Here is a look at recent tax-related happenings on the Hill, including a bipartisan bill focused on IRS administration and procedure reforms.
Lately on the Hill
Trump Talks Taxes & Tariffs in State of the Union Speech
In his February 24 State of the Union address, President Donald Trump said his administration would expand access to tax‑advantaged retirement savings for workers who lack employer‑sponsored plans. He announced a new account vehicle modeled on the plan available to federal employees and described his intention for an annual savings match of up to $1,000, aimed primarily at low‑income private‑sector workers. The president linked the proposal to existing law, noting that it would allow eligible workers to receive the saver’s match created by the SECURE 2.0 Act of 2022.1
Trump also highlighted other recent tax changes, including new deductions enacted in the One Big Beautiful Bill Act (OB3) and the creation of “Trump accounts” for children.
On trade policy, the president addressed the U.S. Supreme Court’s decision invalidating tariffs imposed under the International Emergency Economic Powers Act (IEEPA), calling the ruling “unfortunate” but emphasizing that it would not alter his broader tariff strategy. He said the administration would rely on other “time-tested and approved” alternative statutory authorities to impose tariffs without the need for new congressional legislation. The president further asserted that tariff revenue could eventually replace income taxes as a primary source of federal funding.
Bipartisan Bill Aims to Reform Tax Administration & Service
Bipartisan legislation released by the Senate Finance Committee’s top tax writers, Sens. Ron Wyden (D-OR) and Mike Crapo (R-ID), would enact a broad package of IRS administration and procedure reforms aimed at improving taxpayer service, strengthening standards for tax preparers, and modernizing agency operations.
Titled the Taxpayer Assistance and Service Act, the bill is supported by the National Taxpayer Advocate Erin Collins: “This bill incorporates dozens of common-sense proposals to make tax administration fairer, more transparent, and more responsive to taxpayers.” 2
Key provisions would accelerate digitization of paper returns to speed refunds, require the IRS to offer callback options across all phone lines by 2028, and enhance online taxpayer accounts to allow electronic responses, return review, and clearer refund status updates. The bill would also expand U.S. Tax Court jurisdiction, bolster the independence of the Taxpayer Advocate Service, and grant the IRS explicit authority to regulate paid tax return preparers.
The Aftermath of the Supreme Court Tariff Ruling
In response to the Supreme Court IEEPA tariff ruling, the administration has pivoted to a global levy paired with alternative pathways to rebuild Trump’s tariff regime. Trump announced a 10% worldwide tariff under Section 122, a provision never previously used, and later said he would raise it to 15% “where appropriate.” Section 122 allows tariffs without a prior agency investigation but caps them at 15% and limits them to 150 days, with exemptions for certain goods already subject to national-security tariffs and for goods covered under the United States-Mexico-Canada Agreement (USMCA).3
Alongside the global tariff, the White House has signaled it may pursue other tariffs under §232 (implemented to protect national security), §301 (implemented to dissuade unfair or discriminatory foreign practices), and other authorities. These options generally only allow limited tariffs for limited periods of time, as well as require investigations—hurdles Trump did not face while imposing tariffs under the IEEPA.
Trump has given warnings to trading partners, threatening steeper tariffs on countries that do not adhere to recently completed trade agreements. Some Republicans are currently considering codifying these agreements.4
The European Union has postponed ratification of its trade deal with the U.S. considering the ruling, seeking clarity from the United States. At the same time, it is providing reassurance that it intends to keep the commitments outlined in the agreement, as long as the U.S. upholds its own.5
On Capitol Hill, Congress has not yet coalesced around a legislative response but is on standby as §122 requires congressional approval to extend tariffs beyond 150 days. Trump’s approach appears to be designed to avoid the legislative fight that would be required to codify tariffs in statute, considering slim GOP majorities, internal Republican divisions over tariffs, and Democratic resistance.6
Meanwhile, companies are lining up to obtain refunds of tariffs paid under IEEPA tariffs, although it may be years until litigation is settled and a process is established to obtain the amounts. The refund process was not detailed in the Supreme Court’s ruling, but Justice Brett Kavanaugh quipped that it will “likely be a mess.”7
From the Courts
IRS Can Assess Penalty Related to Foreign Business Reporting (Safdieh v. Commissioner)
The Second Circuit Court of Appeals has sided with the government in a dispute8 over how the IRS may collect penalties tied to foreign business information reporting. It ruled that the agency can assess the §6038(b) penalty rather than having to file a separate lawsuit to recover it.
The court emphasized that Congress has repeatedly amended the reporting statute over decades without curbing the IRS’ long-standing assessment practice, which the court viewed as a strong signal that lawmakers did not intend to force the agency into an additional “detour” through district court.9
The decision puts the Second Circuit in line with the D.C. Circuit ruling in Farhy v. Commissioner, which previously rejected the U.S. Tax Court’s approach.10
Related-Party Partnership Basis Adjustment Disallowed, Lacked Economic Substance (Otay Project LP v. Commissioner)
The U.S. Tax Court ruled11 in favor of the IRS, disallowing a $714 million deduction claimed by a related-party partnership that the court found was generated through a basis adjustment lacking economic substance. The court held that the restructuring was primarily tax-motivated and failed both the technical requirements of §743(b) and the common-law economic substance doctrine. The decision is significant amid heightened IRS scrutiny of basis shifting among related-party partnerships.12
From Treasury & the IRS
IRS CEO Bisignano to Give Update on OB3, Tax Filing Season
On March 4, IRS CEO Frank Bisignano will appear before the House Ways and Means Committee. As the first to hold the newly formed position, Bisignano will reportedly discuss the implementation of the OB3 and provide an update on the current tax filing season.13
IRS Cancels Union Contracts
Contracts between the IRS and the National Treasury Employees Union (NTEU) will be terminated, the IRS told employees last week. The action follows Trump’s executive order issued last spring, excluding the U.S. Department of the Treasury, among other organizations, from labor-management relations programs. The NTEU represents approximately two-thirds of IRS employees.14
OIRA Completes Review of Trump Account Regs
According to the website for the Office of Information and Regulatory Affairs (OIRA), the organization has completed its review of forthcoming proposed regulations concerning new Trump accounts and the election into the contribution pilot program. This is generally the last step before issuing the guidance to the public.
Released Guidance
Computing Foreign Currency Gain or Loss: Notice 2026-17 announces Treasury and the IRS’ intent to issue forthcoming proposed regulations regarding computing taxable income or loss and foreign currency gain or loss under Internal Revenue Code (IRC) §987. The notice aims to simplify the operations of the §987 regulations, ease compliance, and refine the scope of certain rules to limit their effect on routine transactions. For more information, read our FORsights™ article “IRS Guidance on Section 987 Currency Gain or Loss.”
Adoption Tax Credit: FS-2026-03 provides answers to frequently asked questions concerning refundability and Special Needs Determinations made by tribal governments for the Adoption Tax Credit.
From the States
Oregon: Lawmakers approved legislation to decouple the state tax code from several recent federal tax changes, a move intended to help close a roughly $900 million budget gap while setting up a likely voter referendum led by Republicans. The bill eliminates or scales back state-level adoption of federal provisions such as auto loan interest deductions, a small-business stock exemption, and full bonus depreciation, while preserving deductions for tipped and overtime income. Gov. Tina Kotek is expected to sign the legislation.15
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“Trump Pitches Change to Retirement Savings Match,” taxnotes.com, February 25, 2026.
- 2“Top Senate Tax Writers Float IRS Administration Reforms Bill,” news.bloombergtax.com, February 26, 2026.
- 3“Trump’s Options After Supreme Court Said His Tariffs Are Illegal,” news.bloombergtax.com, February 20, 2026.
- 4“Trump Vows Higher Tariffs for Nations That ‘Play Games’ on Deals,” news.bloombergtax.com, February 23, 2026.
- 5“EU Parliament Suspends U.S. Trade Deal Amid New ‘Tariff Chaos,’” taxnotes.com, February 24, 2026.
- 6“Trump’s Revised Tariff Path Avoids Strong Resistance in Congress,” news.bloombergtax.com, February 20, 2026.
- 7“Tariff Ruling Kicks Off Fight Over $170 Billion in Refunds,” news.bloombergtax.com, February 20, 2026.
- 8Safdieh v. Commissioner, 2nd Cir., No. 25-501.
- 9“Second Circuit Overturns Tax Court on Penalty Assessment Power,” taxnotes.com, March 2, 2026.
- 10Farhy v. Commissioner, 160 T.C. No. 6.
- 11Otay Project LP v. Commissioner, T.C. Memo, 2026-21.
- 12“Tax Court Sides With IRS in Otay Basis Adjustment Case,” taxnotes.com, March 2, 2026.
- 13“IRS CEO to Testify Before House Panel on Filing Season, Tax Law,” news.bloombergtax.com, February 24, 2026.
- 14“IRS Cancels Union Contract, Affecting Thousands of Workers,” news.bloombergtax.com, February 27, 2026.
- 15“Oregon Legislature Approves Decoupling From Federal Tax Cuts,” news.bloombergtax.com, February 26, 2026.