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Bill

S 5078

Small Tax Case Threshold Modernization Act

119th Congress Introduced by John Cornyn

Increases the Tax Court small disputes threshold from $50,000 to $100,000 and applies annual COLA-based adjustments after 2026.

Introduced in Senate
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WeVote Research Nonpartisan
Bill Summary · S 5078

Overview

The Small Tax Case Threshold Modernization Act would raise and index the threshold for Tax Court small disputes, increasing the dollar amount that determines whether a Tax Court petition or appeal is considered a “small dispute.” The bill updates the threshold from $50,000 to $100,000 and creates an inflation-adjustment mechanism to adjust future thresholds annually based on the cost-of-living adjustment (COLA). It applies to proceedings filed in calendar years after 2026.

Purpose and intent

  • Modernize and simplify Tax Court proceedings for smaller tax disputes by increasing the monetary threshold that defines “small disputes.”
  • Provide predictable, inflation-adjusted thresholds to reduce administrative and procedural burdens for low-to-moderate amount disputes.

Key provisions and changes

  • Threshold increase:

    • Replaces the existing $50,000 threshold with a new $100,000 threshold in both references where it appears in section 7463 (a) and (f) of the Internal Revenue Code.
    • Redefines the heading and table references to reflect the new “Small Disputes” category.

  • Inflation adjustment:

    • Adds new subsection (g) to Section 7463:
    • For petitions or appeals filed in calendar years after 2026, the $100,000 amounts in subsections (a) and (f) are to be increased each year by the cost-of-living adjustment (COLA) calculated using the method in Section 1(f)(3) of the Internal Revenue Code, with the reference year adjusted to substitute 2025 for 2016.
    • Any increase not a multiple of $1,000 is rounded down to the nearest $1,000.

  • Conforming amendments:

    • Updates headings and related cross-references:
    • Section heading changed from “Disputes Involving $50,000 or Less” to “Small Disputes.”
    • IRS Code table reference updated accordingly to reflect “Small disputes.”

  • Effective date:

    • The amendments apply to proceedings commencing after the date of enactment of the Act (i.e., after enactment).

Who/what would be affected

  • Tax Court litigation involving small disputes with value at or below the threshold:
    • The threshold increase to $100,000 broadens the category of cases considered “small disputes.”
  • Taxpayers initiating petitions or appeals in calendar years after 2026:
    • Beneficiaries include individuals and entities pursuing Tax Court review of IRS decisions with disputes up to the adjusted threshold.
  • Tax Court administrators and IRS personnel:
    • Procedural and docketing processes for small disputes would be impacted by the higher threshold and annual COLA-based adjustments.

Procedural and timing considerations

  • Applicability: The new threshold and indexing apply to proceedings commenced after the Act’s enactment date.
  • Adjustment mechanism: Annual inflation adjustments would ensure the threshold remains aligned with price levels, with rounding rules set to the nearest lower $1,000.
  • Legislative status: Introduced July 22, 2026; referred to the Senate Committee on Finance (sponsor: Sen. Cornyn, with Sen. Luján as a co-sponsor).

Compiled from official sources — confirm details with the bill’s official record.

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