IRS Issues Proposed International Tax Regulations Under OBBBA
The IRS has released proposed regulations implementing key international tax provisions of the One Big Beautiful Bill Act (OBBBA), including changes to Subpart F, Net CFC Tested Income (formerly GILTI), and foreign tax credit calculations. While still in proposed form, they offer an early look at how the IRS intends to administer and enforce these complex provisions.
Why It Matters:
International tax compliance remains a high-risk, high-scrutiny area. These proposed regulations signal how aggressively the IRS plans to interpret OBBBA provisions and where audits and enforcement may focus. Practitioners should review the proposed regulations, assess client exposure, and prepare for potential changes in reporting and calculation methodologies.
Actionable Steps:
- Analyze the proposed rules for client impact, particularly for multinational structures.
- Update internal compliance protocols and client data collection processes to capture new data points required under OBBBA.
- Monitor the regulatory process, including comment periods and IRS updates, and submit comments where appropriate to anticipate implementation timelines.
House Committee Advances Tax-Related Bills
The House Ways and Means Committee has advanced several tax-related bills addressing business deductions, credits, and procedural reforms. While these measures are not yet law, they indicate potential future changes and signal legislative priorities heading into the next session.
Why It Matters:
Even proposed legislation influences planning conversations. Tax professionals benefit from understanding what may be coming next, particularly when advising business owners on long-term strategies. Proposed legislation can influence client planning and expectations, but caution is warranted as proposals can change significantly before enactment.
Actionable Steps:
- Monitor legislative progress and analyze potential impacts on client tax positions, especially for 2026 and beyond.
- Flag clients whose tax positions could be affected by proposed changes, such as expansion of Section 179 expensing or modifications to R&D credits, if applicable.
- Defer implementation of planning strategies until legislation is enacted and encourage participation in comment periods or professional association advocacy where appropriate.
IRS Clarifies Expanded Health Savings Account Rules
The IRS has issued Notice 2026-05, clarifying expanded Health Savings Account (HSA) eligibility under H.R. 1, including compatibility with additional health plan types and telehealth services. The guidance helps clarify how taxpayers and employers should interpret and apply the new rules moving forward.
Why It Matters:
HSAs remain a powerful tax-advantaged planning tool. Expanded eligibility creates new planning opportunities, but also new compliance risks if misunderstood. Practitioners should review the guidance and update client communications accordingly.
Actionable Steps:
- Identify clients who may newly qualify for HSAs under the expanded rules.
- Revise planning materials and coordinate with benefits advisors and payroll providers to ensure consistent implementation and compliance with updated IRS guidance.
- Review plan documents and employee communications for consistency with the new rules, and note any transition relief or grandfathering provisions that may apply.
OBBBA Boosts the Adoption Tax Credit
OBBBA enhances the adoption tax credit by increasing the maximum credit, partially restoring refundability, and expanding recognition of special needs determinations, including those made by Indian tribal governments. These enhancements are designed to provide greater financial support to families pursuing adoption.
Why It Matters:
Credits with refundable components often draw IRS scrutiny and generate taxpayer confusion. Practitioners must understand eligibility requirements, documentation standards, and how these changes affect return preparation and audit risk.
Actionable Steps:
- Review plan documents and employee communications for consistency with the new rules, and note any transition relief or grandfathering provisions that may apply.
- Adjust tax projections and estimated payments where refundable credits apply, and monitor for updated IRS forms and instructions reflecting these changes.
- Prepare clients for potential IRS verification requests tied to refundable credits and ensure all documentation is in order.