On May 12, 2026, the Internal Revenue Service (IRS) published IRS Tax Tip 2026-39 which reminded taxpayers to read any mail received from the IRS. The IRS emphasized that most letters and notices involve routine matters related to tax returns, account updates or payment issues and should be opened and reviewed carefully.

The IRS states that notices are typically sent to explain a specific issue with a taxpayer’s account. A notice may involve changes to a filed return, taxes owed, requests for additional information or questions regarding a claimed credit or deduction. Each letter generally includes instructions outlining whether any action is required.

Taxpayers are encouraged to carefully review the information in all IRS correspondence and determine if next steps are required. If the taxpayer agrees with the notice, no further action may be necessary beyond keeping the letter with their records. However, if the taxpayer disagrees or the IRS is requesting additional documentation, the taxpayer should respond promptly to minimize any potential penalties and interest. When a response is required, the notice will generally provide instructions along with a contact number specific to the issue involved. Taxpayers are encouraged to keep copies of all IRS correspondence with their tax records for at least three years.

The IRS also reminded taxpayers that the agency generally initiates contact through regular mail rather than by phone, email, text message or social media. The IRS never requests payment through gift cards or makes contact using social media. Because scams involving fake IRS communications continue to increase, taxpayers should remain cautious about unsolicited electronic messages requesting personal or financial information.

If taxpayers are uncertain if a notice is legitimate, they can log in to their IRS Online Account or compare the notice with examples available on IRS.gov. The IRS warns taxpayers not to click links or scan QR codes contained in suspicious messages claiming to be from the agency.

Proposed IRA QCD Expansion

A bicameral, bipartisan group of four members of U.S. Congress have introduced the Charity Parity Act. The proposed legislation would expand charitable giving access to employer-sponsored retirement accounts.

In 2006, the Pension Protection Act included a provision that allowed taxpayers age 70½ or older to make a Qualified Charitable Distribution (QCD) from an IRA to an exempt charity. The distribution is not included in taxable income. However, the 2006 Chair of the U.S. Senate Committee on Finance and the Chair of the House Ways and Means Committee agreed that the QCDs would only be permitted from IRAs.

Currently, IRA owners age 70½ or older can make a QCD to a qualified nonprofit up to $111,000. The QCD may satisfy an IRA owner’s required minimum distribution (RMD) in the year it is made. The QCD amount is indexed for inflation.

The four lawmakers note that excluding the IRA QCD from employer-sponsored retirement plans requires individuals to roll over the funds to an IRA, which creates "unnecessary costs and additional steps for retirement savers." Therefore, they propose expanding QCDs to employer-sponsored retirement plans. The legislators explained in detail their reasons for supporting this bill.

Representative Don Beyer (D-VA) stated, "The Charity Parity Act would reinforce recent bipartisan successes and encourage additional giving by providing equal treatment for savers wishing to donate to charity regardless of the type of retirement plan holding their assets." Representative Mike Kelly (R-PA) continued, "Our laws should encourage charitable giving and seek to make such generosity as easy to carry out as possible."

Senator Kevin Cramer (R-ND) stated, "For millions of seniors, restrictive rules on retirement accounts limit their ability to use their hard-earned money to support charitable giving."

Senator Chris Coons (D-DE) added, "Government should encourage that generosity, not tie it down in bureaucratic red tape."

Editor's Note: In 2006, the leaders of the House and Senate tax-writing committees did not include employer-sponsored retirement plans as being eligible for QCDs in the Pension Protection Act. This bicameral, bipartisan effort may advance this process and eventually expand the IRA charitable rollover to include employer-sponsored retirement accounts.

IRS Releases Fourth Conservation Easement Settlement Option

On May 13, 2026, the Internal Revenue Service (IRS) published IR-2026-65 announcing the terms of a new limited-time settlement opportunity for eligible taxpayers involved in conservation easement disputes with the IRS. The new initiative is designed to reduce the growing backlog of conservation easement litigation and encourage additional settlements.

IRS Chief Executive Officer Frank J. Bisignano stated, “Congress created the conservation easement deduction to encourage genuine preservation, not to subsidize tax shelters built on inflated valuations. This settlement opportunity gives eligible taxpayers a chance to resolve these cases on terms more favorable than the results taxpayers have generally achieved in court, while allowing the IRS to continue enforcing the law in a fair and efficient way.”

The IRS indicated that prior settlement initiatives resolved 405 cases, with approximately 32% of offers accepted. The Service hopes the revised terms will encourage broader participation by removing barriers that discouraged prior settlements. Currently, there are over 1,100 conservation easement cases pending, including around 740 docketed Tax Court cases and 400 cases under examination.

Under the new settlement initiative, eligible partnerships will receive individualized settlement letters issued on a rolling basis from the IRS. During the initial 90-day settlement period, taxpayers generally will receive no charitable contribution deduction but may claim an “other deduction” equal to the partnership’s approximate out-of-pocket costs. The gross valuation misstatement penalty will be reduced to 10%, with interest continuing to accrue as required by law. Importantly, many taxpayers will no longer be required to make an upfront payment when entering the into the initiative.

If taxpayers fail to accept the offer during the first 90 days, they may still settle during an additional 45-day period, although the penalty rate increases to 20%. After expiration of the 135-day period, the IRS stated that unresolved cases generally will proceed to litigation. Historically cases that have proceeded to litigation have resulted in taxpayers receiving only 5% to 7% of the claimed deduction and subject to a 40% gross valuation misstatement penalty.

The settlement opportunity is not available to every conservation easement case. It will not be offered to cases on appeal, to cases already settled, if the case is bound to another test case that has already been tried or if the trial is set to commence within 30 days of the announcement. If it is designated as a test case, it is ineligible unless all the bound cases settle or agree to settle.

Editor's Note: The IRS continues to prevail overwhelmingly in syndicated conservation easement litigation, particularly on valuation issues. The revised settlement terms are intended to increase participation by reducing upfront payment obligations and reopening settlement opportunities for previously rejected or expired cases. Taxpayers and advisors will need to carefully evaluate whether the reduced penalties and administrative certainty outweigh the continued risks and costs associated with litigation.

Applicable Federal Rate of 5.0% for June: Rev. Rul. 2026-11; 2026-24 IRB 1 (15 May 2026)

The IRS has announced the Applicable Federal Rate (AFR) for June of 2026. The AFR under Sec. 7520 for the month of June is 5.0%. The rates for May of 5.0% or April of 4.6% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2026, pooled income funds in existence less than three tax years must use a 4.0% deemed rate of return. Charitable gift receipts should state, “No goods or services were provided in exchange for this gift and the nonprofit has exclusive legal control over the gift property.”