Court Weighs Challenges to IRS Credit Guidance

A Ninth Circuit ruling could determine if firms can bypass standard tax refund suits when disputing agency guidance.

Updated on Oct. 26, 2026 in Taxes

Court Weighs Challenges to IRS Credit Guidance

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Should businesses be able to challenge federal agency guidance directly in court?

A federal appellate court panel is weighing whether a tax firm can challenge IRS guidance on the employee retention credit through the Administrative Procedure Act. The case carries implications for how businesses may dispute agency rules outside of standard tax refund procedures.

Why it matters

The outcome of this case could determine if tax firms have a pathway to sue the IRS directly over its guidance, potentially bypassing the traditional process of paying a tax and suing for a refund. For businesses navigating credit eligibility, the ruling may clarify the legal avenues available for challenging agency tax interpretations.

The Ninth Circuit panel is evaluating the case against established tax code remedies, which typically require taxpayers to seek recourse through refund suits. Whether an Administrative Procedure Act claim is permissible remains the central point of contention under judicial review.

The players

Ninth Circuit

An appellate court that reviews federal legal challenges across several states.

IRS

The federal agency responsible for tax collection, rule enforcement, and managing credit programs.

Stenson Tamaddon LLC

A tax advisory firm that provides guidance and services to businesses regarding tax credits.

The details

The dispute centers on whether a tax advisory firm can utilize the Administrative Procedure Act to challenge IRS guidance regarding the employee retention credit. Judges during the hearing questioned if the tax code’s existing framework for refund suits already provides a sufficient, exclusive remedy for these disputes. If the court rules that alternative remedies are sufficient, it may limit the ability of firms to challenge agency policy without first pursuing the standard litigation route.

A Ninth Circuit panel heard oral arguments on October 26, 2026.

Money Landscape

This case sits at the intersection of administrative law and the federal tax code, challenging how oversight is applied to IRS agency actions. It follows a broader trend of businesses seeking broader legal standing to contest agency-level tax guidance.

Businesses that have relied on tax credits should continue monitoring the status of IRS guidance through their own tax professionals. The ruling may impact future eligibility requirements and the methods by which firms can dispute unfavorable agency interpretations.

The takeaway

This case highlights the tension between agency-issued tax guidance and the legal mechanisms available to businesses for challenging those rules. Business owners should consult with a qualified tax professional to understand how current IRS positions on credits affect their specific filings.