Summary
-
Treasury and IRS issue Notice 2026-17: Modifications to Rules for Computing Taxable Income or Loss and Foreign Currency Gain or Loss Under Section 987.
-
Senators Crapo and Wyden introduce the Taxpayer Assistance and Service (TAS) Act.
-
Joint Economic Committee to hold hearing on Destination-Based Cash Flow Tax.
-
Ways and Means Committee to hold hearing with IRS CEO Frank Bisignano.
President Trump’s State of the Union address on February 24 highlighted enactment of the One Big Beautiful Bill Act (OBBBA), but did not contain a set of detailed policy proposals. With regards to tax policy, he advocated that private sector workers whose employers do not sponsor retirement plans be eligible to participate in the retirement plan available to federal workers, which is known as the Thrift Savings Plan (TSP). It appears that legislation would be necessary to allow private sector workers to enroll in the TSP or another similar plan that might be established by the federal government. He also touted the $1,000 retirement account Saver’s Match provided by the federal government, which was enacted in 2022 in the Consolidated Appropriations Act, 2023, Public Law 117-328.
It remains to be seen if the Executive Branch’s proposed budget for fiscal year 2027 will include a “Green Book” of legislative tax proposals. The release of the budget, likely in the next several weeks, is usually accompanied by congressional hearings featuring the members of the President’s cabinet testifying on their portions of the budget, including policy proposals and departmental administration. Secretary Bessent will likely testify before the Committee on Ways and Means and the Senate Finance Committee.
The campaign season for the 2026 mid-term elections kicks off this week with primaries on March 3 in Arkansas, North Carolina and Texas.
There are still no signs of progress on an agreement to fund the Department of Homeland Security, which lapsed at midnight of February 13, resulting in a partial government shutdown. The remainder of the federal government is funded through September 30, 2026, the end of the fiscal year. The total quiet is likely a signal that negotiations are at a standstill. However, it is also possible that the sides are in the advanced stages of exchanging proposals and are therefore keeping things very quiet in order to avoid jeopardizing the talks.
Senators Crapo and Wyden Introduce the Taxpayer Assistance and Service (TAS) Act
On February 26, 2026, Senate Finance Committee Chairman Mike Crapo (R-ID) and Ranking Member Ron Wyden (D-OR) introduced S. 3931, the Taxpayer Assistance and Service Act (a section-by-section summary of the bill is available here), a bipartisan package to modernize IRS operations and strengthen taxpayer protections. The bill is a revision of a discussion draft released by Senators Crapo and Wyden in January of 2025.
The bill spans ten titles and contains more than 60 provisions, highlights of which are summarized below.
Tax Administration and Customer Service: Mandates electronic acceptance and processing of returns and amended returns and Optical Character Recognition-based digitization of returns and taxpayer correspondence (with limited exceptions); requires the IRS to establish a taxpayer-facing dashboard reporting backlogs and wait times, as well as other taxpayer-facing online tools and online accounts; improves telephone and written IRS communications; provides for collection relief (including automatic Earned Income Tax Credit refund-offset bypass treatment for “currently not collectible” taxpayers and installment agreement fee waivers for low-income taxpayers); broadens access to low-income tax clinics; and clarifies penalty approval and multi-year credit disallowance “ban” procedures.
American Citizens Abroad: Streamlines aspects of tax-filing for U.S. persons abroad, including through purely procedural changes as well as by raising the foreign-currency gain exemption from $200 to $1,000 and increasing “simplified” foreign tax credit thresholds from $300 ($600 for joint filers) to $1,000 ($2,000), both indexed to inflation.
Judicial Review: Expands Tax Court refund-related jurisdiction (including to standalone refund cases up to $2 million and certain claims for refunds on taxes not fully paid); grants wider authority to hear collections-due-process claims, authorizes hiring new special trial judges, and broadens Tax Court procedures (including by granting broader third-party subpoena powers, authority to offer relief from final judgment or relief from filing deadlines, and broader powers in “innocent spouse” cases). The bill also mandates greater notice by the IRS of taxpayer bans from the Earned Income Tax Credit, American Opportunity Tax Credit, and Child Tax Credit and grants the Tax Court jurisdiction to review such bans.
Office of the Taxpayer Advocate: Increases the authority and independence of the National Taxpayer Advocate, allowing the NTA to hire attorneys, guaranteeing the advocate access to IRS information, and broadening access to the Taxpayer Advocate Service.
Tax Return Preparers: Strengthens paid preparer standards and expands preparer penalties.
Appeals: Strengthens the IRS Independent Office of Appeals, which is mandated to attempt to settle cases while attempting to avoid litigation, authorizing it to hire its own attorneys independent from the Office of Chief Counsel; requires the IRS to respond to timely requests for refunds within 12 months; and clarifies taxpayers’ right to an appeal in an independent forum, as well as allowing appeal of IRS determinations that returns are “nonprocessable.”
Whistleblowers: Increases the rights of whistleblowers: granting interest on awards, de novo review of IRS award-determinations, exemption from budget sequestration, and greater privacy protections.
Hostages: Postpones tax-filing deadlines for hostages detained abroad.
Small Businesses: Streamlines collection processes for small businesses and independent contractors, allowing for voluntary withholding on non-wage remuneration and a safe harbor from failure-to-pay penalties.
Miscellaneous: Authorizes greater disclosure of student-loan data to the Congressional Budget Office and authorizes the IRS to require large partnerships to file on magnetic media.
The bill impacts a wide variety of groups, including individual and business taxpayers, low-income filers, U.S. persons abroad, paid preparers/electronic return originators and taxpayers in IRS disputes. Effective dates are staggered: digitization/e-processing begins with individual returns received in the calendar year starting at least 180 days after enactment and the dashboard generally becomes effective 12 months after enactment; many other provisions are effective on enactment or require Treasury/IRS guidance and recurring reports.
Treasury and IRS Issue Notice 2026-17: Modifications to Rules for Computing Taxable Income or Loss and Foreign Currency Gain or Loss Under Section 987
Notice 2026-17 announces that the Treasury Department and the IRS plan to issue proposed regulations under IRC § 987 that would allow taxpayers with qualified business units (QBUs) using a non-dollar functional currency to elect an equity and basis pool method for determining taxable income or loss and foreign currency gain or loss. The approach is designed to be simplified and rooted in 1991 proposed § 987 regulations. The notice also previews additional changes that would narrow and simplify certain loss suspension and recognition rules in the final § 987 regulations issued in December 2024, clarify successor and hedging definitions, and introduce a future election under which controlled foreign corporations (CFC) generally would not compute or recognize § 987(3) foreign currency gain or loss except in specific inbound contexts.
The forthcoming proposed regulations are expected to apply for tax years ending on or after the date they are finalized, but taxpayers may rely now on the rules in Notice 2026-17 (other than the CFC election provisions) for a tax year ending before the proposed regulations are published in the Federal Register, provided the § 987 electing group applies the rules consistently across years. Notice 2026-17 reflects taxpayer feedback on complexity under the current regime and signals a broader move toward a more administrable framework for separating operating income and foreign exchange effects in branch reporting.
The IRS has requested public comments on Notice 2026-17 by April 26, 2026, including questions about use of cumulative translation adjustments, interaction with inbound reorganization and liquidations, de minimis thresholds, lower-tier CFC stock treatment, hedging rules under Treas. Reg. § 1.987-14, and application of the CFC election in partnership contexts. Stakeholders should consider submitting comments on these topics and begin modeling the potential impacts of the equity and basis pool election and other simplifications on their § 987 reporting and tax liability.
Committee on Ways and Means Hearing with IRS CEO Frank Bisignano
On March 4 at 10:00 am, the Committee on Ways and Means will hold a hearing with Frank Bisignano, the Chief Executive Officer of the IRS. The role, which is not confirmed by the Senate, was created earlier this year. Bisignano also serves as Commissioner of the Social Security Administration after being approved by the Senate for that position.
Joint Economic Committee Hearing on Border Adjusted Tax
On March 4 at 10:30 am (overlapping with the Ways and Means hearing), the Joint Economic Committee will hold a hearing, “Evaluating the U.S. Competitiveness and Investment Advantages of a Destination-Based Cash Flow Tax (DBCFT).” The witnesses will be: Dr. Alan Auerbach, Professor of Economics, University of California, Berkeley; Dr. Andrew B. Lyon, Economist (and earlier this year, point person on tax issues at the National Economic Council); Dr. Douglas Holtz-Eakin, President, American Action Forum; and Mr. John Arensmeyer, Founder and CEO, Small Business Majority. Joint Economic Committee Chairman Schweikert (R-AZ) has been advocating a DBCFT after the Supreme Court ruling striking down the tariffs imposed by President Trump.