As we head into the 2026 filing season, tax professionals are operating in an environment unlike any we have seen in recent memory: a smaller and more automated IRS, the new OBBBA, and rapid experimentation with AI-enabled tools inside the Service. This field guide is designed to separate what we know for sure from where the IRS is likely to move next, and to translate both into practical planning moves. It does not predict the future; instead, it offers a structured way to think about enforcement, documentation, and client strategy when the rules, the technology, and the politics are all in motion.
State Tax Planning with the “80/20 Company” Exclusion
Ted Stotzer
Many multinational groups find that foreign-source dividends and other income earned by domestic affiliates are fully or partially subject to state income taxation, even where the federal system provides an exemption. This state-level “leakage” can be material – particularly in high-tax jurisdictions – and is often overlooked because the income appears sheltered at the federal level. For groups with predominantly foreign operations, a starting structure or a restructuring that causes one or more domestic affiliates to qualify as an “80/20 company” can substantially reduce or eliminate state taxation on that income.
