The Internal Revenue Service (IRS) has announced significant changes to federal tax regulations that could fundamentally alter how businesses, fuel distributors, and health insurance consumers manage their taxes. This development, revealed on December 22, 2023, aligns with provisions in the One Big Beautiful Bill, which aims to streamline and clarify complex tax rules.
One of the most notable updates involves new refund protocols for dyed fuel. Traditionally, operators of diesel fuel or kerosene have faced challenges when the fuel is taxed upon its removal from a terminal, even if it is later designated for non-taxable use by being dyed. The new legislation establishes a framework for recovering this initial tax when the fuel qualifies for exemption. The IRS has indicated that formal guidance on filing refund claims will be available in early 2026. Until that time, taxpayers are advised to refrain from submitting claims, even if the removal of the fuel occurs after December 31, 2025. Importantly, refunds will only be issued to the party that originally paid the excise tax, a condition that will remain unchanged unless Congress makes further amendments.
The following day, December 23, 2023, the IRS provided new guidance on business interest deductions, reflecting substantial modifications to Section 163(j) of the tax code. Starting with tax years after December 31, 2024, businesses will be able to include depreciation, amortization, and depletion in their Adjusted Taxable Income calculation. This change effectively loosens the cap on deductible interest expenses. In 2026, the IRS clarified that interest costs incurred during the year will generally fall under the Section 163(j) limitation, with specific exceptions for certain foreign income linked to controlled foreign corporations.
On the same day, the IRS issued updates regarding the Premium Tax Credit, which assists low- and moderate-income households in obtaining insurance through the Health Insurance Marketplace. Changes to the credit, resulting from the One Big Beautiful Bill, will eliminate repayment caps on excess advance credits for tax years after December 31, 2025. Additionally, the IRS has removed outdated guidance associated with temporary rules that have long expired.
These updates signify a broader initiative by the IRS to modernize outdated tax regulations, expand deductions and credits in various sectors, and guide taxpayers through the complexities of legislative changes. The IRS’s message is clear: the implications of the One Big Beautiful Bill are transitioning from legislation to practical enforcement, with tax implications expected to surface sooner than many might anticipate.
As these developments unfold, both businesses and individuals should prepare for the evolving landscape of federal taxes, keeping in mind the timetable for new guidance and the potential lasting impact on their financial obligations.
