Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for May 29, 2026 – June 8, 2026.
May 29, 2026: The US Department of the Treasury and the IRS issued additional guidance on the applicability dates of proposed regulations under Internal Revenue Code (IRC) § 892, which governs the tax exemption for certain income earned by foreign governments and sovereign wealth funds from passive US investments. The guidance responds to stakeholder comments by providing both grandfathering protection for existing investments and transitional relief before the proposed rules become final.
Under the guidance, existing foreign government interests generally would not become subject to the final regulations, and affected investors will have at least 90 days after publication of the final regulations or until the beginning of the first taxable year following publication to come into compliance. The Treasury and the IRS stated that the changes are intended to provide certainty for current investments, preserve established market practices, and support continued sovereign investment in the United States.
June 1, 2026: The Treasury and the IRS issued proposed regulations that would increase the user fee for obtaining an estate tax closing letter from $56 to $76. The agencies explained that a recent cost study determined the full cost of processing and issuing these letters exceeds the current fee and that the increase is intended to satisfy federal user-fee requirements that services provided to specific taxpayers be self-sustaining.
The proposed regulations provide that the increased fee would apply to requests received 30 days after publication of the final regulations. The Treasury and the IRS estimate that the higher fee reflects updated labor, quality review, and overhead costs associated with processing approximately 8,000 estate tax closing letter requests annually.
June 3, 2026: Following US President Donald Trump’s executive order creating a new Schedule Policy/Career employment category, the IRS and IRS Office of Chief Counsel identified several career positions that may be reclassified, including senior advisers, program managers, human resources specialists, attorney-advisers, and senior legal counsel positions. Employees placed in the new category will lose certain long-standing civil service protections and could be removed more easily than traditional career employees.
The Trump administration stated that the changes are intended to increase accountability and facilitate the removal of employees for poor performance or misconduct. Critics, including unions and former IRS officials, contend that the reclassification could undermine workforce stability, make recruitment more difficult, and increase concerns about political influence over tax administration and enforcement.
June 4, 2026: The Treasury and the IRS indicated that guidance on clean energy tax credit restrictions enacted by the One Big Beautiful Bill Act is expected in the third quarter of 2026. The guidance is expected to address the new prohibited foreign entity rules, which limit eligibility for certain clean energy credits when projects rely on financing, supplies, components, or contractual relationships involving entities connected to designated foreign countries such as China and Russia.
Treasury officials stated that the guidance will provide additional clarity on the implementation of these restrictions, which have become a significant concern for renewable energy developers and investors. The rules build on interim guidance issued earlier this year regarding the material assistance provisions and are expected to play a key role in determining continued access to clean energy tax incentives.
The IRS also released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums, and Chief Counsel Advice).
Recent court decisions
May 27, 2026: In Flight Options, LLC v. United States, the US Court of Appeals for the Sixth Circuit held that the federal 7.5% air transportation excise tax under 26 U.S.C. §§ 4261 and 4262 applies only to flight-specific usage fees charged by a fractional aircraft ownership company and not to its fixed management and overhead fees. Reversing a $39 million judgment against Flight Options, the Court concluded that the statutory “ticket tax” applies to amounts paid for specific air transportation rather than broader charges associated with owning and operating an aircraft.
The Court emphasized that neither the statute nor IRS guidance clearly required collection of the excise tax on fixed management fees and relied heavily on the principle that taxpayers and third-party tax collectors must receive “precise and not speculative” notice of tax obligations. The Court also rejected the IRS’s position that all costs “reasonably necessary” for air transportation are taxable, finding that the agency never provided a workable standard for determining which fixed costs qualified as payments “for transportation.”
May 29, 2026: In Leigh v. United States, a federal magistrate judge recommended allowing a taxpayer’s 26 U.S.C. § 7433 wrongful collection claim to proceed. The taxpayer alleged that the IRS improperly certified his tax debt as “seriously delinquent” to the US Department of State after he timely requested a Collection Due Process (CDP) hearing, which should have suspended collection activity. The court concluded that the allegations plausibly stated a claim for damages based on violations of IRC §§ 6330 and 7345, including the taxpayer’s alleged inability to renew his passport and related economic harm.
The court, however, recommended dismissal of separate claims challenging the IRS’s handling of a 2017 tax liability, finding that those allegations concerned the assessment of tax liability rather than collection activity and therefore fell outside the limited waiver of sovereign immunity under IRC § 7433. The decision emphasizes the distinction between actionable procedural violations in tax collection and nonactionable disputes over the correctness of tax assessments.
June 4, 2026: In Paschall v. Commissioner, T.C., the US Tax Court held that cryptocurrency staking rewards are taxable upon receipt when the taxpayer obtains dominion and control over the tokens. The Court sustained the IRS’s determination that the taxpayers failed to report $33,354 of Cardano staking rewards received via the eToro platform in 2021, concluding that the rewards constituted an accession to wealth includible in gross income under 26 U.S.C. § 61.
Rejecting the taxpayers’ arguments that staking rewards should be taxed only upon sale, the Court found that the taxpayers had unrestricted ability to sell the rewarded tokens and therefore exercised sufficient dominion and control over them when credited to their account. The Court also declined to analogize staking rewards to nontaxable stock dividends or self-created property, emphasizing that the rewards increased the taxpayers’ ownership interest and value in the cryptocurrency and were received in exchange for validating blockchain transactions.
