July 10, 2026 – A Critical Date to Claim Tax Refunds of Interest and Penalties

The Kwong decision may have provided taxpayers with an opportunity to claim tax refunds of interest and penalties. Meanwhile, the government has recently filed an appeal of the Kwong decision. Because of the government’s appeal, it cannot be stated that the Kwong decision is settled law. This uncertainty creates a problem for taxpayers considering filing a claim for tax refund of interest and penalties under the Kwong decision. Internal Revenue Code Section 6511(a) is considered the general statutory authority to determine the deadline to file an administrative claim for refund of taxes, interest, and penalties.

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Tariff Constitutionality and Tariff Refunds

While the Learning Resources case provides important, but probably not the final, authority concerning tariff constitutionality, it definitely has clear implications on another issue – tariff refunds. The concept is that if persons paid moneys pursuant to unconstitutional tariffs, these persons should be entitled to receive refunds of their tariff payments.

The New “Senior” Deduction

The White House has at times used the phrase, “No Tax on Social Security”, in generally describing the new “senior” deduction. Such description is not correct. Social Security benefits remain taxable under current law. In addition, the eligibility requirements for Social Security do not match up with the eligibility requirements for the “senior” deduction. For example, you can start collecting Social Security benefits as early as age 62, but cannot claim the “senior” deduction until age 65.

Limited Liability Companies – Actions Speak Louder Than Words

Because of its asset protection and tax advantages, the limited liability company has become a popular choice for form of entity. While it is relatively easy to form a limited liability company, it is important to note that various “post-formation” action is necessary to derive the intended benefits from the limited liability company. If you want to maximize the asset protection from your limited liability company, the Orix case suggests that California is not a favorable jurisdiction to use; other states, such as Delaware and Nevada, offer a better alternative on the “charging order/foreclosure” issue.

Internal Revenue Service Clarifies “Qualified Tips” Deduction

The “qualified tips” deduction is often incorrectly described as a “no tax on tips” provision. On September 19, 2025, the Internal Revenue Service issued proposed regulations under Code Section 224 (the “Code Section 224 Proposed Regulations”). Perhaps the key topic addressed by the Code Section 224 Proposed Regulations is the meaning of the phrase, “an occupation which customarily and regularly received tips on or before December 31, 2024”. Qualified tips must be paid without compulsion. Thus, service charges, automatic gratuities and any other mandatory amounts automatically added to a customer’s bill by the vendor or establishment are not qualified tips, even if the amounts are subsequently distributed to employees. “Table 1” in the Code Section 224 Proposed Regulations lists 68 “occupations” as “Occupations that Customarily and Regularly Received Tips on or Before December 31, 2024” – the 68 listed below.

“Relevant” Under the Economic Substance Doctrine – The Case of Patel v. Commissioner

One of the basic principles of tax law is the economic substance doctrine. As recognized for many years in case law, under the economic substance doctrine, courts would generally examine both whether a transaction had economic substance beyond tax benefits and whether there was a nontax business purpose for entering the transaction; transactions that could not meet the economic substance doctrine could be disregarded or disallowed for tax purposes. The Tax Court in the Patel case concluded that (1) the taxpayer’s captive insurance company transactions did not have economic substance under the two-part “economic substance doctrine” test.

Estate of Rowland – An Important Federal Estate Tax Case Concerning Portability

Given that asset values tend to increase over time, and Federal estate tax liability tends to arise more on the death of a “second-to die” spouse than on the death of a “first-to-die” spouse, portability can be a critical concept to minimize Federal estate tax liability. Additionally, Revenue Procedure 2025-28 is relevant for taxpayers seeking to amend their tax returns for taxable years 2022 through 2024 and claim a 100% full deduction of their “domestic research or experimental expenditures” in those taxable years.

The 2025 Tax Act – Key Business Tax Provisions

One key change for business taxpayers under the 2025 Tax Act concerns the tax treatment of “domestic research or experimental expenditures” (often also referred to as “U.S. R&D” costs). Also, the 2025 Tax Act permanently enacts into law the provision from the Tax Cuts and Jobs Act of 2017 that created the “qualified business income” deduction – generally allowing a 20% deduction with respect to the “qualified business income” from partnerships, S corporations, and sole proprietorships.

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The 2025 Tax Act – Key Individual Tax Provisions

Whether it is called by its popular name, the “One Big Beautiful Bill Act”, or by its official legal name, “An Act . . . To provide for reconciliation pursuant to title II of H. Con. Res. 14”, the legislation enacted by Congress on July 3, 2025 and signed into law by President Donald Trump on July 4, 2025 (the “2025 Tax Act”), will have a significant impact on taxpayers. This article describes the key individual tax provisions of the 2025 Tax Act.

“Related Party” Transactions

This article focuses on “related party” transactions under Internal Revenue Code Section 267(a)(1) and Internal Revenue Code Section 1239(a). While there is some overlap, it should be noted that the specific scope of “related parties” for purposes of a “related party” transaction under Internal Revenue Code Section 1239(a) is different than the specific scope of “related parties” under Internal Revenue Code Section 267(a)(1).