Here is a look at recent tax-related happenings on the Hill, including the postponement of a U.S.-China summit that extends trade negotiation uncertainty.
Lately on the Hill
EU Moves to Revive U.S. Trade Deal as Tariff Uncertainty Persists
The European Union (EU) is moving to restart its ratification process for a long-delayed trade deal with the U.S. that could set the deal up for final approval after months of postponement.1 The ratification push arrives as U.S. Trade Representative Jamieson Greer opened new trade investigations involving the EU that could lead to additional tariffs, signaling a shifting environment for transatlantic trade planning. EU lawmakers are preparing for a vote on the agreement next week.2
U.S.-China Summit Delayed, Extending Trade Negotiation Uncertainty
U.S. President Donald Trump announced his summit with Chinese President Xi Jinping is postponed amid uncertainty of trade negotiations between the two countries.3 The delay arises as the administration’s trade position remains active, including ongoing trade investigations led by Greer. Trump said the postponed China summit has been “reset” and suggested it could occur in mid‑May.4
From the Courts
Tax Court Limits Partnership Challenges Under Centralized Audit Regime (Jones Bluff, LLC v. Commissioner)
The U.S. Tax Court5 held that a partnership subject to the centralized audit regime lacked standing to assert its partners’ Fifth Amendment due process claims in a challenge to the IRS audit process.6 The partnership sought to challenge the IRS audit regime on constitutional due process grounds asserted on behalf of its partners. The court’s opinion held the ruling limits the ability to litigate partners’ constitutional claims in partnership-level proceedings under the regime.
Ninth Circuit Rejects Bid to Block IRS ERC Claim Disallowance Program (ERC Today, LLC v. McInelly)
The Ninth Circuit Court7 affirmed a lower court’s refusal to issue an injunction against an IRS Employee Retention Credit (ERC) claims screening process known as the Disallowance During Processing (DDP) program.8 The court held the plaintiffs, two tax preparation firms, failed to show a concrete injury sufficient for Article III standing at the preliminary-injunction stage, leaving the IRS’ current ERC claims approach in place for now.
From Treasury & the IRS
GAO Warns IRS Has No Plan to Reduce Correspondence Backlog
The Government Accountability Office (GAO) reported that the IRS’ taxpayer correspondence backlog remained above pre-pandemic levels at the end of the 2025 filing season and fiscal year 2025, and noted the agency does not have a plan to reduce that inventory.9 The GAO noted that the agency continued balancing demand for phone service against written taxpayer correspondence and warned that, without a plan, the agency risks providing less timely taxpayer service in future filing seasons.
The GAO further reported that IRS filing season performance was similar to prior years: The IRS did not meet its 13-day goal to process paper returns but improved from 20 days in 2024 to 16 days in 2025 and answered about 9 million phone calls in both years. The GAO recommended that the IRS implement a backlog reduction plan, establish an implementation team to manage agency reform efforts, and update its strategic workforce plans. IRS officials told the GAO that a new workforce plan is in development and prior plans are on hold.
Treasury Outlines Timeline for International Tax Regulations Under 2025 Law
Kevin Salinger, deputy assistant secretary for tax policy at the U.S. Department of the Treasury, said Treasury plans to issue proposed regulations addressing the international provisions in Republicans’ 2025 tax law.10 He added that Treasury hopes to finalize regulations for provisions with a 2025 effective date by the end of 2026.
Salinger identified several priority areas, including the pro‑rata share rule under Section 951(a), expense allocation rules under §§904 and 250, and the new §951(B) regime for taxing U.S. shareholders of certain foreign affiliates. Salinger also referenced additional projects tied to the administration’s agenda, including work on §871(m) regulations, foreign tax credit regulations that were previously suspended, and regulations addressing foreign currency gain/loss under §987.
Treasury Describes U.S. Approach to Digital Tax in Pillar 1
Rebecca Burch, Treasury deputy assistant secretary for international tax affairs, said the U.S. views the ongoing Pillar 1 discussions on taxing the digital economy as “constructive dialogue” and described those discussions as a “box.”11 Burch used “box” to describe the defined scope of issues under discussion as negotiations continue, i.e., what topics are in scope for Pillar 1. In addition, Burch said the U.S. will not dictate what is included in that “box” as talks continue. Burch described the discussions as focused on how to address the tax challenges of the digital economy.
OECD Targets Mid-Year Timing for Additional Pillar 2 Guidance
Manal Corwin, director of the Organisation for Economic Co-operation and Development’s (OECD) Centre for Tax Policy and Administration, said the organization is aiming to release additional Pillar 2 global anti-base erosion rules guidance by mid-year 2026.12 Corwin added that the guidance is not expected to include the permanent routine profits safe harbor. Specifically, the near-term update is described as additional administrative interpretive guidance, but not the release of that specific permanent safe-harbor component.
IRS Signals Possible Updates to Research Credit Documentation Rules
The IRS is evaluating potential changes to the research credit documentation reporting form to reduce administrative burden.13 Treasury and the IRS plan to revise the form to address conflicting guidance on the use of statistical sampling to quantify and substantiate qualified research expenditures.14 These developments come as IRS instructions for Form 6765 continue to emphasize more detailed reporting: for tax years beginning before 2026, Section G is optional for all filers, but for tax years beginning after 2025, Section G is required, subject to the instructions’ guidelines.
In addition, IRS guidance on research credit claims for refund underscores the need for “sufficient facts” to support a claim, including identifying the relevant business components and research activities and providing totals of qualified wage, supply, and contract research expenses, which may be provided using Form 6765.
Separately, IRS audit guidance notes that statistical sampling may be used for efficiency, but it does not necessarily limit the scope of an examination; examiners may still request records sufficient to substantiate all expenses and activities to which the credit claim relates, even beyond the items sampled.
Released Guidance
April 2026 AFRs: Revenue Ruling 2026-07 provides the April 2026 applicable federal rates (AFR), adjusted AFR, adjusted federal long‑term rate and long‑term exempt rate, percentages for determining the low‑income housing credit, and the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or reversionary interest.
Corporate Bond Monthly Yield Curve: Notice 2026-19 sets forth the February 2026 corporate bond monthly yield curve and corresponding spot segment rates, the 24‑month average corporate bond segment rates applicable for March 2026, and the 30‑year Treasury securities interest rates and weighted average rates.
Business Interest Limitation and Bonus Depreciation Election: Revenue Procedure 2026-17 provides guidance to withdraw the election made as an excepted trade or business for the purposes of the business interest limitation and exemption from bonus depreciation. The revenue procedure also provides guidance on the election or revocation of a controlled foreign corporation (CFC) group elected under the business interest limitation. Identified taxpayers are allowed to withdraw previously made elections under §163(j) and make the related depreciation adjustments or make a late election out of applying bonus depreciation. For additional background and practical considerations, see our FORsights™ alert, “Transition Relief for §163(j) Business Interest Deduction.”
Digital Asset Relief: Notice 2026-20 extends temporary relief for adequate identification of broker‑custodied digital asset units for an additional year. During the relief period, eligible taxpayers may identify lots using alternative methods (including taxpayer books-and-records identification or a recorded standing order), rather than having to communicate the identification to the broker for each transaction.
Qualified Nonpersonal Use Vehicles (final regs): Final regulations (T.D. 10043) expand the qualified nonpersonal use vehicle rules to include certain unmarked firefighter, rescue squad, and ambulance crew vehicles for §274 substantiation purposes.
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“EU to Restart Process to Ratify US Trade Deal After Block,” news.bloombergtax.com, March 17, 2026.
- 2“EU Lawmakers to Vote on Trade Agreement with US Next Week,” news.bloomberg.com, March 20, 2026.
- 3“Trump Expects Xi Summit in ‘Five or Six Weeks’ as War Rages,” news.bloomberg.com, March 17, 2026.
- 4“Trump Says China Meeting ‘Reset’ After Delay Amid Iran War,” news.bloombergtax.com, March 20, 2026.
- 5Jones Bluff LLC v. Commissioner; No. 577-24; 166 T.C. No. 6.
- 6“Tax Court: Partnerships Can’t Raise Partners’ Due Process Claims,” taxnotes.com, March 20, 2026.
- 7ERC Today, LLC v. McInelly; No. 25-2642 (9th Cir. March 17, 2026) (mem.).
- 8“ERC Claim Processors’ Injunction Denial Upheld,” taxnotes.com, March 19, 2026.
- 9“IRS Found to Lack Plan to Shrink Taxpayer Correspondence Backlog,” news.bloombergtax.com, March 16, 2026.
- 10“International Regulations Under GOP Tax Law Coming by Year-End,” news.bloombergtax.com, March 19, 2026.
- 11“U.S. Not Dictating What to Put in Pillar 1 Talks, Burch Says,” taxnotes.com, March 20, 2026.
- 12“OECD Aiming to Release More Pillar 2 Tax Guidance by Midyear,” taxnotes.com, March 20, 2026.
- 13“IRS Mulling Tweak to Panned R&D Tax Credit Form Requirement,” news.bloombergtax.com, March 17, 2026.
- 14“IRS to Update Research Credit Form Rules for Stat Sampling,” taxnotes.com, March 18, 2026.