IRS and Security Summit Launch New Anti-Fraud Framework
Published June 12, 2026
The Internal Revenue Service (IRS) and Security Summit partners recently announced a significant restructuring of their long-standing public-private partnership. The Security Summit brings together the IRS, state tax agencies, tax software providers, tax professionals and other industry participants to coordinate efforts to protect taxpayers from identity theft and fraud.
According to the IRS, the partnership has helped prevent billions of dollars in fraudulent refunds and protected millions of taxpayers from identity theft. The restructuring involves the creation of five new work groups that focus on the entire tax compliance lifecycle: pre-filing, forecasting, preventing, detecting and reporting and responding.
The new framework reflects the evolving nature of tax fraud. As filing systems and fraud detection tools have become more sophisticated, criminals have increasingly shifted their focus toward stealing legitimate taxpayer, payroll and financial information that can be used to prepare authentic-looking fraudulent returns. The restructuring is intended to improve information sharing, accelerate identification of emerging threats and strengthen safeguards before fraudulent returns are filed.
A notable aspect of the new framework is the increased involvement of payroll providers. The IRS notes that wage and withholding information are increasingly attractive targets for cybercriminals. The IRS continually reminds taxpayers and tax professionals to be aware that identity thieves use phishing attacks, business email compromise schemes and other tactics to obtain taxpayer information that can be leveraged for fraudulent tax filings.
27 States Opt Into New Scholarship Tax Credit
The Internal Revenue Service (IRS) recently announced that 27 states have elected to participate in the new Federal Scholarship Tax Credit (FSTC) program created under the One Big Beautiful Bill Act (OBBBA).
Beginning January 1, 2027, individual taxpayers may be eligible to claim a federal income tax credit of up to $1,700 for cash contributions to qualified Scholarship Granting Organizations (SGOs). These organizations provide scholarships for elementary and secondary education expenses.
Taxpayers may claim the credit only for cash contributions made to SGOs located in states that have elected to participate and submitted a list of qualifying organizations to the IRS. States must submit an annual list of qualifying SGOs to the IRS for taxpayers to claim the credit for contributions made within that state.
The FSTC represents a new charitable planning opportunity that differs from traditional charitable deduction rules. Rather than providing a charitable deduction, the program offers a dollar-for-dollar federal tax credit for qualifying contributions, subject to the annual $1,700 limitation.
As of June 2026, more than half of the states have already opted into the program. Participating states as of June 8, 2026 include: Alabama, Alaska, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia and Wyoming.
IRS Signals New Guidance on Section 4960
The Department of the Treasury and the Internal Revenue Service (IRS) recently announced their intent to issue proposed regulations implementing changes made by the One Big Beautiful Bill Act (OBBBA) to the excise tax on excess compensation paid by tax-exempt organizations. Notice 2026-36 addresses Internal Revenue Code Section 4960, which imposes a 21% excise tax on compensation exceeding $1 million and certain excess parachute payments made by applicable tax-exempt organizations (ATEOs). While the IRS has not yet issued proposed regulations, the notice provides important interim guidance regarding how the agency intends to administer the expanded rules.
Prior to the legislative changes, Section 4960 generally applied only to an organization's five highest-compensated employees for a taxable year, along with individuals who had previously been identified as covered employees. OBBBA significantly broadened the scope of the excise tax by expanding the definition of a covered employee. Under the revised statute, the excise tax now also applies to any employee of a tax-exempt organization whose remuneration exceeds $1 million during a taxable year or who receives an excess parachute payment, substantially increasing the number of employees that may trigger the tax.
The IRS notice clarifies how the agency intends to apply the revised “covered employee” definition. According to the notice, covered employees will generally include individuals who were previously identified as covered employees under the pre-2026 rules, as well as employees who meet the expanded statutory definition for tax years beginning after December 31, 2025.
The notice also indicates that forthcoming regulations are expected to preserve important exceptions for employees providing limited services to a tax-exempt organization and for certain compensation paid from nonexempt funds. The notice provided the intent to issue regulations.
The Treasury Department and IRS have requested public comments on the notice and the forthcoming regulations, which must be submitted on or before August 4, 2026. Until further guidance is issued, organizations may continue to rely on these exceptions.
Applicable Federal Rate of 5.0% for June: Rev. Rul. 2026-11; 2026-24 IRB 1 (15 May 2026)
The IRS has announced the Applicable Federal Rate (AFR) for June of 2026. The AFR under Sec. 7520 for the month of June is 5.0%. The rates for May of 5.0% or April of 4.6% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2026, pooled income funds in existence less than three tax years must use a 4.0% deemed rate of return. Charitable gift receipts should state, “No goods or services were provided in exchange for this gift and the nonprofit has exclusive legal control over the gift property.”
