Despite leadership changes and reduced workforce, the IRS has maintained consistent OBBBA-related guidance since enactment and will continue throughout much of 2026.

Recent Key Guidance Released

Bonus Depreciation (Notice 2026-11)

The IRS issued interim guidance implementing favorable section 168(k) amendments under OBBBA, which permanently restored 100% expensing for qualified property. Guidelines align with existing TCJA bonus depreciation rules, facilitating timely implementation for upcoming tax season. Proposed regulations consistent with the Notice are forthcoming.

Note: Notice 2026-11 does not address temporary section 168(n) full expensing for qualified production property (factories). IRS officials indicate they’re “actively working” on this guidance with no release date yet announced.

Retirement Plan Safe Harbor Explanations (Notice 2026-13)

Treasury and IRS issued revised safe harbor explanations for retirement plan administrators—separate versions for non-Roth and Roth accounts—when providing written rollover distribution explanations to participants under section 402(f). Updates reflect SECURE 2.0 Act changes including:

• Modified 10% early withdrawal penalty rules
• Updated RMD rules for surviving spouses
• Increased age for RMD required beginning dates

Vehicle Loan Interest Deduction (REG-113515-25)

Proposed regulations address the new section 163(a) and (h)(4) deduction for qualified passenger vehicle loan interest under OBBBA, covering:

For Taxpayers:

• Definitions of “applicable passenger vehicle” and “personal use”
• Maximum deduction amounts and MAGI phaseouts

For Lenders:

• New reporting requirements for businesses receiving $600+ in interest on qualified vehicle loans
• New Form 1098-VLI (Vehicle Loan Interest) filing requirement
• Transitional relief from Notice 2025-57 allowing simplified 2025 reporting statements

TPSO Backup Withholding (REG-112829-25)

Proposed regulations align section 3406 backup withholding rules with OBBBA amendments to section 6050W for Third Party Settlement Organizations. Payments become reportable and subject to backup withholding when exceeding $20,000 and 200 transactions per calendar year.

Business Interest Expense Limitation (Fact Sheet 2025-09)

Updated FAQs address OBBBA changes to section 163(j) business interest expense deduction limitation:

• Taxpayers may add back depreciation, amortization, or depletion when calculating Adjusted Taxable Income
• Expanded definition of floor plan financing interest
• Clarification that section 163(j) applies to any interest incurred or capitalized during tax year (except interest capitalized under sections 263(g) and 263A(f))

Premium Tax Credit (Fact Sheet 2025-10)

Updated FAQs address OBBBA changes to Premium Tax Credit, including removal of repayment limitations on excess advance payments for years beginning after December 31, 2025.

Group Exemption Procedures for 501(c) Organizations (Revenue Procedure 2026-08)

Updated procedures for central organizations obtaining tax-exempt status for themselves and affiliated subordinate organizations under section 501(c). Incorporates feedback from 2020 Notice 2020-36 proposal.

• IRS resumed accepting group exemption applications January 21, 2026
• One-year transition period (ending January 22, 2027) for preexisting group exemption letter holders to comply with new requirements

Bipartisan Tax Priorities

While government funding has dominated recent legislative attention, bipartisan tax priorities remain under discussion:

Primary Focus: ACA Premium Tax Credit Ongoing bipartisan, bicameral discussions addressing the enhanced Affordable Care Act premium tax credit (expired December 31, 2025) could enable other limited bipartisan tax extenders.

Additional Priorities Under Consideration:

• Expired Work Opportunity Tax Credit
• Expensing for qualified production costs (film and sound recording)
• Repealing OBBBA gambling loss deduction limitation

Second Reconciliation Bill Prospects

Mixed Republican Support. Uncertainty remains whether Republicans can muster sufficient intraparty support for a second reconciliation bill in 2026. Leadership holds divided views on appetite for another partisan, tax-heavy reconciliation effort.

Republican Study Committee Framework Despite unveiling a framework for second reconciliation legislation, top tax writers and staff remain skeptical—particularly with 2026 midterm elections approaching.

Likely Direction A healthcare-focused, tax-related policy package appears more probable than comprehensive tax reform if round two proceeds.

Significant Tax Litigation Development

Sirius Solutions, L.L.L.P. v. Commissioner (5th Cir., No. 24-60240)

Decision Date: January 16, 2026

Holding: The Fifth Circuit ruled that “limited partner” for federal self-employment tax purposes is defined by state law, reversing the Tax Court’s functional analysis requiring passive investor status.

Background: Section 1402(a)(13) excludes “the distributive share of any item of income or loss of a limited partner, as such, other than guaranteed payments” from self-employment taxes for Social Security and Medicare.

IRS Position (Rejected): The IRS argued the “as such” modifier narrowed the limited partner exception to passive investors only—a functional analysis approach.

Fifth Circuit Reasoning: The court rejected functional analysis (from Soroban Capital Partners LP v. Commissioner, 161 T.C. 310 (2023)), instead employing textual analysis:

• “Limited partner” under IRC depends solely on whether partner has limited liability under state law
• “As such” language clarifies taxation treatment for individuals holding both limited and general partner interests

Important Limitations:

• Geographic Scope: Applies only within Fifth Circuit (Texas, Louisiana, Mississippi)
• Tax Court Authority: Tax Court may maintain functional analysis for cases outside Fifth Circuit
• Potential Circuit Split: Related rulings pending in First and Second Circuits could create circuit split, potentially reaching U.S. Supreme Court

Implications: This decision offers significant self-employment tax-planning opportunities for limited partners in Fifth Circuit states, potentially reducing Social Security and Medicare tax obligations on partnership distributions.

Summary

2026 is the implementation year for OBBBA provisions, with Treasury and IRS issuing consistent guidance across retirement plans, vehicle loans, business interest limitations, and backup withholding. Meanwhile, bipartisan tax priorities center on extending the ACA premium tax credit, while prospects for a second Republican reconciliation bill remain uncertain ahead of the midterm elections. The Sirius Solutions decision raises potential circuit-level disagreement over the limited partner self-employment tax treatment, potentially heading toward Supreme Court resolution. The upcoming 2026 midterm elections will reshape Capitol Hill’s political balance and materially impact tax policy priorities in Washington. Huckabee CPA continues monitoring the evolving situation as the 120th Congress’s composition and direction become apparent.