US Tax Insights: October 2026

Key highlights of the publication

• Federal tax updates: The IRS has updated the procedures for R&E accounting method changes under IRC §174 and §174A, while proposed regulations address the allocation of deductions to Section 951A category income for foreign tax credit limitation purposes.
• State tax updates: New York’s PAID programme providing penalty and interest relief for eligible sales tax liabilities, and California’s expanded conformity to the IRC §162(m) executive compensation deduction limitation.
• Federal administrative guidance: Notice 2026-61 extends the phase-in period for certain rules governing the dividend-equivalent payments under IRC §871(m) and Notice 2026-57, updating pension funding interest rates.
• State administrative guidance: New Hampshire raises the R&D tax credit caps to USD 10 million annually and USD 100,000 per taxpayer, while New Jersey eliminates the USD 250 million cap on certain AI and data center tax credits.
• Private letter rulings (PLRs): Recent PLRs provide relief for late or missed tax elections, including IRC §754 partnership basis adjustments and retroactive qualified electing fund elections for passive foreign investment company investments.
• Judicial insights: Notable court decisions examine the Hologic, Inc. and Subsidiaries v. Commissioner case, addressing the utilisation of capital losses among the members of a New Hampshire water’s-edge combined group.
• Practical tax tips: IRS guidance on reconstructing disaster-related records and understanding tax transcript options.
• Expert perspective: Expert insights on reverse flip structures for India-focused businesses and key US tax considerations to mitigate unintended consequences.

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US Tax Insights: October 2026

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