Here is a look at recent tax-related happenings on the Hill, including the U.S. Court of International Trade certifying a class of importers seeking refunds, with interest, for certain International Emergency Economic Powers Act (IEEPA) tariffs.
Lately on the Hill
2026 Midterms Could Split Control of Congress
The 2026 midterms could leave the next Congress divided or under the control of the Democrats. The Democrats are expected to win the House, while in the Senate, several seats currently held by Republicans may be at risk. A split Congress would likely slow major tax legislation and shift attention toward narrower proposals that can attract bipartisan support. Even if Democrats were to take control of both chambers of Congress, the White House will still be held by President Donald Trump with veto power. Divided government could also bring greater scrutiny of the Trump administration’s implementation of the One Big Beautiful Bill Act (OB3), while making significant changes to that law difficult without support from both parties.
From the Courts
Court Certifies Class for IEEPA Tariff Refund Claims
On October 8, 2026, the U.S. Court of International Trade certified a class of importers of record that paid challenged tariffs imposed under the IEEPA between February 1, 2025 and February 19, 2026, excluding those that separately filed actions seeking recovery. The class is seeking an order requiring Customs to reliquidate affected entries without the IEEPA duties, for which the importer of record has not filed a lawsuit, which would result in refunds with interest. The case now moves forward as a class action, with the parties required to submit a proposed scheduling order by October 22, 2026 that includes a deadline for the government to respond.
Court Orders IRS to Explain Withholding of AI Audit Selection Records
The U.S. District Court for the District of Columbia held that the IRS properly relied on the Freedom of Information Act’s law enforcement exemption to withhold information describing how its artificial intelligence models identify complex partnerships for audit because disclosure could reveal audit selection methods and enable taxpayers to avoid detection. However, the court did find that the agency failed to adequately explain why nonexempt portions of the requested records, including AI model “data cards,” could not be segregated and released. The opinion notes that data cards are structured summaries of facts about data sets used in an AI model and can explain the context in which the model is intended to be used. The court directed the IRS to provide a supplemental declaration by November 4, 2026, clarifying why the documents cannot be partially disclosed.
From Treasury & the IRS
IRS Provides Temporary Dyed Diesel Fuel Relief
The IRS announced nationwide penalty relief for dyed diesel fuel sold for highway use or used in diesel-powered vehicles on highways in response to Trump’s October 5, 2026 executive order. The relief applies to sellers and users and is retroactive to October 1, 2026 through December 31, 2026, although it does not affect state fuel taxes or penalties. The relief does not eliminate the underlying federal excise tax liability, so taxpayers should remain prepared to pay the tax. The IRS expects to issue further guidance addressing the postponement of payments of taxes imposed under Internal Revenue Code (IRC) Section 4041.
IRS Issues Automatic Adoption Tax Credit Refunds
The IRS has begun issuing automatic refunds to more than 50,000 taxpayers following the U.S. Department of the Treasury’s revised interpretation of the adoption tax credit under IRC §23. For 2025 only, adoption tax credit carryforwards from 2020 through 2024 may increase the refundable portion of the 2025 credit, subject to the $5,000 per qualifying child limit. Most affected taxpayers do not need to file an amended return, and the IRS expects to complete most refunds by the end of 2026.
Released Guidance
Consolidated Group Transfers: Final regulations (T.D. 10059) under IRC §§357, 358, and 1502 clarify the treatment of certain liabilities assumed in IRC §351 transfers between members of a consolidated group. The rules provide that IRC §357(c) generally does not apply to transactions subject to the consolidated intercompany transaction rules and clarify that certain assumed liabilities do not reduce the transferor’s basis in stock received in the exchange. The regulations are effective October 16, 2026 and apply to transactions occurring in consolidated return years for which the return’s due date, without extensions, is after October 16, 2026.
Credit & Debit Card Payments: Final regulations (T.D. 10060) under IRC §6311 allow the IRS to directly accept tax payments by credit or debit card and remove restrictions that previously prevented the IRS from paying fees under certain payment processing contracts. If the IRS pays a processing fee under such a contract, it must fully recoup that amount from the taxpayer as a reimbursement fee. The final regulations are effective October 19, 2026 and apply to tax payments and reimbursement fees made on or after that date.
Premium Tax Credit: Proposed regulations (REG-101576-26) under IRC §36B would implement changes under the OB3 to the premium tax credit. The proposal addresses Health Insurance Exchange verification requirements, Medicaid community engagement rules, eligible alien limitations, and elimination of the excess advance premium tax credit repayment limitation. The proposed rules have varying applicability dates beginning as early as October 15, 2026, while the related statutory provisions generally apply to tax or plan years beginning on or after December 31, 2025 and supersede conflicting existing regulations as of that date.
November 2026 AFR: Revenue Ruling 2026-21 provides the November 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.
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.