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The IRS has issued final regulations modifying reporting obligations for partnerships involved in Code Sec. 751(a) exchanges of partnership interests. The regulations remove the requirement that partnerships furnish transferors with certain information relating to unrealized receivables and inventory items by January 31 following the exchange year. The regulations are effective for returns filed for tax years ending on or after May 20, 2026.

Under Code Sec. 6050K, partnerships must file Form 8308, Report of a Sale or Exchange of Certain Partnership Interests, for transfers involving Code Sec. 751(a) property. The IRS and Treasury Department received comments that many partnerships could not determine the information required for Part IV of Form 8308 by the January 31 furnishing deadline. As a result, the final regulations remove Reg. §1.6050K-1(c)(2) and revise Reg. §1.6050K-1(c)(1) to permit partnerships to furnish Form 8308 completed in accordance with the form instructions.

Although partnerships are no longer required to furnish Part IV information to transferors and transferees by January 31, they must still file a completed Form 8308, including Part IV, with Form 1065. The IRS finalized the regulations without substantive changes from the proposed regulations issued in 2025.

T.D. 10048

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The IRS has issued guidance on qualified long-term care distributions from qualified retirement plans. The guidance affects providers of certified long-term care insurance (issuers), plan administrators, and individual participants receiving qualified long-term care distributions. The IRS also extended the general deadline for amending a plan to permit qualified long-term care distributions to December 31, 2027.

Background

The SECURE 2.0 Act of 2022 (SECURE 2.0 Act), permitted defined contribution plans to make qualified long-term care distributions, effective for distributions made after December 29, 2025. The 10 percent additional tax on early distributions would not apply to distributions under Code Sec. 401(a)(39). However, a qualified long-term care distribution would be included in the taxpayer’s gross income.

Disclosure Requirements

The guidance addresses content requirements and procedures for submitting an Issuer Disclosure to the IRS. There is no general deadline for submitting an Issuer Disclosure. However, an issuer must submit an Issuer Disclosure to the IRS before the issuer can file a long-term care premium statement with a defined contribution plan.

Distribution Requirements

Under the guidance, the plan administrator is permitted to rely on the issuer’s statement and the information provided on the long-term care premium statement in making a qualified long-term care distribution. It is optional for a plan to permit qualified long-term care distributions, but the exception to the 10% additional tax only applies if the plan permits qualified long-term care distributions, even if the employee uses a distribution to pay for long-term care insurance. Unlike other permitted distributions, a qualified long-term care distribution would not be eligible for an extended 3-year repayment to a retirement plan.

Reporting Requirements

The payment of a qualified long-term care distribution to an employee must be reported by the payor on Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance Contracts, etc.

Further, issuers must make a return to the IRS using Form 1099-LPS, Long-Term Care Premiums Paid Statement. The issuer will report the long-term care premiums paid for the calendar year. The Form 1099-LPS must be filed with the IRS no later than February 1 of the calendar year following the calendar year the long-term care premium statement was filed with the plan.

Deadline Extension

The guidance extends the deadline for a plan sponsor of a defined contribution plan that is not a governmental plan, a section 403(b) plan maintained by a public school, or an applicable collectively bargained plan, to amend its plan to permit qualified long-term care distributions from December 31, 2026, to December 31, 2027. The deadlines to amend defined contribution plans that are applicable collectively bargained plans or governmental plans remain as provided in Notice 2024-02. Thus, Notice 2024-2, I.R.B. 2024-2, 316, is modified in part.

Notice 2026-33

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The IRS finalized regulations treating income derived by individual members of an Indian tribe from fishing rights-related activities as compensation for purposes of limitations on benefits and contributions under a qualified retirement plan. These regulations are effective for plan years beginning on or after May 4, 2026, and affect participants, beneficiaries, sponsors, and administrators of Tribal plans.

Fishing rights-related income is exempt from federal income tax and employment tax under Code Sec. 7873. However, proposed reliance regulations would allow contributions to be made to qualified retirement plans based on fishing rights-related income. Also, plans that accept contributions of fishing rights-related income may still use safe harbor definitions of compensation. The IRS finalized this rule as proposed without material modification.

Although the final rule is somewhat limited in scope, the IRS addressed additional issues in the preamble. The IRS clarified that plan contributions attributable to a Tribal employee's fishing rights-related activiity is treated as investment in the contract under Code Sec. 72 . Thus, distributions of the amount contributed would generally be tax-free (subject to basis recovery rules) and distributions attributable to earnings would be taxable. The IRS also indicated that plans that permit designated Roth contributions may allow contributions attributable to fishing rights-related activity to be made on a Roth basis.

T.D. 10046

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The IRS has introduced a streamlined option allowing taxpayers to extend the time to challenge disallowed Employee Retention Credit (ERC) claims, reducing the need for immediate refund litigation. The measure applies to taxpayers who received Letter 105-C or 106-C, are awaiting review by the IRS Independent Office of Appeals and have six months or less remaining in the statutory two-year period.

Taxpayers generally have two years from the disallowance notice to resolve the claim or file a refund suit, but an administrative appeal does not suspend this deadline. Once the period expires, the IRS cannot issue a refund even if the taxpayer later prevails. To address this, eligible taxpayers may execute Form 907, Agreement to Extend the Time to Bring Suit, provided it is signed by both parties before the limitation period ends.

The IRS now permits submission of Form 907 through its Document Upload Tool, with qualifying requests reviewed and confirmed in writing. While the IRS is issuing notices to eligible taxpayers, others meeting the criteria may also apply. The agency indicated that the initiative is intended to preserve taxpayer rights and facilitate administrative resolution of ERC disputes.

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The IRS has established a significant issue ruling program for cerain corporate transactions (Rev. Proc. 2026-21). This program would not diminish the availability of letter rulings under existing programs. This procedure modifies and amplifies the ruling procedures provided in Rev. Proc. 2026-1, I.R.B. 2026-1, 1, and Rev. Proc. 2026-3, I.R.B. 2026-1, 143.

The significant issue ruling program allows taxpayers to request rulings on one or more issues that:

are solely under the jurisdiction of the Associate Chief Counsel (Corporate);
are significant issues, as defined in section 4.02 of Rev. Proc. 2026-21; and
involve the tax consequences or characterization of a transaction (or part of a transaction) that is described in Code Sec. 332, 351, 355, 368, or 1036.

Significant Issue Ruling Program

Taxpayers may request, and the IRS may issue, a ruling on part of an integrated transaction described in the above provisions, or a ruling on a particular legal issue under a section of the Code or regulations with respect to a transaction (or part thereof) rather than a ruling that addresses all aspects of that section (or any other section) with respect to the transaction (or part thereof).

In addition, the IRS may rule on the tax consequences resulting from integrated transactions described in the above provisions to the extent that a significant issue is presented under related Code sections that address such tax consequences.

A significant issue generally is a germane and specific issue of law, provided that a ruling on the issue would not be a comfort ruling or the conclusion in such a ruling otherwise would not be essentially free from doubt.

The requests for ruling must contain (1) narrative description of the transaction that puts the significant issue in context; (2) statement identifying the issue; (3) analysis of the solvability of issue; and more.

Effect on Other Documents

Rev. Proc. 2026-1 and Rev. Proc. 2026-3 are modified and amplified.

Effective Date

The significant issue ruling program applies to all letter ruling requests described in section 4.01 of Rev. Proc. 2026-21 postmarked or, if not mailed, received by the IRS after May 5, 2026.

Rev. Proc. 2026-21

Other References:

Code Sec. 332
CCH Reference - FED ¶16,052.188

Other References:

Code Sec. 351
CCH Reference - FED ¶16,405.48

Other References:

Code Sec. 355
CCH Reference - FED ¶16,466.923

Other References:

Code Sec. 368
CCH Reference - FED ¶16,753.53

Other References:

Code Sec. 1036
CCH Reference - FED ¶29,702.11

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The IRS has announced a new time-limited settlement opportunity for eligible taxpayers involved in conservation easement and historic preservation easement disputes with the IRS. The program aims to resolve cases faster and on terms that are generally more favorable than recent Tax Court decisions.

The IRS has announced a new time-limited settlement opportunity for eligible taxpayers involved in conservation easement and historic preservation easement disputes with the IRS. The program aims to resolve cases faster and on terms that are generally more favorable than recent Tax Court decisions. Since 2020, the IRS has settled 405 cases through earlier initiatives, although taxpayers still had to pay penalties and were allowed only limited deductions for certain out-of-pocket costs. More than 1,100 conservation easement cases currently remain pending before the IRS and the Tax Court. Under the new initiative, many eligible partnerships will not have to make an upfront payment to participate. In addition, taxpayers whose earlier settlement offers expired or were rejected may now have another chance to resolve their cases, while some partnerships that were not previously eligible may also qualify. IRS Chief Executive Officer Frank J. Bisignano said Congress created the conservation easement deduction to encourage legitimate preservation efforts rather than tax shelters based on inflated property values.

The IRS said partnerships that accept the offer during the initial 90-day period generally will not be allowed a charitable contribution deduction, but they may qualify for a limited deduction tied to certain out-of-pocket expenses. Those partnerships generally would face a 10 percent gross valuation misstatement penalty, while partnerships settling during an additional 45-day period generally would face a 20 percent penalty. Interest also will continue to accrue as required by law. At the same time, the IRS noted that courts have repeatedly reduced claimed deductions and upheld significant penalties in conservation easement disputes. Certain cases, such as those already tried or currently under appeal, will not qualify for the initiative. The IRS added that eligibility will depend on the status and specific facts of each case.

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Following a 2026 tax filing season that was consistent with the 2025 season, the American Institute of CPAs offered legislators a series of recommendations to help improve filing season in the future.

“Based on limited and anecdotal information, many practitioners noted that the IRS appeared to operating consistently compared with the prior year’s service,” AICPA said in a recent letter to the Senate Finance Committee’s top leadership following a hearing on the 2026 tax filing season, adding that data currently available shows “tax return processing remained relatively consistent, though the quality of telephone services appeared to vary depending on the hotline.”

AICPA did observe that while Internal Revenue Service modernization efforts have allowed for consistent customer service levels compared to recent prior years, “IRS customer service has not returned to pre-COVID-19 pandemic levels according to IRS data and the AICPA’s most recent annual membership survey.”

With that, the industry organization offered recommendations in the areas of governance and oversight, taxpayer services, and dedicated practitioner services.

In the area of IRS governance and oversight, AICPA recommended the following:

Requiring a Government Accountability Office review to determine whether a private sector board with sufficient authority to hold the IRS accountable and oversee implementation of key recommendations from advisory groups;
Re-establish the annual joint hearing review to focus on strategic and business plans, taxpayer service and compliance, technology and modernization, and the filing season; and
The Joint Committee on Taxation should provide a bi-annual report on the overall state of the Federal tax system.

In the area of taxpayer service, the following recommendations were offered:

Hire more qualified and experienced professionals from the private sector, adequately train all agency employees, skillfully manage IRS resources, and ensure organizational alignment between Congress, the executive branch, and the IRS;
Congress should determine what the appropriate level of service is and then ensure that the appropriate resources are allocated to achieve that level;
Continue to improve the technology infrastructure modernization; and
Effectively utilize customer satisfaction surveys to assess IRS performance, improve the taxpayer experience, and effectuate modernization efforts or process improvement.

AICPA pushed for the passage of the Taxpayer Assistance and Services Act, which it states “would significantly improve IRS services, reinforce fairness and transparency in our tax system, and reduce tax administrative burdens on taxpayers and practitioners, including many critical tax provisions for which AICPA has previously advocated.”

In the area of dedicated practitioner services, AICPA recommended:

Create consolidated dedicated “executive-level” practitioner services comparable to private sector services that are implemented and adapted based on practitioner feedback solicited periodically; and
Continue to expand the functionality of a robust and enhanced tax professional account as part of the IRS’s online portal with account access to all of a practitioner’s client information, allowing for IRS to communicate directly with authorized practitioners, enable a centralized login system, and prioritize the protection and privacy of user identities and data;
Provide practitioners with a robust practitioner priority hotline with high-skilled employees capable of resolving complex technical and procedural issues; and
Assign customer service representatives to each geographic area to address unusual or complex issues that practitioners were unable to resolve through the priority hotlines.

The letter to the Senate Finance Committee leadership and other AICPA 2026 tax policy and advocacy comment letter can be found here.

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After years of routine temporary extensions, Congress has made permanent a number of previously temporary tax breaks for individuals and businesses as well as extending others. The Protecting Americans from Tax Hikes Act of 2015 (PATH Act), signed into law by President Obama in December, opens the door to new planning opportunities.

Permanent extensions for individuals

Incentives for individuals extended permanently, and in some cases modified, by the PATH Act include:

American Opportunity Tax Credit
Deduction for certain expenses of elementary and secondary school teachers
Parity for exclusion from income for employer-provided mass transit and parking benefits
Deduction for state and local sales taxes
Reduced earnings threshold for additional child tax credit
Modification of the earned income tax credit
Tax-free distributions from individual retirement plans for charitable purposes for individuals age 70 ½ and older
Special rule for qualified conservation contributions

For some of the incentives, the modifications are significant. For example, the deduction for qualified expenses of elementary and secondary school teachers has been modified to include professional development expenses. Please contact our office for more details.

Permanent extensions for businesses

The PATH Act makes permanent, and in some cases modifies, many popular tax incentives for businesses, including:

Research tax credit
Enhanced expensing under Code Sec. 179
Charitable deduction for contributions of food inventory
Tax treatment of certain payments to controlling exempt organizations
Extension of basis adjustment to stock of S corporations making charitable contributions of property
Employer wage credit for employees who are active duty members of the uniformed services
Extension of 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements
Treatment of certain dividends of regulated investment companies
Exclusion of 100 percent of gain on certain small business stock
Reduction in S corporation recognition period for built-in gains tax
Subpart F exception for active financing income
Temporary minimum low-income housing tax credit rate for non-federally subsidized buildings
Military housing allowance exclusion for determining whether a tenant in certain counties is low-income
Extension of RIC qualified investment entity treatment under FIRPTA

As with the individual incentives, some of the modifications to the business incentives are significant. The research tax credit is not only made permanent, it is enhanced for small businesses. Expensing under Code Sec. 179 is made permanent at generous dollar and investment limitations. Previous limitations for the employer credit for activated reservists are relaxed. For more details, please contact our office.

More incentives extended

The PATH Act did not leave out the rest of the traditional extenders. However, lawmakers did not make these remaining tax breaks permanent. Extended for several years (in some cases through 2019, in other cases through 2016) are:

bonus depreciation,
the Work Opportunity Tax Credit (WOTC),
the higher education tuition and fees deduction,
energy incentives, the Indian employment credit,
special expensing rules for television and film productions,
and more.

Because the extensions are not uniform, as mentioned, some tax breaks are extended through 2019 and others are extended through 2016, careful planning is vital.

Please contact our office if you have any questions about the PATH Act.

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Going into the 2016 filing season, the IRS has additional monetary resources to improve customer service and cybersecurity along with curbing identity theft. The fiscal year (FY) 2016 omnibus spending bill approved by Congress and signed into law by President Obama in December, allocates $290 million above FY 2015 funding to the IRS with instructions of where to spend the funds: customer service, tax-related identity theft and refund fraud, and cybersecurity.

Customer service

During the 2015 filing season, many taxpayers and tax professionals were very frustrated with customer service at the IRS. The National Taxpayer Advocate discovered that less than 40 percent of all calls to IRS customer service representatives were answered. The average wait time to speak with an IRS employee stretched past 20 minutes. Further, the IRS increased its use of so-called "courtesy disconnects." That occurs when the IRS disconnects an incoming call because its phone lines are overloaded. According to the National Taxpayer Advocate, the IRS disconnected more than eight million calls from taxpayers during the 2015 filing season.

Lawmakers became aware of the customer service challenges at the IRS over the course of several hearings during 2015. IRS Commissioner John Koskinen and other officials said that the agency "had to do more with less." Speaking in November, Koskinen said that without more funding, customer service would be worse in 2016.

The FY 2016 omnibus authorizes more funding for 1-800 help line services for taxpayers. Congress directed the IRS to make improving telephone service a priority and to enhance response times.

Identity theft

Tax-related identity theft occurs when a criminal uses the personal identification information of a taxpayer to file a return claiming a fraudulent refund. Typically, refund fraud occurs early in the filing season. The taxpayer files a legitimate return and discovers that his or her identity has been stolen.

In response, the IRS has continuously upgraded its processing filters to uncover fraudulent returns. The agency has also partnered with state tax authorities and private sector tax software vendors and launched public education campaigns about tax-related identity theft. The FY 2016 omnibus authorizes more funding to improve the identification and prevention tax-related identity theft and refund fraud.

Cybersecurity

In 2015, the IRS acknowledged that cybercriminals hacked its popular online Get Transcript app. The app enables taxpayers to obtain line-by-line return information. Criminals, the IRS explained, have used this information to file false returns that claim tax items similar to those items that taxpayers have claimed in the past and to generate fraudulent refunds. The FY 2016 omnibus appropriates more funding to enhance cybersecurity to safeguard taxpayer data.

If you have any questions about the impact of IRS’s FY 2016 budget, please contact our office.

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The IRS has issued the 2016 optional standard mileage rates for calculating the deductible costs of operating an automobile for business, charitable, medical, and moving purposes (Notice 2016-1; IR-2015-137). The decline in gas prices appeared to spur the drop in the optional rates.

The optional standard mileage rate for business will drop from 57.5 cents a mile (for 2015) to 54 cents a mile for 2016, a decrease of 3.5 cents, and the lowest rate in five years. The optional standard mileage rates for medical and moving expenses drops from 23 cents for 2015 to 19 cents per mile for 2016, a decrease of four cents and, again, the lowest rate in five years. The optional standard mileage rate for charitable expenses, which is set by statute, remains at 14 cents per mile for 2016.

Rules for use

Rev. Proc. 2010-51 provides rules for computing deductible costs of operating an automobile, including the use of the optional standard rates. The business standard mileage rate is a substitute for all the costs of an automobile for business use, including depreciation, maintenance and repairs, and gasoline.

However, a taxpayer may not use the business standard mileage rate after using a depreciation method under Code Sec. 168 or after claiming the Code Sec. 179 deduction for that vehicle. Furthermore, a taxpayer may not use the business rate for more than four vehicles at a time.

To compute the allowance under a fixed and variable rate plan, the standard automobile cost may not exceed $28,000 for cars or $31,000 for trucks and vans.

Depreciation

For automobiles used for business, a taxpayer must use 24 cents per mile as the portion of the standard mileage rate treated as depreciation for 2016. For prior years, these amounts are 24 cents for 2015, 22 cents for 2014, and 23 cents for both 2012 and 2013. These amounts are used to calculate basis reductions for depreciation taken under the standard mileage rate.

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