Here is a look at recent tax-related happenings on the Hill, including a proclamation directing negotiations over imports of wind turbines and related components.
Lately on the Hill
Congressional Recess Continues as Election Day Looms
Both congressional chambers remain in recess and are scheduled to return the week after the midterm elections on November 9, 2026.
Trump Orders Trade Actions on Canadian Imports & Wind Turbines
President Donald Trump released a proclamation on October 23, 2026, further modifying tariffs on certain Canadian products under Section 338 of the Tariff Act of 1930, removing some products from the tariff list, and adding others in an effort to address what the administration describes as Canada’s discriminatory treatment of U.S. commerce. The revised product list takes effect on October 30, 2026, removing items such as plywood, certain paper products, and machinery, and adding items including certain valves, carpets, and waste products. The tariffs continue to apply regardless of whether goods qualify under the U.S.-Mexico-Canada trade agreement and in addition to applicable §232 tariffs under the Trade Expansion Act of 1962.
Trump also issued a proclamation on October 22, 2026, finding that imports of wind turbines and related components threaten U.S. national security under §232 of the Trade Expansion Act of 1962. The proclamation directs the U.S. Department of Commerce and the U.S. Trade Representative to pursue negotiations with trading partners and provide an update within 180 days, while leaving open the possibility of future trade measures if the concerns are not resolved.
From the Courts
Court Rejects Inflated Conservation Easement Valuations
The U.S. Tax Court in Watson Lake Investments, LLC v. Commissioner and Meadow Lake Investments, LLC v. Commissioner1 largely sided with the IRS in syndicated conservation easement cases involving two Georgia properties, concluding that the taxpayers’ claimed deductions were based on unrealistic mixed-use development assumptions that vastly overstated the land’s value. The court found that the highest and best use of the properties was their existing values from the claimed $8.1 million and $11.1 million to $115,300 and $208,500, respectively, and upheld 40% gross valuation misstatement penalties. The ruling continues a long line of taxpayer losses in syndicated conservation easement litigation and reinforces the court’s focus on real market demand, credible highest and best use analyses, and recent arm’s-length purchase prices when evaluating conservation easement deductions.
Supreme Court Takes Up Home-Distilling Tax Case
The Supreme Court agreed to hear Department of Justice v. McNutt, a case challenging the federal ban on home distilling that was enacted in 1868 as part of Congress’ effort to prevent excise tax evasion on distilled spirits.2 The case follows a circuit split, with the U.S. Fifth Circuit finding the ban unconstitutional and the U.S. Sixth Circuit upholding it as a necessary tool for collecting federal excise taxes on spirits.
From Treasury & the IRS
IRS Provides Temporary Dyed Diesel Reporting Relief
The IRS announced temporary relief from certain reporting and record-keeping requirements related to excise tax liability arising from taxable uses of dyed diesel fuels. The relief applies to taxable uses occurring from October 1, 2026 through December 31, 2026. The IRS stated it will not challenge covered filing, reporting, or record-keeping failures or impose related civil penalties, while additional guidance on post-relief compliance is under consideration.
IRS Launches Team to Target Abusive Tax Shelters
According to IRS Chief Tax Compliance Officer Jarod Koopman, the agency is creating a new specialty group of 10 to 20 civil and criminal experts to focus on what the IRS has labeled abusive tax shelters, including private placement life insurance (PPLI), Puerto Rico Act 60 structures, Malta pension plans, and other offshore arrangements used to shift income and assets.3 PPLI structures generally involve using customized life insurance policies as investment vehicles that can provide favorable tax treatment on investment growth and distributions.
TIGTA Releases FY 2027 Audit Plan
The U.S. Treasury Inspector General for Tax Administration (TIGTA) released its Fiscal Year 2027 Program Plan focusing on upcoming reviews of the IRS’ use of advanced artificial intelligence, taxpayer data protections, workforce changes, and tax compliance operations. Planned projects also include oversight of Inflation Reduction Act funding, return-to-office compliance, and the agency’s efforts to maintain examination and collection activities with fewer employees.
Released Guidance
Spin-Off Restrictions Withdrawn: Proposed regulations (REG-134016-15) under Internal Revenue Code (IRC) §355 have been partially withdrawn that would have created a per se device test and related anti-abuse rules for tax-free corporate spin-offs. The withdrawal became effective October 21, 2026, following significant stakeholder criticism, although the IRS and Treasury stated they will continue studying the issues and noted that other anti-abuse doctrines, such as substance-over-form and step-transaction principles, may still apply.
Institutional Home Purchase Ban: Proposed regulations (TREAS-DO-2026-0529) would implement the 21st Century ROAD to Housing Act, which prohibits large institutional investors from purchasing single-family homes, subject to certain exceptions, and provides guidance on key definitions and enforcement provisions. The purchase restrictions are scheduled to take effect on January 7, 2027.
IRA Compliance Resolution System: Revenue Procedure 2026-33 establishes the IRA Compliance Resolution System that allows individual retirement account (IRA) custodians and IRA owners to correct certain errors involving IRAs and other tax-favored retirement accounts. Beginning in 2027, taxpayers may request waivers of the 60-day rollover requirement through either the new program or the private letter ruling process, while beginning in 2028 such waiver requests are expected to be handled only through the new compliance program.
Employee Plans Compliance Resolution System: Revenue Procedure 2026-34 updates the Employee Plans Compliance Resolution System, which is the IRS program that allows sponsors of retirement plans to correct certain plan failures and preserve tax-favored status. The guidance contains modifications to the program and requests comments on possible future enhancements.
Update to Rates and Yield Curves: Notice 2026-65 provides the corporate bond monthly yield curve and corresponding spot segment rates, the 24‑month average corporate bond segment rates, 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.
- 1Watson Lake Investments, LLC and Meadow Lake Investments, LLC v. Commissioner, T.C. Memo 2026-106, October 19, 2026.
- 2“Supreme Court to Review Old-Fashioned Liquor Distilling Tax Ban,” taxnotes.com, October 20, 2026.
- 3“New IRS Team Will Crack Down on Abusive Life Insurance Structures,” taxnotes.com, October 26, 2026.