Each year, millions of donors mail end-of-year gifts to their favorite charities, often sending their checks on December 30 or December 31.

The basic rule on charitable deductions for gifts by mail is that the Internal Revenue Service (IRS) will consider the deduction date as the date shown on the postmark. If the postmark is before December 31, the gift will be deductible for the year 2025.

However, the United States Postal Service (USPS) has adopted a final rule to its Domestic Mail Manual. The change affects Section 608.11 of the manual and clarifies the rules on postmarks. The USPS states, "While a postmark confirms the USPS possessed a mail piece on the date inscribed, that date does not necessarily align with the date the USPS first accepted possession of the item."

The USPS is giving notice that, after December 24, 2025, the postmark may not reflect the date that the check was placed in the mailbox. Instead, the postmark is the "date of the first automated processing operation." It could be one or more days after a customer mails a check when a postmark is stamped on the envelope. The USPS emphasizes "the postmark date is not a perfectly reliable indicator of the date of mailing."

Because millions of donors have historically mailed gifts close to the end of the year and deducted those gifts in the year it was mailed, the new rule may have substantial impact. The USPS offers three solutions that donors should consider for gifts mailed near the end of 2025.

The first is to go to your local post office and request a manual postmark. This will make it clear that the gift was made on or prior to December 31.

A second option is to obtain a "Postage Validation Imprint" (PVI) at your local post office. A USPS employee will apply a PVI label with the date.

The third option is to send the envelope through either Certified or Registered Mail. If the envelope is sent through Certified or Registered Mail, there will be a date and a receipt that indicates the gift was mailed in December 2025.

Donors should be aware that while pre-printed labels from self-service kiosks, Click-N-Ship or postal meters show that the postage was printed on a specific date, this is not the same or accepted as the postmark by the USPS. Donors should mail items early to ensure there is a USPS postmark for the correct year or take the recommended steps to manually obtain a postmark.

The “mailbox rule” remains in effect for donations. The difference after this final rule adoption is that there may be a delay as to when the postmark is affixed, which is the deemed date of mailing. The date of the postmark on an envelope shall be deemed to be the date of delivery for the charitable gift. Therefore, donors who obtain a manual postmark at their local post office can be assured that the gift is valid for 2025.

Editor's Note: End-of-year gifts mailed at the end of December should include a trip to your local post office to ensure receiving a postmark that matches the date of actual mailing. You could also consider making an online transfer which will be dated at the time of the transfer.

Record Refunds Expected in 2026

The One Big Beautiful Bill Act (OBBBA) included multiple provisions that are applicable for 2025. Some of the changes include an increase in the state and local tax deduction limit from $10,000 to $40,000, enhancements to the standard deduction, a new exemption for income from qualified tips and overtime and a deduction for auto loan interest. An estimated additional $91 billion in refunds will result from the OBBBA changes applicable for year 2025.

During the filing season that ended in April 2025, there were 92 million refunds. This represented approximately 64% of the filers. The average refund was $2,947. However, under OBBBA the $271 billion in refunds sent during the 2025 season is expected to increase to approximately $370 billion in 2026. The additional deductions could average approximately $1,000 for each filer.

The IRS may have difficulty managing the workload due to the IRS layoffs and retirements which have reduced the work force by 25%. The question is whether the IRS will be able to process refunds with so many new rules under OBBBA.

House Ways and Means Committee member Darin LaHood (R-IL) indicates it is important for all taxpayers to understand these changes. Representative LaHood noted, "Part of the problem is it has not sunk in yet, the benefits and effectiveness of it." With respect to the ability of the IRS to handle all the new provisions, he continued, “I do not think we can answer that question yet. I think many of us are skeptical, but we do not have a conclusion on that premise.”

Former IRS Commissioner Charles Rettig recently addressed the issue at a conference held by the American Bar Association’s Section of Taxation. Mr. Rettig noted, "I think filing season ‘26 is going to be seamless, and I am relying on the people of the IRS to make it happen."

Corporate Transparency Act Held Constitutional

In National Small Business United v. U.S. Department of the Treasury; No. 24-10736 (11th Cir. 2025), the Court of Appeals for the Eleventh Circuit reversed a District Court decision and upheld the constitutionality of the Corporate Transparency Act (CTA).

The CTA was passed as part of the Anti-Money Laundering Act of 2020. The CTA requires corporate entities to report their "beneficial owners."

The District Court determined that the CTA did not regulate economic activity and therefore held the statute unconstitutional. The Eleventh Circuit stated, "By effectively prohibiting anonymous business dealings, the CTA facially regulates economic activities having a substantial aggregate impact on interstate commerce. Moreover, as a uniform and limited reporting requirement, the CTA does not facially violate the Fourth Amendment."

Congress passed the CTA because it was concerned that financial criminals would use shell companies to conceal fraud. There are approximately two million corporations and limited liability companies formed each year. Most states do not require disclosure of beneficial ownership. Therefore, the CTA was passed to enhance "national security, intelligence, and law enforcement efforts to counter money laundering, the financing of terrorism, and other illicit activity."

Under the CTA, the beneficial ownership is required to be reported to the Department of Treasury Financial Crimes Enforcement Network (FinCEN). A "beneficial owner" includes an individual who exercises substantial control or owns 25% of the ownership interests in an entity. The initial deadline for compliance with the CTA was April 25, 2025, or within 30 days of the entity’s formation. The CTA includes exceptions for banks, credit unions, brokers, investment companies, insurance companies, accounting firms, and Section 501(c) nonprofits and entities with more than 20 employees and over $5 million in annual gross revenue.

FinCEN issued an interim final rule that exempts domestic companies from the CTA requirements. The CTA has been involved in litigation. Plaintiffs National Small Business United (NSBU) and Isaac Winkles sued to seek declaratory and injunctive relief. NSBU and Winkles claim that the CTA violates the First, Fourth, Fifth, Ninth and Tenth Amendments.

The District Court determined that the CTA was not valid under the Commerce, Taxing or Necessary and Proper Clauses of the U.S. Constitution.

Under the Commerce Clause, Congress may regulate (1) channels of interstate commerce, (2) instrumentalities of interstate commerce, or (3) activities that substantially affect interstate commerce. Only the "substantial effects" test is applicable to the CTA. This test requires that the underlying activity must be economic in nature.

The Eleventh Circuit determined that the CTA regulates anonymous corporate dealings and is not a general criminal law. However, business entities are created for the purpose of engaging in economic activity. The law does not affect incorporation but rather regulates the operation of the businesses.

Plaintiff Winkles operates two companies with $8 million and $5 million in annual gross sales. The plaintiffs are clearly engaged in economic activity.

The CTA regulates economic activity following incorporation, not the act of incorporation. Therefore, this is a substantial regulation with respect to interstate commerce.

The CTA is also part of federal reporting requirements. This requirement constitutes an effort to curtail abuses by shell companies. Congress reviewed multiple statements from national security and law-enforcement experts prior to passage of the CTA. The Fraternal Order of Police noted the bill would reduce the threat from "transnational criminal organizations and terrorist operations."

Therefore, Congress acted within its Commerce Clause authority to regulate interstate commerce that could be subject to these types of financial crimes.

The second NSBU claim is that the CTA violates the Fourth Amendment against unreasonable searches and seizures. There have been several cases by the Supreme Court on interpretation of the Fourth Amendment. However, the CTA has privacy guarantees and exceptions. The CTA requires the Secretary of the Treasury to protect ownership information and has steps included to reduce the risk of a breach of confidentiality.

Therefore, the CTA is held to be constitutional.

Editor's Note: With the interim rule by FinCEN, it is unlikely that the CTA will be applied to domestic corporations or business entities. However, Congress may continue to implement other methods to reduce the risk of fraud and financial crimes by shell companies.

Applicable Federal Rate of 4.6% for January: Rev. Rul. 2026-2; 2026-3 IRB 1 (15 December 2025)

The IRS has announced the Applicable Federal Rate (AFR) for January of 2026. The AFR under Sec. 7520 for the month of January is 4.6%. The rates for December of 4.6% or November 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.”