Worldwide: Tax Authorities

The Department of the Treasury and IRS have proposed regulations that would eliminate tax-exempt status for private schools maintaining race-based policies in admissions, scholarships, or programs—regardless of remedial or diversity objectives. The rule would affect approximately 18,000 tax-exempt schools, 750,000 students, and outstanding tax-exempt bonds, fundamentally reshaping how educational institutions approach diversity initiatives and donor-restricted scholarships.

The Treasury Department and IRS issued final regulations implementing the new deduction for qualified passenger vehicle loan interest (QPVLI), a temporary benefit created by the One, Big, Beautiful Bill Act (OBBBA) that allows individuals to deduct up to $10,000 of interest paid on certain auto loans, even if they do not itemize deductions. The final rules largely adopt the proposed regulations issued in January 2026 but include clarifications in response to public comments received by the Treasury Department.

The IRS and Treasury Department issued significant guidance in late August 2026 on Trump Accounts, CFC income calculations, and conservation easement enforcement, while federal appellate courts delivered pivotal rulings on the limited partner exception to self-employment tax and the Anti-Injunction Act's scope. These developments reshape tax compliance strategies for individuals, corporations, and partnerships navigating charitable deductions, international income allocation, and procedural challenges.

The United States Tax Court recently issued a reminder that tax sophistication can support a finding of civil fraud. In Janangelo v. Commissioner, T.C. Summary Opinion 2026-8, the court found that a longtime IRS revenue agent, who is also a licensed attorney and CPA, committed civil fraud by claiming a series of fabricated and unsubstantiated deductions across four consecutive tax years.

The Treasury Department and IRS have proposed sweeping new regulations that would revoke tax-exempt status from private schools maintaining any race-conscious policies, from admissions to scholarships to athletics. The proposed rule eliminates longstanding safe harbors for minority-preference programs and extends the Supreme Court's recent college admissions decision to K-12 schools and all educational programs.

For Canadian and other non-U.S. sellers of U.S. real estate, the FIRPTA withholding regime has historically meant waiting months or even years to recover excess tax withholdings. Recent improvements in IRS processing times are making Form 8288-B withholding certificate applications an increasingly effective tool for accelerating the return of substantial funds.

The IRS has introduced a new Automatic Exemption from Penalty program while a federal court struck down key GILTI regulations in a significant post-Loper Bright decision. The Treasury and IRS also finalized guidance on life insurance contract transactions and updated various energy-related tax credits and reporting requirements.

This roundup examines critical IRS developments spanning executive nominations, procedural relief mechanisms, and landmark court decisions that reshape tax collection enforcement and whistleblower award determinations. From supervisory approval requirements for penalty assessments to jurisdictional questions in Collection Due Process proceedings, these developments carry significant implications for taxpayers navigating federal tax controversies and compliance obligations.

The US Department of Treasury defends its authority to regulate stock-based compensation in cost-sharing arrangements under IRC § 482, arguing the regulations fall within statutory bounds and are necessary to ensure arm's-length results between related parties. The government's response to McKesson Corporation's summary judgment motion addresses challenges based on the Loper Bright decision and notably abandons its six-year statute of limitations defense.