Insights

On November 12, 2025, the Tax Court issued a reviewed opinion in Patel v. Commissioner holding in favor of the IRS that the taxpayers’ transaction lacked economic substance, and therefore the taxpayers were liable for penalties under the codified economic substance doctrine at the increased penalty rate, as well as accuracy-related penalties. The Court previously held in a separate opinion that the taxpayers’ purported captive transactions did not constitute insurance because they failed to distribute risk, and in the alternative, that the micro-captives did not act as an insurer commonly would. 

In 2024, the U.S. Supreme Court determined that the civil penalties issued by the SEC against individuals for committing securities fraud were unconstitutional because they were levied without a jury trial.[1]

On August 15, 2025, the Treasury Department and IRS released updated guidance concerning Beginning of Construction requirements to qualify for clean energy tax credits. This new guidance is critical for developers to consider as they rush to qualify for the tax credits before they expire entirely. The much-anticipated guidance followed the July 7, 2025 Executive Order 14315, Ending Market Distorting Subsidies for Unreliable, Foreign-Controlled Energy Sources (“July 7, 2025 Executive Order”), which signaled that the Trump Administration was planning to strictly enforce the termination of production and investment tax credits for solar and wind facilities that are set to expire under the One Big Beautiful Bill Act (OBBB Act), covered in more detail here. The new guidance comes at a time when many in the industry are struggling to keep up with the myriad ways that the new administration is working to roll back wind and solar tax credits, leaving developers to piece through the recent guidance to determine how best to structure and invest in clean energy projects given the volatile position of the current administration vis-a-vis wind and solar energy.

On October 1, 2025, the IRS Independent Office of Appeals launched a two-year pilot program to make Post Appeals Mediation (PAM) more attractive and accessible to taxpayers. See IRS Announcement 2025-10. The new PAM pilot program offers taxpayers the opportunity to be assigned to a new Appeals team, which is otherwise unconnected to the underlying case, who will represent the original Appeals team in the mediation session. The assignment of the new Appeals team does not begin a new appeals process but rather is intended to help facilitate an expedited and impartial look at the underlying case with the goal of further exploring all potential paths to resolution prior to litigation.

On October 1, 2025, the Eighth Circuit decided 3M Co. v. Commissioner in the taxpayer’s favor, based on its application of Loper Bright. The question presented in the case was whether the IRS had the authority to reallocate royalty income to a U.S. parent company that its foreign subsidiary was prohibited from paying under foreign law. The court held that the best interpretation of the governing statute did not permit the IRS’s reallocation.

On August 19, 2025, the U.S. Senate Committee on Finance (“Senate Finance Committee”) sent Paul Atkins, Chairman, U.S. Securities and Exchange Commission (“SEC”) a letter calling on the SEC to investigate White River Energy Corp (“White River”). In the letter, the Senate Finance Committee confirmed a criminal investigation into White River related to the sale of so-called “tribal tax credits” that according to both Congress and the IRS, do not exist. The letter further states that White River allegedly earned millions of dollars selling these credits and has not been forthcoming with investors regarding the existence of the criminal investigation. According to the Senate Finance Committee, White River has failed to file financial disclosure documents with the SEC since March 15, 2024, missing six consecutive reporting periods. The letter instructs White River to disclose the existence of the DOJ criminal tax investigation, and calls on the SEC to take action if White River fails to do so.

On July 23, 2025, the Internal Revenue Service (“IRS”) issued interim guidance for Large Business & International Division (“LB&I”) audit procedure. The IRS announced three major changes: (1) the Acknowledgement of Facts Information Document Request (“AOF IDR”) will be eliminated; (2) Accelerated Issue Resolution (“AIR”) applies to Large Corporate Compliance (“LCC”) cases; and (3) the IRS must conduct additional review before denying a taxpayer’s request to participate in the Fast Track Settlement (“FTS”). These changes reflect the IRS’s continued push to make its examinations “more efficient and current.”

In April 2025, the IRS and the Department of Homeland Security (DHS) formalized a Memorandum of Understanding (MOU) enabling Immigration and Customs Enforcement (ICE) to create a system of information sharing between the agencies. Under the MOU, the IRS can share tax return information for non-tax criminal investigation purposes. More specifically, the MOU permits ICE to request sensitive tax information from the IRS for purposes of pursuing immigration related cases and deportations. Given the Trump administration’s focus on undocumented workers, the implications of the MOU likely will go even further as sharing this information will result in tax enforcement against employers of deported individuals.

On July 4th, President Trump signed into law the One Big Beautiful Bill Act (the “Act”), which included a phaseout of incentives for solar and wind generation projects. Projects must either begin construction within one year or be placed in service by 2027 to qualify for the Section 45Y Clean Electricity Production Tax Credit or the Section 48E Clean Electricity Investment Tax Credit. The House’s version of the legislation required a more accelerated phaseout than the Act and only allowed projects that began construction within 60 days of enactment of the bill to be eligible for the tax credits.  In discussions last week with House conservatives who favored the faster phaseout of solar and wind tax credits, which was not adopted in the Act, President Trump promised strict enforcement of the rules, including the beginning of construction requirements, for solar and wind projects to qualify for energy tax credits.

On May 20, 2025, former Missouri congressman, Billy Long, appeared before the Senate Finance Committee for his confirmation hearing as President Donald Trump’s nominee for IRS Commissioner.  Senators questioned Long about his role in promoting questionable tax credits, including Employee Retention Tax Credits (“ERTC”) after leaving the House of Representatives in 2023.  Long also disclosed receiving financial compensation from these entities for his work promoting ERTC.  Given Long’s support for ERTC, there is speculation that the IRS could ease enforcement activity directed towards these credits.

On May 13, the House Ways and Means Committee passed “The One, Big Beautiful Bill.” This bill includes several provisions that, if enacted, will be important to businesses claiming research and development incentives:

In a significant decision for generic drug manufacturers, the Federal Circuit recently affirmed that litigation expenses incurred in defending Hatch-Waxman patent lawsuits are deductible as ordinary and necessary business expenses under the Internal Revenue Code (IRC). The ruling in Actavis Laboratories FL, Inc. v. United States, No. 23-1320 (Fed. Cir. Mar. 21, 2025), resolves a key tax dispute, allowing tax deductions for these expenses in the year they are incurred rather than capitalizing them over time. This outcome provides clarity and potential tax benefits for qualifying businesses navigating the interplay of patent litigation and FDA drug approvals.

On October 24, 2024, Crowell & Moring LLP hosted its 38th Annual Managing Tax Audits and Appeals Seminar. The seminar featured several prominent IRS speakers and lively discussion among clients, including conversations about the following hot topics:

On Friday, June 28, 2024, the U.S. Supreme Court overruled Chevron U.S.A. v. Natural Resources Defense Council (“Chevron”)[1] in Loper Bright Enterprises v. Raimondo (No. 22-451) and Relentless v. Dep’t of Commerce (No. 22–1219)[2] (the two cases collectively referred to as “Loper Bright”), bringing an official end to the decades-old and eponymously named “Chevron deference” doctrine. Not content to stop there, the Court returned fresh to work Monday, July 1, to, in Corner Post, Inc. v. Board of Governors of the Federal Reserve System (No. 22-451)[3] (“Corner Post”), effectively extend the limitations period to challenge final agency actions under the Administrative Procedure Act (“APA”).

Tax partner and co-chair Starling Marshall and tax partner Carina Federico discuss where they predict tax disputes may arise with the IRS related to the IRA clean energy provisions. 

Last week, the IRS announced plans to begin a campaign to audit personal use of business aircraft. The audits will focus on whether large corporations, partnerships and high-and ultra-high net worth aircraft owners have properly reported their business and personal aircraft usage for tax purposes, with a particular focus on ensuring that owners are only taking deductions to which they are entitled. Given the value of an aircraft, the amount of a deduction for aircraft related expenditures on a given taxpayer’s return can be in the tens of millions of dollars, and with more than 10,000 corporate jets operating in the U.S., IRS Commissioner Daniel Werfel recognized that much is at stake with this campaign.  The audit campaign is expected to focus initially on multinational and domestic corporations and complex partnerships but is expected to expand from there.

This week, IRS Commissioner Daniel Werfel informed a crowd at a conference that the IRS was looking to reset its approach to ERC claims after implementing a moratorium on processing claims in September. Mr. Werfel communicated that the IRS is focused on changing the way it processes these claims and on communicating the eligibility criteria to taxpayers. He also indicated a willingness to work with employers who received the credit, but were not actually entitled to it, allowing taxpayers to pay back the funds to the IRS in a way that works for their businesses.

This week, the IRS announced a new withdrawal process to allow certain employers who filed an Employee Retention Credit (ERC) claim, but have not yet received a refund, to withdraw their submission. As discussed in our previous alert, the IRS recently announced a pause in processing new ERC claims, at least through the end of 2023, due to concerns that many recently filed claims are invalid.

The IRS recently announced that it will stop processing any new claims for the Employee Retention Credit (ERC) through at least the end of the year due to concerns that a large number of recent claims are invalid. The ERC, enacted as part of the CARES Act in 2020, provides a refundable tax credit for eligible employers impacted by the pandemic from March 13, 2020 through September 30, 2021.

On June 14, 2023, the Treasury Department and the Internal Revenue Service (IRS) released proposed regulations regarding the clean energy tax credits eligible for direct pay and transferability under the Inflation Reduction Act (IRA). The IRS also released FAQs for both direct pay and transferability, which provides further guidance to interested taxpayers.