Tax Bytes: Week of May 11, 2026

Tax developments

Where’s the beef? In Liberty Global, the Tenth Circuit finds Project Soy lacks substance

In a 2–1 decision, the Tenth Circuit affirmed the District of Colorado’s decision in Liberty Global, Inc. v. United States, holding that the codified economic substance doctrine under section 7701(o) barred Liberty Global from claiming a section 245A dividends-received deduction resulting from its 2018 restructuring known as “Project Soy.” The transaction involved a tightly integrated series of steps designed to exploit a perceived mismatch in the Tax Cuts and Jobs Act’s (TCJA’s) international provisions. The majority opinion treated the codified economic substance doctrine as a substantive constraint that can deny tax benefits even where a transaction mechanically complies with the Code.

The decision is important because of the majority’s framing of the relevancy requirement for the codified economic substance doctrine: their opinion treated the doctrine as relevant whenever a taxpayer uses technically compliant steps to obtain a tax result the court views as inconsistent with congressional intent.

Read our full alert here.

Significant Revenue Procedure offers flexibility in corporate letter rulings

The IRS has taken oscillating positions on issuing corporate letter rulings on isolated issues in the context of a larger, integrated transaction. Since 2024, taxpayers have been required to request a letter ruling regarding an entire transaction, which made the letter ruling process more time-consuming and costly. With Rev. Proc. 2026-21, the IRS will allow taxpayers to request letter rulings on more discrete, “significant issues” within larger transactions. This move offers flexibility and should encourage more taxpayers to seek rulings in the corporate space.

Read our full alert here.

How the IRS’s Compliance Assurance Process reviews transactions on post-closing, pre-filing basis: A practical guide for taxpayers

The IRS’s Compliance Assurance Process (CAP) allows large taxpayers to identify and address material federal income tax issues before filing through real‑time engagement with the IRS. For significant transactions, review typically begins after closing, providing earlier visibility into tax risk. This is particularly relevant for organizations undertaking acquisitions, restructurings, or financings, where timing and disclosure decisions can materially influence IRS scrutiny and outcomes.

Read our full alert here.

Section 6435 temporary regulations should prompt parties who remove previously taxed dyed diesel fuel or kerosene to re-examine supply agreements

On April 30, 2026, the Treasury and IRS released temporary regulations (T.D. 10047) and identical proposed regulations (REG-119294-25) under section 6435 of the Code, which was added by the One Big Beautiful Bill Act (OBBBA).

Section 6435 provides for a payment from the Treasury to a person who removes indelibly dyed diesel fuel or kerosene from a terminal for a nontaxable use under section 4082(a), in an amount (without interest) equal to the tax under section 4081 that was previously paid with respect to such fuel.

Consistent with Ann. 2026-1, released on December 22, 2025, the regulations take the position that section 6435 does not authorize Treasury to make any payment to the ultimate purchaser of the dyed diesel or kerosene, as would be the case for certain other similar excise tax provisions.⁵ Rather, a payment under section 6435 is only authorized to be made to the taxpayer that has previously paid the section 4081 excise tax, typically the “position holder” who owns the inventory position in the fuel.

Lacking a right to payment from Treasury, the ultimate purchaser instead must rely on contractual provisions to obtain the benefit of section 6435. 

Accordingly, parties to transactions involving the removal of previously taxed diesel fuel and kerosene from a terminal for a nontaxable use should analyze their supply agreements to ensure that the proper party is allocated the benefit of the section 6435 payment.

The proposed and temporary regulations also provide guidance on how a position holder or other party who paid the section 4081 excise tax may obtain a refund of such tax under section 6435, using Schedule 5 to IRS Form 8849.

Read our full alert here.

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