Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for April 1, 2026 – April 9, 2026.
April 3, 2026: The White House proposed significant budget cuts to the Treasury Inspector General for Tax Administration (TIGTA), reducing its funding by nearly 17% for fiscal year 2027 to the lowest level since 2007. TIGTA warned that the cuts, combined with recent staffing losses, could lead to a 35% reduction in oversight activities at a time when risks at the IRS are increasing and have already forced the watchdog to cancel dozens of audits and reviews.
The proposal comes alongside broader reductions to IRS funding and staffing, including cuts to enforcement resources, raising concerns among practitioners that diminished oversight could weaken accountability and tax administration – particularly as the IRS undergoes workforce reductions and expands its use of new technologies, such as artificial intelligence.
April 6, 2026: Taxpayers are urging the Supreme Court of the United States to consider whether the Seventh Amendment guarantees a right to a jury trial for IRS civil penalties in Hirsch v. US Tax Court, arguing that the Court’s 2024 decision in SEC v. Jarkesy should apply in the tax context. Hirsch arises from fraud penalties exceeding $15 million that were assessed against taxpayers who allegedly misrepresented US Virgin Islands residency. A ruling in the plaintiffs’ favor could significantly alter IRS enforcement by making penalties harder to impose and potentially slowing audits and collections.
To date, courts have largely rejected similar arguments, relying on the “public rights” doctrine and long-standing precedent treating tax penalties as remedial rather than punitive, but practitioners note that the issue is gaining traction. If the Supreme Court requires jury trials for certain tax penalties, it could reshape the balance between taxpayers and the IRS, particularly for high-dollar cases, while raising concerns about reduced deterrence and increased administrative burdens on the agency.
April 6, 2026: The IRS issued Revenue Procedure 2026-14, providing guidance for states to nominate population census tracts for designation as qualified opportunity zones, effective January 1, 2027, under §§ 1400Z-1 and 1400Z-2, as amended by the One Big Beautiful Bill Act. The revenue procedure outlines eligibility requirements for low-income communities, limits designations to 25% of eligible tracts per state, and establishes deadlines for nominations and US Department of the Treasury certification.
The IRS also released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums, and Chief Counsel Advice).
Proposed changes to the Voluntary Disclosure Program (VDP)
April 6, 2026: The IRS proposed updates to VDP that would replace the one-time 75% civil fraud penalty with 20% accuracy-related penalties applied annually over the six-year disclosure period while also imposing a new requirement that taxpayers pay all taxes, penalties, and interest and file all required returns within 90 days of conditional acceptance. Practitioners generally support the move away from the 75% penalty but warn that the cumulative penalties (along with continued uncertainty around Foreign Bank and Financial Accounts Report penalties) may still result in significant liability.
Tax professionals and bar groups have raised concerns that the proposed 90-day payment and filing deadline is impractical and could deter participation, particularly for taxpayers lacking immediate liquidity or needing time to obtain records (e.g., from foreign banks). Critics argue that the deadline may create inequities between taxpayers and undermine the program’s goal of encouraging voluntary compliance, even as the IRS seeks to streamline the process and increase efficiency.
Recent court decisions
April 6, 2026: The Tax Court dismissed a whistleblower’s claim for lack of jurisdiction, holding that it may review an award determination under § 7623(b) only when the IRS proceeds with an administrative or judicial action based on the information provided. The petitioner filed Form 211 in July 2021 alleging that a target taxpayer failed to report income over multiple years, but the IRS Whistleblower Office referred the claim to a classifier who recommended denial because the amount at issue was less than $10,000.
Because the IRS did not initiate an examination or other enforcement action, the Court found that there was no reviewable determination and therefore no jurisdiction. The Court emphasized that a preliminary denial or internal review, such as a classifier’s recommendation, does not trigger Tax Court jurisdiction, even if the submission otherwise meets threshold requirements.
April 8, 2026: The Tax Court held that § 246(c) disallows a portion of a § 245A dividends-received deduction where the taxpayer does not directly satisfy the required holding period, and that indirect ownership through foreign subsidiaries does not meet the “held by the taxpayer” requirement.
The case arose from the Court’s earlier decision allowing a § 245A deduction for certain § 78 deemed dividends while limiting related foreign tax credits and the subsequent disputes over how those amounts should be computed. The Court rejected the petitioner’s argument that § 246(c) does not apply to § 78 “gross-up” dividends, holding that such amounts are “dividends on any share of stock” within the meaning of the statute. The Court further rejected the petitioner’s interpretation of “hold,” concluding that direct ownership is required for § 246 holding period purposes.
