Here is a look at recent tax-related happenings on the Hill, including the House passing four bipartisan taxpayer protection bills.
Lately on the Hill
House Committee Advances Crypto Tax Legislation as Senate Effort Stalls
The House Ways and Means Committee on September 16 approved the bipartisan Digital Asset Tax Certainty Act (H.R. 13057) by a 38-to-5 vote, advancing a package of digital asset tax provisions to the full House. The bill would establish federal tax rules for a variety of cryptocurrency transactions, including provisions addressing digital asset reporting, wash sales, mining and staking activities, and a de minimis rule for certain transactions. Because the House is now in recess until after the November elections, further consideration is expected during the post-election lame-duck session.1 For additional details on the legislation, see our FORsights™ article, “Ways & Means Approves Digital Asset Tax Certainty Act.”
Meanwhile, the broader Senate Digital Asset Market Clarity Act (H.R. 3633) failed to clear a key procedural hurdle on September 15. The legislation received only 49 votes, short of the 60 votes needed to advance, after Republicans and Democrats remained divided over ethics provisions and other policy concerns.2 Following the vote, the U.S. Commodity Futures Trading Commission submitted a prerule to the Office of Information and Regulatory Affairs for review titled, “Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets.” The text has not yet been publicly released.
The House bill also incorporates provisions from the FULL HOUSE Act (H.R. 6985), which would restore the ability of taxpayers to deduct 100% of gambling losses against gambling winnings. The One Big Beautiful Bill Act reduced that deduction to 90%, a change that drew criticism because taxpayers could owe tax despite breaking even on their wagering activity.3
House Passes Bipartisan Taxpayer Protection Package
The House passed four bipartisan taxpayer protection bills on September 15 designed to provide relief for fraud victims and strengthen taxpayer rights.4 The measures would expand relief for taxpayers suffering fraud-related losses (H.R. 9500), postpone tax deadlines for hostages and wrongfully detained Americans (H.R. 9496), clarify the scope of the statute of limitations for fraudulent returns (H.R. 9499), and allow the National Taxpayer Advocate to participate as an amicus curiae in federal court proceedings (H.R. 9498). The legislation now moves to the Senate for consideration.
Congress Sends ESOP Legislation to the President
Legislation (S. 2403) designed to expand employee ownership opportunities has cleared Congress and been sent to President Donald Trump for signature.5 The bill would provide statutory guidance on the adequate consideration requirements that apply when employee stock ownership plans (ESOPs) acquire employer stock. ESOP fiduciaries would be allowed to rely on independent appraisers using the valuation principles outlined in Revenue Ruling 59-60 when determining the fair market value of stock in closely held companies, addressing long-standing uncertainty and litigation risk surrounding ESOP transactions.
Penny Rounding Legislation Passes
Following the end of U.S. penny production, Congress is moving to establish a uniform federal standard for rounding cash transactions to the nearest nickel.6 Bipartisan legislation (H.R. 10167) advanced from the House would permit businesses to round cash purchases up or down based on the final cents of the transaction while leaving electronic payments unchanged. The bill would provide a safe harbor for businesses that follow the federal rules, addressing concerns about differing state rounding requirements adopted in response to penny shortages.
From the Courts
Second Circuit Affirms Functional Approach to Limited Partner Exception
In Soroban Capital Partners LP v. Commissioner,7 the U.S. Court of Appeals for the Second Circuit affirmed the U.S. Tax Court’s conclusion that the Internal Revenue Code (IRC) Section 1402(a)(13) limited partner exception from self-employment tax applies only to partners who both have limited liability and do not run, manage, or control the partnership’s business. The court rejected the argument that state law limited partner status alone is sufficient, holding instead that a partner’s activities and level of involvement must be considered. Because Soroban’s limited partners actively managed the hedge fund and played key roles in generating its income, the court held that they did not qualify for the exception. The decision generally aligns with the Fifth Circuit’s recently revised approach in K. Alain, LLLP v. Commissioner (formerly known as Sirius Solutions LLLP v. Commissioner), which likewise looks to a partner’s involvement in managing the business rather than relying solely on formal state law status, although the precise standards differ.
Tax Court Rules for IRS on Foreign Dividend Deduction & Tax Credit Issues
In Sysco Corporation v. Commissioner,8 the U.S. Tax Court followed its prior decisions in Varian Medical Systems, Inc. v. Commissioner and ruled for the IRS on two IRC §245A issues. First, the court held that the IRC §245A dividends received deduction is limited to dividends attributable to shares directly held by the taxpayer and cannot be expanded through indirect ownership. Second, the court reaffirmed its approach for calculating foreign tax credits disallowed under IRC §245A(d)(1) in connection with IRC §965 transition tax inclusions. The court rejected Sysco’s arguments for a different interpretation, concluding that its prior Varian analysis controlled the outcome and granted summary judgment for the IRS.
From Treasury & the IRS
IRS Chief Counsel, Tax Court Nominees Appear Before Senate Finance Committee
On September 15, James Gadwood, nominated to serve as IRS chief counsel, and Andrew. A. De Mello, nominated to serve as a judge on the U.S. Tax Court, appeared before the Senate Finance Committee as part of the confirmation process.9 If confirmed, De Mello would fill the final vacant seat among the Tax Court’s 19 voting judges.
Draft Form 1040 Includes Citizenship Question
The IRS has released a draft 2026 Form 1040 that would require taxpayers to indicate whether they, and a spouse if filing jointly, are U.S. citizens, U.S. nationals, or otherwise lawfully authorized to work in the United States. The agency stated that the information would help curb abuse of refundable tax credits.10
Released Guidance
September 2026 AFR: Revenue Ruling 2026-19 provides the October 2026 applicable federal rates (AFR), adjusted AFR, adjusted federal long-term rate and long-term tax-exempt rate, percentages for determining the low-income housing credit, and the federal rate for determining the present value of an annuity, and interest for life or for a term of years, or a remainder or reversionary interest.
Livestock Drought Relief: Notice 2026-54 extends the replacement period for certain livestock sold because of drought conditions in counties and regions where severe, extreme, or exceptional drought continued during the 12-month period ending August 31, 2026. Eligible taxpayers may continue to defer gain recognition under IRC §1033(e) until the end of the first taxable year ending after the first drought-free year for the applicable region.
Update to Rates and Yield Curves: Notice 2026-57 provides the corporate bond monthly yield curve and corresponding spot segment rates derived from August 2026 data, the 24‑month average corporate bond segment rates applicable for September 2026, and the 30‑year Treasury securities interest rates and weighted average rates.
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“Sweeping Crypto Tax Bill Advanced by Ways and Means Committee,” taxnotes.com, September 17, 2026.
- 2“Crypto Stocks and Tokens Drop After Senate Blocks Landmark Bill,” news.bloombergtax.com, September 15, 2026.
- 3“House Panel to Weigh Restoring Full Gambling Loss Tax Break,” news.bloombergtax.com, September 14, 2026.
- 4“House Passes Taxpayer Protection Bills,” taxnotes.com, September 17, 2026.
- 5“US House Sends Employee Ownership Plan Bill to Trump’s Desk,” news.bloombergtax.com, September 16, 2026.
- 6“House Advances Penny Rounding Bill as Retailers See Shortages,” news.bloombergtax.com, September 14, 2026.
- 7Soroban Capital Partners LP v. Commissioner, 2nd Cir., No. 25-2079.
- 8Sysco Corporation v. Commissioner, T.C. Memo. 2026-84, No. 5728-23.
- 9“IRS, Tax Court Nominees Escape Scrutiny at Finance Hearing,” taxnotes.com, September 16, 2026.
- 10“IRS Pitches Adding Citizenship Question to Form 1040,” taxnotes.com, September 21, 2026.