- Treasury official comments on Section 892 guidance, mentions timeline for OBBBA proposed international regulations.
- Ways and Means Committee hearing with IRS CEO Frank Bisignano.
- Treasury and IRS issue proposed regulations to withdraw early 2025 regulations on partnership transaction basis shifting reporting.
- Treasury and IRS issue proposed regulations to facilitate electronic delivery for digital asset Form 1099-DA statements.
- Treasury and IRS issue two sets of proposed regulations on Trump Accounts created in the OBBBA.
- Tax Court holds note contributed to partnership by partner’s disregarded subsidiary does not result in basis.
Speaker Johnson (R-LA) and House Budget Committee Chairman Arrington (R-TX) are advocating that congressional Republicans enact a reconciliation bill this year as House Republicans hold their annual retreat this week to consider their legislative agenda for the remainder of the year. The latter said that a reconciliation bill will likely be the only way of enacting supplemental appropriations to fund the military operations in Iran and that congressional Republicans should also include other policy priorities, such as spending reforms, tax, and health, in such a bill.
House Appropriations Chairman Cole (R-OK) said that the Executive Branch’s proposed budget for Fiscal Year 2027 will likely be released at the end of March. On March 10, Ken Kies, Assistant Secretary of the Treasury for Tax Policy, said that the upcoming proposed budget would likely not contain a Green Book of legislative tax proposals. He said that the OBBBA contained the Administration’s legislative tax agenda to date and that Treasury and the IRS are focused on implementing that law.
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 shutdown is starting to cause flight delays. Although TSA employees are generally deemed essential, and therefore required to work, they are not being paid and have been increasingly calling in sick.
The Joint Economic Committee postponed until further notice its hearing, “Evaluating the U.S. Competitiveness and Investment Advantages of a Destination-Based Cash Flow Tax (DBCFT),” that had been scheduled for March 4.
Treasury Comments on Section 892, OBBBA Proposed International Regulations
On March 5, James Wang, Treasury’s International Tax Counsel, said that Treasury plans to issue proposed regulations with regards to the international tax provisions in the OBBBA by midyear. This includes proposed regulations under Section 250 regarding foreign-derived deduction eligible income (for prior guidance, see Notice 2025-78), under Section 951 regarding certain dividends paid by controlled foreign corporations (for prior guidance, see Notice 2025-75), described in this S&C memo, and under Section 898 for allocating foreign taxes (see Notice 2025-72), described in this S&C memo. Wang said that Treasury is considering changes to the section 892 proposed regulations, described in this S&C memo, and that various portions of the proposed regulations might be finalized, reproposed or withdrawn. He also said that Treasury is rethinking transition rules on those regulations.
Committee on Ways and Means Hearing with IRS CEO Frank Bisignano
On March 4, the Committee on Ways and Means held a hearing with Frank Bisignano, the Chief Executive Officer of the IRS, on the 2026 tax filing season. As expected, the hearing was highly partisan. Bisignano said that the filing season is going well. Bisignano and Committee Republicans touted the OBBBA and refunds Americans have been receiving because of the OBBBA. Committee Democrats criticized Treasury for ending its collective bargaining agreement with the IRS union. They also focused on the recent court ruling that the IRS had improperly shared confidential taxpayer information with Immigration and Customs Enforcement.
Treasury and IRS Release Notice of Proposed Rulemaking on Partnership Basis Rules
On March 6, the Department of the Treasury and the Internal Revenue Service issued a notice of proposed rulemaking to remove Treasury Regulation Section 1.6011-18, which identifies certain partnership related-party basis adjustment transactions as “transactions of interest” (TOIs), a type of reportable transaction.
On March 10, Assistant Secretary for Tax Policy Ken Kies provided more background on this action, which he said would have resulted in the IRS receiving 100,000 forms, burdening taxpayers but not helping the government. “If the IRS receives 100,000 of anything, do you know what happens to them? Nothing,” he said.
Treasury and the IRS proposed these regulations in a notice of proposed rulemaking on June 18, 2024, accompanied by Notice 2024-54 and Revenue Ruling 2024-14. Notice 2024-54 stated the intent of Treasury and the IRS to propose regulations under sections 732, 734(b) and 755 addressing related-party basis adjustments, and under section 1502 “to clearly reflect the taxable income and tax liability of a consolidated group (as defined in § 1.1502-1(h)) whose members own interests in a partnership.” Revenue Ruling 2024-14 concluded that certain related-party partnerships with basis adjustments violated the economic substance doctrine (see this S&C Memo for a discussion of the June 2024 guidance package). Treasury estimated that the guidance package would raise more than $50 billion in revenue over 10 years.
Treasury and the IRS finalized the proposed regulations on January 14, 2025 (see this S&C Memo for further discussion). The January 2025 regulations require participants and material advisors involved in specified basis adjustment transactions under sections 732(b), 732(d), 734(b), and 743(b) of the Tax Code to comply with reportable transaction disclosure obligations by making the transactions TOIs.
On April 17, 2025, Treasury and the IRS issued Notice 2025-23 announcing their intent to publish proposed regulations to remove § 1.6011-18. Notice 2025-23 also provided immediate relief from penalties under those regulations. Furthermore, Notice 2025-23 withdrew Notice 2024-54’s stated intent to issue further proposed regulations in this area.
The NPRM requests comments by April 6. A public hearing will be held if requested by a person that timely submits electronic or written comments and requests to testify.
Treasury Proposes Streamlined Electronic Delivery Framework for Digital Asset Form 1099-DA Statements
On March 6, Treasury and the IRS issued proposed regulations (REG-105064-25) that would generally permit digital asset brokers to furnish Form 1099-DA statements electronically under a streamlined consent framework, and allow brokers to decline to provide such statements on paper.
The proposal addresses the mechanics of how brokers may deliver required payee statements to customers. Specifically, the regulations would allow brokers to obtain customer consent to electronic delivery without being required to offer a paper alternative, subject to enhanced notice, disclosure, and access requirements. The proposal does not expand the underlying digital asset information reporting regime finalized in 2024.
Under existing rules applicable to information reporting more broadly, brokers generally must obtain affirmative consent before furnishing payee statements electronically and must provide paper statements to customers who do not consent or who withdraw prior consent. Treasury and the IRS stated that applying those legacy consent rules to digital asset reporting presents unreasonable practical challenges. Unlike many traditional brokerage accounts, digital asset trading activity can generate a very high volume of reportable transactions for individual customers, potentially resulting in extremely lengthy annual statements. The preamble recognizes that printing and mailing such statements could impose significant administrative and cost burdens on digital asset brokers, particularly where customers transact exclusively through electronic platforms.
To address these concerns, the proposed regulations would establish a dedicated consent regime for Form 1099-DA statements. Brokers could satisfy their furnishing obligations electronically if they obtain “positive consent” after providing specified disclosures and if they use one of two qualified electronic delivery methods—either posting the statement to an electronically accessible account location with a separate email notification or directly transmitting the statement by email. Notably, under the proposed rules, brokers would not be required to continue offering a paper delivery option to customers who decline electronic consent; instead, brokers could limit or terminate services for non-consenting customers, provided appropriate disclosures are made.
Consolidated reporting statements would be permitted in electronic form only if the broker has obtained valid consent for each included form under the applicable consent framework. In short, the proposed regulations are operational rather than substantive: they do not modify which digital asset transactions must be reported or the content of Form 1099-DA but instead establish a crypto-specific electronic furnishing regime intended to reduce compliance burdens while preserving taxpayer notice and IRS matching functionality. Written comments are due by May 5, 2026.
Treasury and IRS Release Proposed Regulations on Trump Accounts under the OBBBA
On March 6, the Treasury Department and the IRS released two notices of proposed rulemaking (NPRMs) addressing the creation and operation of “Trump Accounts” under new sections 530A and 6434 of the Tax Code, enacted as part of the OBBBA.
Treasury and IRS previously released Notice 2025-68 in December 2025, notifying the public that such proposed regulations would be forthcoming and outlining their overall framework (as discussed in S&C’s December 8 Tax Policy Update).
Initial Trump Accounts (Section 530A)
The proposed regulations under section 530A would provide guidance on the election to open an initial Trump Account, a new form of IRA, which the guidance describes as a type of traditional IRA, established for eligible individuals under age 18. An eligible individual must have a Social Security number and must not have attained age 18 before the end of the calendar year in which the election is made. The election must be submitted on a prescribed form (Form 4547) or through an IRS electronic platform and may be made through December 31 of the year the child turns 17.
The regulations also establish rules for who may make the election and designate the electing individual as the default “responsible party” for the account. The NPRM states the intention of the government to subsequently issue further proposed regulations addressing contributions, investments, distributions, reporting, and coordination with other IRA provisions.
$1,000 Pilot Program Contribution (Section 6434)
The proposed regulations under section 6434 would implement the one-time $1,000 federal “pilot program” contribution for certain children born between 2025 and 2028. An eligible child must be a U.S. citizen, have a Social Security number issued before the election, satisfy section 152(c) qualifying child requirements (on a forward-looking basis), and not have had a prior processed election.
The proposed regulations also outline the procedure for electing into the pilot program and the necessary relationship between the individual electing into the program and the eligible child.
To ensure that the full $1,000 is contributed, the regulations create a “special taxable year” for the child upon processing of the election, generating a $1,000 deemed payment and corresponding overpayment that is refunded exclusively as a contribution to the child’s Trump Account. The amount is protected from offset under section 6402 and is not treated as a refund claim. Elections may be made from the date the child becomes eligible through December 31 of the year the child turns 17, and only the first processed election is effective.
Both NPRMs request comments within 30 days (April 8) after publication in the Federal Register (March 9). A public hearing will be held if requested by a person that timely submits electronic or written comments and requests to testify. The final regulations are proposed to apply for tax years starting on or after January 1, 2026. In particular, comments are requested regarding the requirements to be a nonbank trustee, and who should be eligible to open accounts on behalf of eligible children, including whether States or other government entities should be authorized to make elections on behalf of eligible individuals if no such election is made by others, and on possible simplification.
Tax Court Holds Note Contributed to Partnership by Partner’s Retroactively Disregarded Subsidiary Does Not Result in Basis
In Continental Grand Limited Partnership v. Commissioner, the Tax Court (in a precedential opinion) addressed whether the contribution of a partner’s own note to a partnership in exchange for a partnership interest gives rise to basis.
The Tax Court has previously held that a partner who contributes its own note to a partnership does not obtain outside basis in the resulting partnership interest and the recipient partnership does not receive inside basis. The novel issue before the Tax Court was whether that principle extends to a promissory note that was previously regarded, but contributed to a partnership by a disregarded subsidiary at a time when the note was also disregarded.
In the case, the promissory note was issued by a parent to its wholly-owned, regarded subsidiary. The subsidiary then contributed the note to the partnership. Later, the subsidiary elected under the entity-classification regulations to be treated as a disregarded entity, retroactively to a date before the contribution of the note.
Under Treas. Reg. § 301.7701-3(g), an election to be classified as a disregarded entity is treated as a deemed liquidation of the subsidiary into its owner, followed by continuation of the activities in disregarded form. Because the election in this case was retroactive, the deemed liquidation was treated as occurring before the subsidiary’s contribution of the note to the partnership. As a result, the parent was deemed to have received the subsidiary’s assets and liabilities, including the note, in liquidation and then to have contributed the note directly to the partnership.
It is not entirely clear from the decision whether the promissory note was originally issued in exchange for cash (with the subsidiary’s basis in the note retroactively disappearing), or whether the novel issue was merely that the note existed between separate entities for non-tax purposes before its contribution. At minimum, the note was created by a separate regarded entity before being deemed contributed by its owner. The case therefore extends prior precedent from situations involving a direct contribution of a partner’s own note to a deemed contribution resulting from a retroactive entity-classification election.
In 2009, the parent satisfied the note, and the subsidiary withdrew from the partnership, receiving a liquidating distribution of cash. The IRS determined that the parent’s adjusted basis in the note was zero; that its basis in the partnership interest immediately following the contribution was zero under § 722; and that the partnership’s basis in the note was likewise zero under § 723. The Tax Court, in an opinion written by Judge Toro, granted partial summary judgment sustaining those basis determinations. The court did not adjudicate the ultimate tax consequences of the 2009 liquidation or of repayment of the note.
Judge Toro’s reasoning followed the sequence of transactions. Because the retroactive check-the-box election caused a deemed liquidation of the subsidiary into the parent before the contribution, the parent was treated, for federal tax purposes, as having contributed its own note to the partnership in exchange for a partnership interest. Section 722 provides that a partner’s basis in a partnership interest equals the adjusted basis of the property contributed. The parent’s basis in its own note was zero. Accordingly, the parent’s outside basis in the partnership interest was zero. Similarly, under § 723, the partnership’s basis in the contributed note equaled the contributing partner’s basis, which was also zero.
The opinion’s scope, however, was relatively narrow. Although the court described the contribution of a partner’s own note as not giving rise to outside or inside basis, it did not purport to resolve broader questions about the consequences of zero basis notes, such as whether there would have been gain on repayment on the note. Notably, in other contexts, such as a § 357(c) line of cases, courts have treated similar obligations differently, and the Tax Court expressly distinguished those authorities.