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Status: Updated

To provide a comprehensive research dossier for your US Tax Court analysis, this report synthesizes current Internal Revenue Code (IRC) updates, recent precedents from the 2020–2026 period, and the specific "missing content" of the One, Big, Beautiful Bill Act (OBBBA) draft article that has been a subject of significant recent debate.

1. Missing Content of the "Draft Article" (OBBBA)

In the context of recent legislative analysis (as of January 2026), the "draft article" often refers to the original 2025 draft of the One, Big, Beautiful Bill Act (OBBBA). Legal researchers have noted that several key provisions were present in the initial House and Senate drafts but were "missing" or significantly altered in the final enacted Public Law 119-21.

The missing/removed content includes:

• Expansion of Section 501(p): The original draft proposed expanding the IRS's power to suspend the tax-exempt status of "terrorist supporting organizations" (broadening the definition from the current "terrorist organizations"). This expansion of Section 501(p) of the IRC, which deals with the tax-exempt status of organizations, was ultimately removed from the final version due to due process concerns.
• UBTI for Name/Logo Royalties: A draft provision would have treated royalties received by tax-exempt organizations for the sale or license of their name or logo as Unrelated Business Taxable Income (UBTI). This provision, which would have subjected these royalties to tax, was omitted in the final bill.
• The SALT "Second Prong": The original draft proposed a complex "second-prong" mechanism that would have effectively imposed an additional 5% tax on income equal to a taxpayer's State and Local Taxes (SALT). This was replaced by a more straightforward $40,000 SALT cap (phasing out for high-income earners).
• Pease Limitation Repeal: While the draft aimed for a full repeal of the Pease limitation (Section 68, which limited itemized deductions for high-income taxpayers), the final law retained a modified version linked to new high-income brackets.

2. Relevant IRS Code Sections & Current Interpretations

• Section 174 (R&D Expenditures): Following the OBBBA, the lack of clarity regarding the amortization of research and experimental expenditures (post-2022) was resolved. Section 174 governs how companies deduct research and development (R&D) costs. Current interpretations now favor permanent expensing for domestic R&D, a significant shift from the five-year amortization requirement initially imposed by the Tax Cuts and Jobs Act (TCJA) of 2017.
• Section 7623 (Whistleblower Awards): A critical 2026 interpretation focuses on the definition of "collected proceeds." Section 7623 provides for awards to whistleblowers who provide information leading to the collection of taxes. The Tax Court now holds that proceeds include self-reported tax changes made by a taxpayer during an investigation, even if not directly assessed through a formal audit.
• Section 1402(a)(13) (Self-Employment Tax): Recent appellate rulings have rejected the "functional analysis" test for limited partners. Section 1402(a)(13) provides an exclusion from self-employment tax for certain limited partners. The current interpretation (2026) reverts to a statutory text approach, granting the SE tax exclusion to any partner with limited liability regardless of their level of activity.
• Section 7701(o) (Economic Substance): The IRS continues to aggressively apply this doctrine to "charitable LLC" shelters. Section 7701(o) codifies the economic substance doctrine, which allows the IRS to disregard transactions lacking economic substance. Interpretation has evolved to focus on whether a transaction has a tax-independent purpose and is compelled by business realities (Frank Lyon standard, referencing the Supreme Court case Frank Lyon Co. v. United States).

3. Recent Precedents (2020–2026)

4. Practical Implications & News

• "Trump Accounts" Implementation: The OBBBA introduced these new savings vehicles, which are currently undergoing IRS rulemaking. Early guidance suggests they will function as "super-ROTHs" with higher contribution limits for mid-career professionals.
• Qualified Overtime Reporting: For the 2026 tax year, employers must begin using Code "TT" in Box 12 of Form W-2 to report the overtime premium. The IRS has granted temporary penalty relief for 2025 due to the retroactive nature of the law.
• Audit Surge in Conservation Easements: Despite the Green Valley procedural setback, the IRS has utilized the Economic Substance Doctrine under Section 7701(o) to maintain high-value denials for conservation easements in Texas and Georgia throughout late 2025.
• International digital taxes: The US continues to oppose unilateral Digital Services Taxes (DSTs), which are taxes imposed by foreign countries on revenue derived from digital services. This opposition is based on the "retaliatory measures" provision (Section 899) added by the OBBBA against countries that do not adopt the OECD Pillar One framework, which aims to address the tax challenges arising from the digitalization of the economy.