IRS Introduces Major Tax Revisions in New Legislation

The Internal Revenue Service (IRS) has announced significant changes to tax regulations that could impact businesses, fuel distributors, and health insurance consumers. In a statement released on December 22, 2025, the IRS outlined new refund rules related to dyed fuel, addressing long-standing issues for fuel operators navigating federal excise taxes. These changes are part of a broader legislative package known as the One, Big, Beautiful Bill.

Under the previous tax framework, diesel fuel and kerosene were subject to taxation when removed from a terminal, even if they were later dyed for non-taxable use. The newly introduced statute allows for the recovery of that initial tax payment if the fuel qualifies for exemption. The IRS indicated that formal guidance on filing refund claims will be published in early 2026. Taxpayers are advised to refrain from submitting claims until that guidance is available, as the IRS will not accept or process any claims made before then.

On the following day, December 23, 2025, the IRS issued updates regarding business interest deductions, specifically modifying Section 163(j) of the tax code. Starting with tax years after December 31, 2024, businesses will again be able to incorporate depreciation, amortization, and depletion into their Adjusted Taxable Income. This change effectively raises the cap on deductible interest expenses. Furthermore, the IRS clarified that interest costs capitalized during the year typically fall under the Section 163(j) limitation, with specific exceptions for certain foreign income inclusions linked to controlled foreign corporations.

Another update released on the same day addressed health care, specifically revisions to the Premium Tax Credit. This credit assists low- and moderate-income households in affording insurance through the Health Insurance Marketplace. Modifications made by the One, Big, Beautiful Bill have eliminated repayment caps on excess advance credits for tax years following December 31, 2025. The IRS also removed outdated guidelines related to temporary rules that have since expired.

These updates signal a significant shift within the IRS, as the agency works to untangle outdated tax regulations while expanding deductions and credits in certain areas. The message from the IRS is clear: the detailed provisions of the One, Big, Beautiful Bill are transitioning from legislative text to practical enforcement. Taxpayers, both individuals and businesses, can expect to see the effects of these changes reflected in their tax returns sooner than anticipated.

As the IRS continues to clarify these new rules, stakeholders are urged to stay informed and prepared for the implications of these sweeping tax changes.