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The U.S. Department of the Treasury issued proposed regulations addressing two changes affecting the gaming industry and taxpayers: (i) an increase in the information reporting threshold for certain payees, including gambling winnings, and (ii) the implementation and clarification of new statutory limits on wagering loss deductions. The proposed rules reflect recent legislative changes enacted as part of the One Big Beautiful Bill Act.

Included in the proposed regulations is the adjustment of reporting thresholds for certain information returns, including Form W-2G (Certain Gambling Winnings). Beginning in 2026, the threshold for reporting certain gambling winnings is increased to $2,000, with future adjustments indexed for inflation. This represents a substantial increase from long-standing thresholds, and is intended to reduce administrative burdens on payors while modernizing the reporting regime. The proposal also aligns regulatory language with statutory updates and existing IRS guidance, including rules governing aggregation of wagers and the determination of proceeds in pari-mutuel betting contexts.

For operators, the change will require updates to internal systems, payout tracking, and compliance procedures. For taxpayers, the practical effect may be fewer information returns issued for smaller winnings, although all gambling income remains fully taxable regardless of reporting thresholds. The proposed regulations also implement recent statutory changes to IRC §165(d), which now limit the deductibility of wagering losses to 90% of losses, up to the amount of wagering gains, beginning in 2026.

This represents a departure from prior law, under which taxpayers could generally deduct 100% of their wagering losses (subject to the limitation of wagering gains). However, the new limitation has the potential to create “phantom income”, taxable income in excess of a taxpayer’s net economic gain. For example, a taxpayer with $100,000 in winnings and $100,000 in losses would now be limited to deducting $90,000 of those losses, resulting in $10,000 of taxable income despite breaking even economically. Taken together, these changes ease reporting burdens on payors while simultaneously tightening the rules governing loss deductions for taxpayers. 

From a compliance perspective, gaming operators should evaluate updates to information reporting systems and thresholds, adjustments to withholding and documentation procedures, and coordination with evolving IRS forms and instructions. Gamblers should carefully consider the impact of the new loss limitation on effective tax rates and recordkeeping practices. Although these rules are subject to the open comment period before finalization, taxpayers and industry participants should begin preparing now. For more information, contact Liskow attorneys Leon Rittenberg III, Caroline Lafourcade, and Kevin Naccari, and visit Liskow’s Tax Practice page. 

The Internal Revenue Service (IRS) Independent Office of Appeals (IRS Appeals) has been slow to resolve Covid-era Employee Retention Credit (ERC) refund claims.  As a result, employers with unresolved ERC claims are now faced with a difficult decision — pursuing litigation against the IRS to secure their ERC refunds or losing the refund.  

The ERC, which was offered under IRC §3134 as part of the IRS’s COVID-19 pandemic relief program, provided a refundable credit against employment taxes for certain tax periods to help struggling businesses pay their employees. The program has been scrutinized due to fraudulent claims.

In February 2026, the U.S. Government Accountability Office announced that, as of December 31, 2025, the IRS had closed all non-examined ERC claims. Approximately 41,000 claims remained under IRS examination or in Appeals at that time.

Many of the ERC claim disallowances issued in the summer of 2024 have been challenged by employers who filed appeals. However, the two-year deadline to file a refund suit following a disallowance notice is fast approaching, forcing taxpayers to decide how to proceed while their unresolved claims linger in IRS examinations and appeals.

Administrative delay does not eliminate judicial deadlines.  Under IRC §6532(a), taxpayers generally have two years from the date a notice of disallowance is mailed to file a refund suit or obtain a written extension from the IRS.  A protest to IRS Appeals does not suspend that deadline. Without filing suit or obtaining a written extension (Form 907, Agreement to Extend the Time to Bring Suit), the right to a refund can be permanently lost. 

While a Form 907 would eliminate the need for filing a lawsuit, the process for obtaining an agreement from the IRS to extend the time to bring suit has been difficult, and conflicting.

For taxpayers with ERC claims that are pending without action (i.e., where there has not been any disallowance), the statute of limitations analysis is more complex. Some courts have dismissed taxpayer refund suits that were filed more than six and a half years after the claim arose.   This timeframe reflects the six-month waiting period before a taxpayer may file suit, plus the six-year statute of limitations for civil claims against the government. IRC § 3702(b). For ERC claims submitted in 2020, the end of this six-and-a-half-year period is quickly approaching. To the extent a court will apply this limitation, a taxpayer with an ERC refund claim may be barred from suit even without a formal disallowance by the IRS.

Businesses facing challenged, delayed, or disallowed ERC claims should evaluate their statute posture without delay in order to protect their right to an ERC refund as protective litigation may be necessary to preserve their potential refunds. 

For more information, contact Liskow attorneys Caroline Lafourcade and Kevin Naccari, and visit Liskow’s Tax Practice page. 

the two-year deadline to bring a refund suit following a disallowance notice is fast approaching forcing taxpayers to decide how to proceed with their unresolved claims still lingering in IRS examinations and appeals.

A recent decision from the United States Court of Appeals for the Fifth Circuit has brought renewed attention to the limits of federal regulatory authority, this time in the context of home distilling. In McNutt v. U.S. Department of Justice, the court addressed whether a Reconstruction-era federal prohibition on at-home distillation of spirits could be justified as an exercise of Congress’s taxing power. The ruling signals further development in the ongoing judicial reassessment of expansive federal authority.

The case originated when a group of hobby distillers challenged an 1868 federal law that effectively criminalized the distillation of spirits in or near a private residence, even for personal use. The plaintiffs, including members of the Hobby Distillers Association, argued that the prohibition exceeded Congress’s constitutional powers, particularly where the activity was noncommercial and confined to the home. A federal district court in Texas agreed, concluding that the law neither meaningfully advanced tax collection nor fit within Congress’s Commerce Clause authority.

On appeal, the Fifth Circuit affirmed that core reasoning. The court emphasized that Congress’s taxing power is not unlimited and cannot be used as a backdoor to regulate purely private conduct. In particular, the court found that banning home distillation does not raise revenue, but instead prevents the creation of potentially taxable goods, an approach that stretches the concept of taxation beyond its constitutional limits.

The decision reflects a broader judicial trend of scrutinizing federal statutes that rely on attenuated connections to enumerated powers. The court reasoned that permitting the federal government to prohibit any activity that might generate taxable revenue would effectively grant a general police power, something the Constitution reserves primarily to the states. The Fifth Circuit’s analysis echoes themes from recent Supreme Court precedent emphasizing that federal authority must be tied to genuine revenue-raising or interstate commerce objectives, rather than speculative or indirect effects.

Importantly, the ruling does not necessarily create a regulatory free-for-all. Even if the federal prohibition is invalidated, home distillation remains subject to a complex web of federal permitting requirements and state law restrictions. The decision instead signals a shift away from outright prohibition toward a regulatory framework more closely tied to legitimate governmental interests.

For businesses and individuals alike, McNutt is less about moonshine and more about constitutional structure. The case underscores that the federal government’s broad federal taxing authority does have limits, particularly when it intersects with private, noncommercial conduct. As challenges to federal regulatory regimes continue, McNutt may serve as an important reference point in defining the boundary between taxation and regulation. For more information, contact Liskow attorneys Leon Rittenberg III, Caroline Lafourcade, and Kevin Naccari, and visit Liskow’s Tax Practice page. 

In Louisiana Attorney General Opinion No. 25-0049 (Apr. 6, 2026), the Attorney General clarifies the scope of Louisiana’s homestead exemption and the disabled veteran ad valorem tax exemption, specifically addressing the treatment of additional structures located on residential property. Louisiana’s homestead exemption is grounded in La. Const. art. VII, §20(A), which exempts a portion of the assessed value of an owner-occupied primary residence from ad valorem taxation. Similarly, §20(G) provides enhanced exemptions for certain disabled military veterans. Both provisions extend not only to the residence itself, but also to associated improvements and appurtenances.

However, the constitutional provision creates ambiguity around the outer limits of these exemptions, specifically whether additional structures on the same tract of land qualify, and under what conditions. The Attorney General’s opinion clarifies two significant points regarding the scope of “buildings and appurtenances” and the application of the disabled veterans exemption.

The opinion concludes that the phrase “buildings and appurtenances” encompasses structures beyond the primary dwelling, provided that:

• The structures are located on the same tract of land as the homestead; and
• The structures are capable of residential use or are functionally related to the residential character of the property; and
• The structures are not used for commercial or income-producing purposes. 

This interpretation confirms that secondary buildings, such as guest houses, garages with living quarters, or similar improvements, may fall within the homestead exemption if they retain a residential nexus and are not used in a trade or business.

The opinion further provides that where a property qualifies for the disabled veteran exemption, the exemption applies to the entire qualifying property, including all buildings and appurtenances, in the same manner as the homestead exemption. This effectively harmonizes the treatment of auxiliary structures under both exemption regimes and confirms that the broader exemption afforded to qualifying veterans extends to the full residential property footprint.

Property owners should be aware that the presence of rental activity or business use in auxiliary structures may jeopardize exemption eligibility for those structures. However, non-commercial residential use of additional buildings strengthens the case for inclusion within the exemption. This opinion also provides support for a broader reading of exempt property, particularly in disputes involving mixed-use or multi-structure residential tracts. 

Ultimately, Attorney General Opinion No. 25-0049 reinforces a functional, use-based interpretation of Louisiana’s homestead and disabled veteran exemptions, confirming that qualifying exemptions extend beyond the primary residence to include additional structures that are residential in nature and non-commercial in use. For more information, contact Liskow attorneys Bob Angelico, Caroline Lafourcade, and Kevin Naccari, and visit Liskow’s Tax Practice page. 

The U.S. Department of the Treasury and the Internal Revenue Service have issued final regulations (Federal Register Doc. No. 2026-07104) implementing the “no tax on tips” provisions enacted as part of the One Big Beautiful Bill Act (OBBBA). The rule provides comprehensive guidance on the definition of “qualified tips,” the scope of eligible occupations, and the applicable reporting framework, resolving a number of interpretive questions left open by the statute.

The OBBBA added new §224 to the Internal Revenue Code, creating an above-the-line deduction for “qualified tips” received by individuals for tax years beginning after December 31, 2024 and before January 1, 2029. The statute caps the deduction at $25,000 annually, subject to phase-out based on modified adjusted gross income. While the statutory language established the basic framework for the deduction, it did not fully define what constitutes a qualifying tip or how eligibility should be determined, leaving those issues to administrative guidance.

The final regulations adopt a relatively narrow definition of “qualified tips,” emphasizing the voluntary nature of the payment. To qualify, a tip must be paid at the discretion of the customer and determined solely by the payor, without compulsion or negotiation. The rule further clarifies that qualified tips include cash and cash-equivalent compensation, such as charged tips and amounts distributed through tip-sharing arrangements. At the same time, the regulations expressly exclude mandatory service charges and automatic gratuities, which are treated as non-qualifying payments. In addition, the rule limits eligibility to tips received in occupations that customarily and regularly received tips on or before December 31, 2024, thereby preventing expansion of the deduction to newly structured compensation arrangements. The regulations also exclude tips received in specified service trades or businesses within the meaning of §199A, such as law, health, and consulting services.

In addressing occupational eligibility, the regulations establish a framework tied to historical tipping practices. Treasury identifies categories of occupations that traditionally rely on tipping, including roles within food and beverage service, hospitality, personal care, and transportation. By anchoring eligibility to pre-existing industry practices, the rule reflects a deliberate effort to prevent recharacterization of wages as tips in order to qualify for the deduction.

The final rule also introduces a detailed reporting and substantiation regime. Employers are required to separately report qualified tips on Forms W-2 and other applicable information returns and must identify employee occupations using classifications prescribed by Treasury. The regulations contemplate that payroll and related systems will distinguish between qualifying tips and other forms of compensation, including service charges and non-qualifying payments. On the taxpayer side, individuals must maintain adequate records substantiating both the amount and character of tips received, as well as their eligibility based on occupation. Transitional guidance allows taxpayers to rely on reasonable records for the 2025 tax year, including employer-reported amounts and contemporaneous tip logs.

The regulations operate in parallel with the OBBBA’s separate provisions addressing the deductibility of qualified overtime compensation under §225. Together, these provisions reflect a broader legislative and administrative effort to provide targeted tax relief for certain categories of earned income while imposing structured reporting requirements designed to facilitate compliance and enforcement.

Overall, the final regulations adopt a compliance-focused approach that narrows the scope of the statutory deduction and emphasizes clear documentation and reporting. For more information, contact Liskow attorneys Leon Rittenberg III, Caroline Lafourcade, and Kevin Naccari, and visit Liskow’s Tax Practice page.