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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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Commissioner Files Opening Brief in Ninth Circuit Appeal of Altera

In Altera Corp. v. Commissioner, 145 T.C. No. 3 (July 27, 2015), the Tax Court, in a unanimous reviewed opinion, held that regulations under Section 482 requiring parties to a qualified cost-sharing agreement (QCSA) to include stock-based compensation costs in the cost pool to comply with the arm’s-length standard were procedurally invalid because the US Deparment of Treasury and the Internal Revenue Service (IRS) did not engage in the “reasoned decisionmaking” required by the Administrative Procedures Act and the cases interpreting it. For a discussion of the Tax Court’s Altera opinion, see our prior On the Subject. The Commissioner of Internal Revenue (Commissioner) appealed this holding to the Ninth Circuit Court of Appeals; he filed his opening brief on June 27, 2016.

According to the Commissioner, the Tax Court’s holding was based on several related errors: (1) the Tax Court mistakenly concluded that promulgation of the QCSA regs required the IRS to engage in an “essentially empirical” analysis; (2) this led the court to apply the wrong standard; (3) in its analysis, the court relied heavily on its holding in Xilinx, Inc. v. Commissioner, 125 T.C. 37 (2005), that analysis of QCSAs must comport with the arm’s-length standard, meaning that a taxpayer can defend a QCSA by reference to comparable behavior between unrelated parties; and (4) the Tax Court failed to take into account that the finalization of the new QCSA regulations worked a “change in the legal landscape,” which should have altered the court’s analysis of the new regulations’ validity. Moreover, “the coordinating amendments [to the existing QCSA regulations] supersede [the Ninth Circuit’s] understanding of the arm’s-length standard as reflected in its own Xilinx opinion.” (more…)

IRS roundup: May 7 – May 18, 2026

Commissioner Files Opening Brief in Ninth Circuit Appeal of Altera

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