Estate planning attorneys refer to the process of titling and transferring assets to the trust as “funding.” If assets are not titled properly, your trust will not function as intended. Certain property requires special attention, particularly the following:

• Newly acquired or forgotten assets
• Real estate
• Business interests
• Retirement accounts
• High-value tangible personal property

Newly Acquired & Forgotten Assets

Newly acquired and forgotten assets frequently cause funding problems. It is common for estate planning attorneys to ask their clients to complete a questionnaire or provide a financial statement to assist with preparing the plan and identifying funding needs. If an asset is forgotten or omitted from a questionnaire, it may not be transferred to the trust. As a result, that asset would be tied up in probate, costing the decedent’s estate money and his or her family time. A forgotten asset may even fail to be distributed as the decedent intends. When providing information to your estate planning attorney, be sure to do a thorough review of your assets to ensure nothing slips through the cracks.

Real Estate

Real estate funding is more complex than updating bank information or executing an assignment because it requires preparation of deeds, or other instruments, and navigating mortgages. When preparing a deed, a title search should be conducted to gather required information and identify any signers that need to execute the deed. Additionally, if a property is mortgaged, a transfer-on-death designation affidavit should be considered in lieu of a deed to avoid triggering a “due on sale” clause. It is common to see those provisions in mortgages, and they could require the mortgage to be paid in full after a transfer. Due to their technical nature, extra care should be taken when funding requires real estate transactions.

Business Interests

As many business owners have discovered, operating a business can be fast paced and unpredictable. If a business interest is not properly transferred to your trust, it may go through probate. For most assets, going through probate is a costly inconvenience. For a business, going through probate can be excruciating. There are special rules for operating a business during probate and, most importantly, day-to-day operations could be delayed. To provide the business with stability and continuity, you should share your business’s important documents with your estate planning attorney so that transferring the business to your trust follows proper protocol and complies with the formalities of your business. If you only have a partial interest in your business, this becomes even more important because you and your estate planning attorney will need to coordinate with the other owners during the transfer process.

Retirement Accounts

Retirement accounts, like IRAs and 401(k)s, deserve their own section because of the tax considerations associated with them. First off, retirement accounts should not be transferred directly to the trust. Instead, the trust should be named as a beneficiary of the accounts to minimize tax liability. Second, and it seems counterintuitive to the goals of funding, but your trust should not be named as the beneficiary of retirement accounts if you are married. Your spouse should be named the primary beneficiary of any retirement accounts, with your trust named as the contingent, backup beneficiary. Naming your spouse as the primary beneficiary provides greater tax advantages than naming your trust first.

High-Value Tangible Personal Property

During the initial funding process, tangible personal property is typically assigned to your trust, or ownership is transferred pursuant to a provision in the trust. In the event you have high-value personal property, like jewelry, artwork, or collectibles, you should provide guidance to your successor trustees as to where the items are located, a description as well as associated documentation, and, if applicable, how to access them if they are in a safe or other restricted storage location. Providing written guidance as to high-value personal property is particularly important in the event your estate plan includes provisions gifting the high-value items to specific beneficiaries.

It is important to note that your trust will not function as intended if it is not funded properly. Creating the trust document is only the first step. Funding your trust should receive special attention to ensure your assets avoid probate and reach their intended beneficiaries. Taking the time to complete this task and periodically reviewing your assets as your financial circumstances change can help ensure your estate plan works as intended.

For more information on this topic or to seek counsel from our Trusts & Estates practice group, please reach out to request a consultation or call us at 216-696-1422.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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Background

In 2019, Congress added subsection (d) to 7508A, which granted an automatic extension for any “qualified taxpayer” in an area affected by a federally declared disaster. The extension began at “the earliest date of the incident specified in the declaration” and lasted to “the date which is 60 days after the latest incident so specified.” In 2021, Congress changed the language of subsection (d), which effectively changed the extension period to a maximum period of 60 days after the declaration was issued, not the end of the disaster itself. The 2025 amendment, and current version of the code, changed the extension time from 60 days after the declaration was issued to 120 days.

In the case of Kwong v. United States, the United States Court of Federal Claims effectively ruled that the 2019 version of section 7508A applies to all claims related to Covid-19 disasters because the 2021 amendment (and presumably the 2025 amendment) could only be applied to disasters declared after the amendment because the statute explicitly provided that it was only effective for disasters declared after the amendment was adopted.  As such, the court found that the extension period began on January 20, 2020, the start of the emergency declaration, and ended on July 10, 2023.

Implications of the Kwong Case

Under normal circumstances, taxpayers are subject to certain filing deadlines and failure to file by the applicable deadline will result in failure to file (and potentially failure to pay) penalties. The Code also imposes significant interest normally incurred from the applicable due date of the payment. The COVID disaster declaration granted an automatic extension for both filing tax returns and paying income tax. This is unique to the COVID declaration and does not normally occur in other federal disaster declarations.

This means that if a taxpayer filed a return late during the COVID disaster relief period believing the deadline was April 15^th, the taxpayer may be entitled to receive a refund of any interest and penalties paid during that period because their returns were not actually considered late as long as they were filed and any taxes were paid by July 10, 2023.

Remaining Uncertainty Around Kwong

The government appealed the Kwong decision on May 15, 2026, but as it currently stands, the relief period for qualified taxpayers to file timely refund claims may have extended to July 10, 2026. A refund claim is usually timely if the taxpayer files it within three years of the filing of a return or two years from the payment of taxes, whichever expires later. If the Kwong tolling period applies, taxpayers who filed returns or were required to file tax returns during the taxable years of 2019 through 2022, may be able to file a refund claim for any interest and penalties paid but only if the returns were filed before July 10, 2023 and the claim for refund is filed by July 10, 2026. Even though the Kwong case is currently being appealed and the case will likely not be finally resolved prior to the July 10, 2026 deadline, our recommendation is to file a protective claim for any refunds owed under these rules prior to the July 10, 2026 deadline.

There are many other legal issues to consider including whether a taxpayer is a “qualified taxpayer” entitled to extended relief, which is not addressed in this article. It is important for one to retain experienced tax counsel to navigate the refund process and to ensure one’s rights are protected.

For more information, or to seek counsel from our Taxation practice group, please reach out to request a consultation or call us at 216-696-1422.      

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McCarthy Lebit would like to thank law clerk Logan B. Kijewski for his work in assisting with the preparation of this legal advisory for The More Report.
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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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For children born between January 1, 2025, and December 31, 2028, the federal government provides a $1,000 initial contribution. Parents may still open a Trump Account for any U.S. citizen under age 18, even if the child is not eligible for this initial contribution. Parents may contribute up to $5,000 annually, and employers may also contribute to an employee’s child’s account, with those contributions counting toward the same annual limit. There is no income or means testing limitations on the child’s family, so the accounts are open to all minors who meet the age requirements.

Prior to the child attaining age 18, funds must be invested in low-fee, passively managed mutual funds or exchange-traded funds (“ETFs”), with fees capped at 0.1% of the account balance. While these limitations are intended to control costs and encourage diversification, they also restrict investment flexibility, including the ability to use age-based or target-date strategies. On January 1 of the year the child turns 18, the account automatically converts to a traditional individual retirement account (“IRA”) and is no longer subject to the investment limitations.

When evaluating whether a Trump Account makes sense, it is important to understand how these accounts function in practice.

Key Financial Features of Trump Accounts

Trump Accounts allow for tax-deferred growth, meaning contributions are not taxed until withdrawn. Withdrawals may be made penalty free at the same age-requirements imposed upon traditional IRA rules. If withdrawals are taken before such time, a 10% early withdrawal penalty applies. However, unlike traditional IRAs, Trump Accounts provide exceptions to the 10% early withdrawal penalty for certain uses, including qualified education expenses and up to $10,000 for a first-time home purchase. These exceptions are broader than those available under custodial IRAs. However, even when the penalty is waived, withdrawals are still subject to ordinary income tax.

Broader Financial Considerations

Funds held in a Trump Account may be considered when determining eligibility for certain federal assistance programs, such as SNAP. After the account converts to a traditional IRA at age 18, it becomes subject to the rules governing IRAs, including early withdrawal penalties in most circumstances.

There are still a number of unanswered questions regarding how Trump Accounts will operate in practice. One of the most significant uncertainties is whether the $5,000 annual contribution limit will be treated as a gift subject to the annual federal gift tax exclusion.

In addition, the strict withdrawal requirements associated with a Trump Account significantly limit access to funds during the child’s minority as these are meant to be a tool primarily used for retirement planning. Because withdrawals are generally not permitted before age 18 and the account automatically converts to a traditional IRA on January 1 of the year the child turns 18, contributions may be effectively inaccessible for many families’ planning purposes.

Finally, families whose primary goal is to save for education expenses may prefer to consider a Section 529 plan. While both accounts offer tax-advantaged growth, qualified withdrawals from a Section 529 plan for education expenses are generally tax-free at the federal level (and often at the state level as well). By contrast, even when Trump Account withdrawals are used for qualified education expenses, they remain subject to federal, state, and local income taxes.

For more information, or to seek counsel from our Taxation or Trusts & Estates practice groups, please reach out to request a consultation or call us at 216-696-1422.

*Please note that on April 30, 2026, Trump signed an executive order and made a reference in his announcement to a new retirement account he called the “Trump IRA”. There is no such thing as a Trump IRA.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

The post Trump Accounts: What Are They & How Do They Work? appeared first on McCarthy Lebit - A Cleveland/Ohio Law Firm.

Ohio’s At-Will Employment Rules

Generally speaking, in Ohio, unless a written contract otherwise specifies, all employees are considered “at will” employees. This means an employee can be discharged or fired, and the terms and conditions of their employment such as pay, hours, and benefits, can prospectively change with or without cause. Of course, the at will nature of an employment relationship is subject to contractual, statutory and regulatory considerations.

For example, a written employment contract can alter the at-will nature of employment. Written employment contracts can include a written employment term, specify the reasons for discharge or reprimand (such as requiring for cause only dismissals), and may also include post-termination restrictive covenants such as non-complete agreements, non-solicitation agreements, and confidentiality and non-disclosure agreements. Written contracts are frequently, although not always, used for management level employees and those employees having access to confidential and proprietary information including trade secrets.   

Union Employees & Collective Bargaining Considerations

Collective bargaining agreements for union employees may also alter the nature of the at-will employment relationship. CBAs may also include provisions regulating reasons for discharge and reprimand.

The National Labor Relations Act (NLRA) regulates the interaction between employers and employees, including the right to unionize. The NLRA includes provisions affirming construction workers’ entitlement to engage in collective bargaining and establish or join labor unions, prohibiting employers from interfering with workers’ rights to discuss or coordinate activities related to labor, including online discussions; and, regulating unfair labor practices, such as discrimination or retaliation against unionized workers.

Wage, Overtime, & Recordkeeping Compliance

The Fair Labor Standards Act (“FLSA”) also imposes legal and regulatory requirements. The FLSA establishes standards for minimum wage, overtime pay, recordkeeping, and child labor. The FLSA includes provisions ensuring that construction workers are compensated at least the federal minimum wage for their hours of labor, mandating the provision of overtime pay for work exceeding 40 hours in a workweek and requiring employers to maintain precise records of employees’ worked hours, wages, and other pertinent documentation.

OSHA & Workplace Safety Compliance

Workplace safety considerations are of paramount importance in the construction industry. One of the most significant considerations is the Occupational Safety and Health Act (OSHA). OSHA requires construction firms to provide workplace safety and safeguard employees from potential hazards. Compliance with OSHA mandates include having a safe workplace free from recognized hazards, effective communication by employers of safety standards and requiring comprehensive training for their workforce, record keeping, routine inspections to verify compliance with safety regulations, and regulating non-compliance with OSHA standards with penalties and fines.

The Americans with Disabilities Act (“ADA”), the Family and Medical Leave Act (“FMLA”) and state workers compensation laws often overlap when an employee is injured on the construction job. Reasonable accommodation for disabilities is required by the ADA. Medical leave is required by the FMLA, and workers compensation laws apply to employees injured on the job. An employee with a work-related injury may be eligible for both FMLA and ADA accommodations. The ADA may require an employee to make reasonable accommodation, which might include light duty or modified schedules. The FMLA is separate and does not replace ADA obligations. Requiring FMLA use instead of providing reasonable accommodation may violate the ADA.

Best Practices for Employment Law Compliance

In complying with these statutory requirements, construction employers must balance job protection, medical treatment, and legal compliance, while employees recover from job related injuries. In addition, wrongful discharge claims may arise from an employer taking retaliatory action against an employee for exercising a right guaranteed by the ADA, FMLA or workers compensation laws. 

In sum, best practices require construction employers to maintain clear policies and procedures in place with respect to FLSA compliance, OSHA record keeping and training, and for ADA accommodation, FMLA leave, and reporting workers compensation claims.

For more information, or to seek counsel from our Employment practice group, please reach out to request a consultation or call us at 216-696-1422.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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What Is Intellectual Property?

Intellectual Property (“IP”) is generally classified as intangible personal property, meaning it’s an asset that lacks physical form but holds economic value.

The main types of IP are:

• Copyrights (protections for original works like books, music, software, art): Treated as intangible personal property under federal law.
• Patents (exclusive rights to inventions or processes): Classified as intangible personal property.
• Trademarks (protections for brands, logos, slogans): Regarded as intangible personal property.
• Trade Secrets (confidential business info like formulas, methods): Treated as intangible personal property or contract rights (enforced via agreements).

How Is IP Viewed in Marriage?

When you intertwine IP and marriage, it can create complications that many couples may not have been aware of previously. If you and your partner have not had a conversation or set up a prenuptial agreement where you explicitly state what happens to any IP, either created before or during marriage, in the event of divorce it can create animosity over who owns the IP, as well as who receives any assets the IP may generate.

Marital vs. Separate

IP developed before marriage is usually separate, but if developed during, that IP becomes marital. Even if the IP was created before marriage, an increase in value throughout the duration of the marriage may become marital property.

Valuation of the Asset

Valuing IP is complicated because it is intangible and based on future potential income. In some cases, if the IP is crucial to a spouse’s career and cannot be easily split, a court might award the asset to the creator, while retaining the non-creating spouse’s entitlement to financial interest in the work. Another method of division of IP is for the court to offset a given value of the IP by giving the spouse that is not awarded the IP more of other marital assets to balance the total value.

How A Court Would Divide in Divorce

Generally, a court will award intellectual property to the creator spouse (the spouse who created or obtained the intellectual property). Thus, the creator spouse has sole management and control over the intellectual property. However, the non-creator spouse may still be entitled to a financial interest in the work, if the work was created during the marriage. For example, if a spouse creates a new iPhone Application during the marriage, that spouse would hold the exclusive possession and control of that Application. The other spouse, however, could be entitled to a portion of the royalties and any other economic benefit earned from the Application.

How Do I Protect My Intellectual Property?

A prenuptial agreement is an effective way to protect your IP and any associated assets prior to marriage or in the event of a divorce. A well-drafted prenup can establish clear guidelines for how IP will be treated if the marriage ends. If you and your spouse have created IP during marriage, an experienced attorney can outline ownership rights or how any income associated with IP would be divided.

If you are an individual or business with intellectual property and would like advice on these assets, as well as how to protect them in the case of an upcoming marriage or potential divorce, our firm can handle these issues all under one roof. Our Intellectual Property and Domestic Relations attorneys will work hand-in-hand to ensure your IP is protected and passed along as you desire it to be.

For more information, or to seek counsel from our Family Law or Intellectual Property practice groups, please reach out to request a consultation or call us at 216-696-1422.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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Planning Well in Advance of a Transaction

From a tax and estate planning perspective, the most valuable opportunities often arise well before a business is formally brought to market. Early planning allows business owners to take advantage of strategies that may no longer be available once a transaction becomes imminent.

One key consideration is ownership structuring. Reviewing how the business is held, whether individually, through entities, or in trust, can uncover opportunities to improve tax efficiency and facilitate wealth transfer. For example, transferring minority interests in a business to irrevocable trusts for family members, when valuations are lower and before a sale is anticipated, may reduce future estate tax exposure. These strategies, often referred to as “pre-sale gifting,” can allow appreciation to occur outside of the owner’s taxable estate.

Trust planning also plays an important role. Properly structured trusts can provide asset protection, centralized management, and multigenerational wealth planning benefits. However, timing is critical. Once a letter of intent is signed or a sale becomes highly probable, the IRS may scrutinize transfers more closely, potentially limiting the effectiveness of these strategies.

From the deal side, “early” really means early. By the time a letter of intent is signed, the framework of the transaction is often set, and leverage begins to shift. Preparing in advance—cleaning up corporate records, evaluating contracts, and aligning ownership—can prevent delays and preserve negotiating strength.

Just as importantly, early coordination with tax counsel ensures that the business is positioned in a way that supports both marketability and tax efficiency. Buyers will conduct extensive diligence, and a well-prepared seller is better equipped to maintain momentum, avoid surprises, and command stronger terms.

Planning During the Transaction

Once a transaction is underway, the process moves quickly and becomes highly structured. Negotiations typically focus on key terms such as purchase price, representations and warranties, indemnification, and, critically, deal structure.

One of the most significant structural decisions is whether the sale will be an asset purchase or a stock purchase. Buyers often prefer asset deals for liability protection and tax benefits, while sellers frequently favor stock deals for cleaner exits and capital gains treatment. Navigating this tension is a central part of the negotiation process.

In addition, deal mechanics such as earnouts, rollover equity, and escrow arrangements can materially impact both risk allocation and overall value. These terms should be evaluated not only from a legal perspective, but also in light of their tax consequences.

That’s where tax planning continues to play a critical role during the deal itself. The structure of the transaction directly affects how proceeds are taxed, and careful analysis can help align the interests of both buyer and seller.

For example, in an asset sale, buyers may receive a step-up in tax basis, which can be highly valuable. However, sellers (particularly C corporations) may face double taxation. In a stock sale, sellers often achieve more favorable capital gains treatment, though buyers may be wary of inheriting liabilities.

Tax elections can sometimes bridge this gap. Certain elections allow the parties to achieve a hybrid result; providing buyers with basis step-up benefits while preserving favorable tax treatment for sellers. These opportunities require proactive analysis and close coordination with deal counsel.

A Coordinated Approach Delivers Better Outcomes

A successful transaction is not just about getting to closing—it’s about getting there efficiently, with minimal disruption and maximum value; and making sure you actually keep that value when it’s all said and done.

Together, a coordinated team of advisors can align transaction execution with tax efficiency and long-term wealth planning. Business owners who engage counsel early (and maintain that collaboration throughout the process) are best positioned to achieve a successful and well-planned exit.

For those considering a future sale, the takeaway is clear: start planning early, stay engaged throughout the process, and ensure your advisors are working together every step of the way.

For more information or to seek counsel from our Business & Corporate or Taxation practice groups, please reach out to request a consultation or call us at 216-696-1422.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

The post Planning the Exit: Maximizing Value Before, During, & After the Sale appeared first on McCarthy Lebit - A Cleveland/Ohio Law Firm.

The Growing IRS Focus on Digital Creators

For IRS purposes, an influencer is an individual monetizing digital following through (1) platform payouts and ad revenue; (2) brand sponsorships and partners; (3) affiliate marketing commissions; (4) merchandise and digital products; (5) subscriptions and memberships; and (6) speaking and appearance fees. In an IRS audit, there are three critical areas where the IRS or state agency will audit (1) whether the influencer is engaging in a trade or business or being an influencer as a hobby; (2) whether the influencer is an employee or independent contractor; and (3) whether the influencer is conducting a combined business or conducting separate ventures.

The Importance of Recordkeeping

The bottom line is that the IRS and state tax agencies are generally skeptical about influencers’ deductions because there is a concern that influencers may be disguising personal vacation expenses as tax-deductible business expenses, or improperly deducting wardrobe costs, or deducting home office expenses that were personal in nature and turning personal meals into deductible business expenses. The IRS and state tax agencies alike will be successful in challenging these deductions unless the influencer maintains appropriate documentation and records establishing that all their deductions are business expenses and therefore deductible.

Social Media as an Audit Tool

Make no mistake that the IRS will also be scrutinizing the income reported by influencers. The IRS will be looking at the influencer’s social media profile to determine whether the lifestyle that is portrayed in the profile is properly reflected on the influencer’s tax return. Just as with the student athletes discussed in our first installment, cash is not the only thing that results in income. The influencer must report the FMV of all goods and services received in connection with its influencer business. Many influencers run into problems because they receive free products from companies or all expenses paid trips to hotels in exchange for a few posts about the product or hotel. These items are taxable and if the FMV of these items are not properly reported, the influencer may create significant tax issues for themselves.

When to Seek Professional Guidance

In conclusion, it is imperative that digital content creators consider the financial and tax implications of running their respective businesses and select the appropriate business structure to suit their needs. Mistake of law is never a defense in the course of a civil tax audit and if the IRS feels that a taxpayer has willfully failed to report income to the IRS or inflated its tax deductions, these taxpayers could find themselves facing criminal charges for tax fraud in addition to being slapped with civil liabilities.

For more information, or to seek counsel from our Taxation practice group, please reach out to request a consultation or call us at 216-696-1422.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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Why It’s Important

Although the releases do not change the tax law, they are important because they dictate how and when taxpayers can receive written guidance, including letter rulings, determination letters, and technical advice.

Revenue Procedure 2026-1: Letter Rulings and Determination Letters

Rev. Proc. 2026-1 explains the revised procedures for requesting letter rulings, determination letters, and information letters on federal tax issues issued by the Large Business and International Division, Small Business/Self-Employed Division, Wage and Investment Division, and the Tax Exempt and Government Entities Division. This procedure also outlines which IRS offices handle specific requests, the information required for submission, user fee information, and circumstances under which the IRS may decline to issue guidance.

Revenue Procedure 2026-2: Technical Advice

Rev. Proc. 2026-2 discusses Technical Advice Memoranda (TAMs), which can arise during IRS audits or examinations where IRS personnel request guidance from the National Office on how the law applies to a specific set of facts. The updated procedure explains when advice can be requested by the taxpayer, how to participate in the process, how the results are issued, and the rights a taxpayer has when a field office requests a TAM.

Revenue Procedure 2026-3: Domestic “No-Rule” Areas

Rev. Proc. 2026-3 addresses areas of domestic tax law in which the IRS does not issue letter rulings. These areas generally involve issues that are otherwise unsuitable for guidance. If a topic appears on a “no-rule” list, the IRS will typically decline to rule, though in some cases they may choose to provide information letters on the subject.

Revenue Procedure 2026-4: Tax-Exempt, Government Entities, and Employee Plans

Rev. Proc. 2026-4 addresses procedures for government entities, tax-exempt organizations, and employee benefit plans. This procedure supports Rev. Proc. 2026-1 by addressing the considerations that apply to these entities.

Revenue Procedure 2026-5: Exempt Organizations

Rev. Proc. 2026-5 focuses on determination letters for exempt organizations specifically. This includes applications for tax-exempt status and other exempt organization issues. It also addresses remedies available under Internal Revenue Code Section 7428, which grants specific organizations the right to seek a declaratory judgment from certain U.S courts regarding their tax-exempt status. It provides a procedure to resolve disputes over qualifications and aims to protect from litigation.

Revenue Procedure 2026-7: International “No-Rule” Areas

Rev. Proc. 2026-7 mirrors the domestic “no-rule” list from Rev. Proc. 2026-3, however this applies to international and cross-border matters.

Overall, the updates presented by the IRS in its Annual Revenue Procedure for 2026 don’t represent a substantive shift in law or policy, rather just an annual update. As with previous years and anything presented by the IRS, it’s important for taxpayers to understand these changes and when, how, and under what circumstances a taxpayer may seek guidance from the IRS. It’s important to consult your tax professional for guidance on how these updates can impact you.

For more information or to seek counsel from our Taxation group, please reach out to request a consultation or call us at 216-696-1422.

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[1] https://www.irs.gov/irb/2026-01_IRB

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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New Limitations and Rules

The OBBB changed the rules for charitable deductions for both itemizing and non-itemizing taxpayers. Beginning January 1, 2026, itemizing taxpayers are now subject to a charitable deduction floor of 0.5% of their adjusted gross income and will continue to be subject to a 60% cap on cash contributions made to public charities. Additionally, the new rules cap the tax benefit of itemized charitable deductions at 35% for those in the 37% marginal tax bracket.  These rules will also impact charitable deduction carryovers for such taxpayers. For taxpayers that do not elect to itemize, taxpayers filing individually are now eligible to deduct charitable contributions up to $1,000 and taxpayers filing jointly are now eligible for a maximum $2,000 charitable deduction. Previously, charitable deductions were only available to itemizing taxpayers.

Similar to itemizers, a new floor applies to C-Corporations, which means donations are only deductible in excess of 1% of the company’s taxable income. The existing 10% taxable income ceiling for C-Corporations is unchanged.

Impact on Charitable Foundations

While these legislative changes are driven by a number of factors, the real-world impact on those affected is often overlooked. According to a new research report by Indiana University Lilly Family School of Philanthropy, the OBBB is projected to reduce charitable giving by roughly $5.69 billion annually (roughly 1%). That total is estimated based on the following:

• An increase of $4.39B of gifting by those non-itemizing taxpayers now motivated to give because of the new above-the-line deduction available to them.
• A decrease of $2.43B of gifting due to the 0.5% floor for itemizing taxpayers.
• A decrease of $6.1B of gifting due to the 35% cap on value of the deductions for those in the highest tax bracket.
• A decrease of $1.55B by C-Corporation gifting due to the 1% floor on corporate charitable gifting.

These effects may not be fully seen until one full year after the law is in effect.

Increase in Donor-Advised Funds

Based off the projected impacts of the OBBB, there has been a rise in the use of a Donor Advised Fund (DAF). DAFs are charitable giving accounts that allow donors to make a large deductible contribution in one year and then give to their chosen charities over a span of time as they choose.

Ultimately, the OBBB signals a notable shift in how taxpayers approach charitable giving. As these changes take effect, taxpayers and charitable organizations should reevaluate their strategies. While new thresholds and reduced incentives may limit immediate tax advantages, there are tools that exist that can play an important role in maximizing tax efficiency and charitable giving impact.

For more information, or to seek counsel from our Taxation group, please reach out to request a consultation or call us at 216-696-1422.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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What is the Residential Real Estate Rule?

FinCEN’s Residential Real Estate Rule took effect on December 1, 2025, with reporting obligations beginning March 1, 2026. The rule was designed to address money laundering risks in certain U.S. real estate transactions. It focused on non-financed residential purchases involving legal entities and trusts, particularly those structured as all-cash transactions.

To determine whether a transaction was reportable, parties were required to work through a step-by-step analysis. If certain elements were met, the transaction would have been subject to reporting. For transactions that met the reporting criteria, the rule required submission of detailed information to FinCEN, including:

• Identity of the seller and buyer
• Information about the transferee entity or trust
• Beneficial ownership details
• Individuals signing on behalf of the buyer
• Property and transaction details, including purchase price and method of payment

The rule also established a hierarchy to determine which party was responsible for filing a report. Responsibility generally fell first on closing or settlement agents, followed by other participants such as settlement statement preparers and title professionals.

What does this mean going forward?

FinCEN has acknowledged the Texas ruling and stated that reporting parties are not currently required to submit real estate reports and will not face liability for failing to do so while the ruling remains in place; however, this may change quickly. An appeal or other regulatory action could revive reporting requirements with little notice.

Businesses and advisors involved in residential real estate transactions should continue to monitor developments and remain prepared to adjust their processes if needed. In the meantime, now is a good time to revisit internal procedures and consider how reporting obligations would be implemented if reinstated.

If you have any questions regarding these changes or to seek counsel from our Real Estate & Construction group, please reach out to request a consultation or call us at 216-696-1422.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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