(d) mandatory extension period. The CFC also held that the IRC § 7508A(d) mandatory extension period, as applied to the COVID-19 disaster, commenced on January 20, 2020, and ended on July 10, 2023.

Kwong has potentially sweeping implications for taxpayers who faced federal tax filing and/or payment deadlines that fell between January 20, 2020, and July 10, 2023. Under the CFC’s Kwong analysis, the deadline for payment of any federal tax falling between these two dates was extended to July 11, 2023. Since the IRS computes underpayment interest and/or failure-to-file/pay penalties from the payment due date, penalties should not accrue from January 20, 2020, through July 10, 2023, and any taxpayers who already paid these amounts may be entitled to a refund. The CFC’s analysis also does not rule out the possibility that taxpayers with payment due dates preceding January 20, 2020, may be entitled to relief to the extent the underpayment interest and/or failure-to-file/failure-to-pay penalties accrued during the COVID-19 disaster period.

As noted in our previous post, taxpayers considering this refund opportunity should be aware that the statute of limitations to file a refund claim expires three years from the filing deadline of the original tax return or two years from the date on which payment was made, whichever is later (unless the statute of limitations period was otherwise extended). This refund opportunity may apply to underpayment interest and/or penalties paid with respect to federal income, estate, gift, employment, or excise taxes.

IRS roundup: November 7 – November 24, 2025

by Evan Walters, Samuel F. Hamer, Edward L. Froelich, Michael J. Scarduzio and Matthew J. Blaney | Dec 2, 2025 | Court Procedure Matters, IRS Guidance, Significant Court Decision, Tax Reform

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for November 7, 2025 – November 24, 2025.

November 10, 2025: The IRS released Internal Revenue Bulletin No. 2025-46, which includes proposed regulations 109742-25. The proposed regulations would remove a rule in previous final regulations that uses the shareholders of certain domestic corporations to determine whether foreign persons hold – directly or indirectly – stock in a domestically controlled qualified investment entity (QIE). If a QIE was not domestically controlled following the changes from the proposed regulations, stock owned by foreign persons in a QIE would qualify as a US real property interest.

November 10, 2025: The IRS released Revenue Procedure 2025-31, providing guidance on a safe harbor that allows trusts qualifying as investment trusts under Section 301.7701-4(c) and as grantor trusts to stake digital assets without losing their tax status and offering a limited period for existing trusts to amend their governing instruments to meet the safe harbor requirements.

November 13, 2025: The IRS released Notice 2025-67, which announces the annual cost-of-living adjustments to the limits on benefits and contributions for qualified retirement plans under Section 415 of the Internal Revenue Code (Code). These adjustments, required by Section 415(d), follow procedures similar to those used for Social Security benefit updates and apply to certain amounts under deferred compensation plans.

November 13, 2025: The IRS released Revenue Ruling 2025-22, announcing that interest rates will remain unchanged for the calendar quarter beginning January 1, 2026. The rates are as follows:

7% for individual overpayments and 6% for corporate overpayments
5% on the portion of a corporate overpayment exceeding $10,000
7% for underpayments and 9% for large corporate underpayments

Under the Code, these rates are recalculated quarterly based on the federal short-term rate. For noncorporate taxpayers, both overpayment and underpayment rates equal the federal short-term rate plus three percentage points. For corporations, the underpayment rate is also the short-term rate plus three points while the overpayment rate is the short-term rate plus two points. Large corporate underpayments add five points, and corporate overpayments exceeding $10,000 add 0.5 points. The current rates are based on the federal short-term rate determined in October 2025.

November 19, 2025: The IRS announced that it would resume its regular activities following the 2025 lapse in appropriations during the government shutdown. In its announcement, the IRS included specific frequently asked questions regarding the resumption of regular activities for audits, collections, and appeals and stated that determination letter applications for tax exempt and government entities would resume.

Recent court decisions

November 5, 2025: The US District Court for the Northern District of Texas issued an opinion in Ryan, LLC v. IRS. Check out our recent insight on the case, including an analysis of the district court’s holdings and practice points for taxpayers.

November 12, 2025: The US [...]

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