Minnesota Clarifies Taxation of Foreign Corporations

The Minnesota Department of Revenue has issued Revenue Notice No. 26-01 clarifying how Minnesota taxes foreign corporations whose income may be exempt from federal income tax but remains subject to Minnesota corporate franchise tax. Unlike federal law under IRC § 882, which generally taxes foreign corporations only on income that is effectively connected with a U.S. trade or business, Minnesota law does not adopt the federal “effectively connected income” standard. Instead, Minnesota asserts taxing jurisdiction based on constitutional nexus and taxes foreign corporations that have contacts with the state producing gross income attributable to Minnesota sources, even if that income is not taxable at the federal level.

The Notice explains that this difference can cause discrepancies between federal Form 1120-F and Minnesota Form M4I. The Department highlights two common situations: (1) income that is exempt from federal tax because it is not effectively connected with a U.S. trade or business, and (2) income exempt from federal tax under an applicable U.S. tax treaty. In both cases, Minnesota may still tax the income. Foreign corporations must report federal taxable income as defined under IRC § 63 on Minnesota Form M4I, reconcile differences using Schedule REC where applicable, and, in treaty situations, prepare a pro forma federal Form 1120 to compute Minnesota taxable income.

For more information: https://bit.ly/4cdpghW 

 

IRS Urges Use of Online Accounts for 2026 Filing Season

The IRS is encouraging taxpayers to establish an IRS Individual Online Account to prepare for the 2026 tax filing season. This online tool allows third-party authorizations—such as powers of attorney and tax information authorizations—to be completed entirely online, significantly reducing processing times and eliminating the need to fax, mail, or upload documents. Most authorizations are approved immediately. Through the Tax Pro Account, taxpayers can use their Individual Online Account to review tax records, make payments, check refund status, obtain an Identity Protection PIN (IP PIN), and electronically approve authorization requests from their tax professionals. The IRS issued this guidance in News Release IR-2026-17.

Individual taxpayers can sign up for or access their Individual Online Account here: https://www.irs.gov/payments/online-account-for-individuals

 

IRS Issues Proposed Regulations on Clean Fuel Production Credit

The IRS has released proposed regulations addressing the Section 45Z clean fuel production credit, providing guidance for domestic producers on eligibility requirements, credit calculation, emissions rates, and applicable certification and registration rules. The credit applies to qualifying clean transportation fuel produced in the United States after December 31, 2024, and sold through December 31, 2029. To claim the credit, producers must be registered with the IRS at the time of production by filing Form 637, Application for Registration (For Certain Excise Tax Activities).

The proposed regulations reflect statutory changes enacted under the One Big Beautiful Bill Act (OBBBA), which extended the credit, restricted eligible feedstocks to those sourced from the United States, Mexico, or Canada, and introduced limitations related to foreign entities. Additional provisions broaden attribution rules for fuel sold through intermediaries, eliminate the special credit rate for sustainable aviation fuel, add an anti-abuse rule to prevent double crediting, and generally prohibit the use of negative emissions rates. Comments on the proposed regulations are due by April 6, 2026, and a public hearing is scheduled for May 28, 2026, as announced in News Release IR-2026-20 and REG-121244-23.

 

IRS Awards $53 Million for 2026 TCE and VITA Grant Programs

The IRS recently announced the award of $53 million in grants for the 2026 Tax Counseling for the Elderly (TCE) and Volunteer Income Tax Assistance (VITA) programs. These grants fund organizations that provide free federal tax return preparation and tax counseling services to targeted communities, with the TCE program serving individuals age 60 and older and the VITA program assisting underserved populations, including low- to moderate-income taxpayers and individuals with limited English proficiency.

For 2026, the IRS awarded grants to 48 TCE and 315 VITA applicants, selected from 479 total applications requesting more than $79 million in funding. The IRS continues to partner with nonprofit organizations, community groups, and similar entities, offering tax law training, certification, and oversight to help ensure accurate and reliable return preparation.