Monthly US Tax Bulletin - October 2026

This edition provides a concise summary of recent key developments in federal and state taxes.

Key highlights:

Federal taxes

• R&E expenditures: IRS updates procedures for automatic accounting method changes relating to domestic and foreign research and experimental expenditures under IRC §174 and §174A.
• Foreign tax credit rules: Treasury and the IRS propose rules addressing the allocation of deductions to Section 951A category income relating to a US shareholder’s share of a controlled foreign corporation’s (CFC) tested income for foreign tax credit limitation purposes.
• Consolidated group regulations: Final regulations were issued addressing certain liability assumptions in transfers between members of consolidated groups.
• IRS Direct Pay: The IRS highlighted Direct Pay as an electronic option for making federal tax payments.
• 2027 Compliance Assurance Process: The IRS opened applications for the 2027 Compliance Assurance Process (CAP) for eligible large corporate taxpayers.

State taxes

• Pennsylvania: Clarified the application of the IRC §163(j) business interest expense limitation for Corporate Net Income Tax purposes.
• New York: Introduced the Penalty and Interest Discount (PAID) program, providing eligible sales tax vendors relief from certain penalties and interest on qualifying outstanding liabilities.
• Texas: Proposed amendments that would exclude certain qualifying marketplace and platform fees from taxable data processing services.
• California: Expands conformity with the federal IRC §162(m) limitation on deductions for certain executive compensation.
• Nevada: Proposes new record-submission and audit requirements, including potential penalties for failure to provide requested records.

Monthly US Tax Bulletin - October 2026

The tax and regulatory environment continues to evolve rapidly, with significant developments on both federal and state fronts. To keep you ahead of these developments, we present the October 2026 edition of the Grant Thornton Bharat Monthly US Tax Bulletin.

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