IEEPA tariff refunds: claims and key income tax considerations for importers.

On February 20, 2026, the U.S. Supreme Court held in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs. U.S. Customs and Border Protection (CBP) has since begun refunding IEEPA duties, with interest, through a phased administrative process. The third phase opened on October 6, 2026 and is limited to entries liquidated more than 80 days earlier, including finally liquidated entries, of importers that brought suit in the Court of International Trade.

Importers must first establish that they are eligible and file a claim through CBP. The refunds then raise several federal income tax questions: whether a refund is includible in gross income or instead reduces the cost of inventory, the taxable year in which it is recognized, the treatment of the accompanying interest, and the effect of any obligation to return tariff surcharges to customers. The IRS has not issued guidance specific to IEEPA refunds, so the analysis relies on existing principles under IRC §§111, 263A, 451, and 471.

Background

The IEEPA tariffs at issue include the so-called reciprocal tariffs and the fentanyl-related tariffs imposed in 2025. Following the Court’s decision, the Court of International Trade on March 4, 2026 directed CBP to liquidate or reliquidate affected entries without IEEPA duties. CBP is administering the refunds through its Consolidated Administration and Processing of Entries (CAPE) functionality in the ACE portal, which it has opened in phases:

Phase	Effective date	Entries covered
1	April 20, 2026	Unliquidated entries and entries within 80 days of liquidation
2	June 29, 2026	Entries flagged for reconciliation for which the reconciliation entry has not been filed
3	October 6, 2026	Entries of Court of International Trade plaintiffs liquidated more than 80 days earlier, including finally liquidated entries, that are covered by court-ordered reliquidation

Phase 3 is available only to plaintiffs whose entries the Court of International Trade has specifically ordered reliquidated. Plaintiffs that had provided a valid importer of record number by July 30, 2026 could file when the phase opened, and CBP has said it will issue further instructions for later submissions. The government has appealed to the Court of Appeals for the Federal Circuit, arguing that relief for finally liquidated entries should extend only to importers that sued. CBP has not set a date for other finally liquidated entries, entries subject to antidumping or countervailing duties, entries under open protest, warehouse entries (although warehouse withdrawals remain eligible), reconciliation entries already filed, or drawback, which it lists as under evaluation.

According to a declaration CBP filed with the Court of International Trade on October 6, 2026, CAPE had accepted approximately $136.6 billion in potential and certified refunds for processing as of October 2, 2026, and approximately $126 billion had been sent to the Treasury for payment. Refunds are paid to the importer of record, or to a party the importer designates on CBP Form 4811, by ACH, with rare exceptions, and include interest under 19 U.S.C. §1505.

Eligibility for IEEPA Refunds

The refunds are limited to IEEPA duties, which were reported under the IEEPA provisions of Chapter 99 of the Harmonized Tariff Schedule. These include the reciprocal tariffs and the fentanyl-related tariffs on goods from Canada, Mexico, and China. Where a combined rate applied, as under the trade arrangements with the European Union, Japan, South Korea, and Switzerland and Liechtenstein, only the IEEPA portion is refundable and the general rate of duty remains owed. Duties imposed under Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974, antidumping and countervailing duties, and tariffs imposed under other authorities after the decision remain in effect and are not refundable through CAPE.

The right to a refund belongs to the importer of record, the party named on the entry summary (CBP Form 7501), regardless of whether the duty was economically borne by a customer. Purchasers that acquired imported goods from a distributor acting as importer of record are not entitled to a refund from CBP, and any recovery from the distributor is a matter of contract. Where an express carrier or its brokerage affiliate acted as importer of record, as is common for delivered-duty-paid and low-value shipments, the carrier files the claim. UPS and other carriers have stated that they will pass refunds through to the party that paid the duties after CBP pays them, although the carriers have not committed to a uniform timeline and their roles as importer of record or customs broker vary by shipment.

Claiming Refunds Through CAPE

A refund is claimed by filing a CAPE Declaration in the ACE Secure Data Portal. CBP’s guidance sets out the following requirements:

• Filer. The declaration may be filed only by the importer of record or by the licensed customs broker that filed the entries. A broker may include entries for several importers on one declaration. Attorneys and other representatives may not file on an importer’s behalf.
• ACE account and bank information. The importer must have an active ACE Portal account with refund bank information on file for ACH payment. Refund bank information is maintained separately from the account used to pay CBP. As of September 11, 2026, CBP reported approximately $1.3 billion in refunds held because ACH information was missing.
• Declaration. The declaration is a list of entry numbers uploaded to the portal, with up to 9,999 entries per declaration. CBP validates the file and each entry and issues a CAPE claim number. An accepted declaration cannot be amended or withdrawn, and an entry may appear on only one accepted declaration.
• Payment. CBP has said valid refunds are generally issued within 60 to 90 days after a declaration is accepted, and payment typically follows liquidation or reliquidation of the entry by three to five weeks. Entries that are extended, suspended, or under review, and warehouse withdrawals, are refunded when they liquidate.

CBP has not published a deadline for CAPE declarations, but entry-level time limits still apply. CAPE relies on CBP’s authority to reliquidate an entry on its own initiative within 90 days of liquidation under 19 U.S.C. §1501, and protests under 19 U.S.C. §1514 must be filed within 180 days of liquidation. Entries liquidated more than 80 days ago that are not covered by a court order cannot be filed in the current CAPE phases. While an entry remains within 180 days of liquidation, a protest may preserve the importer’s rights, but an entry under an open protest is not eligible for CAPE. Entries beyond the protest period may require an action before the Court of International Trade.

Taxability of IEEPA Refunds and the Tax Benefit Rule

Under IRC §111 and the tax benefit rule, the recovery of an amount that reduced taxable income in a prior taxable year, including through cost of goods sold, is generally includible in gross income, except to the extent the prior amount did not reduce the taxpayer’s tax. Customs duties are a cost of acquiring inventory, capitalized under IRC §263A and Treas. Reg. §1.471-3, and are recovered through cost of goods sold when the related goods are sold. Accordingly, the treatment of a refund generally follows the status of the goods to which the duty relates:

Status of related goods	General treatment of refund
Sold in a prior taxable year	Includible in gross income under the tax benefit rule when the right to the refund is fixed or the refund is received
Sold in the current taxable year	Reduces current-year cost of goods sold
Held in ending inventory	Reduces the cost of inventory on hand and is recovered through lower cost of goods sold when the goods are sold

Most importers will have refunds relating to goods in each category, requiring an allocation across taxable years and inventory layers. The allocation will depend on the taxpayer’s inventory method, including FIFO, LIFO, or specific identification, and on how duties were allocated to inventory under the taxpayer’s §263A methodology.

Duties capitalized into the basis of imported machinery or equipment present a separate issue. A refund generally reduces the basis of the asset. Where the asset was fully expensed under IRC §168(k), there may be no remaining basis to reduce, and the refund would generally be includible in income.

Timing of Recognition

A cash-method taxpayer generally includes a refund in income when it is received. An accrual-method taxpayer includes an item in income when all events have occurred that fix the right to receive it and the amount can be determined with reasonable accuracy.

The filing of a refund request, by itself, generally does not satisfy the all-events test. In Rev. Rul. 2003-3, the IRS concluded that an accrual-method taxpayer includes a state income or franchise tax refund in income when it receives payment or notice that the refund claim has been approved, whichever is earlier, because the state’s review of the claim is substantive rather than ministerial. Applying similar reasoning, the right to an IEEPA refund arguably becomes fixed when CBP liquidates or reliquidates the entry without IEEPA duties, or when payment is received, if earlier. An argument can be made for earlier accrual, upon acceptance of the CAPE Declaration or on the basis of the court’s refund order. However, acceptance reflects only validation of the file and entries, and the refund amount is not determined until liquidation or reliquidation, including any netting against other duties owed.

Taxpayers with an applicable financial statement should also consider IRC §451(b), which generally requires an item to be included in income no later than the taxable year in which it is taken into account as revenue in the applicable financial statement. Whether a refund claim against the government is subject to that rule is not clear, and the interaction between book and tax recognition should be evaluated before year-end.

Interest on Refunds

Interest paid by CBP generally accrues from the date the duty was deposited to the date of liquidation or reliquidation, at the overpayment rate under IRC §6621, as provided in 19 C.F.R. §24.3a. CBP includes the interest in the refund payment rather than paying it separately. The interest is ordinary income and is reportable separately from the refund. It does not reduce cost of goods sold, and the interest component of each payment should be identified and should not be netted against the refund in the taxpayer’s books or tax workpapers. CBP’s ES-022 report separates principal and interest for each entry. For an accrual-method taxpayer, the interest generally should be evaluated under the same all-events analysis as the refund, rather than accrued ratably from the deposit date, because the amount is not determined until liquidation or reliquidation.

Tariff Surcharges Passed Through to Customers

Many businesses recovered IEEPA costs from customers in 2025 through separately stated surcharges or price increases. As of August 2026, nearly 100 putative consumer class actions had been filed in nearly 30 federal districts, asserting that importers must return passed-through amounts upon receipt of a refund.

For federal income tax purposes, the refund and any payment to customers are generally separate items. A contractual or legal obligation to remit a portion of the refund does not, by itself, exclude the refund from gross income. Amounts returned to customers are generally deductible when the liability is fixed and economic performance occurs, which for a rebate or refund is generally when payment is made, subject to the recurring item exception where applicable. Amounts relating to current-year sales may instead be treated as an adjustment to gross receipts. Where the refund and the related customer payments fall in different taxable years, the taxpayer may recognize income in one year and the corresponding deduction in another.

Financial Reporting and State Tax Considerations

For financial reporting purposes, companies have generally accounted for anticipated refunds either as a gain contingency, recognized when realized or realizable, or under a loss recovery model. Where book and tax recognition occur in different periods, entities reporting under ASC 740 will need to evaluate the resulting temporary differences.

Refunds may also affect state tax liabilities. For Texas franchise tax purposes, a refund may affect total revenue or cost of goods sold depending on the taxpayer’s reporting position, and should be considered together with the Comptroller’s recent change in Internal Revenue Code conformity, discussed in RSK’s analysis of the 2026 franchise tax changes.

Quick answers

RSK Insight

Importers that have not filed should confirm that their ACE Portal account and refund bank information are in place, file CAPE Declarations for eligible entries, and identify entries that may require a protest or other action before the applicable deadlines. Importers expecting IEEPA refunds should quantify and classify them before year-end. The status of the related inventory determines both the amount of current-year income and the year in which it is recognized, and the analysis requires coordination among the tax, accounting, and trade functions. In the absence of IRS guidance specific to IEEPA refunds, taxpayers should document the basis for their timing and inventory positions.

Businesses that passed tariff costs to customers should review their contracts and invoicing practices and evaluate potential obligations before refunds are received. Taxpayers expecting entries to be liquidated or reliquidated, or refunds to be received, before December 31, 2026 should consider the effect on fourth-quarter estimated tax payments. Protest strategy, finally liquidated entries of importers that did not sue, and litigation before the Court of International Trade raise customs law questions outside the scope of this discussion, and importers should consult trade counsel on those matters.

How RSK Can Help

• Refund claim coordination. Work with the importer’s customs broker and trade counsel to inventory eligible entries, confirm ACE and ACH readiness, and reconcile refunds received to the entries claimed.
• Refund classification and timing. Allocate expected refunds by inventory status and taxable year, and determine the year of inclusion under the taxpayer’s method of accounting.
• Inventory and §263A review. Assess the effect of refunds on inventory costing, LIFO layers, and capitalized equipment.
• Customer pass-through analysis. Evaluate the tax treatment and timing of amounts returned to customers.
• Tax provision support. Evaluate book-tax differences and ASC 740 implications of refund recognition.
• Estimated tax and year-end planning. Incorporate expected refunds into fourth-quarter estimates and 2026 planning.

Please visit RSK’s Tax Advisory page or contact us for more information on how RSK can help.

References

1. Learning Resources, Inc. v. Trump, No. 24-1287 (U.S. Feb. 20, 2026). Opinion (supremecourt.gov)
2. U.S. Customs and Border Protection, “IEEPA Duty Refunds” (CAPE guidance, refund recipients, ACH and interest). cbp.gov
3. U.S. Customs and Border Protection, “IEEPA Duty Refunds Fact Sheet” (Apr. 2026). cbp.gov
4. Thompson Coburn, “CBP Confirms Launch of Phase 3 of IEEPA Refund Process” (Sept. 17, 2026). thompsoncoburn.com
5. Supply Chain Dive, “CBP Starts Paying Out IEEPA Tariff Refunds for Finally Liquidated Entries” (Oct. 8, 2026). supplychaindive.com
6. BDO, “Update on CBP IEEPA Refund Progress and New Orders from the U.S. Court of International Trade” (June 5, 2026). bdo.com
7. UPS, “U.S. Customs Tariff Refunds.” ups.com
8. 19 C.F.R. §24.3a, interest on overpayments of duties. 19 C.F.R. §24.3a
9. 19 U.S.C. §§1501 and 1514, voluntary reliquidation and protests. 19 U.S.C. §1501 · 19 U.S.C. §1514
10. Thompson Hine SmarTrade, “CBP Confirms October 6, 2026 Launch of Phase 3 of the IEEPA Tariff Refund Process” (Sept. 2026). thompsonhinesmartrade.com
11. IRC §111, recovery of tax benefit items. 26 U.S.C. §111
12. IRC §263A and Treas. Reg. §1.471-3, costs included in inventory. 26 U.S.C. §263A · 26 C.F.R. §1.471-3
13. IRC §451(b), income inclusion tied to applicable financial statements. 26 U.S.C. §451
14. Rev. Rul. 2003-3, accrual of state tax refunds by accrual-method taxpayers. irs.gov
15. 19 U.S.C. §1505, interest on overpaid duties. 19 U.S.C. §1505
16. Holland & Knight, “IEEPA Tariff Consumer Class Actions: Litigation Update” (Aug. 2026). hklaw.com

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This article is for general informational purposes only and does not constitute tax or legal advice. It reflects authorities and guidance available as of October 12, 2026. The IRS has not issued guidance specific to the tax treatment of IEEPA refunds, and CBP’s refund procedures continue to evolve. The application of these rules depends on each taxpayer’s specific facts. Readers should consult a qualified advisor before taking action.

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