Federal Scholarship Tax Credit, Temporary Regulations, TD 10057, RIN 1545-BS17, 91 Fed. Reg. [page] (published Oct. 2, 2026) (codified at 26 C.F.R. pt. 1).

Federal Scholarship Tax Credit, Notice of Proposed Rulemaking and Notice of Public Hearing, REG-117199-25, RIN 1545-BR97, 91 Fed. Reg. [page] (prop. Oct. 2, 2026) (to be codified at 26 C.F.R. pt. 1).

On October 1, 2026, the Department of the Treasury and the Internal Revenue Service released a comprehensive regulatory package implementing the new nonrefundable Federal Scholarship Tax Credit under Internal Revenue Code (Code) Section 25F. This statutory credit was enacted by Section 70411 of Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA). Section 25F allows individual taxpayers a nonrefundable tax credit of up to $1,700 annually for qualified cash contributions made to certified scholarship granting organizations (SGOs) in taxable years ending after December 31, 2026. Concurrently, OBBBA Section 70411(b) enacted Section 139K, which excludes from gross income any scholarship amounts received by eligible students or their dependents from SGOs.

To establish the necessary administrative, operational, and procedural infrastructure prior to the January 1, 2027 effective date for taxpayer contributions, Treasury and the IRS simultaneously published Temporary Regulations under Treasury Decision 10057 (TD 10057, RIN 1545-BS17) and a Notice of Proposed Rulemaking under REG-117199-25 (RIN 1545-BR97). Published pursuant to the mandatory cross-referencing requirement of Code Section 7805(e)(1), the temporary and proposed regulations establish binding guidelines for individual contributors, SGOs, and participating States.

This technical article provides tax practitioners—CPAs, Enrolled Agents, and tax attorneys—with an exhaustive analysis of the regulatory framework. It examines the legal justifications articulated by Treasury, the structural additions and modifications to the Income Tax Regulations (26 CFR Part 1), the economic and administrative rationale underlying key choices, proposed effective dates, taxpayer reliance provisions, and a subsection-level analysis of each regulatory provision.

Title: National Taxpayer Advocate Enhancement Act of 2025
Bill Number: H.R. 997 (119th Congress)
Primary IRC Code Section Affected: 26 U.S.C. § 7803(c)(2)(D)(i)

Executive Summary & Legislative Status

On September 28, 2026, the United States Senate passed H.R. 997, the National Taxpayer Advocate Enhancement Act of 2025, by Unanimous Consent without amendment. This followed unanimous passage in the House of Representatives on March 31, 2025 by a roll call vote of 385–0 (Roll No. 85), following favorable reporting by the House Committee on Ways and Means (H. Rept. 119-46). The legislation has been cleared for enrolled print and sent to the President for signature.

Sponsored by Rep. Randy Feenstra (R-IA-4), H.R. 997 enacts targeted statutory amendments to Internal Revenue Code (IRC) § 7803. The primary purpose of the Act is to establish independent statutory authority for the National Taxpayer Advocate (NTA) to appoint dedicated legal counsel within the Taxpayer Advocate Service (TAS) who report directly to the NTA, thereby removing TAS legal personnel from the supervisory chain of the Treasury Legal Division and IRS Chief Counsel.

IRS Notice 2026-63, 2026-42 I.R.B. ___ (Sept. 30, 2026)

On September 30, 2026, the Internal Revenue Service released Notice 2026-63, granting comprehensive administrative tax relief under Internal Revenue Code (I.R.C.) § 7508A to individuals and entities impacted by the ongoing terroristic action in the State of Israel throughout calendar years 2025 and 2026. This administrative guidance extends statutory deadlines for time-sensitive tax compliance obligations that were due to be performed on or after September 30, 2026, and before September 30, 2027, postponing the required performance date to September 30, 2027.

The notice addresses an evolving humanitarian and security crisis, serving as the latest installment in a sequence of relief measures. The IRS previously issued Notice 2023-71, Notice 2024-72, and Notice 2025-53 to assist taxpayers affected by terroristic actions in the region. Notice 2026-63 formally bridges these prior grants of relief, establishing that for eligible taxpayers, acts previously postponed through September 30, 2026, under Notice 2025-53 are further postponed through September 30, 2027.

Fine v. Commissioner, 167 T.C. No. 13 (2026)

When representing taxpayers in protracted IRS examinations, tax practitioners frequently confront statute of limitations extensions under Internal Revenue Code (I.R.C.) § 6501(c)(4). A common procedural question arises when settlement negotiations fail: Can a taxpayer who previously executed a fixed-date extension on IRS Form 872 (Consent to Extend the Time to Assess Tax) unilaterally terminate that extension prior to its stated expiration date by sending IRS Form 872-T (Notice of Termination of Special Consent to Extend the Time to Assess Tax)?

In Fine v. Commissioner, 167 T.C. No. 13 (2026), the United States Tax Court answered this question with an emphatic “no.” Addressing an open issue in the U.S. Court of Appeals for the Eleventh Circuit, Judge Ashford held that Form 872-T applies exclusively to open-ended waivers executed on Form 872-A (Special Consent to Extend the Time to Assess Tax) and has no legal effect on a properly executed, fixed-date Form 872. Consequently, a Form 872 remains binding until its negotiated expiration date unless the IRS issues a Notice of Deficiency or the parties execute a subsequent written agreement.

For Certified Public Accountants (CPAs) and Enrolled Agents (EAs), Fine v. Commissioner serves as a critical procedural precedent. It underscores the binding nature of fixed-term waivers, highlights the strict contractual interpretative rules applied to IRS consent forms, and reinforces that strategic unhappiness with Appeals settlement progress does not permit taxpayers to alter agreed-upon extension terms.

Sevillo Fine Foods LLC v. United States, Case No. 2:25-cv-00273-DBP, 2026 U.S. Dist. LEXIS _____ (D. Utah Sept. 28, 2026)

As tax practitioners evaluating Employee Retention Credit (ERC) refund claims, CPAs and Enrolled Agents (EAs) face heightened scrutiny from both the Internal Revenue Service and federal courts regarding claims grounded in the “Suspension Test.” A significant subset of ERC claims filed during the pandemic relied on indirect supply chain disruptions, arguing that upstream bottlenecks—such as maritime port congestion—constituted a partial suspension of business operations.

In Sevillo Fine Foods LLC v. United States, Case No. 2:25-cv-00273-DBP (D. Utah Sept. 28, 2026), Magistrate Judge Dustin B. Pead granted the government’s partial motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, dealing a decisive blow to supply chain ERC claims predicated on generalized port delays and indirect workplace safety regulations. The District Court articulated three independent, legal grounds for dismissal:

1. Identification of a qualifying governmental order: Advisory documents and workplace safety mandates that regulate conditions of operation rather than capping throughput do not constitute orders “limiting commerce.”

2. Standard of causation: The statutory phrase “due to” in Section 2301(c)(2)(A)(ii)(I) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) requires both factual (but-for) and proximate cause, barring claims linked through an attenuated supply chain.

3. Definition of partial suspension: Supply delays, increased costs, and capacity reductions do not equate to an operational suspension, particularly where a taxpayer maintains its workforce and revenues.

Trump Accounts, 91 Fed. Reg. 63200 (Sept. 30, 2026) (TD 10056); Trump Accounts, 91 Fed. Reg. 63215 (proposed Sept. 30, 2026) (CC-00226466-26)

The Department of the Treasury and the Internal Revenue Service have jointly issued temporary regulations (Treasury Decision 10056, RIN 1545-BS27) and a concurrent notice of proposed rulemaking (CC-00226466-26, RIN 1545-BR91) implementing Internal Revenue Code (IRC) Section 530A. Enacted under Section 70204 of Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly referred to as the One, Big, Beautiful Bill Act (OBBBA), Section 530A establishes “Trump accounts”—specialized traditional Individual Retirement Accounts (IRAs) maintained for eligible minors during a statutorily defined “growth period” ending on December 31 of the calendar year in which the beneficiary attains age 17.

Treasury and the IRS issued these dual regulations to establish an immediate, uniform, and legally sound administrative structure for account enrollment, master group trust investment, auto-account administration, and broad-based private and governmental funding through qualified general and stock contributions. The immediate release of temporary regulations under 26 CFR §§ 1.530A-1T and 1.530A-7T addresses an urgent statutory mandate: while contributions to Trump accounts were statutorily prohibited prior to July 4, 2026, accounts may now accept funds, and Treasury auto-enrollment elections are slated to commence on or about October 1, 2026. Without immediately effective rules, trustees, financial agents, and donors lacked an operative regulatory framework to execute account creation, protect taxpayer return information, and administer large-scale contributions.

Amodio v. Commissioner, T.C. Memo. 2026-96, Docket No. 9959-22L (Sept. 28, 2026)

For tax controversy practitioners, Certified Public Accountants, and Enrolled Agents, navigating the personal liability provisions of Internal Revenue Code (I.R.C.) § 6672 requires a precise understanding of the statutory standards for “willfulness” and the joint-and-several mechanisms governing the Trust Fund Recovery Penalty (TFRP). In Amodio v. Commissioner, T.C. Memo. 2026-96 (Sept. 28, 2026), Special Trial Judge Carluzzo delivered an instructive opinion examining two pivotal tax controversy issues: (1) whether a corporate officer acts “willfully” under I.R.C. § 6672(a) when, upon discovering pre-existing tax delinquencies, he uses unencumbered corporate funds to pay net wages and union benefits to maintain business operations, and (2) whether an Offer-in-Compromise (OIC) accepted by the IRS to compromise the underlying corporate employment tax debt operates to cap the individual officer’s derivative TFRP liability.

This article examines the factual matrix of Amodio, dissects the taxpayer’s statutory arguments, outlines the Tax Court’s legal analysis, and evaluates the judicial synthesis of joint-and-several tax principles against Internal Revenue Manual (IRM) administrative guidelines.

Rev. Rul. 2026-20, 2026-20 I.R.B. 1, September 28, 2026

Notice 2026-62, 2026-20 I.R.B. 1, September 28, 2026

In a coordinated regulatory release, the Department of the Treasury and the Internal Revenue Service issued Revenue Ruling 2026-20 alongside Notice 2026-62 to address what tax administrators describe as “novel investment fund strategies that purport to produce tax results that may be inconsistent with the purpose and proper application of the relevant federal tax rules.” Targeted at certified public accountants, enrolled agents, and corporate tax counsel, these administrative pronouncements draw a decisive boundary between conventional, long-established exchange-traded fund (ETF) operations and tax-motivated, structured transactions designed to circumvent gain recognition under Subchapter M and Subchapter C of the Internal Revenue Code (Code).

At the center of this enforcement initiative is Section 852(b)(6), a specialized nonrecognition provision applicable to regulated investment companies (RICs). While Section 852(b)(6) historically shields a RIC from recognizing gain under Section 311(b) when distributing appreciated portfolio property in redemption of its stock upon a shareholder’s demand, tax advisors have increasingly paired this provision with Section 351 corporate formation rules and partnership exchange fund mechanisms under Section 721. Through Revenue Ruling 2026-20, the IRS invokes longstanding step-transaction and substance-over-form doctrines to recharacterize so-called “Section 351 conversion transactions” as direct, taxable asset exchanges under Section 1001. Concurrently, Notice 2026-62 serves as a broad warning shot across several other atypical usages of Section 852(b)(6) and multi-position derivative strategies, signaling prospective or retroactive regulatory action, potential transaction-of-interest designations, and direct examination challenges.

Notice of Proposed Rulemaking, Election to Pay in Installments Tax on Gain from Certain Farmland Property, REG-117095-25, 91 Fed. Reg. 63812 (proposed Sept. 29, 2026)

The Department of the Treasury and the Internal Revenue Service have issued proposed regulations (REG-117095-25) implementing Internal Revenue Code (IRC) Section 1062. This statutory provision was enacted by Section 70437 of Public Law 119-21, 139 Stat. 72, 248–250 (July 4, 2025), commonly referred to as the One, Big, Beautiful Bill Act (OBBBA). The primary legislative purpose underlying Section 1062 is to facilitate the transition of agricultural real property to active, younger generations of farmers by easing the immediate capital gains tax burden associated with outright sales of farmland.

Under Section 1062(a), eligible taxpayers who recognize gain from the sale or exchange of “qualified farmland property” to a “qualified farmer” may elect to pay their “applicable net tax liability” in four equal annual installments rather than recognizing the full tax obligation in the year of disposition. The Treasury Department promulgated these proposed regulations pursuant to its general rulemaking authority under Section 7805(a), as well as specific statutory mandates under Section 1062(c)(2) (governing pass-through entity elections) and Section 1502 (governing consolidated corporate groups).

Juliet R. Singh v. United States, No. 1:25-cv-00056 (E.D.N.Y. Sept. 24, 2026)

Tax practitioners frequently encounter situationally complex client cases where taxpayers, acting without immediate legal or tax counsel, submit informal written requests to the Internal Revenue Service (IRS) explaining economic hardships or casualty events. When formal amended returns (Form 1040-X) are subsequently submitted past the standard statutory period under Internal Revenue Code (IRC) § 6511(a), the IRS routinely asserts a lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), claiming sovereign immunity.

In Juliet R. Singh v. United States, No. 1:25-cv-00056 (E.D.N.Y. Sept. 24, 2026), United States District Judge Ann M. Donnelly issued a pivotal ruling denying the government’s motion to dismiss for lack of subject matter jurisdiction. The decision provides critical guidance for Certified Public Accountants (CPAs) and Enrolled Agents (EAs) on two distinct legal theories preserving refund jurisdiction: the Informal Claim Doctrine and statutory postponements under IRC § 7508A(d) resulting from federally declared disasters.

Jagannath v. Commissioner, T.C. Memo. 2026-92 (Sept. 24, 2026)

In Jagannath v. Commissioner, T.C. Memo. 2026-92 (Filed September 24, 2026), the United States Tax Court addressed the application of section 4958 intermediate sanctions excise taxes to an uncorrected transaction between a Section 501(c)(3) public charity and its founder/president. The decision serves as a stark reminder for tax practitioners regarding the strict statutory mechanics of IRC § 4958, the evidentiary burden on taxpayers under Subtitle D, and the mandatory reporting rules on Form 4720.

The petitioner, Sitaraman Jagannath, holds bachelor’s and master’s degrees in chemical engineering and worked as a chemical engineer and real estate manager. On September 9, 2015, Mr. Jagannath formed Senecura, a Tennessee non-profit corporation designed to assist indigent individuals with basic living necessities. On September 29, 2015, the Internal Revenue Service (IRS) issued Letter 5436 approving Senecura’s exemption from corporate income tax under IRC § 501(c)(3) and granting public charity status under IRC § 170(b)(1)(A)(vi), retroactive to September 9, 2015.

Lindsey v. Commissioner, T.C. Memo. 2026-94 (Sept. 24, 2026)

In federal tax controversy practice, few procedural hurdles carry as much consequence as the mailing of a Statutory Notice of Deficiency (SNOD) under Internal Revenue Code (I.R.C.) § 6212 and the strict 90-day jurisdictional petition window mandated by I.R.C. § 6213(a). For tax practitioners representing clients before the Internal Revenue Service (IRS) and the United States Tax Court, understanding how the IRS establishes proper mailing—especially when administrative recordkeeping breaks down—is vital.

In Lindsey v. Commissioner, T.C. Memo. 2026-94 (Sept. 24, 2026), the Tax Court evaluated a case where the IRS conceded it could not rely on the statutory presumption of mailing due to an incomplete U.S. Postal Service (USPS) Form 3877. Nevertheless, the court held that the Commissioner carried his burden of proving proper mailing through cumulative, circumstantial evidence. Consequently, because the taxpayer filed her petition well beyond the 90-day statutory period, the Tax Court dismissed the case for lack of jurisdiction under controlling Seventh Circuit precedent. This article provides a technical analysis of the factual background, evidentiary rulings under the Federal Rules of Evidence, procedural tax law, application to facts, and the broader legal implications of the decision.

Notice 2026-60, 2026-41 I.R.B. 1, Sept. 23, 2026

On an annual basis, the Internal Revenue Service releases administrative guidance updating the special per diem rates and list of high-cost localities utilized by taxpayers to substantiate ordinary and necessary business travel expenses. Notice 2026-60 serves as the official IRS release for the 2026–2027 fiscal year cycle, covering travel performed on or after October 1, 2026, through September 30, 2027. Specifically, Notice 2026-60 provides:

“the 2026-2027 special per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home, specifically (1) the special transportation industry meal and incidental expenses (M&IE) rates, (2) the rate for the incidental expenses only deduction, and (3) the rates and list of high-cost localities for purposes of the high-low substantiation method.”

The administrative issuance of Notice 2026-60 is essential for employers operating accountable plans, transportation sector businesses, and qualifying tax-deductible travelers who seek to streamline compliance and avoid the administrative burden of maintaining detailed receipts for every lodging and meal expenditure.

Treasury Decision 10055, RIN 1545-BS10, Sept. 25, 2026

The Department of the Treasury and the Internal Revenue Service (IRS) have issued Final Regulations (Treasury Decision 10055, RIN 1545-BS10) amending 26 CFR Part 300 to increase the user fee charged to authorized persons requesting IRS Letter 627, commonly referred to as an estate tax closing letter. This regulatory action adopts without change the proposed regulations (REG-103193-26) published on June 2, 2026 (91 FR 32909). The final rule establishes a revised user fee of $76 per request, representing an increase from the $56 fee established in 2025.

An estate tax closing letter provides verification from the IRS that the estate tax return (Form 706, United States Estate and Generation-Skipping Transfer Tax Return) has been accepted, confirming either the net estate tax liability, discharge from personal liability under Internal Revenue Code (IRC) § 2204, or the final settlement of audit determinations. For estate planning professionals, tax practitioners, CPAs, and corporate fiduciaries, obtaining Letter 627 is a critical administrative step in closing probate estates, distributing assets to beneficiaries, and securing final discharge of local liability.

Williams v. Commissioner, T.C. Memo. 2026-91, (Sept. 23, 2026)

This analysis examines Williams v. Commissioner, T.C. Memo. 2026-91, a United States Tax Court decision evaluating the disallowance of significant personal casualty loss deductions, noncash charitable contributions, state and local tax (SALT) deductions, and active-duty military commuting expenses claimed as reservist travel deductions following a catastrophic natural disaster. The decision serves as a critical precedent for certified public accountants (CPAs) and enrolled agents (EAs) regarding the non-negotiable statutory substantiation standards under Internal Revenue Code (IRC) Sections 165, 170, 164, 162, and 274, as well as the procedural mechanics of Section 6662(a) accuracy-related penalties and Section 6751(b) supervisory approval requirements.

IRS Notice 2026-55, 2026-41 I.R.B. 1 (Sept. 2026).

The Department of the Treasury and the Internal Revenue Service issued Notice 2026-55 in Part III of the Internal Revenue Bulletin to request formal public and professional commentary regarding complex administrative and legal issues under Section 1400Z-2 of the Internal Revenue Code (I.R.C.). This notice directly addresses statutory modifications enacted under Section 70421 of Public Law 119-21 (139 Stat. 72, July 4, 2025), popularly known as the One, Big, Beautiful Bill Act (OBBBA).

As tax practitioners specializing in real estate transactions and capital gain deferral strategies evaluate the evolving statutory landscape, Notice 2026-55 serves as a crucial administrative benchmark. It signals the IRS’s intent to refine regulations governing Qualified Opportunity Funds (QOFs) and Qualified Opportunity Zone Businesses (QOZBs). The Treasury Department and the IRS specifically request that tax professionals “identify provisions of the § 1400Z-2 regulations or other guidance that should be retained, modified, or supplemented, and to describe in technical detail the legal analysis supporting any such changes based on the statutory text of § 1400Z-2 and other applicable provisions of the Code.”

Perkins v. Director of the Virgin Islands Bureau of Internal Revenue, No. 3:25-cv-00002 (D.V.I. Sept. 18, 2026)

Territorial tax administration frequently presents complex jurisdictional and statutory coordination questions under the “mirror code” framework. In Perkins v. Director of the Virgin Islands Bureau of Internal Revenue, the District Court of the Virgin Islands directly addressed whether the Virgin Islands Bureau of Internal Revenue (VIBIR) possesses authority to assess the 3.8% Net Investment Income Tax (NIIT) under Internal Revenue Code (I.R.C.) § 1411 against a bona fide resident of the U.S. Virgin Islands (USVI).

Resolving a motion for partial judgment on the pleadings under Federal Rule of Civil Procedure 12(c), the court held that the VIBIR’s assessment was ultra vires and void as a matter of law. This decision re-anchors territorial tax enforcement to fundamental principles of federal territorial power, administrative law, and binding Treasury regulations. For CPAs and Enrolled Agents advising high-net-worth individuals and entity structures in USVI or other mirror-code territories (such as Guam and the Commonwealth of the Northern Mariana Islands), Perkins serves as a crucial authority on the non-applicability of Chapter 2A un-mirrored taxes and the absolute binding nature of Treasury Department legislative regulations on territorial tax authorities.

Kings Road Property, LLC v. Commissioner, 167 T.C. No. 11 (2026)

In Kings Road Property, LLC v. Commissioner, 167 T.C. No. 11 (2026), the United States Tax Court addressed two pivotal issues arising under the partnership audit and litigation procedures of the Bipartisan Budget Act of 2015 (BBA), codified at Internal Revenue Code (I.R.C.) §§ 6221–6241. First, the court held that the 90-day filing deadline set forth in I.R.C. § 6234(a) for petitioning the Tax Court following the issuance of a Final Partnership Adjustment (FPA) is a nonjurisdictional claims-processing rule subject to equitable tolling. Second, the court established that misinformation provided by Internal Revenue Service (IRS) personnel, combined with undelivered certified mail, constitutes extraordinary circumstances justifying equitable tolling where the taxpayer demonstrates continuous diligence. Finally, the court rejected taxpayer cross-challenges concerning minor address abbreviations and acting official authority under the Federal Vacancies Reform Act (FVRA), affirming that an FPA remains statutory valid even if returned undelivered or unsigned.

For certified public accountants (CPAs), enrolled agents (EAs), and tax litigators, Kings Road Property provides essential guidance on statutory computation mechanics, administrative reliance, and procedural motion practice in BBA partnership examinations.

Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, H.R. 5334, 119th Cong. (2026) (enrolled bill transmitted to the President Sept. 17, 2026); 26 U.S.C. § 62(a)(2)(D), (d)(1).

Note: The President signed the bill into law on September 18, 2026.

H.R. 5334, designated as the “Lindsey O. Graham Sanctioning Russia and Iran Act of 2026,” represents a statutory measure originating in the 119th Congress. Introduced by Representative Jimmy Panetta [D-CA-19] on September 11, 2025, and referred to the House Committee on Ways and Means, the measure was formally reported as amended under House Report 119-600. Following passage in the House of Representatives on April 27, 2026, the Senate considered the bill under Amendment SA 6711, proposed by Senator Lindsey Graham. The Senate passed the amended bill, and on September 16, 2026, the House concurred in the Senate amendments by a roll call vote of 262 to 159. The enrolled legislation was subsequently transmitted to the President on September 17, 2026.

While the primary division of H.R. 5334 enacts extensive economic sanctions, energy export bans, and international financial restrictions under Division A, the bill also incorporates targeted amendments to the Internal Revenue Code of 1986 (I.R.C.). Specifically, the legislation expands the above-the-line deduction for educator expenses under I.R.C. § 62(a)(2)(D) to incorporate early childhood educators. For tax practitioners, Certified Public Accountants (CPAs), and Enrolled Agents (EAs), understanding the precise interaction between current statutory provisions, the enacted amendatory language, and the statutory effective date is critical for proper income tax return preparation, client tax planning, and compliance strategy.

Soroban Capital Partners LP v. Commissioner of Internal Revenue, Nos. 25-2079 (L), 25-2250 (CON) (2d Cir. Sept. 17, 2026), aff’g 161 T.C. 310 (2023), and T.C.M. (RIA) 2025-52.

K Alain, L.L.L.P. v. Commissioner of Internal Revenue, No. 24-60240, 184 F.4th 766 (5th Cir. Aug. 12, 2026), granting reh’g, withdrawing and substituting 165 F.4th 374 (5th Cir. 2026), vacating and remanding Nos. 11587-20, 30118-21 (U.S. Tax Court Feb. 20, 2024)

The tax world has reached a defining moment regarding the application of the federal Self-Employment Contributions Act (SECA) tax to partnership distributive shares. For over a decade, asset managers, private equity sponsors, hedge fund operators, and pass-through entities have relied heavily on state-law limited partnership structures to insulate active partner distributive shares from the 15.3% SECA tax imposed under Internal Revenue Code (I.R.C.) § 1401(a)–(b). That reliance has encountered a formidable wall of judicial precedent.

On September 17, 2026, the United States Court of Appeals for the Second Circuit issued its highly anticipated decision in Soroban Capital Partners LP v. Commissioner of Internal Revenue, Nos. 25-2079 (L), 25-2250 (CON) (2d Cir. Sept. 17, 2026), affirming the United States Tax Court’s rulings in Soroban Capital Partners LP v. Commissioner (“Soroban I”), 161 T.C. 310 (2023), and Soroban Capital Partners LP v. Commissioner (“Soroban II”), T.C.M. (RIA) 2025-52, 2025 WL 1517432 (May 28, 2025). The Second Circuit held unequivocally that the statutory exemption under I.R.C. § 1402(a)(13) for a “limited partner, as such” does not protect partners who exert operational or managerial control over a partnership’s business, regardless of their formal designation under state partnership law.

This significant ruling comes shortly after the United States Court of Appeals for the Fifth Circuit granted rehearing, withdrew its initial opinion in Sirius Solutions, L.L.L.P. v. Commissioner, 165 F.4th 374 (5th Cir. 2026), and issued a revised opinion under the taxpayer’s renamed entity, K Alain, L.L.L.P. v. Commissioner, No. 24-60240, 184 F.4th 766 (5th Cir. Aug. 12, 2026).

For CPAs, Enrolled Agents, and tax attorneys advising pass-through entities, understanding the precise statutory mechanics, procedural jurisdictional hurdles, and substantive functional standards established by these decisions is critical. This article provides a comprehensive technical analysis of the facts in Soroban, the taxpayers’ request for relief, the Second Circuit’s statutory analysis, the application of law to facts, and a rigorous comparison with the Fifth Circuit’s revised decision in K Alain to evaluate whether a true circuit split exists.