Welcome to this week’s edition of Tax Bytes. Our team of tax lawyers is actively monitoring for federal and international tax developments and issues of note. Each week we pull together the items we deem most important to provide updates you need to know for your business.
Tax developments
Treasury issues interim guidance on OBBBA Bonus Depreciation
In Notice 2026-11, the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) issued interim guidance, and announced their intention to issue proposed regulations consistent with such guidance, to implement amendments made to § 168(k) by the One, Big, Beautiful Bill Act (OBBBA). These amendments permanently restored 100% bonus depreciation with respect to qualified property and expanded the definition of qualified property to include certain sound recording productions. The guidance confirms that taxpayers should, with the exception of a few modifications enumerated in the notice, continue to apply guidance in the existing TCJA-era bonus depreciation regulations. The notice does not address implementation of new § 168(n).
The OBBBA permanently restored the 100% additional first-year depreciation deduction under § 168(k) with respect to qualified property acquired, and specified plants planted or grafted, after January 19, 2025, eliminating the prior statutory phase-down and placed-in-service sunset rules. Pursuant to the notice, to implement the amendments made by OBBBA, taxpayers should generally apply existing regulatory concepts under Treas. Reg. §§ 1.168(k)-2 and 1.1502-68, substituting the new statutory dates and percentages for the TCJA-era dates and percentages and disregarding acquisition and placed-in-service date limitations that no longer apply under OBBBA.
The notice also provides that the TCJA-era regulations are modified to expand the definition of qualified property to include qualified sound recording productions commencing in taxable years ending after July 4, 2025, consistent with the expanded definition of qualified property under the OBBBA. The notice provides qualified sound recording productions are treated as placed in service upon initial release or broadcast.
Taxpayers may rely on the interim guidance for eligible property placed in service in taxable years beginning before the forthcoming proposed regulations are published in the Federal Register, provided the guidance is applied both consistently and in its entirety beginning with the first year of reliance.
IRS issues updated guidance on Section 163(j) business interest limitation: Key changes under OBBBA
The IRS recently updated guidance in Fact Sheet FS-2025-09 (Fact Sheet) to address changes to the limitation on business interest expense deductions under Internal Revenue Code Section 163(j) enacted by the OBBBA (P.L. 119-21). As the Fact Sheet notes, the OBBBA amendments to section 163(j) fall into two categories based on their effective dates, with some changes effective beginning in 2025, and others effective beginning 2026.
Read our full alert here, which highlights some notable updates to the Fact Sheet guidance for section 163(j).
House tax bill signals improved taxpayer protections against penalties
The House of Representatives recently passed H.R. 5346, the “Fair and Accountable IRS Reviews Act,” with strong bipartisan support. The legislation seeks to address long-standing challenges in tax administration. If enacted in its current form, the bill would revise the penalty-approval framework under Section 6751(b), significantly strengthening taxpayer protection against improperly imposed penalties. Although it is unclear when the Senate may take up the provision, the strong bipartisan support suggests the bill may find its way into legislation in the current Congress. Championed by Rep. Jason Smith (R), Chairman of the House Ways and Means Committee, the bill reflects Congress’ ongoing effort to balance effective tax enforcement with enhanced procedural fairness for taxpayers.
Read our full alert here.
House tax bill signals improved Tax Court efficiency
On December 1, 2025, the House of Representatives passed H.R. 5349, the “Tax Court Improvement Act,” with bipartisan support. The bill seeks to modernize several historically challenging aspects of tax administration. As approved by the House, H.R. 5349 would strengthen the Tax Court’s ability to effectively advance cases by expanding its subpoena authority, permitting equitable tolling, and implementing other procedural enhancements. Although it is not clear that the bill has the support to pass the Senate, in light of bipartisan support it is increasingly likely that it could be enacted as part of legislation in the current Congress. The bill was championed by Rep. Jason Smith (R), Chairman of the House Ways and Means Committee, and reflects Congress’s ongoing efforts to balance enforcement with greater procedural fairness for taxpayers.
Read our full alert here.
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