deficiency petition Archives | TAX CONTROVERSY 360

IRS roundup: May 7 – May 18, 2026

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 [...]

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Tax Court Holds That Deficiency Petition 90-Day Time Limit Is Jurisdictional

Last summer, the Supreme Court of the United States held that the 30-day time limit to file a Collection Due Process (CDP) petition is a non-jurisdictional deadline subject to equitable tolling (Boechler, P.C. v. Commissioner). (Our prior discussion of Boechler can be found here.) The natural follow-up issue was whether this holding extended to the 90-day limit for deficiency petitions.

On November 29, 2022, in a unanimous 17-0 opinion in Hallmark Research Collective v. Commissioner, the US Tax Court held that the 90-day time limit is jurisdictional not subject to equitable tolling. The taxpayer in that case filed its deficiency petition one day late but argued that the 90-day limit is non-jurisdictional under Boechler and that it should be allowed to show cause for equitable tolling of the limitations period.

The Tax Court analyzed the relevant statute (Internal Revenue Code (IRC) Section 6213(a)) and found that the statutory text, context and relevant historical treatment all confirmed that the 90-day time limit clearly provided that the deadline was jurisdictional. Its analysis started with the US Constitution and tracked the deficiency procedures from the days of its predecessor (the Board of Tax Appeals) through various statutory changes and the overall framework of the procedures. Based on its analysis of almost 100 years of statutory and judicial precedent, the Tax Court concluded that it and the US Courts of Appeals have expressly and uniformly treated the 90-day time limit as jurisdictional, and the US Congress was presumptively aware of this treatment and had acquiesced in it.

The Tax Court rejected the taxpayer’s arguments to the contrary. It noted that the Supreme Court in Boechler rejected the analogy of the statutory 30-day limit for a CDP petition to the statutory 90-day limit for a deficiency petition. The Court also provided separate reasons why the statutory 30-day time limit was different, both in its text and in prior judicial constructions from the 90-day time limit.

Practice Point: The Tax Court’s opinion in Hallmark will not be the last word on the issue, and we expect further developments in this area. Additionally, there are other types of petitions that can be filed in the Tax Court (e.g., so-called “innocent spouse” petitions filed in non-deficiency cases) that contain language different from the statutes addressed in Boechler and Hallmark. We will continue to follow this area and provide relevant updates as they develop.

IRS roundup: May 7 – May 18, 2026

Tax Court Holds That Deficiency Petition 90-Day Time Limit Is Jurisdictional

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