United States: Tax

The US Court of Federal Claims recently addressed a critical question for Canadian exempt organizations earning US-source income: can they rely on fiscal transparency rules to claim treaty benefits through investment vehicles? The court's ruling in The South Saskatchewan Community Foundation Inc. v. United States examines when charitable organizations may look through intermediary entities to access tax exemptions under the US-Canada tax treaty, with significant implications for cross-border investment

The Treasury Department has issued proposed regulations fundamentally changing how U.S. shareholders calculate their pro rata share of controlled foreign corporation income when ownership interests vary throughout the year. These regulations implement amendments from the One Big Beautiful Bill Act, introducing daily proration methodologies, mandatory year-end closings for status changes, and new elective provisions for significant ownership variances.

The Maryland Tax Court struck down the state's digital advertising tax on multiple constitutional grounds, potentially establishing a precedent for challenging similar state taxes targeting the digital economy. The decisions address fundamental questions about how states can tax digital services without violating federal law and constitutional protections.

California's proposed Billionaire Tax Act would impose a onetime 5% excise tax on individuals and trusts with assets exceeding $1 billion, creating unprecedented challenges for estate planners. The retroactive application and anti-abuse provisions raise critical questions about the treatment of grantor trusts, non-grantor trusts, and beneficiary interests that deviate significantly from established federal wealth transfer tax principles.

The Financial Accounting Standards Board issued Accounting Standards Update 2026-03, Fair Value Measurement (Topic 820): Investment Companies with Equity Securities Subject to Contractual Sale Restrictions, on September 9, 2026. While the update is aimed at investment company accounting, it could benefit estate planners and valuation professionals who regularly defend marketability discounts on closely held and restricted stock.

California's Proposition 40 would impose a one-time excise tax of up to 5 percent on billionaires' worldwide net worth, measured as of December 31, 2026, but based on residency as of January 1, 2026. The measure faces significant legal challenges and could be nullified by competing ballot initiatives that have also qualified for the November 2026 ballot.

The IRS has issued Notice 2026-40 providing transition guidance for investors who deferred capital gains under the original Opportunity Zone program. While December 31, 2026 remains the mandatory recognition date for deferred gains, the guidance reveals a potential planning opportunity that may allow certain investors to continue deferring gains under the new Opportunity Zone regime through strategic pre-year-end transactions.

California's proposed Billionaire Tax Act would impose a onetime 5% excise tax on individuals and trusts with assets exceeding $1 billion, creating unprecedented challenges for estate planners. The retroactive application and anti-abuse provisions raise critical questions about the treatment of grantor trusts, non-grantor trusts, and beneficiary interests that deviate significantly from established federal wealth transfer tax principles.

Private placement life insurance (PPLI) has been characterized as a tax loophole for the ultra-wealthy, but is that characterization accurate? This analysis examines the mechanics, regulatory framework, and evolving accessibility of PPLI, challenging common misconceptions about how these insurance products actually work and who can benefit from them.

The U.S. Treasury and IRS have issued proposed regulations addressing a new category of income excluded from deduction eligible income under section 250(b)(3)(A)(i)(VII), which was introduced by the One Big Beautiful Bill Act. These regulations clarify how income from sales of intangible property and certain depreciable assets will be treated under the foreign-derived deduction eligible income regime, with significant implications for software transactions and related party transfers.

The US Department of Treasury defends its authority to regulate stock-based compensation in cost-sharing arrangements under IRC § 482, arguing the regulations fall within statutory bounds and are necessary to ensure arm's-length results between related parties. The government's response to McKesson Corporation's summary judgment motion addresses challenges based on the Loper Bright decision and notably abandons its six-year statute of limitations defense.

Discover how artificial intelligence is transforming tax law and intellectual property, while examining critical issues of tax rates and wealth inequality in modern America. Professor Jeremy Bearer-Friend from George Washington University Law School shares expert insights on these evolving challenges in the tax landscape.