Internal Revenue Bulletin No. 2025–45

Bulletin 2025-45: OBBBA Implementation and 2026 Inflation Adjustments

The IRS is actively implementing provisions of the 'One, Big, Beautiful Bill Act' (OBBBA), Public Law 119-21, alongside its routine annual inflation adjustments. This bulletin contains vital updates impacting both individuals and businesses, mandating careful review by tax practitioners. The key items include transitional relief for the newly mandated reporting of vehicle loan interest (Notice 2025-57), a comprehensive package of 2026 inflation adjustments impacting numerous Code sections (Rev. Proc. 2025-32), an increase in the Patient-Centered Outcomes Research Trust Fund (PCORTF) fee (Notice 2025-61), and the publication of the November 2025 Applicable Federal Rates (AFRs) (Rev. Rul. 2025-21). These changes, particularly those stemming from the OBBBA, require practitioners to adapt quickly to ensure compliance and optimize tax planning strategies for their clients.

Notice 2025-57: Transitional Relief for Vehicle Loan Interest Reporting

The One, Big, Beautiful Bill Act (OBBBA), enacted on July 4, 2025, introduced significant changes to the tax treatment of certain vehicle loan interest. Specifically, it added Section 6050AA to the Internal Revenue Code, which mandates information reporting for "specified passenger vehicle loans." This stems from an amendment to Section 163(h)(4), which defines "personal interest" (generally not deductible under Section 163(a)) but excludes "qualified passenger vehicle loan interest" (QPVLI) from that definition for the tax years 2025 through 2028, effectively making it deductible. QPVLI is defined as interest on indebtedness incurred after December 31, 2024, for the purchase of an applicable passenger vehicle secured by a first lien, used for personal purposes.

Under Section 6050AA(a), any person engaged in a trade or business who receives from an individual interest aggregating $600 or more for any calendar year on a specified passenger vehicle loan must file an information return with the IRS. Section 6050AA(b) details the information required on the return, including the borrower's name and address, the amount of interest received, the outstanding principal at the beginning of the year, the loan origination date, and details about the vehicle (year, make, model, VIN). Section 6050AA(c) further requires the lender to furnish a written statement to the borrower by January 31 of the following year, containing the lender's contact information and the details reported to the IRS.

Given the relatively recent enactment of the OBBBA, both recipients of interest (lenders, auto finance companies) and the IRS require time to update their systems and forms to fully implement the new reporting requirements. Specifically, Section 6050AA(b) prescribes required data fields that may not currently be tracked by lending institutions. Furthermore, the IRS needs to modify its processing systems to handle the new information returns.

To address this transition, Notice 2025-57 provides transitional relief for the 2025 calendar year. Instead of filing a formal information return as required by Section 6050AA(a) and furnishing a statement that mirrors the information return required by Section 6050AA(c) by January 31, 2026, recipients of interest can satisfy their reporting obligations by making a statement available to the individual indicating the total amount of interest received in calendar year 2025 on a specified passenger vehicle loan. The notice provides examples of how lenders may make this statement available, including through an online account portal, a regular monthly statement, or an annual statement.

Critically, the IRS will not impose penalties under Section 6721, which addresses failures to file correct information returns, or Section 6722, which concerns failures to furnish correct payee statements, on recipients of interest who have satisfied the reporting obligations under Section 6050AA for calendar year 2025 as described in the notice. These penalties can be significant, and the relief provides substantial protection for lenders making a good-faith effort to comply.

Practitioners advising lenders and auto finance companies must ensure that systems are in place to provide borrowers with a statement of total interest paid on specified passenger vehicle loans in 2025 by January 31, 2026. While this transitional relief avoids penalties for 2025, full compliance with Section 6050AA will be expected in subsequent years, making it imperative to develop robust reporting mechanisms.

Rev. Proc. 2025-32: 2026 Inflation Adjustments & OBBBA Impact

Following the transitional relief outlined in Notice 2025-57, providing substantial protection for lenders making a good-faith effort to comply, the IRS released Rev. Proc. 2025-32, outlining the 2026 inflation adjustments for various tax items. This guidance reflects significant changes stemming from Public Law 119-21, known as the One, Big, Beautiful Bill Act (OBBBA), signed into law on July 4, 2025. This revenue procedure modifies certain sections of Rev. Proc. 2024-40 to account for these legislative amendments. These adjustments are crucial for tax practitioners as they navigate the evolving tax landscape. The foundation for these adjustments rests on Section 1(f), which governs how inflation adjustments are generally determined. It is imperative that taxpayers consult additional guidance for any Code amendments enacted after October 9, 2025, to ascertain their applicability for the 2026 tax year.

Several key changes take effect in 2026 due to the OBBBA. Section 70101 of the OBBBA amended Section 1(j) to make permanent the tax rate tables that were effective for taxable years beginning after December 31, 2017, and before January 1, 2026. The existing seven tax rates for individual taxpayers (10%, 12%, 22%, 24%, 32%, 35%, and 37%) and the four tax rates for estates and trusts (10%, 24%, 35%, and 37%) remain in effect.

Furthermore, the standard deduction under Section 63 sees a notable increase. Section 70102 of the OBBBA amended Section 63(c)(7) to make permanent the temporary increases of the basic standard deduction amounts provided in Section 63(c)(2), which were effective for taxable years beginning after December 31, 2017, and before January 1, 2026, and further increased the base amounts. For single filers and married individuals filing separately, the standard deduction rises to $15,750. Heads of households will see a standard deduction of $23,625, while married couples filing jointly and surviving spouses will have a standard deduction of $31,500. These amounts are adjusted for inflation for taxable years beginning after 2025.

The estate tax landscape is also affected. Section 70106 of the OBBBA amends Section 2010(c)(3) by increasing the basic exclusion amount to $15,000,000 for calendar year 2026. This change impacts the applicable exclusion amount described in Section 2010(c)(2) and consequently influences the applicable credit amount against estate tax described in Section 2010(c)(1) and the applicable credit amount against gift tax described in Section 2505(a)(1). Additionally, for calendar year 2026, the generation-skipping transfer exemption amount under Section 2631(c) is also set at $15,000,000. These amounts will be adjusted for inflation for taxable years beginning after December 31, 2026.

For families, the Child Tax Credit under Section 24 receives attention. Section 70104 of the OBBBA amends Section 24 to make the increased and expanded child tax credit under Section 24(h) that were effective for taxable years beginning after December 31, 2017, and before January 1, 2026, permanent. In addition, the OBBBA amends Section 24(h)(2) to provide that the maximum amount of child tax credit is $2,200 for any taxable year beginning in 2025. This amount is adjusted for inflation for taxable years beginning after December 31, 2025.

Businesses can also expect changes. Section 70306 of the OBBBA amends Section 179, which allows an election to expense certain depreciable assets, by increasing the maximum amount a taxpayer may expense under Section 179(b)(1) and the phaseout threshold amount under Section 179(b)(2). Under Section 179(b)(1), the maximum amount allowable is $2,500,000. Under Section 179(b)(2), the $2,500,000 amount is reduced by the amount by which the cost of Section 179 property placed in service during the taxable year exceeds $4,000,000, but not below $0. These amounts are adjusted for inflation for taxable years beginning after December 31, 2025.

Section 70105 of the OBBBA amended Section 199A, which allows a deduction for qualified business income, to add a minimum deduction of $400. Additionally, a taxpayer will be required to have a minimum of $1,000 of qualified business income to be eligible for the deduction, effective for taxable years beginning after December 31, 2025. The $400 and $1,000 amounts in Section 199A(i) will be adjusted for inflation for taxable years beginning after 2026.

Finally, it is crucial to note the termination of Section 179D for property the construction of which begins after June 30, 2026, as per Section 70507 of the OBBBA. Section 179D provides a deduction for energy-efficient commercial buildings.

In summary, Rev. Proc. 2025-32 signifies a major recalibration of the tax landscape for 2026. The new legislation is not only making tax provisions permanant but also adding new layers of complexity that practitioners need to fully understand.

Notice 2025-61: PCORTF Fee Increase to $3.84

As the tax landscape shifts under the OBBBA, adjustments to existing healthcare-related fees are also taking effect. Notice 2025-61 addresses the fee imposed by Section 4375, which concerns fees on issuers of specified health insurance policies, and Section 4376, which covers fees on plan sponsors of applicable self-insured health plans. These sections help fund the Patient-Centered Outcomes Research Trust Fund (PCORTF).

The rule established by this notice adjusts the applicable dollar amount used to calculate the PCORTF fee for policy years and plan years ending on or after October 1, 2025, and before October 1, 2026, to $3.84 per covered life. This represents an increase from the $3.47 rate applicable for the prior period, as detailed in Notice 2024-83.

This adjustment is based on the percentage increase in the projected per capita amount of National Health Expenditures, calculated using data published by the Department of Health and Human Services (HHS). The calculation methodology involves multiplying the previous year's applicable dollar amount ($3.47) by this percentage increase, reflecting updates to the underlying data used in the prior calculation.

Health plan sponsors and issuers must immediately update their fee calculations to reflect this new adjusted applicable dollar amount of $3.84 for the relevant policy and plan years. The PCORTF fee, originally established to fund patient-centered outcomes research, was extended through September 30, 2029, by the Further Consolidated Appropriations Act, 2020.

Rev. Rul. 2025-21: November 2025 Applicable Federal Rates

Following the update to the PCORTF fee, the IRS issued Rev. Rul. 2025-21, which provides the applicable federal rates (AFR) for November 2025. These rates are crucial for various tax calculations, especially those involving debt instruments and property valuations. The ruling includes several tables outlining different rates for specific purposes.

Specifically, Table 1 of Rev. Rul. 2025-21 details the short-term, mid-term, and long-term AFRs as defined under Section 1274(d), which governs the determination of issue price for certain debt instruments issued for property. Table 2 presents the adjusted AFRs, relevant for calculations under Section 1288(b), concerning original issue discount on tax-exempt obligations. Table 3 sets forth rates under Section 382(f), pertaining to limitations on net operating loss carryforwards following ownership changes. Table 4 provides percentages for the low-income housing credit under Section 42(b)(1), while noting that Section 42(b)(2) sets a minimum applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008. Finally, Table 5 contains the rate used for determining the present value of annuities, life interests, and remainder or reversionary interests under Section 7520.

Of particular note are the Section 7520 rate, which is set at 4.60% for November 2025, and the long-term AFR, which stands at approximately 4.62% annually. These rates are essential for calculations under Section 1274, which deals with the determination of the issue price for debt instruments, Section 382, concerning the limitation on net operating loss carryforwards, and Section 7520, which governs the valuation of annuities, life estates, and remainders. Practitioners must use these rates for transactions occurring in November 2025 to ensure accurate tax compliance.