The tax environment continues to change quickly, and the first quarter of 2026 brought about significant tax updates. CEOs, CFOs, controllers, and other tax leaders need to consider how these developments may impact their organization. This article breaks down recent developments, focusing on the pivotal U.S. Supreme Court (SCOTUS) ruling on tariffs, the complexities of obtaining tariff refunds, and the potential implications of IRS staff reductions.
SCOTUS Ruling Changes to Tariffs
SCOTUS issued a decision on February 20, 2026 that the president cannot impose tariffs under the International Emergency Economic Powers Act (IEEPA). The justices ruled that the language in IEEPA does not grant taxing power and remains a constitutional power outside presidential reach under this specific act.
Does this mean that tariffs disappear entirely? No. The president can still embargo trade with a country or enact tariffs through other channels. The environment remains highly challenging for importers of record. Since importers of record hold the legal responsibility to pay the tariff, it is important to stay informed on how to prepare for next steps. The broader tariff landscape remains intact.
The Complex Path to Tariff Refunds
As discussed during our Q1 2026 tax webinar, obtaining tariff refunds will likely be challenging and heavily dependent upon documentation. While the SCOTUS decision didn’t detail how refunds should be treated, it did establish that the United States Court of International Trade (CIT) would process these types of cases (rather than district courts). With no specific time frame detailed, the waiting period could possibly take weeks or in some cases, even years. You can find more updated guidance on tariffs in our recent update on the IEEPA tariff refund process.
IRS Staffing Reductions Impact Timelines & Tax Investigations
According to IRS’ news release, “Between the start of the 2025 filing season and June, the IRS workforce decreased from about 102,000 employees to fewer than 76,000, a drop of about 26%.” These IRS staffing reductions can materially affect procedural timelines, refunds, and tax investigations. Major funding cuts, combined with the staff cuts, leave the agency with a less experienced workforce overall than in the past.
Currently, the IRS has been focusing resources on large corporations, ultra-high-net-worth individuals, and partnerships subject to the Bipartisan Budget Act of 2015 (BBA) audit rules. The IRS has also shown recent interest in tax returns reporting merger and acquisition transactions. Because of these constraints and processing delays, claims may be delayed in processing while appeals remain tied up in litigation.
Also impacted by IRS staff reductions, many Employee Retention Credit refund claims are still awaiting processing, with others under examination, pending IRS Independent Office of Appeals conferences, or subject to ongoing litigation.
How Forvis Mazars Can Help
Staying ahead in this fast-changing tax environment is essential. At Forvis Mazars, our experienced Tax team is ready to help you prepare for what’s next and navigate challenges like globalization, economic shifts, and regulatory changes. If you have any questions or need assistance, please reach out to a professional at Forvis Mazars.
Watch our on-demand webinar, “Quarterly Tax Webinar: Q1 2026,” for more information on these topics.
The information set forth contains the analysis and conclusions of the author(s) based upon his/her/their research and analysis of industry information and legal authorities. Such analysis and conclusions should not be deemed opinions or conclusions by Forvis Mazars or the author(s) as to any individual situation as situations are fact-specific. The reader should perform their own analysis and form their own conclusions regarding any specific situation. Further, the author(s)’ conclusions may be revised without notice with or without changes in industry information and legal authorities.