Key Takeaways
- Trump administration examines nonprofit status of schools over diversity programs.
- More on the IRS conservation easement overhaul.
- Senate Democrats react to Treasury exempt organization plan.
- IRS has spent most of 2022 modernization funding.
- National Food Bank Day.
Non-Profit Development
New IRS proposal threatens universities' tax-exempt status over diversity programs - Brian Faler, Politico:
The proposed regulations released by the IRS are aimed at preventing discrimination on the basis of race and could affect up to 18,000 high schools, universities and trade schools, the agency said. Around 750,000 students who qualify for scholarships tied to race, ethnicity or national identity could be affected, the department estimates.
The proposed rules would apply to the schools’ admission decisions, how they dole out scholarships and loans, how their programs are run, and other policies. They could also hurt schools’ fundraising because their tax exemptions allow donors to deduct their gifts from their tax bills.
The proposed rules would apply to the schools’ admission decisions, how they dole out scholarships and loans, how their programs are run, and other policies. They could also hurt schools’ fundraising because their tax exemptions allow donors to deduct their gifts from their tax bills.
Conservation Easement Update
IRS Reworks Embattled Conservation Easement Strategy: Explained - Erin Slowey, Bloomberg Tax ($):
The announcement marks an attitude shift from how the IRS has spoken about easements in the last year, with the agency now saying it recognizes the “important role conservation and historic preservation easements can play” and acknowledges some of the difficulties when trying to take the settlement offer.
The agency generally had taken a hard stance against syndicated easements. Ken Kies, the assistant secretary for tax policy who was a driver behind the scrapped settlement agreement from the IRS, left the job earlier this summer. He was a staunch critic of the tax arrangement.
It was a soured strategy that put off many easement investors who thought the IRS was taking an extreme approach with land valuations.
The agency generally had taken a hard stance against syndicated easements. Ken Kies, the assistant secretary for tax policy who was a driver behind the scrapped settlement agreement from the IRS, left the job earlier this summer. He was a staunch critic of the tax arrangement.
It was a soured strategy that put off many easement investors who thought the IRS was taking an extreme approach with land valuations.
Congress
Treasury Pushes Back on Democrats’ Private Jet Tax Crackdown Ask - Chris Cioffi, Bloomberg Tax ($):
A Treasury Department official denied a request from Senate Democrats to close a tax break for private jet owners, arguing it would be administratively burdensome for both taxpayers and the IRS.
Senate Democrats, led by Sen. Sheldon Whitehouse (D-R.I.), ripped Treasury’s August response in a Thursday statement, accusing the Trump administration of being “hell-bent on using the powers of government to make the ultra-rich even richer.”
Whitehouse and other Senate Democrats called on Treasury Secretary Scott Bessent and IRS CEO Frank Bisignano in a July letter to close a tax break that they said allows private jet owners to undervalue personal travel on corporate aircraft.
Senate Democrats, led by Sen. Sheldon Whitehouse (D-R.I.), ripped Treasury’s August response in a Thursday statement, accusing the Trump administration of being “hell-bent on using the powers of government to make the ultra-rich even richer.”
Whitehouse and other Senate Democrats called on Treasury Secretary Scott Bessent and IRS CEO Frank Bisignano in a July letter to close a tax break that they said allows private jet owners to undervalue personal travel on corporate aircraft.
Senate Finance Democrats to Investigate Alleged EO Targeting - Kelsey Brooks, Tax Notes ($):
Two Senate Democratic taxwriters are launching an inquiry into reports that the IRS is planning on targeting the exempt status of certain nonprofits ahead of the 2026 midterm elections.
In a September 2 letter, Senate Finance Committee ranking member Ron Wyden, D-Ore., and committee member Raphael G. Warnock, D-Ga., questioned Treasury Secretary Scott Bessent and IRS CEO Frank Bisignano on allegations “that senior Treasury officials are developing plans to target left-leaning tax-exempt organizations with IRS enforcement scrutiny and potentially revoke their tax-exempt status.”
The New York Post reported August 27 that Treasury officials were reviewing the tax-exempt status of organizations perceived to be opposed to the Trump administration, including Open Society Foundations, the Southern Poverty Law Center, and the Council on American-Islamic Relations.
In a September 2 letter, Senate Finance Committee ranking member Ron Wyden, D-Ore., and committee member Raphael G. Warnock, D-Ga., questioned Treasury Secretary Scott Bessent and IRS CEO Frank Bisignano on allegations “that senior Treasury officials are developing plans to target left-leaning tax-exempt organizations with IRS enforcement scrutiny and potentially revoke their tax-exempt status.”
The New York Post reported August 27 that Treasury officials were reviewing the tax-exempt status of organizations perceived to be opposed to the Trump administration, including Open Society Foundations, the Southern Poverty Law Center, and the Council on American-Islamic Relations.
One Big Beautiful Bill Act Implementation
How Trump’s Big Beautiful Bill Boosted a Tiny-Home Tax Shelter - Lauren Loricchio and Chandra Wallace, Tax Notes ($):
What sounds like a good deal might be too good to be true. If it is, buyers might get stuck with a large tax bill, penalties, and an underwater asset. But that's only if the IRS tries to stop it.
“The IRS is always playing catch up to emerging schemes, so . . . by the time they catch up, a lot of times if it is a scheme, the promoters are on to something different,” said former IRS Criminal Investigation Division agent Jonathan Schnatz of Withum Smith+Brown PC.
Leandra Lederman of the Indiana University Maurer School of Law also said the budget and staffing cuts at the IRS hinder its ability to react.
“It has really been hamstrung,” Lederman said. “It’s going to be slower at moving on things like this.”
“The IRS is always playing catch up to emerging schemes, so . . . by the time they catch up, a lot of times if it is a scheme, the promoters are on to something different,” said former IRS Criminal Investigation Division agent Jonathan Schnatz of Withum Smith+Brown PC.
Leandra Lederman of the Indiana University Maurer School of Law also said the budget and staffing cuts at the IRS hinder its ability to react.
“It has really been hamstrung,” Lederman said. “It’s going to be slower at moving on things like this.”
IRS Finalizes Rule to Implement Auto Loan Interest Tax Break - Erin Slowey and Michael Rapoport, Bloomberg Tax ($):
The IRS finalized rules on the car loan interest tax deduction from the GOP’s tax-and-spending law Friday.
The rules implement the newly created tax break from the multitrillion-dollar law that President Donald Trump signed in July 2025. The tax benefit is meant to shrink the costs of purchasing a new car for households while also strengthening the auto industry.
Certain taxpayers can deduct up to $10,000 in car loan interest on their tax return for vehicles purchased between 2025 and 2028. The law also established reporting requirements for businesses that receive individual interest of $600 or more on certain loans.
The rules implement the newly created tax break from the multitrillion-dollar law that President Donald Trump signed in July 2025. The tax benefit is meant to shrink the costs of purchasing a new car for households while also strengthening the auto industry.
Certain taxpayers can deduct up to $10,000 in car loan interest on their tax return for vehicles purchased between 2025 and 2028. The law also established reporting requirements for businesses that receive individual interest of $600 or more on certain loans.
IRS Funding
IRS Has Already Spent 64% of Modernization Funds From 2022 Law - Macon Atkinson, Bloomberg Tax ($):
The IRS spent about $16.5 billion, or 64%, of its funding from the 2022 tax-and-climate law by March 31, the agency’s watchdog found in a new report.
Employee compensation was the largest expenditure at $7.7 billion, followed by $5.4 billion for contractor advisory and assistance services, according to the Treasury Inspector General for Tax Administration. The IRS also spent approximately $11.6 million in fiscal year 2023 to study the direct e-file tax program, which explored the feasibility of a public electronic filing tool championed by progressives like Sen. Elizabeth Warren (D-Mass.).
The IRS initially received $79 billion in supplemental funding in 2022 under the Biden administration, but the funds had slowly been clawed back over time. By March 2026, the Republican-led Congress had reduced this funding by $53.4 billion, leaving $26 billion available through Sept. 30, 2031.
Employee compensation was the largest expenditure at $7.7 billion, followed by $5.4 billion for contractor advisory and assistance services, according to the Treasury Inspector General for Tax Administration. The IRS also spent approximately $11.6 million in fiscal year 2023 to study the direct e-file tax program, which explored the feasibility of a public electronic filing tool championed by progressives like Sen. Elizabeth Warren (D-Mass.).
The IRS initially received $79 billion in supplemental funding in 2022 under the Biden administration, but the funds had slowly been clawed back over time. By March 2026, the Republican-led Congress had reduced this funding by $53.4 billion, leaving $26 billion available through Sept. 30, 2031.
CAMT
NYSBA Floats Fixes to CAMT Guidance for Distressed Companies - Edward Beeby, Tax Notes ($):
Treasury should rely more heavily on regular tax principles when applying the corporate alternative minimum tax to liabilities and distressed companies, according to the New York State Bar Association Tax Section.
In an August 31 report, NYSBA urged Treasury to address a growing set of corporate AMT guidance questions as it prepares to repropose comprehensive regulations.
NYSBA said the existing guidance has moved toward regular tax principles in some distressed company contexts but still leaves taxpayers and the government to administer overlapping book, tax, and corporate AMT-specific liability rules. The current hybrid approach remains too complex and incomplete, it said.
In an August 31 report, NYSBA urged Treasury to address a growing set of corporate AMT guidance questions as it prepares to repropose comprehensive regulations.
NYSBA said the existing guidance has moved toward regular tax principles in some distressed company contexts but still leaves taxpayers and the government to administer overlapping book, tax, and corporate AMT-specific liability rules. The current hybrid approach remains too complex and incomplete, it said.
Blogs & Bits
Treasury's Proposed Refundable Tax Credit Rule Would Have Unintended Consequences, Aravind Boddupalli, Margot Crandall-Hollick, The Tax Policy Center TaxVox blog. "More broadly, the rule could carry costs for taxpayers that policymakers ought to consider."
IRS Enforcement Revenue Fell To $93.8 Billion In 2025, Kelly Phillips Erb, Taxgirl. "Taxpayers paid a record amount to the IRS in fiscal year 2025, but the amount collected through enforcement moved in the opposite direction."
Getting Crypto Tax Reform Right Means Prioritizing Neutrality, Garrett Watson, The Tax Foundation blog. "As policymakers pursue reforms, they should prioritize neutrality between digital assets, legacy investment assets, and novel opportunities that have yet to mature."
What Day Is It?
It's National Food Bank Day! A good day to remember how easy it is to help others achieve a full belly and some peace. See how to donate to your local food bank here.
Every organization deserves to realize its full potential. Let us help you find yours.
Learn More