Areas in which rulings will not be issued, Associate Chief Counsel (International).

Notice 2026-3 provides relief from the additions to tax under sections 6654 and 6655 for underpayment of estimated income tax, and assists in implementing section 70437 of the One, Big, Beautiful Bill Act, which added a new limited payment deferral election in section 1062(a) applicable in the case of a sale or exchange of qualified farmland property to a qualified farmer (qualified sale or exchange). In the interest of sound tax administration, the IRS will waive a portion of the addition to tax under sections 6654 and 6655 attributable to a qualified sale or exchange for which an election under section 1062(a) (section 1062 election) is properly made. The amount of the relief depends on the amount of tax the payment of which is deferred by the section 1062 election.

This notice sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for November 2025 used under § 417(e)(3)(D), the 24-month average segment rates applicable for December 2025, and the 30-year Treasury rates, as reflected by the application of § 430(h)(2)(C)(iv).

This revenue ruling provides tables of covered compensation under § 401(l)(5)(E) of the Internal Revenue Code and the Treasury Regulations thereunder, effective January 1, 2026.

This notice provides guidance on changes relating to health savings accounts (HSAs) enacted by Pub. L. 119-21, 139 Stat. 72 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA). These changes generally expand the availability of HSAs under section 223 of the Internal Revenue Code (the Code). This notice provides answers to common questions related to these changes.

Notice 2026-6 extends the transition period provided in Revenue Ruling 2025-4 for an additional year to calendar year 2026 for States administering paid family and medical leave (PFML) programs and employers participating in such programs. The Notice provides States and employers additional time to make the necessary changes to their systems to comply with the tax and information reporting responsibilities set forth in Revenue Ruling 2025-4.

Rev. Proc. 2026-6 provides the exclusive procedure for a State to make an election to be a “covered state” prior to identifying scholarship granting organizations (SGOs) in the State in accordance with § 25F(g) of the Internal Revenue Code, as added by § 70411 of Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act (Advance Election). Pursuant to this revenue procedure, if a State chooses to make an Advance Election, the State must submit Form 15714, Advance Election to Participate Under Section 25F for 2027, in accordance with section 4 and the Form 15714 instructions, on or after January 1, 2026, and before the final date on which the State is permitted to submit the list identifying SGOs (as will be specified in future guidance).

The principal author of this revenue ruling is Tom Morgan of the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). However, other personnel from the Internal Revenue Service participated in the development of this guidance. For further information regarding this revenue ruling, contact Mr. Morgan at (202) 317-6700 (not a toll-free number).

Section 430 specifies the minimum funding requirements that apply to single-employer plans (except for CSEC plans under § 414(y)) pursuant to § 412. Section 430(h)(2) specifies the interest rates that must be used to determine a plan’s target normal cost and funding target. Under this provision, present value is generally determined using three 24-month average interest rates (“segment rates”), each of which applies to cash flows during specified periods. To the extent provided under § 430(h)(2)(C)(iv), these segment rates are adjusted by the applicable percentage of the 25-year average segment rates for the period ending September 30 of the year preceding the calendar year in which the plan year begins.¹ However, an election may be made under § 430(h)(2)(D)(ii) to use the monthly yield curve in place of the segment rates.

Section 1.430(h)(2)-1(d) provides rules for determining the monthly corporate bond yield curve,² and § 1.430(h)(2)-1(c) provides rules for determining the 24-month average corporate bond segment rates used to compute the target normal cost and the funding target. Consistent with the methodology specified in § 1.430(h)(2)-1(d), the monthly corporate bond yield curve derived from November 2025 data is in Table 2025-11 at the end of this notice. The spot first, second, and third segment rates for the month of November 2025 are, respectively, 4.07, 5.15, and 6.01.

The 24-month average segment rates determined under § 430(h)(2)(C)(i) through (iii) must be adjusted pursuant to § 430(h)(2)(C)(iv) to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates. Those percentages are 95% and 105% for plan years beginning in 2024, 2025 and 2026. For this purpose, any 25-year average segment rate that is less than 5% is deemed to be 5%. The 25-year average segment rates for plan years beginning in 2024, 2025 and 2026 were published in Notice 2023-66, 2023-40 I.R.B. 992, Notice 2024-67, 2024-41 I.R.B. 726 and Notice 2025-47, 2025-40 I.R.B. 441, respectively.

The three 24-month average corporate bond segment rates applicable for December 2025 without adjustment for the 25-year average segment rate limits are as follows:

The adjusted 24-month average segment rates set forth in the chart below reflect § 430(h)(2)(C)(iv) of the Code. The 24-month averages applicable for December 2025, adjusted to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates in accordance with § 430(h)(2)(C)(iv), are as follows:

Section 431 specifies the minimum funding requirements that apply to multiemployer plans pursuant to § 412. Section 431(c)(6)(B) specifies a minimum amount for the full-funding limitation described in § 431(c)(6)(A), based on the plan’s current liability. Section 431(c)(6)(E)(ii)(I) provides that the interest rate used to calculate current liability for this purpose must be no more than 5 percent above and no more than 10 percent below the weighted average of the rates of interest on 30-year Treasury securities during the four-year period ending on the last day before the beginning of the plan year. Notice 88-73, 1988-2 C.B. 383, provides guidelines for determining the weighted average interest rate. The rate of interest on 30-year Treasury securities for November 2025 is 4.70 percent. The Service determined this rate as the average of the daily determinations of yield on the 30-year Treasury bond maturing in August 2055 determined each day through November 12, 2025 and the yield on the 30-year Treasury bond maturing in November 2055 determined each day for the balance of the month. For plan years beginning in December 2025, the weighted average of the rates of interest on 30-year Treasury securities and the permissible range of rates used to calculate current liability are as follows:

In general, the applicable interest rates under § 417(e)(3)(D) are segment rates computed without regard to a 24-month average. Section 1.417(e)-1(d)(3) provides guidelines for determining the minimum present value segment rates. Pursuant to that section, the minimum present value segment rates determined for November 2025 are as follows:

The principal author of this notice is Tom Morgan of the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). However, other personnel from the IRS participated in the development of this guidance. For further information regarding this notice, contact Mr. Morgan at 202-317-6700 or Tony Montanaro at 626-927-1475 (not toll-free calls).

¹ Pursuant to § 433(h)(3)(A), the third segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount of the full funding limitation under § 433(c)(7)(C)).

² For months before February 2024, the monthly corporate bond yield curve was determined in accordance with Notice 2007-81, 2007-44 I.R.B. 899. Section 1.430(h)(2)-1(d) generally adopts the methodology for determining the monthly corporate bond yield curve under Notice 2007-81 but includes two enhancements to take into account subsequent changes in the bond market. Those enhancements are described in the preamble to TD 9986 (89 FR 2127).

This notice provides relief from the additions to tax under sections 6654 and 6655 of the Internal Revenue Code (Code)¹ for underpayment of estimated income tax by a taxpayer that makes a valid election under section 1062(a) (section 1062 election).

The relief provided in this notice applies for the purpose of calculating any installment of estimated income tax of a taxpayer that makes a valid section 1062 election, with respect to the taxable year of the sale or exchange of qualified farmland property that is the subject of the section 1062 election. The amount of the relief depends on the amount of income tax for which payment is deferred by the section 1062 election.

.01 Section 1062.

(1) Generally. Section 70437 of Public Law 119-21, 139 Stat. 72 (2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA), redesignated pre-OBBBA section 1062 as section 1063 and inserted a new section 1062. Section 1062(a) now allows a taxpayer who has gain from the sale or exchange of qualified farmland property to a qualified farmer (qualified sale or exchange) to elect (by making a section 1062 election) to pay the applicable net tax liability determined under section 1062(d)(1)(A) in four equal installments. Section 1062(b)(1) provides that, if a section 1062 election is made, the first installment must be paid on the due date (determined without regard to any extension of time for filing the return) for the return of tax for the taxable year in which the qualified sale or exchange occurs, and each succeeding installment must be paid on the due date (determined without regard to any extension of time for filing the return) for the return of tax for the taxable year following the taxable year with respect to which the preceding installment was made.

(2) Applicable net tax liability. Section 1062(d)(1)(A) defines “applicable net tax liability” with respect to a qualified sale or exchange as the excess (if any) of (i) such taxpayer’s net income tax for the taxable year, over (ii) such taxpayer’s net income tax for such taxable year determined without regard to any gain recognized from the qualified sale or exchange. Section 1062(d)(1)(A) defines “net income tax” for these purposes to mean the regular tax liability (as defined in section 26(b)) reduced by the credits allowed under subparts A, B, and D of part IV of subchapter A of chapter 1 of the Code.

(3) Qualified farmland property. Section 1062(d)(2)(A) defines the term “qualified farmland property” as real property located in the United States that (i) during substantially all of the 10-year period ending on the date of the qualified sale or exchange has been used by the taxpayer either as a farm for farming purposes or leased by the taxpayer to a qualified farmer for farming purposes, and (ii) is subject to a covenant or other legally enforceable restriction which prohibits the use of such property other than as a farm for farming purposes for 10 years after the date of the qualified sale or exchange. Section 1062(d)(2)(A) further provides that property that is used or leased by a partnership or S corporation is treated as used or leased by each person who holds a direct or indirect interest in such entity. Section 1062(d)(2)(B) provides that the terms “farm” and “farming purposes” have the respective meanings given such terms under section 2032A(e). See section 2032A(e)(4) and (5).

(4) Qualified farmer. Section 1062(d)(3) defines the term “qualified farmer” as any individual who is actively engaged in farming (within the meaning of 7 U.S.C. §§ 1308-1(b) and (c)).

(5) Acceleration of payment. Section 1062(b)(2)(A) provides that if there is an addition to tax for failure to timely pay any installment required under section 1062, then the unpaid portion of all remaining installments is due on the date of such failure. Additional circumstances, described in section 1062(b)(2)(B) and (C), may also accelerate the due date of unpaid installments.

(6) Election procedures. Section 1062(e) requires that a taxpayer making a section 1062 election include with the return for the taxable year of the qualified sale or exchange a copy of the covenant or other legally enforceable restriction described in section 1062(d)(2)(A)(ii). Forthcoming guidance will provide further instructions on how a taxpayer may properly make a section 1062 election.

.02 Section 6654.

(1) Estimated income tax and liability for addition to tax. Generally, the Code requires taxpayers to pay Federal income taxes as they earn income. To the extent these taxes are not withheld from wages or other income, a taxpayer normally must pay estimated income tax. Individual taxpayers who fail to make a sufficient or timely payment of estimated income tax are liable for an addition to tax under section 6654(a). With some exceptions, section 6654(l)(2) provides that the provisions of section 6654 generally apply to certain estates and trusts.

(2) Quarterly payments of estimated income tax for most individual taxpayers. Section 6654 provides that, in the case of an individual, estimated income tax is generally required to be paid in four installments, each in the amount of 25 percent of the required annual payment. Generally, under section 6654(d)(1)(B), the required annual payment is the lesser of (i) 90 percent of the tax shown on the return for the taxable year; or (ii) 100 percent of the tax shown on the return of the individual for the preceding taxable year (110 percent if the individual’s adjusted gross income on the previous year’s return exceeded $150,000), provided that the preceding taxable year was 12 months in duration and the individual filed a return for that year. An individual taxpayer whose income varies during the taxable year may be able to use the annualized income installment method described in section 6654(d)(2) to determine estimated income tax liability as their income accumulates, rather than dividing the required annual payment by four as if the income were earned equally throughout the year. Generally, section 6654(d)(2)(B) allows an individual taxpayer to reduce the amount of estimated income tax installments that are due earlier in the year and increase the amount of estimated income tax installments that are due later in the year.

(3) Due dates for installments of estimated income tax. Pursuant to section 6654(c)(2), estimated income tax installments for an individual calendar-year taxpayer generally are due on April 15, June 15, and September 15 of the taxable year, and on January 15 of the following year. Pursuant to section 6654(k)(1), for an individual fiscal-year taxpayer, the due dates of installments of estimated income tax are determined by substituting corresponding months. Section 6654(h), (i), and (j) provides special rules regarding installment amounts and due dates for taxpayers described therein.

(4) One annual payment of estimated income tax for qualifying farmers or fishermen. Special rules apply in the case of an individual taxpayer who is a farmer or fisherman and satisfies the requirements of section 6654(i) for a taxable year (qualifying farmer or fisherman). Under section 6654(i)(1), a qualifying farmer or fisherman has only one required installment payment (instead of four quarterly payments) due on January 15 of the year following the taxable year if at least two-thirds of the taxpayer’s total gross income was from farming or fishing in either that taxable year or the preceding taxable year. For a qualifying farmer or fisherman who does not make the required estimated income tax installment payment by January 15 of the year following the taxable year, section 6654(i)(1)(D) provides that the taxpayer is not subject to an addition to tax for failing to pay estimated income tax if the taxpayer files the return for the taxable year and pays the full amount of tax reported on the return by March 1 of the year following the taxable year. The definition of “qualified farmer” under section 1062(d)(3) differs from the definition of “farmer or fisherman” under section 6654(i)(2). For purposes of section 6654, section 6654(i)(2) provides that an individual is a farmer or fisherman for any taxable year if (A) the individual’s gross income from farming or fishing (including oyster farming) for the taxable year is at least 66 and 2/3 percent of the total gross income from all sources for the taxable year, or (B) the individual’s gross income from farming or fishing (including oyster farming) shown on the return of the individual for the preceding taxable year is at least 66 and 2/3 percent of the total gross income from all sources shown on such return.

(5) Exceptions to the addition to tax. An individual taxpayer will not be subject to the addition to tax under section 6654(a) if an exception applies. Under section 6654(e)(1), no addition to tax will be imposed on an individual taxpayer if the taxpayer owes less than $1,000 in tax, after subtracting tax withheld on wages. Under section 6654(e)(2), an individual will not be subject to an addition to tax if (i) the individual did not have any tax liability for the previous taxable year, (ii) the preceding taxable year was 12 months, and (iii) the individual was a citizen or resident of the United States throughout the preceding taxable year. Under section 6654(e)(3)(A), the addition to tax will not be imposed with respect to any underpayment to the extent the Secretary of the Treasury or the Secretary’s delegate (Secretary) “determines that by reason of casualty, disaster, or other unusual circumstances the imposition of such addition to tax would be against equity and good conscience.”

.03 Section 6655.

(1) Estimated income tax and liability for addition to tax. Section 6655(a) imposes an addition to tax for failure by a corporation to make a sufficient and timely payment of estimated income tax. Section 6655(c) and (d)(1)(A) generally provides that, in the case of a corporation, estimated income tax is required to be paid in four installments and the amount of any required installment is 25 percent of the required annual payment. Generally, under section 6655(d)(1)(B), the required annual payment is the lesser of two amounts described in section 6655(d)(1)(B)(i) and (ii). The amount described in section 6655(d)(1)(B)(i) is 100 percent of the tax shown on the return for the taxable year. The amount described in section 6655(d)(1)(B)(ii) is 100 percent of the tax shown on the taxpayer’s return for the preceding taxable year, so long as the preceding taxable year was twelve months long and the return for such year showed a liability for tax. However, pursuant to section 6655(d)(2), in the case of a large corporation (as defined under section 6655(g)(2)), the amount described in section 6655(d)(1)(B)(ii) may not be used to reduce the amount of an installment payment other than the first installment payment for the taxable year. A taxpayer that is a corporation with income that varies during the taxable year may be able to use the annualized income installment method or the adjusted seasonal installment method described in section 6655(e) to lower the amount of one or more required estimated income tax installments.

(2) Due dates for installments of estimated income tax. Pursuant to section 6655(c)(2), estimated income tax installments of a corporation that uses the calendar-year for its taxable year generally are due on April 15, June 15, September 15, and December 15 of the taxable year. Pursuant to section 6655(i), for a corporation that uses a fiscal year for its taxable year, the due dates of installments of estimated income tax are determined by substituting corresponding months. In special circumstances, other rules specified in section 6655 or elsewhere may also apply.

.01 Reasons for waiver. The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) are aware that taxpayers may be concerned that, in order to avoid the addition to tax under section 6654 or 6655 for failure to make a sufficient and timely payment of estimated income tax, they must pay the full amount of applicable net tax liability, or a substantial portion of it, as estimated income tax for the taxable year of the qualified sale or exchange. Doing so would be contrary to the purpose of the section 1062 election, which is to allow payment of the liability in installments over four years. Without a limited waiver of the addition to tax, a taxpayer making a section 1062 election might be deprived of the full benefit of the provision.

.02 Limited Waiver.

In the interest of sound tax administration, the IRS will waive a portion of the addition to tax under sections 6654 and 6655 attributable to the qualified sale or exchange for which the section 1062 election is made for taxpayers who both qualify to make a section 1062 election and properly make a section 1062 election. The limited waiver applies with respect to the applicable net tax liability the payment of which is deferred by the section 1062 election. Accordingly, a taxpayer may exclude 75 percent of the applicable net tax liability (with respect to the qualified sale or exchange as to which the taxpayer has properly made the section 1062 election) from the calculation of the required annual payment for purposes of determining estimated income tax installment amounts for the taxable year of the qualified sale or exchange for which the section 1062 election is made. In determining the required annual payment for the taxable year of the qualified sale or exchange, the taxpayer must include the portion of the applicable net tax liability that is required to be paid on the due date of the income tax return for the taxable year of the qualified sale or exchange (25 percent of the applicable net tax liability with respect to the qualified sale or exchange as to which the taxpayer has properly made the section 1062 election).

A proper section 1062 election is a prerequisite to receiving the relief provided in this notice, but an acceleration of installment due dates under section 1062(b)(2) will not affect this waiver. The waiver will apply automatically to any taxpayer who qualifies for the waiver and does not self-report an addition to tax under section 6654 or 6655 on their income tax return for the taxable year of the qualified sale or exchange. A taxpayer who otherwise satisfies the criteria for relief under this notice, but who has already filed an income tax return reporting an addition to tax under section 6654 or 6655, may request an abatement of the addition to tax by filing Form 843, Claim for Refund and Request for Abatement and noting “Abatement requested pursuant to Notice 2026-3” at the top of the claim. A taxpayer that satisfies the criteria for relief under this notice but receives a penalty notice from the IRS should also request an abatement of the addition to tax by filing Form 843.

.03 Form instructions to be modified. The instructions to forms relevant to estimated income tax requirements, including Form 1040-ES, Estimated Tax for Individuals, Form 1041-ES, Estimated Income Tax for Estates and Trusts, Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, Form 2210-F, Underpayment of Estimated Tax by Farmers and Fishermen, Form 2220, Underpayment of Estimated Tax by Corporations, will be modified, as necessary, to reflect the relief granted by this notice. If necessary, the modified instructions will be posted on https://www.irs.gov.

The principal author of this notice is Alexander Wu of the Office of the Associate Chief Counsel (Procedure and Administration). Other personnel from the Treasury Department and the IRS participated in its development. For further information, please contact Alexander Wu at (202) 317-6845 (not a toll-free number).

¹ Unless otherwise specified, all “section” references are to sections of the Code.

This notice provides guidance on changes relating to health savings accounts (HSAs) enacted by Pub. L. 119-21, 139 Stat. 72 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA). These changes generally expand the availability of HSAs under section 223 of the Internal Revenue Code (the Code). This notice provides answers to common questions related to these changes.

The Treasury Department and the IRS request comments on all aspects of this notice. Written comments should be submitted on or before March 6, 2026. Consideration will be given, however, to any written comment submitted after that date, if such consideration will not delay the issuance of guidance. The subject line for the comments should include a reference to Notice 2026-5. Comments may be submitted electronically via the Federal eRulemaking Portal at https://www.regulations.gov (type IRS-2025-0335 in the search field on the regulations.gov homepage to find this notice and submit comments). Alternatively, comments may be submitted by mail to: Internal Revenue Service, CC:PA:01:PR (Notice 2026-5), Room 5503, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. All commenters are strongly encouraged to submit comments electronically. The Treasury Department and the IRS will publish for public availability any comment submitted electronically, or on paper, to the IRS’s public docket on https://www.regulations.gov.

Notice 2012-14 is modified with respect to the guidance regarding eligibility to contribute to an HSA within three months of receiving medical care from the Indian Health Services.

The principal author of this notice is Alexander Krupnick of the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes), though other Treasury Department and IRS officials participated in its development. For further information on the provisions of this notice, contact Mr. Krupnick at (202) 317-5500 (not a toll-free number).

¹ For calendar year 2026, the annual deduction limit for contributions to HSAs under section 223(b)(2)(A) for an individual with self-only coverage is $4,400 and $8,750 for family coverage. For calendar year 2026, an HDHP is defined under section 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,700 for self-only coverage and $3,400 for family coverage, and for which the annual out-of-pocket expenses (excluding premiums) do not exceed $8,500 for self-only coverage and $17,000 for family coverage (other than bronze and catastrophic plans). Rev. Proc. 2025-19, 2025-18 IRB 1430.

² See https://www.cms.gov/medicare/coverage/telehealth/list-services; see 90 Fed. Reg. 49266, 49317 (Nov. 5, 2025), https://www.federalregister.gov/documents/2025/11/05/2025-19787/medicare-and-medicaid-programs-cy-2026-payment-policies-under-the-physician-fee-schedule-and-other#p-573.

³ See 29 CFR 2510.3-1(l) (establishing safe harbor conditions for when an employer payment of premiums for individual health insurance will not cause the individual health insurance coverage to become group health insurance coverage or coverage offered in connection with a group health plan under the Employee Retirement Income Security Act of 1974, Public Law 93-406, 88 Stat. 829, as amended).

⁴ See https://www.cms.gov/files/document/offering-exchange-only-plans-without-csr-loading.pdf.

⁵ Bronze plans are treated as HDHPs under section 223 regardless of which services they cover before the deductible. It is the Treasury Department’s and IRS’s understanding that ACA section 1301(a)(3) allows QHPs to provide coverage through a direct primary care medical home plan. Nothing in this notice is intended to provide any interpretive guidance with respect to ACA section 1301(a)(3).

This notice extends for an additional year the transition period provided in Revenue Ruling 2025-4 for States administering paid family and medical leave (PFML) programs and employers participating in such programs with respect to the portion of medical leave benefits a State pays to an individual that is attributable to employer contributions.

On January 15, 2025, the Department of Treasury (Treasury Department) and the Internal Revenue Service (IRS) issued Revenue Ruling 2025-4, 2025-7 I.R.B. 758, providing guidance on the income and employment tax treatment of contributions and benefits paid in certain situations under a State paid family and medical leave (PFML) statute. Revenue Ruling 2025-4 includes seven separate holdings. Holding (4) concludes, in part, that amounts paid to an employee by a State as medical leave benefits that are attributable to the employer’s contribution pursuant to a State’s PFML statute are included in an employee’s gross income under § 105¹ except as otherwise provided in that section, are wages for Federal employment tax purposes under §§ 3121(a) and 3306(b), and are third-party payments of sick pay as defined in § 3402(o). Holding (4) also concludes that States must comply with the employment tax and reporting requirements that apply to such payments under § 32.1 and other guidance.

With respect to both the Federal income and employment tax obligations and related information reportion requirements discussed in holding (4), Revenue Ruling 2025-4 provides that calendar year 2025 is a transition period for purposes of IRS enforcement and administration, intended to provide States and employers time to configure their reporting and other systems and to facilitate an orderly transition to compliance with those rules.²

A number of States with PFML statutes requested that the transition period in Revenue Ruling 2025-4 be extended for an additional year or that the effective date be amended because the required changes cannot occur within the current timeline.

The Treasury Department and the IRS understand that States may need additional time to make the necessary changes to their systems and state budgets to comply with their Federal income tax and employment tax obligations, as well as related information reporting responsibilities under § 32.1. For this reason, calendar year 2026 will be regarded as an additional transition period for purposes of IRS enforcement and administration with respect to components (1) and (2) of the transition period set forth in Revenue Ruling 2025-4. Accordingly:

(1) For medical leave benefits a State pays to an individual in calendar year 2026, with respect to the portion of the medical leave benefits attributable to employer contributions, (a) a State or an employer is not required to follow the income tax withholding and reporting requirements applicable to third-party sick pay, and (b) consequently, a State or employer will not be liable for any associated penalties under § 6721 for failure to file a correct information return or under § 6722 for failure to furnish a correct payee statement to the payee.

(2) For medical leave benefits a State pays to an individual in calendar year 2026, with respect to the portion of the medical leave benefits attributable to employer contributions, (a) a State or an employer is not required to comply with § 32.1 and related Code sections (as well as similar requirements under § 3306) during the calendar year; (b) a State or an employer is not required to withhold and pay associated taxes; and (c) consequently, a State or employer will not be liable for any associated penalties.

This notice is effective for medical leave benefits paid from States to individuals during calendar year 2026.

The principal author of this notice is the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). For further information regarding this notice, call (202) 317-6798 (not a toll-free call).

26 CFR 601.601: Rules and regulations.<br></br>(Also Part I, § 25F.)

This revenue procedure provides the exclusive procedure for a State¹ to make an election to be a “covered state”² prior to identifying scholarship granting organizations (SGOs) in the State in accordance with § 25F(g) of the Internal Revenue Code (Code)³ (Advance Election). Making an Advance Election allows a State to inform potential SGOs of a State’s participation under section 25F before submitting its SGO list, giving SGOs additional time to prepare for the commencement of this new credit in 2027.

.01 Overview of § 25F Credit. Section 25F provides a nonrefundable income tax credit (§ 25F credit) allowable to a taxpayer for qualified contributions to an SGO made by an individual who is a citizen or resident of the United States (within the meaning of § 7701(a)(9)). Section 25F(c)(3) defines a “qualified contribution” as a charitable contribution of cash to an SGO that uses the contribution to fund scholarships for eligible students (as defined in § 25F(c)(2)) solely within the State in which the organization is listed pursuant to § 25F(g). In order for a contribution made by a taxpayer to an SGO in a State to be a qualified contribution eligible for a § 25F credit, a State must have voluntarily made an election to participate under § 25F and must have identified the SGO as one that satisfies the requirements of § 25F(c)(5) for the applicable calendar year in accordance with § 25F(g).

.02 Statutory Requirements for Elections to Participate under § 25F. Section 25F(g)(1) provides that a State that voluntarily makes an election to participate under § 25F must provide to the Secretary of the Treasury or the Secretary’s delegate a list of the SGOs that meet the requirements described in § 25F(c)(5) and are located in the State (State SGO list). The State SGO list must be submitted by January 1 of the calendar year for which the election to participate under § 25F is being made (or, with respect to calendar year 2027, as early as practicable). Section 25F(g)(2) provides that each State SGO list must include a certification that the individual, agency, or entity submitting such list on behalf of the State has the authority to perform this function. See sections 2.04 and 3 of Notice 2025-70, 2025-50 I.R.B. 773 (December 8, 2025), for additional information and a request for comments regarding State SGO lists and the certifications necessary for elections to participate under § 25F.

.03 Future guidance. The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) intend to publish future guidance under § 25F(g) on how a State submits its State SGO list with all required certifications. The future guidance will provide that any State making an Advance Election will be required to perfect its election by submitting its State SGO list in accordance with such guidance. Future guidance also will address how to make an election to participate under § 25F for calendar year 2027 at the same time the State submits the State SGO list, and how to make elections (including Advance Elections) to participate under § 25F for subsequent calendar years.

.01 Advance Elections. This revenue procedure applies to States that choose to make an Advance Election for calendar year 2027. Section 4 of this revenue procedure provides the exclusive procedure for a State to make an Advance Election for calendar year 2027.

.02 Perfection of Advance Election. As the Treasury Department and the IRS intend to specify in future guidance, each State making an Advance Election for calendar year 2027 will need to perfect its election by submitting its State SGO list, along with all required information and certifications, before the final date on which the State is permitted to submit the State SGO list (as will be specified in future guidance). Because a State that makes an Advance Election is required by § 25F(g) to provide its State SGO list as part of its election, a failure to submit the list by the deadline would not meet the statutory requirements, and, as a result, no organization in that State would qualify as an SGO under § 25F for calendar year 2027.

.01 Submission of Advance Election. If a State chooses to make an Advance Election for calendar year 2027, the State must submit Form 15714, Advance Election to Participate Under Section 25F for 2027, in accordance with this section 4 and the Form 15714 instructions, on or after January 1, 2026, and before the final date on which the State is permitted to submit the State SGO list (as will be specified in future guidance). Form 15714, including instructions for its submission, are available at www.irs.gov/pub/irs-pdf/f15714.pdf. No alternative method of making an Advance Election, and no alteration of Form 15714, will be accepted for calendar year 2027. The IRS will acknowledge or otherwise confirm receipt of a State’s Advance Election submitted in accordance with this section 4.

.02 No Inclusion of Other Attachments or SGO List. Any State SGO list (or other information or attachments) submitted with Form 15714 will not be processed by the IRS and will need to be resubmitted in accordance with the procedures for submitting State SGO lists as specified in future guidance.

.03 No Subsequent Advance Election Submissions. Once a State’s Advance Election for calendar year 2027 has been made, the only subsequent submission that will be processed by the Treasury Department and the IRS is the submission of the State SGO list (including all required certifications).

This revenue procedure is effective as of January 1, 2026. No Advance Election for calendar year 2027 may be submitted to the IRS before January 1, 2026, or after the day before the final date on which the State is permitted to submit the State SGO list (as will be specified in future guidance).

The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) (PRA) generally requires that a Federal agency obtain the approval of the Office of Management and Budget (OMB) before collecting information from the public, whether such collection of information is mandatory, voluntary, or required to obtain or retain a benefit. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the OMB.

Section 4 of this revenue procedure sets forth collections of information to be provided with Form 15714, including information related to an Advance Election. The collections will be used by the IRS for tax administration purposes. The respondents are States that voluntarily elect, on or after January 1, 2026, to participate under § 25F for the following calendar year in advance of perfecting the election by providing the State SGO list, as required under § 25F(g)(1).

Estimated number of respondents: 51 respondents.

Estimated number of responses: 51 responses.

Estimated frequency of responses: Annually.

Estimated average time per response: 0.72 hours.

Estimated total annual burden: 37 hours.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law.

The collection of information contained in this revenue procedure has been submitted to the OMB under control number 1545-2335.

The principal author of this revenue procedure is Edward Waters of the Office of the Associate Chief Counsel (Income Tax & Accounting). However, other personnel from the Treasury Department and the IRS participated in its development. For further information regarding this revenue procedure, please contact Mr. Waters at (202) 317-7009 (not a toll-free call).

26 CFR § 601.201: Rulings and determination letters

.01 Purpose

This revenue procedure updates Rev. Proc. 2025-7, 2025-1 I.R.B. 301, by providing a current list of those areas of the Internal Revenue Code under the jurisdiction of the Associate Chief Counsel (International) (hereinafter “the Office”) relating to matters on which the Internal Revenue Service (hereinafter “the Service”) will not issue letter rulings or determination letters.

.02 Changes

Old section 4.01(22), regarding rulings under § 1059A, has been removed.

.01 Background

In the interest of sound tax administration, the Service answers inquiries from individuals and organizations regarding their status for tax purposes and the tax effects of their acts or transactions before the filing of returns or reports that are required by the Internal Revenue Code. There are, however, areas where the Service will not issue letter rulings or determination letters, either because the issues are inherently factual or for other reasons. These areas are set forth in sections 3 and 4 of this revenue procedure.

Section 3 lists areas in which letter rulings and determination letters will not be issued under any circumstances.

Section 4 lists areas in which letter rulings and determination letters ordinarily will not be issued; in these areas, unique and compelling reasons may justify issuing a letter ruling or determination letter. A taxpayer who plans to request a letter ruling or determination letter in an area described in Section 4 should first contact the Office by telephone ((202) 317-3800) or in writing to discuss the unique and compelling reasons that the taxpayer believes justify issuing the letter ruling or determination letter. Although not required, a written submission is encouraged because it will enable Office personnel to arrive more quickly at an understanding of the unique facts of each case. A taxpayer who contacts the Office by telephone may be requested to provide a written submission.

The Service may provide a general information letter in response to inquiries in areas on either the Section 3 or Section 4 list. These lists are not all-inclusive. Future revenue procedures may add or delete items. The Service may also decline to rule on an individual case for reasons peculiar to that case, and the decision will not be announced in the Internal Revenue Bulletin. See Section 6.02, Rev. Proc. 2026-1, 2026-1 I.R.B. 1.

.02 Scope of Application

This revenue procedure does not preclude the submission of requests for technical advice to the Office from other offices of the Service.

.01 Specific Questions and Problems

(1) Section 861.—Income from Sources Within the United States.—A method for determining the source of a pension payment to a nonresident alien individual from a trust under a defined benefit plan that is qualified under § 401(a) if the proposed method is inconsistent with §§ 4.01, 4.02, and 4.03 of Rev. Proc. 2004-37, 2004-1 C.B. 1099.

(2) Section 862.—Income from Sources Without the United States.—A method for determining the source of a pension payment to a nonresident alien individual from a trust under a defined benefit plan that is qualified under § 401(a) if the proposed method is inconsistent with §§ 4.01, 4.02, and 4.03 of Rev. Proc. 2004-37, 2004-1 C.B. 1099.

(3) Section 871(g).—Special Rules for Original Issue Discount.—Whether a debt instrument having original issue discount within the meaning of § 1273 is not an original issue discount obligation within the meaning of § 871(g)(1)(B)(i) when the instrument is payable 183 days or less from the date of original issue (without regard to the period held by the taxpayer).

(4) Section 894.—Income Affected by Treaty.—Whether a person that is a resident of a foreign country is entitled to benefits under the United States income tax treaty with that foreign country pursuant to the limitation on benefits article. However, the Service may rule regarding the legal interpretation of a provision of an applicable objective test within the relevant limitation on benefits article, including, in appropriate cases, whether the person satisfies an element of such objective test.

(5) Section 954.—Foreign Base Company Income.—The effective rate of tax that a foreign country will impose on income.

(6) Section 954.—Foreign Base Company Income.—Whether the facts and circumstances show that a controlled foreign corporation makes a substantial contribution through the activities of its employees to the manufacture, production, or construction of the personal property sold within the meaning of § 1.954-3(a)(4)(iv).

(7) Sections 7701(b) and 894.—Definition of Resident Alien and Nonresident Alien.—Whether an alien individual, whether or not a dual resident alien, is a nonresident of the United States, including whether the individual has met the requirements of the substantial presence test or exceptions thereto, or whether the alien is solely a nonresident under a United States income tax treaty. However, the Service may rule regarding the legal interpretation of a particular provision of § 7701(b) or the regulations thereunder.

.02 General Areas.

(1) The prospective application of the estate tax to the property or the estate of a living person, except that rulings may be issued on any international issues in a ruling request accepted pursuant to § 5.06 of Rev. Proc. 2026-1.

(2) Whether reasonable cause exists under Subtitle F (Procedure and Administration) of the Code.

(3) Whether a proposed transaction would subject a taxpayer to criminal penalties.

(4) Any area where the ruling request does not comply with the requirements of Rev. Proc. 2026-1.

(5) Any area where the same issue is the subject of the taxpayer’s pending request for competent authority assistance under a United States income tax treaty.

(6) A “comfort” ruling will not be issued with respect to an issue that is clearly and adequately addressed by statute, regulations, decisions of a court, tax treaties, revenue rulings, or revenue procedures absent extraordinary circumstances (e.g., a request for a ruling required by a governmental regulatory authority in order to effectuate the transaction).

(7) Any frivolous issue, as that term is defined in § 6.10 of Rev. Proc. 2026-1.

.01 Specific Questions and Problems

(1) Section 367(a).—Transfers of Property from the United States.—Whether the transferee foreign corporation, or any qualified subsidiary or any qualified partnership, is engaged in an active trade or business outside the United States for purposes of § 1.367(a)-3(c)(3)(i)(A).

(2) Section 367(a).—Transfers of Property from the United States.—Whether a transferred corporation subject to a gain recognition agreement under § 1.367(a)-8 has disposed of substantially all of its assets.

(3) Section 864.—Definitions and Special Rules.—Whether a taxpayer is engaged in a trade or business within the United States, and whether income is effectively connected with the conduct of a trade or business within the United States; whether an instrument is a security as defined in § 1.864-2(c)(2); whether a taxpayer effects transactions in the United States in stocks or securities under § 1.864-2(c)(2); whether an instrument or item is a commodity for purposes of § 1.864-2(d)(3); and for purposes of § 1.864-2(d)(1) and (2), whether a commodity is of a kind customarily dealt in on an organized commodity exchange, and whether a transaction is of a kind customarily consummated at such place.

(4) Section 871(h).—Repeal of Tax on Interest of Nonresident Alien Individuals Received from Certain Portfolio Debt Investments.—Whether a payment constitutes portfolio interest under § 871(h); whether an obligation qualifies for any of the components of portfolio interest such as being in registered form; and whether the income earned on contracts that do not qualify as annuities or life insurance contracts because of the limitations imposed by §§ 72(s) and 7702(a) is portfolio interest as defined in § 871(h).

(5) Section 881(c).—Repeal of Tax on Interest of Foreign Corporations Received from Certain Portfolio Debt Investments.—Whether a payment constitutes portfolio interest under § 881(c); whether an obligation qualifies for any of the components of portfolio interest such as being in registered form; and whether the income earned on contracts that do not qualify as annuities or life insurance contracts because of the limitations imposed by §§ 72(s) and 7702(a) is portfolio interest as defined in § 881(c).

(6) Section 892.—Conduct of Foreign Governments.—Whether a foreign government or an entity in which a foreign government holds any interest is treated as conducting commercial activities for purposes of section 892(a)(2).

(7) Section 893.—Compensation of Employees of Foreign Governments and International Organizations.—Whether wages, fees, or salary of an employee of a foreign government or of an international organization received as compensation for official services to such government or international organization is excluded from gross income and exempt from taxation and any underlying issue related to that determination.

(8) Section 894.—Income Affected by Treaty.—Whether the income received by an individual in respect of services rendered to a foreign government or a political subdivision or a local authority thereof is exempt from federal income tax or withholding under any of the United States income tax treaties that contain provisions applicable to such individuals.

(9) Section 894.—Income Affected by Treaty.—Whether a taxpayer has a permanent establishment in the United States for purposes of any United States income tax treaty and whether income is attributable to a permanent establishment in the United States.

(10) Section 894.—Income Affected by Treaty.—Whether certain persons will be considered liable to tax under the laws of a foreign country for purposes of determining if such persons are residents within the meaning of any United States income tax treaty, including pursuant to Rev. Rul. 2000-59, 2000-2 C.B. 593.

(11) Section 894.—Income Affected by Treaty.—Whether the income received by a nonresident alien student or trainee for services performed for a university or other educational institution is exempt from federal income tax or withholding under any of the United States income tax treaties that contain provisions applicable to such nonresident alien students or trainees.

(12) Section 894.—Income Affected by Treaty.—Whether the income received by a nonresident alien performing research or teaching as personal services for a university, hospital or other research institution is exempt from federal income tax or withholding under any of the United States income tax treaties that contain provisions applicable to such nonresident alien teachers or researchers.

(13) Section 894.—Income Affected by Treaty.—Whether a recipient of a payment is the beneficial owner for purposes of any United States income tax treaty.

(14) Section 894.—Income Affected by Treaty.—Whether an entity is treated as fiscally transparent by a foreign jurisdiction for purposes of § 894(c) and the regulations thereunder or pursuant to any United States income tax treaty.

(15) Section 895.—Conduct of a Foreign Central Bank of Issue.—Whether a foreign central bank of issue is treated as conducting a commercial banking function or other commercial activity.

(16) Section 901.—Taxes of Foreign Countries and of Possessions of United States.—Whether a foreign levy meets the requirements of a creditable tax under § 901.

(17) Section 901.—Taxes of Foreign Countries and of Possessions of United States.—Whether a person claiming a credit has established, based on all of the relevant facts and circumstances, the amount (if any) paid by a dual capacity taxpayer under a qualifying levy that is not paid in exchange for a specific economic benefit. See § 1.901-2A(c)(2).

(18) Section 903.—Credit for Taxes in Lieu of Income, Etc., Taxes.—Whether a foreign levy meets the requirements of a creditable tax under § 903.

(19) Section 937.—Definition of Bona Fide Resident.—Whether an individual is a bona fide resident of American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands. However, the Service may rule regarding the legal interpretation of a particular provision of § 937(a) or the regulations thereunder.

(20) Sections 954(d), 993(c).—Manufactured Product.—Whether a product is manufactured or produced for purposes of §§ 954(d) and 993(c).

(21) Section 989(a).—Qualified Business Unit.—Whether a unit of the taxpayer’s trade or business is a qualified business unit.

(22) Sections 1471, 1472, 1473, and 1474.—Taxes to Enforce Reporting on Certain Foreign Accounts.—Whether a taxpayer, withholding agent, or intermediary has properly applied the requirements of chapter 4 of the Internal Revenue Code (§§ 1471 through 1474, also known as “FATCA”) or of an applicable intergovernmental agreement to implement FATCA.

(23) Section 1503(d).—Dual Consolidated Loss.—Whether the income tax laws of a foreign country would deny any opportunity for the foreign use of a dual consolidated loss in the year in which the dual consolidated loss is incurred under § 1.1503(d)-3(e)(1); whether no possibility of foreign use exists under § 1.1503(d)-6(c)(1); whether an event presumptively constitutes a triggering event under § 1.1503(d)-6(e)(1)(i); whether the presumption of a triggering event is rebutted under § 1.1503(d)-6(e)(2); and whether a domestic use agreement terminates under § 1.1503(d)-6(j)(1).

(24) Section 2501.—Imposition of Tax.—Whether a partnership interest is intangible property for purposes of § 2501(a)(2) (dealing with transfers of intangible property by a nonresident not a citizen of the United States).

(25) Section 7701.—Definitions.—Whether an estate or trust is a foreign estate or trust for federal income tax purposes.

(26) Section 7701.—Definitions.—Whether an intermediate entity is a conduit entity under § 1.881-3(a)(4); whether a transaction is a financing arrangement under § 1.881-3(a)(4)(ii); whether the participation of an intermediate entity in a financing arrangement is pursuant to a tax avoidance plan under § 1.881-3(b); whether an intermediate entity performs significant financing activities under § 1.881-3(b)(3)(ii); whether an unrelated intermediate entity would not have participated in a financing arrangement on substantially the same terms under § 1.881-3(c).

(27) Section 7874.—Expatriated Entities and Their Foreign Parents.—Whether, after the acquisition, the expanded affiliated group has substantial business activities in the foreign country in which, or under the law of which, the foreign entity is created or organized, when compared to the total business activities of the expanded affiliated group.

(28) Section 7874.—Expatriated Entities and Their Foreign Parents.—Whether a foreign corporation completes the direct or indirect acquisition of substantially all of the properties held directly or indirectly by a domestic corporation or substantially all of the properties constituting a trade or business of a domestic partnership.

.02 General Areas

(1) Whether a taxpayer has a business purpose for a transaction or arrangement.

(2) Whether a taxpayer uses a correct North American Industry Classification System (NAICS) code or Standard Industrial Classification (SIC) code.

(3) Any transaction, or series of transactions, that is designed to achieve a different tax consequence or classification under U.S. tax law (including tax treaties) and the tax law of a foreign jurisdiction, where the results of that different tax consequence or classification are inconsistent with the purposes of U.S. tax law (including tax treaties).

(4)(a) Situations where a taxpayer or a related party is domiciled or organized in a foreign jurisdiction with which the United States does not have an effective mechanism for obtaining tax information with respect to civil tax examinations and criminal tax investigations, which would preclude the Service from obtaining information located in such jurisdiction that is relevant to the analysis or examination of the tax issues involved in the ruling request.

(b) The provisions of subsection 4.02(4)(a) above shall not apply if the taxpayer or affected related party (i) consents to the disclosure of all relevant information requested by the Service in processing the ruling request or in the course of an examination to verify the accuracy of the representations made and to otherwise analyze or examine the tax issues involved in the ruling request, and (ii) waives all claims to protection of bank or commercial secrecy laws in the foreign jurisdiction with respect to the information requested by the Service. If the taxpayer’s or related party’s consent to disclose relevant information or to waive protection of bank or commercial secrecy is determined by the Service to be ineffective or of no force and effect, then the Service may retroactively rescind any ruling rendered in reliance on such consent.

(5) The federal tax consequences of proposed federal, state, local, municipal, or foreign legislation.

(6)(a) Situations involving the interpretation of foreign law or foreign documents. The interpretation of a foreign law or foreign document means making a judgment about the import or effect of the foreign law or document that goes beyond its plain meaning.

(b) The Service, at its discretion, may consider ruling requests that involve the interpretation of foreign laws or foreign documents. In these cases, the Service may request information in addition to that listed in § 7.01(2) and (6) of Rev. Proc. 2026-1, including a discussion of the implications of any authority believed to interpret the foreign law or foreign document, such as pending legislation, treaties, court decisions, notices, or administrative decisions.

(7) The treatment or effects of hook equity, as described in section 4.02(11) of Rev. Proc. 2026-3, 2026-1 I.R.B. 143.

Rev. Proc. 2025-7 is superseded.

This revenue procedure is effective January 5, 2026.

This revenue procedure was compiled by James Kostura of the Office of Associate Chief Counsel (International). For further information regarding this revenue procedure contact Mr. Kostura at (202) 317-3800 (not a toll-free number).

¹ Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Treasury Regulations.

² Revenue Ruling 2025-4 also includes holding (5), and provides transition relief for calendar year 2025 to employers with respect to an amount an employer voluntarily pays of any part of the employee’s otherwise required contribution to a State PFML program (i.e., employer pick-up). This notice does not extend the third component of the transition relief announced in Revenue Ruling 2025-4 to an employer pick-up for calendar year 2026, and consequently, contemplates that employers will treat contribution amounts they voluntarily pay on behalf of their employees to a State PFML program as wages for Federal employment tax purposes under §§ 3121(a), 3306(b), and 3401(a) and report such amounts on the employee’s Form W-2, Wage and Tax Statement, in accordance with § 6051.

¹ For purposes of this notice, the term “State” means one of the 50 States or the District of Columbia.

² Section 25F(c)(1), as added by § 70411 of Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act, defines a “covered state” as one of the 50 States, or the District of Columbia, that, for a particular calendar year, both voluntarily elects to participate under § 25F and identifies the scholarship granting organizations in the State, in accordance with § 25F(g).

³ Unless otherwise provided, all “section” or “§” references are to sections of the Code.