Letter to the Treasury on Income Tax Reporting for Estates and Trusts related to Section 68

Dear Mr. Salinger and Mr. Bisignano: 

The American Bankers Association (ABA) urges the Treasury Department (Treasury) and the Internal Revenue Service (IRS) to issue guidance on income tax reporting for estates and trusts related to Section 68 as implemented in the One Big Beautiful Bill Act (OBBBA) for tax years on or after December 31, 2025.

ABA members serve as trustees, executors, custodians, wealth managers, and fiduciaries for trusts, estates, charitable organizations, and individual taxpayers throughout the United States. Because banks and other financial institutions administer a substantial share of fiduciary assets, prompt guidance is essential to ensure consistent application of Section 68 and to avoid unintended distortions within Subchapter J.

The need for timely guidance is further heightened by the ongoing state conformity process following enactment of OBBBA. If states adopt differing conformity positions while federal treatment remains uncertain, fiduciaries and financial institutions could face significant compliance and reporting challenges resulting from inconsistent federal and state tax treatment.

OBBBA revisions to section 68 have created uncertainty when applied to deductions that are unique to trusts and estates. Prior to the OBBBA, Section 68 provided a special exemption for estates and trusts; however, the OBBBA repealed that exemption. 

Section 641(b) states, "The taxable income of an estate or trust shall be computed in the same manner as in the case of an individual, except as otherwise provided in this part." We note that footnote 102 in the Joint Committee on Taxation's (JCT) report – General Explanation of the Tax Provisions of Public Law 119–21 ("Blue Book") – states that Section 641(b) provides that "the taxable income of an estate or trust generally is computed in the same manner as in the case of an individual"; however, footnote 102 does not refer to the "except as otherwise provided in this part" in Section 641(b). It is not clear how Section 68 applies to special deductions for estates and trusts as outlined under Sections 642(b), 642(c), 651, 661, and 691 within Part 1 of Subchapter J. 

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