Everyone who retires from a school district or university not covering employees for Social Security (SS) is subject to GPO. Under a new law - effective July 1, 2004 - if you retire from a school district or university that covers employees for SS and have worked there the last five years you are not subject to GPO. Why is this a big deal? The GPO is a calculation that reduces your SS benefit by two-thirds of your TRS benefit. In many cases the GPO will reduce your SS benefit to zero!

Retirees of TRS are also subject to Windfall Elimination Provision (WEP) if the years at a TRS and SS covered institution are less than 30. WEP is a method to calculate SS benefits without giving a larger benefit to low income workers. Current SS benefits are increased for workers that are considered "low income" -- to eliminate higher benefits paid to those who may have maintained summer or part-time jobs to get the minimum 40 quarters for SS the WEP was enacted.

Retirees who worked their entire careers at a charter school or worker at a school having both TRS and SS AND worked 30 years are not subject to either GPO or WEP.

Spousal and survivor benefits are also covered by the GPO and in many cases reduce the SS benefit to zero.

These rules are rather complicated and if you have questions, give us a call. The Association of Texas Professional Educators has a good website that explains the rules and calculations in greater detail (http://www.atpe.org).

A quick note about Medicare coverage. Anyone with at least 30 quarters of service is eligible to be covered at age 65. Those with less than 40 quarters, or not eligible to receive SS benefits, must pay monthly premiums to receive coverage.

--Paul Ask, CPA

We think that QHDHPs will be growing in availability as time goes on with more insurance companies providing this product. We also think more employers will switch to these as they look for ways to reduce their insurance costs. One trend that was quoted in a seminar we attended was that "higher risk to insure people" have been the first to embrace these products. That makes it unclear if initially the cost of insurance will be competitive on these products, but as they grow in popularity the pool should grow and the costs decrease.

-- Paul Ask, CPA

Not everyone is eligible for a Roth IRA - you must have earned income - sweat of the brow - and the availability is phased out for those with income above $95,000 for single and $150,000 for married filing jointly. Beginning in 2005 the maximum contribution limit is $4,000 with an extra $500 for those 50 years of age and above.

-- Paul Ask, CPA

1 - An FLP is a limited partnership like any other limited partnership -- except only family members are owners.

2 - Income tax treatment is no different from any other limited partnership.

3 - If you set out to use it to save estate and gift tax - you will lose your case.

That being said, a FLP is still a good vehicle to use for other valid reasons. The main reasons to use a FLP are for multiple ownership with central control and to keep an asset(s) together for management. Assets could include real estate (farm land, apartments, commercial buildings, raw land, etc) or investments (stocks, bonds, etc.) Sometimes because of a diverse family situation such as farmers and city dwellers, the owners may have differing views and individually owned land may cause a farm to be sold. In order to prevent this, a parent may put the land in a FLP to preserve the family farm. You may have a large investment portfolio and to prevent it from being split-up thereby losing the economies of scale and lower investment management fees, it can put into a FLP. The FLP will generally have language that forbids owners from mortgaging their portion, selling or transferring their portion or otherwise threatening the FLP as a unit. The FLP should have mandatory income distributions to give all owners a true economic interest.

So why is it that a FLP is "sold" as an estate tax savings device? The answer --the asset has been impeded. The whole reason to set this up is to make it difficult to split apart -- to carry the wishes of those setting it up to another generation. First the ones setting it up are giving up total control over the assets and spreading the control to other family members who have differing opinions. You cannot take it back! Second the one receiving an ownership interest does not have full say so over the use of the asset. These two factors need to be considered carefully before creating a FLP.

An attorney familiar with a FLP needs to be used for the set up. The reasons for setting up an FLP need to be carefully considered and then the reasons need to be carefully documented. If gifting is intended, a qualified appraiser must be used to value any gifts. This may be each year depending upon the frequency of the gift. Lastly, the FLP should be reviewed no less than annually and preferable quarterly for asset management and applicable law changes.

See how simple that is! If you have questions, please fee free to call or email the office.

-- Paul Ask, CPA

The Treasury Department and IRS have finalized regulations regarding the deduction of up to $10,000 in personal car loan interest by individuals for tax years 2025 through 2028. This includes regulations on information returns required to be filed by a lender or other person engage in a trade or business who receives $600 or more of qualified interest during the calendar year. The final regulations adopt the proposed regulations published in January 2026 (NPRM REG-113515-25) with some changes in response to public comments.

The Treasury Department and IRS have finalized regulations regarding the deduction of up to $10,000 in personal car loan interest by individuals for tax years 2025 through 2028. This includes regulations on information returns required to be filed by a lender or other person engage in a trade or business who receives $600 or more of qualified interest during the calendar year. The final regulations adopt the proposed regulations published in January 2026 (NPRM REG-113515-25) with some changes in response to public comments.

Qualified Personal Vehicle Loan Interest

For tax years beginning in 2025 through 2028, a noncorporate taxpayer may claim a deduction of up to $10,000 for qualified personal vehicle loan interest (QPVLI) paid or accrued during the tax year on a specified passenger vehicle loan (SPVL) incurred by the taxpayer for the purchase of an applicable personal vehicle (APV) for personal use. Generally, interest includes an amount paid, received, or accrued as compensation for the use or forbearance of money under the debt instrument.

The final regulations clarify that QPVLI also includes prepaid interest in the form of points and deferred or capitalized interest. In addition, it may include origination-related or financing-related charges, prepayment penalties, late-payment charges, default-related charges, and similar fees, if characterized as an interest expense for federal income tax purposes.

Secured by First Lien

Interest is QPVLI only if it is paid or accrued on debt for the purchase of an APV for personal use that is secured by a first lien. The final regulations clarify that an SPVL is secured by a first lien with the first voluntary security interest recorded against the vehicle. Any involuntary liens are disregarded even if given temporary higher priority at a later date.

A vehicle also may be considered secured by a first lien even if the lien has not yet been perfected or recorded due to short-term delays arising under State or local law. It may also be considered secured by a first lien where the lien is removed in connection with the taxpayer no longer owning the vehicle, but the taxpayer continues to be liable for the loan (repossession or insurance payout).

Purchase of Applicable Passenger Vehicle

An SPVL is qualified only to the extent the debt is incurred for the purchase of a new vehicle and any other items or amounts customarily financed in the same purchase transaction (for example, vehicle service plans, extended warranties, sales taxes, and vehicle-related fees). Any portion of a loan for items or amounts not customarily financed in the purchase are not qualified.

The taxpayer must allocate the debt on a pro rata basis. Whether items are customarily financed and directly related to the purchase of the vehicle is determined on an industry-wide basis and not on the particular financing terms. The final rules, however, expand the list of examples of items customarily financed in an APV purchase. The final regulations also maintain that debt incurred for negative equity in a prior purchased vehicle is not incurred for the purchase of an APV.

The requirement that an APV must be a new vehicle under the loan documentation refers to the lender’s classification of the vehicle for purposes of its financing programs. The original use of the vehicle must commence with the taxpayer. However, original use does not commence with a dealer if the vehicle is held primarily for sale to customers in the ordinary course of its trade or business. Original does not commence with a lessee if the lessee purchases the vehicle during or at the end of the lease term.

Information Reporting

Any lender or other person who, in the course of that trade or business, receives from any individual interest aggregating $600 or more for any calendar year on an SPVL, must report the receipt of interest on Form 1098-VLI to the IRS and the payee. The final regulations affirm that lenders are required to include only interest received on an SPVL for the purchase of an APV, the first use of which begins with the payee. This is required by statute and may require the lender to collect information it currently does not collect. The lender must file Form 1098-VLI for each SPVL.

T.D. 10054

The Treasury Department and IRS have issued proposed regulations providing that a private school is not eligible for Federal income tax exemption under section 501(c)(3) if it considers race, color, or national or ethnic origin in any of its educational, admissions, scholarship, athletic, or other school-administered policies. Any such consideration, under the proposed regulation subsection, would be considered de facto racial discrimination. The proposed rules would apply to taxable years beginning after May 31, 2027.

The Treasury Department and IRS have issued proposed regulations providing that a private school is not eligible for Federal income tax exemption under section 501(c)(3) if it considers race, color, or national or ethnic origin in any of its educational, admissions, scholarship, athletic, or other school-administered policies. Any such consideration, under the proposed regulation subsection, would be considered de facto racial discrimination. The proposed rules would apply to taxable years beginning after May 31, 2027.

Racial Nondiscrimination

The proposed regulations would treat all race-based consideration in private education as contrary to a fundamental public policy, regardless of its purpose, including remedial or diversity-related objectives. This restriction does not inclulde policies or actions designed to eliminate prejudice or other forms of discrimination. The rules would cover private primary and secondary schools, colleges, professional or trade schools, and universities. The rules specifically do not include governmental units, any agency or instrumentality of a governmental unit, or any organization owned or operated by such an agency or instrumentality.

Application to Private Schools

To qualify for tax exemption, a private school could not consider race, color, or national or ethnic origin in:

• (1) Educational or admissions policies
• (2) Scholarship or loan programs
• (3) Athletic or other school-supported programs

The proposal would not prevent religious schools from maintaining religious missions or selecting students based solely on religious affiliation. If finalized, Rev. Proc. 75-50 would also be modified to remove provisions permitting certain race-based preferences for minority groups.

The proposed regulations would add §1.501(c)(3)-2 and apply to taxable years beginning after May 31, 2027.

Proposed Regulations, NPRM REG-119986-25

IR 2026-103

A Notice of Final Partnership Adjustment (FPA) issued by the IRS to a partnership was timely under Code Sec. 6235 because the partnership and IRS had agreed to extend the limitations period for making partnership adjustments. It was determined that the extended period under Code Sec. 6235(a)(1) controlled because the statute permits adjustments until the latest of the periods specified in Code Sec. 6235(a). Accordingly, the partnership’s motion for summary judgment was denied.

A Notice of Final Partnership Adjustment (FPA) issued by the IRS to a partnership was timely under Code Sec. 6235 because the partnership and IRS had agreed to extend the limitations period for making partnership adjustments. It was determined that the extended period under Code Sec. 6235(a)(1) controlled because the statute permits adjustments until the latest of the periods specified in Code Sec. 6235(a). Accordingly, the partnership’s motion for summary judgment was denied.

The partnership, which was subject to the centralized partnership audit (CPA) regime, challenged an FPA disallowing a charitable contribution deduction. The partnership argued that the FPA was issued outside the applicable limitations period because the 330-day period following the notice of proposed partnership adjustment had expired. However, the parties had previously executed an agreement extending the limitations period for partnership adjustments under Code Sec. 6235(b).

Further, it was concluded that the periods specified in Code Sec. 6235(a) were not sequential deadlines. The statutory phrase “later of” required use of the latest applicable period, and an agreed extension under Code Sec. 6235(b) extended the limitations period for making adjustments, including issuance of the FPA. Because the FPA was mailed before expiration of the agreed extended period, the FPA was timely.

Katanga Properties, LLC, 167 TC No. 10, Dec. 62,899

The Doug LaMalfa Federal Disaster Tax Relief Certainty Act has been signed into law by President Trump.

The Doug LaMalfa Federal Disaster Tax Relief Certainty Act has been signed into law by President Trump.

The law (H.R. 5366) allows victims of federally declared disasters to deduct qualified losses above $500 per disaster without itemizing and removes the 10 percent adjusted gross income threshold for those losses. A fact sheet on the bill can be found here.

Under the law, this treatment of personal casualty loss is available until Jan. 1, 2027.

It also excludes wildfire relief payments from taxable income regardless of when they are received, so long as the wildfire disaster declaration occurs after Dec. 31, 2014, and before Jan. 1, 2027.

President Trump signed the bill into law on Sept. 11, 2026.

The IRS has modified automatic accounting method change procedures for research or experimental expenditures and certain residential construction contracts. Rev. Proc. 2026-32 modifies sections 7 and 19 of Rev. Proc. 2025-23 to reflect changes made by the One, Big, Beautiful Bill Act (OBBBA).

The IRS has modified automatic accounting method change procedures for research or experimental expenditures and certain residential construction contracts. Rev. Proc. 2026-32 modifies sections 7 and 19 of Rev. Proc. 2025-23 to reflect changes made by the One, Big, Beautiful Bill Act (OBBBA).

For research expenditures, the procedure modifies accounting method changes under Code Secs. 174 and 174A. Code Sec. 174 continues to require capitalization and 15-year amortization for foreign research expenditures. Code Sec. 174A generally allows a current deduction for domestic research expenditures paid or incurred in tax years beginning after December 31, 2024.

The procedure also revises rules governing adjustments associated with accounting method changes. It coordinates certain Code Sec. 481 adjustments with the OBBBA transition method for recovering unamortized domestic research expenditures. It also extends through tax years beginning before 2028 waivers of certain eligibility restrictions for specified automatic changes.

Further, the IRS provides automatic accounting method changes for residential construction contracts affected by the OBBBA amendments to Code Sec. 460. Taxpayers may change from the percentage-of-completion method to an exempt contract method for qualifying contracts entered into in tax years beginning after July 4, 2025. Certain taxpayers may also change their treatment of costs under Code Sec. 263A.

The modified procedures generally apply to Form 3115, Application for Change in Accounting Method, filed after September 4, 2026. Special transition rules apply to certain previously filed Forms 3115.

Rev. Proc. 2026-32