Today, 20 February, the US Supreme Court ruled in a 6-3 decision that the International Emergency Economic Powers Act (IEEPA) does not provide authority to impose tariffs. The decision strikes down tariffs imposed under IEEPA on goods from Canada, Mexico and China, as well as global 10% and country-specific tariffs. The decision also invalidates the potential for tariffs pursuant to executive orders related to Venezuela, Russia, Iran, Brazil and Cuba.

With Chief Justice John Roberts writing for the majority, the Court concluded that a tariff is a tax, falling squarely within Congress's authority under Article I, Section 8 of the Constitution. In short, the Chief Justice wrote: "The President asserts the extraordinary power to unilaterally impose tariffs of unlimited amount, duration, and scope. In light of the breadth, history, and constitutional context of that asserted authority, he must identify clear congressional authorization to exercise it. IEEPA's grant of authority to 'regulate … importation' falls short."

The Court's decision does not address next steps in terms of how companies that paid the tariffs might recoup them. Companies hoping for clarity on next steps to recover duties paid will have to wait for additional developments.

Importantly, the decision does not affect any tariffs the Administration imposed under Section 232 of the Trade Expansion Act of 1962 or Section 301 of the Trade Act of 1974. It is widely expected that the Administration will move quickly to invoke other available authorities to impose tariffs and maintain continuity in the tariff policy. President Trump reenforced this expectation during a press conference held a few hours after the Court issued its ruling. A Breaking Tax News Alert is available here and a Global Trade Alert is forthcoming.

"Pillar One is dead" a senior US Treasury official said on 19 February during a webcast, with another Treasury official saying the BEPS two-Pillar solution no longer exists. Kenneth Kies, Treasury assistant secretary for tax policy and acting IRS chief counsel said that Treasury Secretary Scott Bessent wants to explore ways to reach an appropriate agreement on the digital economy and is "encouraged by the positive outcome on Pillar Two."

Another senior Treasury official, Rebecca Burch, deputy assistant secretary for international tax affairs, indicated that although the US is interested in a substantive discussion of the issues, this will require a reexamination of the underlying principles and assumptions upon which Pillar One Amount A was based. She added: "Picking up where we left off is not acceptable and we are going to have to define and find the contours of what it means to have a digital discussion."

The official explained that the discussion now will start with "a review of the first principles and a challenge of whether those first principles continue or are different today." Talks on the digital economy at the Inclusive Framework reportedly are just beginning, with the first step requiring defining and agreeing upon what is a "constructive dialogue."

President Trump will deliver his State of the Union address to a joint session of Congress on 24 February. The Administration is also expected to release a proposed 2026 budget sometime in the near future.

The IRS issued Notice 2026-7 on 18 February, providing what is expected to be the final tranche of additional interim corporate alternative minimum tax (CAMT) guidance before the release of proposed regulations expected toward the end of the year. The notice also modifies certain provisions of the previously issued interim CAMT guidance.

Notice 2026-7 would allow taxpayers to adjust applicable financial statement income (AFSI) for certain domestic research amortization claimed in tax years beginning after 31 December 2024. It also would modify previous CAMT guidance to allow all taxpayers (regardless of industry) to make AFSI adjustments for deductible tax repairs related to IRC Section 168 property and amortization under IRC Section 197 attributable to goodwill and certain other intangibles (regardless of their acquisition date).

Additionally, Notice 2026-7 would allow AFSI adjustments for qualified production costs under IRC Section 181 and certain materials and supplies that are deducted for regular tax purposes but depreciated for financial reporting purposes.

Notice 2026-7 modifies the guidance in Section 4 of Notice 2025-46 for financially troubled companies and would modify the anti-avoidance rules in Prop. Reg. Section 1.56A-4 (regarding certain foreign transactions). It also provides guidance on the CAMT consequences of transactions involving intangible property subject to IRC Section 367(d).

The forthcoming CAMT proposed regulations are anticipated to include proposed rules consistent with the interim guidance in Notice 2026-7. Subject to certain exceptions and special rules, taxpayers may generally rely on the guidance in Notice 2026-7 for tax years beginning before the proposed regulations are published in the Federal Register. A Tax Alert is forthcoming.

The OECD on 17 February released Frequently Asked Questions (FAQs) on BEPS Pillar One Amount B. Amount B provides for a simplified and streamlined approach to the application of the arm's-length principle to in-country baseline marketing and distribution activities.

The OECD also released an updated pricing automation tool that is designed to automatically compute the Amount B return for an in-scope tested party; it requires only minimal data inputs and is aimed at both tax administrations and taxpayers.

Finally, in additional trade news, the US and North Macedonia issued a joint statement announcing a "Framework for an Agreement on Reciprocal Trade." According to a statement, the US will maintain a 15% country-specific tariff rate on imports from North Macedonia and 0% tariff on certain products. See the fact sheet here.

The US and Bangladesh also released a joint statement on an "Agreement on Reciprocal Trade." The US has committed to reducing the country-specific tariff on imports from Bangladesh to 19% and to "establish a mechanism allowing a zero reciprocal tariff rate on certain textile and apparel goods imported from Bangladesh." The full text of the US-Bangladesh Agreement is here; the fact sheet is here.