Happening today! Register now for the Eide Bailly Webinar "New Tax Legislation: An Overview." Coverage includes restoration of full equipment expenses, increased business interest deductions, full expensing of domestic research costs, QBI, Opportunity Zones, and energy credits. August 19, 1:30 p.m. Central time.
Statute of Limitations
3rd Circ. Says IRS Can Pursue Taxes In Decades-Old Fraud - Anna Scott Farrell, Law 360 Tax Authority ($):
In a precedential opinion, a three-judge panel affirmed a U.S. Tax Court ruling allowing the IRS to extend its three-year deadline to collect $65,000 worth of unpaid taxes from Stephanie Murrin going back to 1993 because her tax preparer intentionally placed false entries on her filings that caused the debt.
Preparer Fraud Case Creates Statute of Limitations Circuit Split - Nathan Richman, Tax Notes ($):
Under section 6501, the IRS normally has three years from when a taxpayer files a return to assert a deficiency on that tax return. However, section 6501(c)(1) says that no statute of limitations on assessment applies to “a false or fraudulent return with the intent to evade tax.”
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The Third Circuit panel found the passive voice language in section 6501(c)(1) to be a persuasive justification for reading the provision to apply even if the fraudulent intent comes from someone other than the taxpayer, according to Montgomery-Reeves.
“Absent from section 6501(c)(1) is any express or implied textual indication that the ‘intent to evade tax’ is cabined to the taxpayer,” Montgomery-Reeves said when looking at the text of the statute in general. Just because the statute addresses someone’s intent to evade the taxpayer’s tax liability doesn’t mean it points to a specific actor, she reasoned.
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Montgomery-Reeves acknowledged the Federal Circuit’s contrary interpretation of section 6501(c)(1) in BASR but said the Third Circuit would “respectfully part ways” in light of a 2023 Supreme Court case supporting the idea that Congress can be “agnostic” about whose intent matters when text is written in passive voice, as it was in section 6501(c)(1).
Ben Peeler, Eide Bailly's Tax Controversy Practice Leader, comments, "So far practically the IRS has refused to consider the hazards of the Federal Circuit ruling so this will make it more difficult as the IRS still considers Allen the rule. More cases will need to be litigated to change things within the IRS ranks." Allen is a 2007 Tax Court case holding that the statue of limitations on a return marred by preparer fraud does not close, even if the client was unaware of the fraud.
Related: Eide Bailly IRS Resolution & Collections.
OBBBA Guidance
European Renewable Stocks Rise After U.S. Tax Credit Guidance - Adam Whittaker, Wall Street Journal:
After the European markets closed on Friday, the U.S. Treasury issued guidance that said projects must begin “physical work of a significant nature” by July 5, 2026, in order to qualify for the tax credits. In doing so, it removed a previous 5% capital expenditure requirement for the project to qualify.
Under the new guidelines, projects must also demonstrate a “continuous program of construction” with work taking no more than four calendar years. However, the rules do allow for delays to permitting, grid interconnection or weather related issues.
Related: Eide Bailly Business Credits & Incentives.
The New Information Reporting Rules for Opportunity Zones 2.0 - Marie Sapirie, Tax Notes ($):
Treasury also got a new job beyond writing rules to implement the information reporting requirements. “As soon as practical” after the date of the OBBBA’s enactment, Congress wants Treasury to issue a public report on QOFs. That report will include the following data: how many QOFs there are; the aggregate dollar amount of assets held in them; a breakdown of the aggregate amount of investments made by QOFs in QOF property by North American Industry Classification System code; the percentage of census tracts designated as a zone; the approximate average monthly number of full-time equivalent employees of QOZ businesses in each tract; the percentage of the total amount of investments made by QOFs in QOZ property, meaning real property and other types of property; the aggregate approximate number of residential units resulting from investments made by QOFs in real property by tract; and the aggregate dollar amount of investments made by QOFs in each tract.
Related: Extension and Permanency for Opportunity Zone Investors - Adam Sweet, Eide Bailly.
IRS & ICE
IRS Sharing Tax Info With ICE Amid Legal Challenge - Kevin Pinner, Law 360 Tax Authority ($):
The IRS is sharing the return information with ICE under an April 7 memorandum of understanding between the U.S. Department of the Treasury and the U.S. Department of Homeland Security, according to a notice filed Aug. 12 in D.C. district court. The notice appeared in a case brought by nonprofit groups that have sought — so far unsuccessfully — to block the IRS from sharing taxpayer information with ICE. The dispute is on appeal at the D.C. Circuit.
Federal Immigration Actions Could Affect State And Local Tax Revenues - Gabriella Garriga & Aravid Boddupalli, Tax Policy Center:
Contrary to some perceptions, an estimated 5.4 million undocumented immigrants pay taxes using individual taxpayer identification numbers (ITINs). But if their households lose eligibility for key tax benefits, they may become less likely to file. This will impact US citizens too: an estimated 2.7 million US citizen children live in single- or two-parent households where the parents are undocumented.
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Taken together, the loss of federal tax benefits and fear of being targeted or deported may reduce tax filing by undocumented immigrants and mixed-status families. One independent estimate suggests that the IRS information-sharing alone could cost the federal government $147 to $479 billion over the next 10 years.
Partnership Reporting Proposal
IRS Floats Changes To Reporting Sale Of Partnership Interest - Kat Lucero, Law 360 Tax Authority ($):
The IRS proposed rules to remove the requirement for partnerships under Internal Revenue Code Section 1.6050K-1(c)(2) to complete Form 8308 after finding that it created "undue burden" for businesses, the agency said in the proposed regulations' preamble.
Blogs and Bits
IRS Issues Applicable Federal Rates (AFR) for September 2025 - Bailey Finney, Eide Bailly:
The Section 7520 rate for September 2025 is 4.80%. Higher Sec. 7520 rates benefit Qualified Personal Residence Trusts (QPRTs) and Charitable Remainder Annuity Trusts (CRATs). Lower Sec. 7520 rates benefit Grantor Retained Annuity Trusts (GRATs), Charitable Lead Annuity Trusts (CLATs) and Private Annuities.
IRS Draft 2026 Form W-2 Offers Insights into Some OBBBA Reporting Issues - Ed Zollars, Current Federal Tax Developments:
The mention of Schedule 1-A suggests that all these deductions will be reported on a new schedule, with the aggregate of such deductions subsequently carried forward to Form 1040. Given that the Draft 2025 Form 1040 has not yet been released, it is highly probable that this new form will debut with the 2025 Form 1040 filings.
IRS accepting applicants for 2026 Compliance Assurance Process - IRS:
Launched in 2005, CAP employs real-time issue resolution through transparent and cooperative interaction between large corporate taxpayers and the IRS to improve federal tax compliance by resolving issues before filing of a tax return.
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See highlights and updates for detailed information on the CAP program for 2026, including updates on audited financial statement requirements. General program information and the 2026 application details are available on the CAP webpage.
The worse news, according to the report, was that “IRS management was aware of the risk of erroneous refunds being issued based on fraudulent Form 941 filings, but did not take action to prevent the scheme.”
Tax Trouble
Rhode Island businessman convicted a second time on tax charges - IRS (defendant name omitted):
Court documents reflect that in March 2019, Defendant submitted documentation to the IRS falsely indicating that he had little or no income. As a result, the IRS did not pursue collections of taxes due at that time. Further, in 2022 Defendant signed an Offer in Compromise to lower his liability for taxes owed for calendar years 2007-2013, knowing that he was understating his actual personal income. The IRS determined that, in fact, Defendant manipulated the finances and business records for a business for which he worked to have it under report his income and conceal his personal expenditures, including over $10,000 on a motorcycle, $100,000 to discharge a debt owed the State of Rhode Island, $12,000 downpayment on a new truck for his wife, and other personal expenditures paid for through the use of a business credit card paid off with funds from business accounts.
What week is it?
It's National Aviation Week!
