Tax News & Views Fancy Donuts and Energy Credits Roundup

IRS guidance on new restrictions on clean energy tax credits fails to address some of the most pressing issues tax practitioners say are creating headaches in the tax equity and tax credit transfer markets.

The Treasury Department and IRS Feb. 12 released guidance on the material assistance provision of the prohibited foreign entity rules that restrict tax benefits for clean energy projects if developers have ties to covered nations, such as China and Russia. The guidance answered most questions around supply chain foreign limits, but tax professionals say they need more details around contracts and debt restrictions.

The foreign restrictions largely affect the battery storage and solar industries, which typically rely on Chinese technology. Tax professionals have said the complicated rules created a chilling effect on tax equity investors or companies looking to buy energy tax credits. Developers have spent the past few months rethinking their supply chains and contracts to reduce foreign influence, according to Crux Climate, a tax credit transfer platform.

A group of Senate Democrats want to repeal Treasury guidance that makes it more challenging for wind and solar energy companies to claim clean energy production and clean electricity investment tax credits.

Senate Finance Committee ranking member Ron Wyden, D-Ore., Finance Committee member Catherine Cortez Masto, D-Nev., and Senate Minority Leader Charles E. Schumer, D-N.Y., announced a Congressional Review Act (CRA) resolution February 13 to challenge Notice 2025-42, 2025-36 IRB 351, issued August 2025, which eliminated a beginning-of-construction safe harbor for larger solar facilities and all wind facilities.

The U.S. Treasury Department's move to allow domestic clean fuel producers selling to intermediaries to qualify for the production tax credit under newly released proposed rules recognizes the industry's commercial realities and clears up uncertainty that had been hindering the market, practitioners said.

In proposed regulations this month, the department specified that producers selling to unrelated companies — such as wholesalers, distributors and dealers that resell the fuel — are eligible to claim the clean fuel production tax credit under Internal Revenue Code Section 45Z.

Extending the now-expired Affordable Care Act tax credit was, for months, one of the most pressing issues on Capitol Hill, but efforts to revive it have largely faded, leaving little hope for the roughly 20 million affected Americans.

The enhanced premium tax credit, which expired at the end of 2025, was at the center of last fall’s record-long government shutdown. Most Senate Democrats refused for 43 days to vote to reopen the government without an agreement to extend the tax credit. But their efforts were ultimately unsuccessful, and momentum to find a bipartisan solution has petered out.

A group of Democratic lawmakers is asking Treasury and the IRS to detail their plans to expand the use of Free File following the end of Direct File program, as the 2026 filing season heats up.

Eight lawmakers, led by Senate Finance Committee members Elizabeth Warren, D-Mass., and Angus S. King Jr., D-Maine, asked for more information on how Treasury plans to improve Free File — a long-standing partnership between the IRS and various tax software companies — citing the program’s historically low participation rate and participants’ track record of “engaging in misleading conduct.”

The Internal Revenue Service's recent admission that a faulty system improperly shared taxpayer records with U.S. Immigration and Customs Enforcement vindicates long-standing warnings about privacy and data protection risks, Senate Democrats said.

There was no verification from the IRS that the information it disclosed to Immigration and Customs Enforcement belonged to the correct taxpayers, eight senators said Thursday in a letter to acting Internal Revenue Commissioner Scott Bessent and Homeland Security Secretary Kristi Noem, who oversees the immigration enforcement agency. The Senate Finance Comittee released the letter Friday.

Congressional Democrats are demanding answers from Treasury about a taxpayer data sharing agreement that resulted in the IRS erroneously giving U.S. Immigration and Customs Enforcement the confidential information of 47,000 taxpayers.

In a February 12 letter, 17 Democratic members of the House Ways and Means Committee urged the Treasury Inspector General for Tax Administration to investigate the agreement, calling it “another example of the Trump administration recklessly and unlawfully violating the rights of immigrants and working families.”

And in a separate February 12 letter, Senate Finance Committee ranking member Ron Wyden, D-Ore., and several other Senate Democrats raised concerns that the system created by the Trump administration to transfer taxpayer data to ICE may have misidentified a large, unknown number of taxpayers in response to ICE inquiries.

The pending highway bill gives Congress another chance to close a growing gap between how much cash the government brings in and how much it spends on transportation projects nationwide, but political barriers remain formidable.

Spending from the Highway Trust Fund, which supports roads, bridges, and other infrastructure, has outpaced revenue for two decades. Congress has covered multiyear surface transportation measures with hundreds of millions of dollars from the general fund, most recently in 2021 as part of the bipartisan infrastructure law.

Current authorizations run out Sept. 30, and lawmakers will once again be scrambling to bridge the gap.

Organizations and professionals have told Treasury and the IRS that the proposed rules on investments by foreign governments may complicate existing business structures and stifle U.S. investment.

In December 2025 Treasury and the IRS issued proposed regs (REG-101952-24) on determining the scope of commercial activity and when a foreign government is deemed to have effective control of an entity. They also released final and temporary regs (T.D. 10042) that consolidate and expand on previously released guidance on the section 892 tax exemption for foreign governments' qualified U.S. investments.

Horse racing, one of America’s oldest sports, has repeatedly been left for dead. Worries over animal safety, cheating scandals and competition from online gambling have undermined racing’s appeal.

But lately, horse racing is seeing a renaissance. Last year, owners spent nearly $1.5 billion in pursuit of fast racehorses in North America, a nearly 21 percent increase from 2024. The Keeneland September Yearling Sale, one of the premier horse auctions, set a global record with $531.5 million in total sales, up nearly 24 percent from the year before.

But a big impetus of the recent cash infusion into the Sport of Kings has come from a tax break tucked away in President Trump’s One Big Beautiful Bill, which he signed into law last summer.

The tax provision — called a bonus depreciation — means businesses can immediately deduct the full cost of certain assets, like machinery and equipment, and enhance their cash flow.