Treasury and IRS Finalize Rules for Qualified Tip Deduction
The IRS has issued final regulations (T.D. 10044) implementing the “No Tax on Tips” provision enacted under the One Big Beautiful Bill Act (OBBBA), providing detailed guidance on the new deduction for qualified tips under IRC § 224. The rules define “qualified tips” as voluntary cash tips received in occupations that customarily and regularly received tips as of December 31, 2024, and introduce a comprehensive list of more than 70 eligible occupations. The final list expands on prior proposals to include roles such as floral designers, visual artists, and gas pump attendants, along with several clarifications to existing categories (e.g., app-based delivery workers and non-restaurant food and beverage servers). Mandatory service charges and similar automatic gratuities generally do not qualify, although additional voluntary amounts may be eligible if customers have the option to reduce the charge to zero. Tips must also be properly reported on applicable returns to be deductible.
The deduction is limited to $25,000 per tax year and phases out for higher-income taxpayers, and it is available for tax years 2025 through 2028. The final regulations also clarify that qualified tips must be paid in cash or cash equivalents (including foreign currency), while excluding digital assets under current law, and they provide additional examples distinguishing tips from compensation in contexts such as digital content creation. Importantly, the rules include strengthened anti-abuse provisions to prevent recharacterization of wages or service payments as tips. The regulations are effective June 12, 2026, but apply to tax years beginning after December 31, 2024.
Experts Find Profitable Corporations Paid Little or No Federal Income Tax in 2025
Recent reports from the Institute on Taxation and Economic Policy and the FACT Coalition highlight that at least 88 large U.S. corporations paid no federal income tax in 2025, despite generating more than $105 billion in collective pretax income. According to the findings, these companies not only avoided the statutory 21% corporate tax rate but also received approximately $4.7 billion in tax rebates. Notable corporations identified include Tesla, United Airlines, and Yum! Brands, among others. A separate analysis further found that major oil and gas companies such as Chevron, ConocoPhillips, and ExxonMobil paid an average effective federal tax rate of just 6% on domestic profits.
The reports attribute these outcomes largely to provisions in recent tax legislation, including accelerated depreciation, research and experimentation credits, and immediate expensing rules, which significantly reduce taxable income. Additional factors include changes to the Corporate Alternative Minimum Tax and industry-specific carveouts. Policymakers have raised concerns about the IRS’s capacity to audit large corporations and address the tax gap, particularly in light of recent staffing reductions, signaling potential ongoing debate around corporate taxation and enforcement priorities.
Proposed Regulations Clarify New 1% Excise Tax on Remittance Transfers
The Treasury Department and IRS have issued proposed regulations (REG-114499-25) providing initial guidance on the new 1% excise tax on certain remittance transfers scheduled to take effect for transfers made after December 31, 2025. The proposal clarifies that the tax applies to transfers funded with cash and cash equivalents, including money orders, cashier’s checks, and traveler’s checks, and specifically treats transfers funded by a cashed personal check as taxable cash transactions. Notably, the proposed rules do not adopt the Electronic Fund Transfer Act (EFTA) safe harbor for small providers, meaning the tax would apply regardless of a provider’s transaction volume.
The excise tax is calculated based on the total amount transferred to the recipient, including any promotional incentives, but excluding service fees and the excise tax itself. Taxpayers may rely on the proposed regulations for transfers occurring after December 31, 2025, pending issuance of final rules. The IRS is currently accepting public comments on the proposal through June 12, 2026.
Tariff Refunds and the Tax Impacts for Businesses
A recent U.S. Supreme Court decision invalidating tariffs imposed under the International Emergency Economic Powers Act (IEEPA) has created the opportunity for businesses to claim substantial refunds, but it also introduces complex tax and operational considerations. Tariff refunds are treated as a reduction in cost of goods sold, which increases taxable income and creates a corresponding tax liability. Companies must also evaluate contractual obligations to determine whether portions of refunds must be passed on to customers, particularly where tariffs were explicitly itemized or incorporated into pricing. In many cases, identifying the ultimate economic beneficiary of the refund will require careful analysis of supplier agreements and pricing practices.
Additional complexities arise with respect to timing and transfer pricing. Because refunds may relate to transactions spanning multiple tax years, companies will need to determine the appropriate reporting treatment across periods. Multinational businesses, in particular, must assess whether refunds tied to intercompany transactions require transfer pricing adjustments, especially where U.S. entities operate as limited-risk distributors. The guidance emphasizes that thorough documentation is critical, as refund claims and related tax positions are likely to face scrutiny from both tax authorities and customs regulators. Businesses are encouraged to coordinate across tax, customs, and transfer pricing functions to ensure accuracy, compliance, and audit readiness.
Minnesota Issues Guidance on Taxability of Delivery Charges
The Minnesota Department of Revenue has released updated guidance on the sales tax treatment of delivery charges, clarifying that when a taxable item or service is sold, any related delivery charges are generally also taxable as part of the total sales price—even if separately stated. The guidance broadly defines delivery charges to include activities such as handling, packing, crating, fuel surcharges, and product preparation. In contrast, delivery services provided and billed by an independent third party are typically not subject to sales tax, with limited exceptions, including deliveries of aggregate materials and concrete block.
The release also addresses the treatment of delivery charges for nontaxable items, as well as how to allocate charges in transactions involving a mix of taxable and nontaxable goods. In addition, it outlines the application of Minnesota’s separate Retail Delivery Fee and highlights special rules applicable to certain construction-related materials. This updated guidance replaces prior Sales Tax Fact Sheet No. 155 and is intended to provide clearer direction for businesses on properly applying sales tax to delivery-related charges.
