Tax News & Views Weekly Roundup: OBBBA Implementation, Midterms Approach

OBBBA Implementation

Used Cars Denied for Loan Interest Deduction in Final Regs - Trevor Sikes, Tax Notes ($):

Final rules rejected calls to expand the car loan interest deduction to used or nearly new vehicles, but the guidance addressed dealership use of vehicles for test drives and other purposes.

The final regulations (T.D. 10054) issued by Treasury and the IRS September 4 clarified that original use of a vehicle starts with the first customer purchaser, not the dealership, if the vehicle is used as a demonstration car by the dealer.

But if the dealer uses or holds the vehicle for any purpose other than “primarily for the sale of customers in the ordinary course of its trade or business,” then original use may be deemed to have started with the dealership, the final rules added.

Proposed O-Zone Regs Clarify Opportunity Fund Decertification - Trevor Sikes, Tax Notes ($):

Treasury and the IRS are looking to clarify the One Big Beautiful Bill Act’s modifications to the qualified Opportunity Zone reporting obligations and provide a voluntary decertification process for qualified opportunity funds.

The proposed regulations (REG-116506-25), issued September 10, also address numerous areas of the OBBBA’s updated requirements and enforcement mandates concerning QOF return filings and certifications, eligibility testing, and information reporting for QOZ businesses (QOZBs).

The QOZ program, enacted under the Tax Cuts and Jobs Act, was created to allow for and encourage qualified investments in economically distressed areas.

Republicans Sell Tax Law as Midterm Case at Dallas Event - Chris Cioffi, Bloomberg Tax ($):

Rep. Monica De La Cruz (R-Texas) touted the worker-friendly federal breaks on some tipped and overtime income included in the tax law she voted for. And she bragged about the tax credit for older Americans.

“That’s real money for real people,” said De La Cruz, who faces a competitive challenge from Democrat Bobby Pulido, a popular Tejano music singer and songwriter.

Department of Housing and Urban Development Secretary Scott Turner, pointed out parts of the tax law that gave homeowners money back in their pockets with deductions for mortgage insurance, and noted that the law made changes to the Opportunity Zones program.

Trump Accounts Take ESG Investing Crackdown to Kids’ Portfolios - Brett Samuels, Bloomberg Tax ($):

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 Congress

Film Tax Credit Idea Backed by Trump Spurs Bipartisan House Bill - Macon Atkinson, Bloomberg ($):

House tax writers plan to drop a bill next week that would introduce a federal film and television tax incentive after President Donald Trump publicly called for such a measure last month.

Reps. Nathaniel Moran (R-Texas) and Linda Sánchez (D-Calif.), who sit on the Ways and Means Committee, are working on a long-sought bipartisan bill that would infuse the struggling domestic film industry with a 20% to 30% production cost tax incentive.

The incentive would need to pass both the committee and Congress to take effect, though given Trump’s support, it’s something that could theoretically pass this session.

Building a Useful Digital Asset Voluntary Disclosure Program - Nana Ama Sarfo, Tax Notes ($):

A congressional bill seeks to give some of those nonreporting taxpayers a path back into compliance. On June 8 House Ways and Means Committee member Aaron Bean, R-Fla., introduced H.R. 9174, the Digital Assets Voluntary Disclosure Program Act, which would create a two-year voluntary disclosure program allowing taxpayers to correct their digital asset tax violations, pay penalties, and in some cases, receive protection from additional civil penalties and criminal enforcement.

The legislative proposal arrives at an important moment for digital asset tax administration. New broker reporting rules via IRS Form 1099-DA went live during the 2025 tax year, giving the IRS substantially more third-party information about taxpayers’ digital asset sales. At the same time, the national taxpayer advocate has called on the IRS to develop guidance for noncompliant taxpayers whose errors stem from confusion or a lack of information. The advocate also wants the IRS to create a pathway for those taxpayers to correct their mistakes.

IRS Administration and Enforcement

Ex-Treasury Official Defends His Tenure After Controversial Exit - Erin Schilling, Bloomberg Tax ($):

Since Kies left, the IRS has largely dismantled his strategy for tackling abusive conservation easements, a tax scheme involving donating land at inflated values that Kies often rallied against in public speeches during his tenure.

The IRS is now standing up a new Office of Conservation Easements, betting on more tailored deals to cut through the hundreds of cases either under audit or in Tax Court. Kies had promoted a one-size-fits-all settlement offer.

Kies was optimistic, if a little skeptical, that the IRS’s new approach to the schemes would be successful.

“The IRS already had an office that had that responsibility, and it’s called Appeals,” he said.

IRS Hits Snags Using Economic Substance in Transfer Pricing - Michael Rapoport, Bloomberg Tax ($):

One of the IRS’s tools for pursuing companies in transfer pricing disputes is turning out to be harder to use than it looks.

Over the past couple of years, the agency has said it would use the economic substance doctrine — the idea that transactions must have a real business purpose to qualify for tax benefits — to press its case in litigation and audits over transfer pricing, or the way transactions between parts of the same company are priced and taxed.

But the IRS doesn’t seem to have actually done much, tax practitioners say. In the one major transfer pricing court case in which the IRS used the doctrine, against drug company Perrigo Co., the agency lost.

On Wall Street

Wealthy investors are pouring billions into this new tax strategy despite risks - Robert Frank, CNBC:

The tax benefits can be substantial. Casey gives the example of a portfolio with a $1 million investment. With a tax-aware long-short strategy, the portfolio could generate capital losses of $250,000 in the first year, though that would decline over time. For a California-based investor, the $250,000 in losses could be worth up to $137,500 if they’re offsetting short-term capital gains, he said.

Those tax benefits, however, come with risks. Tax attorneys and investment experts say too many wealthy investors are rushing into TALS strategies without fully understanding the details or investment implications. The surge in assets is also attracting scrutiny from tax authorities.

Blogs & Bits

Opportunity Zones: Analyzing the tax incentive’s impacts, and how to enhance them, The Brookings Institution. "These differences suggest that the federal tax incentive’s effects were shaped not only by the flow of OZ capital, but also by local market conditions and complementary state and local policies."

The Destination-Based Cash Flow Tax Remains a Strong Option for US Business Tax Reform, Richard DiSalvo and Guy Cardwell, The Tax Foundation blog. "A DBCFT reduces the tax code’s penalty on investment, narrows its bias toward debt over equity, and removes much of the incentive to shift profits abroad."

Some GOP lawmakers warming to Social Security wage base changes, Kay Bell, Don't Mess With Taxes. "That bleak fiscal outlook finally has a few Republican members talking — out loud and to the media — about raising taxes to help ensure that Social Security continues to pay at its current level."