Here’s a look at recent tax-related happenings on the Hill, including the Trump administration appealing a circuit court’s decision regarding the legality of certain tariffs.
Lately on the Hill
Congress Speaking With Businesses Still Waiting for Employee Retention Credits
Congressional members from the Senate Finance Committee and the House Ways and Means Committee reportedly met with organizations representing thousands of businesses still waiting for their Employee Retention Credit (ERC) claims to be processed.
Movement on the claims has been slow since the IRS restarted processing claims after a temporary pause that ended in August 2024. As of April 2025, about 597,000 claims had not yet been processed.1
Tariff Ruling Appealed to the U.S. Supreme Court
The Trump administration has appealed a circuit court’s decision on the legality of certain tariffs to the U.S. Supreme Court. The contested ruling came on August 29, 2025, finding the imposition of tariffs by President Donald Trump under the International Emergency Economic Powers Act (IEEPA) as illegal.
The administration asserts in its petition for writ of certiorari, “IEEPA authorizes the President to ‘regulate’—i.e., to govern or control—foreign imports to address national emergencies. Imposing tariffs is a quintessential method of governing or controlling imports.”
The administration has provided that tariffs are necessary to address the nation’s trade deficit and stop the flow of fentanyl trafficking.
A request for an expedited ruling was also delivered, stating, “The en banc Federal Circuit’s erroneous decision has disrupted highly impactful, sensitive, ongoing diplomatic trade negotiations, and cast a pall of legal uncertainty over the President’s efforts to protect our country by preventing an unprecedented economic and foreign-policy crisis.”
The IEEPA tariffs imposed on countries including China, India, Mexico, and Canada will end October 14, 2025 unless the Supreme Court issues a stay on the order pending a decision.
Reciprocal Tariffs Modified & Tariffs on Semiconductors Coming Soon
The White House released a fresh executive order and fact sheet removing items subject to reciprocal tariffs. These items include bullion-related articles, certain critical minerals, and pharmaceutical products.
Meanwhile, some goods are no longer exempt from tariffs, including certain aluminum hydroxide, resin, and silicone products.
The full listing of changes are found in Annex II of the executive order and are effective September 8, 2025.
The executive order also provides a list of products to which the administration is willing to apply the Most-Favored-Nation tariff if a trade deal is struck. The list consists of aircraft and aircraft parts, certain generic pharmaceuticals and their ingredients, unavailable natural resources and closely related derivate products, and certain agricultural products.
Last week, Trump also foretold of impending tariffs on semiconductor imports during a White House dinner with technology companies. “I’ve discussed it with the people here, chips and semiconductors, and we’ll be putting tariffs on companies that aren’t coming in,” Trump said. “We’ll be putting a tariff very shortly. You probably are hearing we’ll be putting a fairly substantial tariff, or not that high, but fairly substantial tariff.”2
Trade Deal Implemented With Japan
Just a few days after the IEEPA tariff decision, the White House issued an executive order to implement a trade agreement with Japan. The framework of the deal was agreed to in late July, showcasing a $550 billion investment into the U.S. by Japan.
According to a fact sheet accompanying the deal, the U.S. will reduce tariffs on Japan to 15%, including for automobiles and automobile parts. In return, Japan will make the aforementioned $550 billion investments into the U.S., make purchases of U.S. energy totaling $7 billion per year, and provide increased market access to U.S. automobile manufacturers, among other commitments.
From the Judiciary
Transfer Pricing Case Gets Fresh Remand From Appeals Court. Medtronic, Inc. v. Commissioner, 8th Cir., Nos. 23-3063 & 23-3281.
The Eighth Circuit Court of Appeals has once again vacated a U.S. Tax Court ruling and remanded the case involving Medtronic’s calculation on transfers of intellectual property with an offshore subsidiary. At issue is the best method for determining an arm’s-length price for intangible property transferred between related entities.
The IRS argues for the comparable profits method (CPM), which “evaluates whether the amount charged in a controlled transaction is arm’s length based on objective measures of profitability (profit level indicators) derived from uncontrolled taxpayers that engage in similar business activities under similar circumstances” under Section 1.482-5(a).
Medtronic favors the comparable uncontrolled transaction (CUT) method, which “evaluates whether the amount charged for a controlled transfer of intangible property was arm’s length by reference to the amount charged in a comparable uncontrolled transaction” under §1.482-4(c)(1).
The tax court rejected both methods, opting for an unspecified three-step method to which both parties disagreed and appealed to the Eighth Circuit. The regulations require the transaction to be determined under the “best method,” which is “the method that, under the facts and circumstances, provides the most reliable measure of an arm’s length result,” according to §§1.482-4(a)-1(c)(1).
The appellate court directed the tax court to consider “sufficient similar[ities]” to proposed comparable companies, purported differences in asset bases, quantify product liability risk with comparable companies and evaluate materiality differences with respect to profits earned, and determine whether manufacturing the devices in a different facility or building a new facility was a realistic alternative.
While the ruling is not an outright win for the IRS, the court rejected Medtronic’s use of the CUT method within the facts of the case and leaned more favorably toward the use of the CPM.3
From Treasury & the IRS
Regulatory Agenda Re-Released
The Spring 2025 Treasury Rule Agenda was re-released with plans for new regulations on digital assets, international tax, and transfer pricing.4 The agenda also includes plans for proposed regulations to remove final rules on partnership related-party transactions as transactions of interest.
IRS Budget & Assistance Centers Facing Cuts
The agency faces a $2.8 billion reduction in funding in an appropriations bill passed by the House Appropriations Committee by a 35-to-28 vote. $2.4 billion would come out of the enforcement budget, while technology and operations support would see a $350 million reduction.5
Reportedly, notices were sent to congressional members detailing plans to close nine IRS taxpayer assistance centers effective November 30, 2025. Closing locations include Altoona, Pennsylvania; Wilkes-Barre, Pennsylvania; Cedar Rapids, Iowa; Elmira, New York; West Nyack, New York; Owensboro, Kentucky; Paducah, Kentucky; Walnut Creek, California; and Wheeling, West Virginia.6
Leadership Updates
The Senate Finance Committee has scheduled a hearing on September 10 on the nomination of Donald Korb as IRS chief counsel. Kenneth Kies has been serving as acting chief counsel since June while simultaneously serving as the assistant secretary for tax policy. In addition to his work in the private sector, Korb had previously served as an assistant to the IRS commissioner and attorney-adviser in the chief counsel’s office.7
Acting IRS Commissioner of the Large Business and International Division Jennifer Best vacated her position last week. Mabeline Baldwin will take over while retaining her job as director of the Eastern Compliance Practice Area.8
Released Guidance
Proposed Regulations (REG-129260-16) have been determined to be unnecessary and withdrawn. The guidance released in March 2018 proposed to authorize the U.S. Department of State to disclose returns and related information to contractors who assist in revoking or denying passports of delinquent taxpayers. Treasury and the IRS wrote that the proposed regulations are unnecessary due to existing authorization under §301.6103(n)-1(a)(2)(ii).
This newsletter features developing content that is subject to change at any time. It does not constitute legal or tax advice. Consult your professional advisors prior to acting on the information set forth herein.
- 1“Businesses Waiting for ERC Money Ramp Up Pressure on Congress,” taxnotes.com, September 3, 2025.
- 2“Trump Says ‘Fairly Substantial’ Chips Tariffs Coming Shortly,” bloomberglaw.com, September 4, 2025.
- 3“Medtronic Ruling Bolsters IRS-Favored Transfer Pricing Method,” bloomberglaw.com, September 5, 2025.
- 4“Trump Administration Reposts Treasury, IRS Regulatory Agenda,” bloomberglaw.com, September 4, 2025.
- 5“House Panel Advances Bill to Cut IRS Enforcement Funding,” bloomberglaw.com, September 3, 2025.
- 6“IRS Plans to Shutter Taxpayer Centers Angers GOP Lawmaker,” bloomberglaw.com, September 4, 2025.
- 7“Senate Schedules Hearing for IRS Chief Counsel Nominee,” taxnotes.com, September 4, 2025.
- 8“Acting IRS Large Business Unit Head Becomes Latest to Depart,” bloomberglaw.com, September 4, 2025.