Key Takeaways
- Direct File
- Shutdown Fight
- Tax Law Guidance
- Tip and Overtime Pay Relief
- Tariffs
- IRS Data Share
- Conservation Easements
- Nacho Day
Direct File
IRS to States: Direct File Tool Is a No-Go for Next Tax Season – Erin Slowey, Bloomberg ($):
The IRS told its state partners this week that the Biden-era Direct File tool won’t be offered for the 2026 tax filing season.
Cindy Noe, an IRS employee who worked on Direct File, said in an email to states that was viewed by Bloomberg Tax that “No launch date has been set for the future.”
The announcement comes after former IRS Commissioner Billy Long said in July that Direct File was “gone.” Direct File’s chief, Bridget Roberts, was put on administrative leave in August and the office saw a steep exodus with the Trump administration’s incentives to leave the federal government.
Cindy Noe, an IRS employee who worked on Direct File, said in an email to states that was viewed by Bloomberg Tax that “No launch date has been set for the future.”
The announcement comes after former IRS Commissioner Billy Long said in July that Direct File was “gone.” Direct File’s chief, Bridget Roberts, was put on administrative leave in August and the office saw a steep exodus with the Trump administration’s incentives to leave the federal government.
IRS Shutters Direct File, Citing Cost and Low Uptake – Benjamin Valdez, Tax Notes ($):
Treasury announced in a new report to Congress that the IRS’s Direct File tool will be suspended in favor of improving Free File — the IRS’s longstanding partnership with private tax software companies.
“The report announces that the IRS will suspend Direct File,” Treasury said in the report, which is dated October 2 but was released November 5. “The report recommends refocusing IRS efforts on strengthening existing free filing programs, particularly Free File, while engaging stakeholders to modernize and promote awareness of Free File.”
“The report announces that the IRS will suspend Direct File,” Treasury said in the report, which is dated October 2 but was released November 5. “The report recommends refocusing IRS efforts on strengthening existing free filing programs, particularly Free File, while engaging stakeholders to modernize and promote awareness of Free File.”
IRS Direct File Will Not Be Offered In 2026, States Confirm – Kat Lucero, Law 360 ($):
State revenue agencies confirmed Wednesday that the Internal Revenue Service has informed them that its free online tax preparation tool, Direct File, will not be offered for the 2026 filing season and potentially other years.
The IRS' Direct File "will not be available in filing season 2026" and "no launch date has been set for the future," the agency's Cynthia Noe said in a Monday email to the states, seen by Law360.
The agency sent the email to states participating in Direct File, such as New York, Illinois, Oregon, Pennsylvania and Maryland. The program is an electronic system for people to file tax returns directly with the IRS for free, serving as an option to paid services.
The IRS' Direct File "will not be available in filing season 2026" and "no launch date has been set for the future," the agency's Cynthia Noe said in a Monday email to the states, seen by Law360.
The agency sent the email to states participating in Direct File, such as New York, Illinois, Oregon, Pennsylvania and Maryland. The program is an electronic system for people to file tax returns directly with the IRS for free, serving as an option to paid services.
Shutdown Fight
Democrats Dig In on ACA Tax Credit Extension After Election Wins – Katie Lobosco, Tax Notes ($):
Some Senate Democrats are feeling emboldened to hold their ground on extending the enhanced healthcare tax credit after the party won three key state- and city-level elections November 4.
The expiring Affordable Care Act tax credit is at the center of the fight over the government shutdown, which is now the longest in history.
Senate Minority Leader Charles E. Schumer, D-N.Y., told reporters that the Democrats’ wins in Virginia, New Jersey, and New York City are proof that Republicans should come to the table and engage with Democrats on healthcare costs. So far, Republican leaders have refused to negotiate on the issue until the government reopens.
The expiring Affordable Care Act tax credit is at the center of the fight over the government shutdown, which is now the longest in history.
Senate Minority Leader Charles E. Schumer, D-N.Y., told reporters that the Democrats’ wins in Virginia, New Jersey, and New York City are proof that Republicans should come to the table and engage with Democrats on healthcare costs. So far, Republican leaders have refused to negotiate on the issue until the government reopens.
Democrats Harness Election Wins in Obamacare-Shutdown Standoff – Erin Durkin & Maeve Sheehey, Bloomberg ($):
Senate Democrats, bolstered by big election wins for their party Tuesday, are doubling down on demands for Republicans to negotiate extending Obamacare premium tax credits, or see the government shutdown drag on.
Sen. Bernie Sanders (I-Vt.) said Wednesday that senators could “end the shutdown tomorrow” if President Donald Trump and Speaker Mike Johnson (R-La.) committed to extending the Affordable Care Act tax credits.
...
“I’m not making a deal on anything,” Johnson said when asked if he’d take that deal the day after Democrats swept gubernatorial elections in Virginia, New Jersey, and a mayor’s race in New York City.
Sen. Bernie Sanders (I-Vt.) said Wednesday that senators could “end the shutdown tomorrow” if President Donald Trump and Speaker Mike Johnson (R-La.) committed to extending the Affordable Care Act tax credits.
...
“I’m not making a deal on anything,” Johnson said when asked if he’d take that deal the day after Democrats swept gubernatorial elections in Virginia, New Jersey, and a mayor’s race in New York City.
Health Tax Credits in Shutdown Row Hit Trump’s Florida Backyard – Zach C. Cohen, Bloomberg ($):
Florida is at the center of the fight over enhanced Obamacare-era tax credits that’s spurred the longest government shutdown in US history.
The state’s unique dependency on the premium credits has forced lawmakers in both parties to balance their desire to extend the expanded subsidies with their aversion to ceding political ground.
Senate Democrats have repeatedly blocked legislation from the GOP-controlled House to extend government funding, which expired over a month ago. At issue is extension of a Biden-era increase to a tax credit subsidizing insurance plans purchased on exchanges created by then-President Barack Obama’s health care law.
The state’s unique dependency on the premium credits has forced lawmakers in both parties to balance their desire to extend the expanded subsidies with their aversion to ceding political ground.
Senate Democrats have repeatedly blocked legislation from the GOP-controlled House to extend government funding, which expired over a month ago. At issue is extension of a Biden-era increase to a tax credit subsidizing insurance plans purchased on exchanges created by then-President Barack Obama’s health care law.
Next Tax Filing Season Faces Big Challenges, Werfel Says – Tyrah Burris, Tax Notes ($):
The government shutdown and a lack of resources at the IRS are among the significant risks to the 2026 tax filing season, according to former IRS Commissioner Daniel Werfel.
Speaking at a November 5 Tax Trends Summit hosted by Tax Analysts and the American Bar Association Section of Taxation, Werfel said there are several causes for concern for the upcoming filing season, starting with delays caused by the government shutdown.
Speaking at a November 5 Tax Trends Summit hosted by Tax Analysts and the American Bar Association Section of Taxation, Werfel said there are several causes for concern for the upcoming filing season, starting with delays caused by the government shutdown.
IRS Workers in Collections Take Biggest Hit in Shutdown Firings – Erin Slowey, Bloomberg ($):
IRS employees in exam and collections made up the largest chunk of workers who were fired by the Trump administration in its mass layoffs during the government shutdown.
Almost 40% or 527 of the 1,399 Treasury workers fired Oct. 10 were part of IRS exam and collection duties, which includes enforcement, appeals and litigation work, according to a court filing made by Deputy Assistant Secretary for Human Resources at the Treasury Department Trevor Norris. Others laid off at the IRS included 297 in shared service jobs like communications, protection of taxpayer information, and procurement, and 489 workers in information services.
Almost 40% or 527 of the 1,399 Treasury workers fired Oct. 10 were part of IRS exam and collection duties, which includes enforcement, appeals and litigation work, according to a court filing made by Deputy Assistant Secretary for Human Resources at the Treasury Department Trevor Norris. Others laid off at the IRS included 297 in shared service jobs like communications, protection of taxpayer information, and procurement, and 489 workers in information services.
Tax Law Guidance
Rollbacks of Tax Rules to Take Back Seat to Guidance for New Law – Michael Rapoport, Bloomberg ($):
Ambitious Treasury Department and IRS plans to roll back tax regulations that business doesn’t like could stall as the agencies tackle rules implementing the huge GOP tax law and deal with government-shutdown hiccups.
Rules on corporate subsidiaries’ foreign-currency gains and losses, the stock-buyback excise tax, and cloud computing are among those that Treasury and the IRS may seek to roll back or revise next as part of their deregulatory efforts.
…
But the agencies are also tasked with issuing guidance on provisions of the giant tax-and-spending law enacted in July. That may have to take precedence for now, pushing back any further rollbacks of existing guidance, tax observers said.
Rules on corporate subsidiaries’ foreign-currency gains and losses, the stock-buyback excise tax, and cloud computing are among those that Treasury and the IRS may seek to roll back or revise next as part of their deregulatory efforts.
…
But the agencies are also tasked with issuing guidance on provisions of the giant tax-and-spending law enacted in July. That may have to take precedence for now, pushing back any further rollbacks of existing guidance, tax observers said.
J&J Pushing for Treasury to Regulate on CAMT, R&D Expensing – Erin Slowey & Lauren Vella, Bloomberg ($):
Many companies will keep capitalizing their US research and development expenses and not take advantage of provisions allowing immediate expensing in the new GOP tax law, to avoid exposure to the 15% corporate alternative minimum tax, a vice president at Johnson & Johnson said.
Republicans’ 2025 tax-and-spending law restored companies’ ability to deduct their domestic research and development costs immediately instead of spanning them over five years. Large companies will be able to take catch-up deductions this year and next for any R&D costs from the past few years they haven’t yet been able to deduct.
Republicans’ 2025 tax-and-spending law restored companies’ ability to deduct their domestic research and development costs immediately instead of spanning them over five years. Large companies will be able to take catch-up deductions this year and next for any R&D costs from the past few years they haven’t yet been able to deduct.
Tip and Overtime Pay Relief
IRS Provides Relief to Employers Reporting Tip and Overtime Pay – Nathan J. Richman, Tax Notes ($):
The IRS and Treasury granted transition penalty relief to employers and other payers required to make third-party reports that could include tip or overtime compensation eligible for new deductions for 2025 filings.
On November 5 in Notice 2025-62, 2025-48 IRB 1, the IRS and Treasury announced transition penalty relief for the new payment reporting requirements behind the two new tax benefits in the One Big Beautiful Bill Act (P.L. 119-21).
On November 5 in Notice 2025-62, 2025-48 IRB 1, the IRS and Treasury announced transition penalty relief for the new payment reporting requirements behind the two new tax benefits in the One Big Beautiful Bill Act (P.L. 119-21).
IRS Provides Penalty Relief For 2025 Tips, OT Reporting – Asha Glover, Law 360 ($):
The Internal Revenue Service will treat the 2025 tax year as a transition period for enforcement and administration of the information reporting requirements for the new deductions for tips and overtime, according to guidance released Wednesday.
Employers and other payers will not face penalties for failing to file the correct information returns required under the tips deduction created by this summer's budget reconciliation bill, according to Notice 2025-62. Taxpayers will also be granted relief from penalties if they fail to provide the total amount of qualified overtime compensation as required by the law's overtime deduction. The relief applies only to the 2025 tax year, according to the notice.
Employers and other payers will not face penalties for failing to file the correct information returns required under the tips deduction created by this summer's budget reconciliation bill, according to Notice 2025-62. Taxpayers will also be granted relief from penalties if they fail to provide the total amount of qualified overtime compensation as required by the law's overtime deduction. The relief applies only to the 2025 tax year, according to the notice.
IRS Gives Relief to Employers That Have Tips, Overtime Roles – Erin Slowey, Bloomberg ($):
The IRS issued guidance Wednesday providing penalty relief for employers from reporting requirements in President Donald Trump’s new tax law on tips and overtime.
Notice 2025-62 said that employers won’t face penalties for failing to provide separate accounting of tip amounts or occupations. For employers with workers who make overtime, there won’t be penalties for not separately providing the total amount of overtime compensation. The relief applies for tax year 2025.
Notice 2025-62 said that employers won’t face penalties for failing to provide separate accounting of tip amounts or occupations. For employers with workers who make overtime, there won’t be penalties for not separately providing the total amount of overtime compensation. The relief applies for tax year 2025.
Tariffs
The conservative justices nerded out on legal theory, and other takeaways from the tariff arguments – Josh Gerstein, Politico:
President Donald Trump’s signature tariff policy faced some serious static at the Supreme Court Wednesday as both conservative and liberal justices expressed doubts about whether Congress meant to give the president such sweeping power — and whether it could even if it wanted to.
The two-and-a-half hour argument session was closely watched by American businesses and foreign leaders for signs about whether the justices will allow Trump to press on with his use of tariffs as a club to coerce U.S. allies and competitors into trade concessions they have resisted for decades.
The two-and-a-half hour argument session was closely watched by American businesses and foreign leaders for signs about whether the justices will allow Trump to press on with his use of tariffs as a club to coerce U.S. allies and competitors into trade concessions they have resisted for decades.
Justices Skeptical About Trump's Emergency Tariff Authority – Dylan Moroses, Law 360 ($):
Several U.S. Supreme Court justices asked the government to defend why well-established judicial doctrines shouldn't limit President Donald Trump's tariffs imposed under the International Emergency Economic Powers Act during oral arguments Wednesday, casting doubt on whether they believe the law provides that kind of authority.
Chief Justice John Roberts told U.S. Solicitor General D. John Sauer that the major questions doctrine, which generally says large-scale regulatory initiatives that have broad effects can't be grounded in vague, minor or obscure provisions of law without clear congressional authorization, "might be directly applicable" to the case, despite the government's arguments against that idea.
Chief Justice John Roberts told U.S. Solicitor General D. John Sauer that the major questions doctrine, which generally says large-scale regulatory initiatives that have broad effects can't be grounded in vague, minor or obscure provisions of law without clear congressional authorization, "might be directly applicable" to the case, despite the government's arguments against that idea.
Supreme Court Justices Question Trump’s IEEPA Tariffs – Caitlin Mullaney & Cameron Browne, Tax Analysts ($):
U.S. Supreme Court justices seemed skeptical of the Trump administration's argument that the president is allowed to impose tariffs under the International Emergency Economic Powers Act (IEEPA).
During November 5 oral arguments in V.O.S. Selections v. United States and Learning Resources Inc. v. Trump, justices questioned counsel for both sides for more than two hours about their interpretation of presidential tariff powers under IEEPA and the congressional intent and legislative history behind the statute.
During November 5 oral arguments in V.O.S. Selections v. United States and Learning Resources Inc. v. Trump, justices questioned counsel for both sides for more than two hours about their interpretation of presidential tariff powers under IEEPA and the congressional intent and legislative history behind the statute.
White House tells Supreme Court it doesn’t care about the tariff money raised – David J. Lynch, Washington Post:
The Trump administration told the Supreme Court on Wednesday that raising government revenue is not the purpose of the emergency tariffs that President Donald Trump imposed this year on all imported goods.
Though the president has repeatedly boasted that the government is making a “fortune” from his new import taxes, Solicitor General D. John Sauer denied that the tariffs are equivalent to a tax and said they would work best if they were never paid.
Though the president has repeatedly boasted that the government is making a “fortune” from his new import taxes, Solicitor General D. John Sauer denied that the tariffs are equivalent to a tax and said they would work best if they were never paid.
IRS Data Share
Docs Show IRS Improperly Shared Data With ICE, Groups Say – Kevin Pinner, Law 360 ($). “Documents submitted by the U.S. government to a D.C. federal court show the IRS violated taxpayer privacy laws by sharing individuals' addresses with ICE despite its requests lacking required information and by accepting an unreasonable explanation about why the information was requested, several groups said.”
Conservation Easements
Sixth Circuit Rejects Pie-in-the-Sky $22.6M Easement Valuation – Chandra Wallace, Tax Notes ($):
An investment partnership couldn’t monetize its vision of a lost opportunity to build a 45-story luxury tower in place of the 11-story building it had already used historic preservation tax credits to renovate, the Sixth Circuit ruled.
In a November 5 published opinion in Corning Place Ohio LLC v. Commissioner, a Sixth Circuit panel affirmed the Tax Court’s 2024 conclusion that the taxpayer claimed a charitable contribution deduction substantially in excess of the conservation easement it donated. It had also failed to document key expenses and claimed the deduction on the wrong tax return, the court said.
In a November 5 published opinion in Corning Place Ohio LLC v. Commissioner, a Sixth Circuit panel affirmed the Tax Court’s 2024 conclusion that the taxpayer claimed a charitable contribution deduction substantially in excess of the conservation easement it donated. It had also failed to document key expenses and claimed the deduction on the wrong tax return, the court said.
Cleveland Developer Properly Denied $22.6 Million Tax Deduction – Tristan Navera, Bloomberg ($):
A real estate developer can’t claim a $22.6 million tax deduction on a downtown Cleveland building it redeveloped on the theory that it also could have developed a new skyscraper on the site, a federal appeals court said Wednesday.
The US Court of Appeals for the Sixth Circuit affirmed a lower court’s decision finding that Millennia Cos. affiliate Corning Place Ohio LLC wasn’t entitled to a charitable contribution tax deduction for its donation of a conservation easement on a former 11-story office building in the center of the city.
The US Court of Appeals for the Sixth Circuit affirmed a lower court’s decision finding that Millennia Cos. affiliate Corning Place Ohio LLC wasn’t entitled to a charitable contribution tax deduction for its donation of a conservation easement on a former 11-story office building in the center of the city.
IRS Loses $76 Million Easement Case by Adjusting Taxes Too Late – Tristan Navera, Bloomberg ($):
The government attempted to adjust a partnership’s taxes after it was allowed to do so, the US Tax Court said, invalidating a change that blocked a $76 million conservation easement deduction.
Judge Jeffrey S. Arbeit granted summary judgment to Bayou Serpent Property LLC after determining that the government attempted to adjust the partnership’s taxes to disallow the donation more than 60 days after the deadline for doing so. He based his ruling on a prior Tax Court case in a $2 million Section 1231 dispute, finding it “squarely on point.”
Judge Jeffrey S. Arbeit granted summary judgment to Bayou Serpent Property LLC after determining that the government attempted to adjust the partnership’s taxes to disallow the donation more than 60 days after the deadline for doing so. He based his ruling on a prior Tax Court case in a $2 million Section 1231 dispute, finding it “squarely on point.”
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