Key Accounting Considerations for IEEPA Tariff Refunds

During President Trump’s second term, tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were challenged by importers who argued that IEEPA does not authorize the president to impose tariffs. The lower courts agreed in 2025, and on February 20, 2026, the Supreme Court affirmed in a 6–3 decision that IEEPA does not confer such authority. The Supreme Court’s decision, however, did not address how previously collected amounts should be refunded.

Key Takeaways

• On February 20, 2026, the Supreme Court held in a 6-3 decision that IEEPA does not authorize the president to impose tariffs. Still, the decision did not address how previously collected amounts should be refunded.
• Customs and Border Protection is administering IEEPA refunds in phases through its Consolidated Administration and Processing of Entries (CAPE) system, with Phase 2 processing beginning June 29, 2026.
• Under the loss-recovery model in ASC 410-30 applied by analogy, an organization recognizes a refund asset only when recovery is probable under ASC 450-20, capped at tariff costs previously recognized.
• The gain-contingency model in ASC 450-30 is an acceptable alternative policy that defers recognition until the gain is realized or realizable, provided it is applied consistently and disclosed.
• Statutory interest included in a refund is evaluated separately under ASC 450-30, may be recognized later than the refund principal, and is typically presented as other nonoperating income.
• Selling refund rights to a third-party funder is generally a financing transaction analogous to a sale of future revenue under ASC 470, not a derecognition event under ASC 860.

Where does the IEEPA Refund Process Stand?

The refund process has since been addressed by the U.S. Court of International Trade (CIT), which directed Customs and Border Protection (CBP) to begin refunding amounts previously paid. CBP is administering refunds through its CAPE system in phases:

• Phase 1 — Unliquidated entries and entries nearing liquidation; refunds, including interest, began in May 2026.
• Phase 2 — Certain reconciliation-flagged entries; processing began on June 29, 2026.
• Phase 3 — Entries liquidated more than 80 days ago, which represent a smaller but still significant portion of total tariffs paid. The Department of Justice is contesting CBP’s authority to reliquidate these entries without individual court orders, so the timing and availability of refunds remain uncertain.

The treatment of drawback claims, protested entries, and other special categories also remains unresolved.

How Should Organizations Account for IEEPA Tariff Refunds?

When Can You Recognize a Refund Asset?

For tariffs that were previously expensed, capitalized, or recognized through cost of sales, companies may analogize to the loss-recovery model in ASC 410-30. Under this approach, a refund asset is recognized only when recovery is probable under ASC 450-20 and is limited to previously recognized tariff costs. Companies should consider the status of the refund process, the administrative complexity of the applicable phase, and management’s intent and ability to pursue the claim. In many cases, the probability assessment should be performed on an entry-by-entry basis.

Costs Not Yet Recognized in Earnings

If tariff costs remain capitalized in inventory or undepreciated fixed assets, a company may adopt an accounting policy to recognize a refund asset only for amounts already recognized in earnings. Alternatively, it may recognize an asset for capitalized but unexpensed amounts by reducing the related asset's carrying amount.

Alternative Gain-Contingency Model

Some companies may instead apply the gain-contingency guidance in ASC 450-30 by analogy. Under that model, recognition is deferred until the gain is realized or realizable. The loss-recovery model may be the more relevant analogy when a company is recovering previously recognized costs; however, the gain-contingency model may also be acceptable if applied consistently, with consideration of ASC 250 and related disclosure requirements under ASC 235.

How is Interest on Refunds Treated?

Statutory interest included in refund payments should be assessed separately from the recovery of tariff costs. Interest is generally evaluated under the gain-contingency model in ASC 450-30, may be recognized later than the related refund principal, and is typically presented as other nonoperating income.

Statement of Cash Flows Presentation

Refund proceeds should generally be classified consistently with the original tariff payments, whether as operating or investing cash flows. If a company monetizes refund rights by selling them to a third-party funder for upfront cash, the initial cash inflow is generally classified as a financing activity. Subsequent payments to the funder should be allocated between financing outflows for principal-like amounts and operating outflows for interest-like amounts.

Monetizing Refund Rights Before Collection

A sale of refund rights to a third-party funder generally does not change the accounting for the underlying claim against CBP. The funding arrangement and the government refund claim should be evaluated as separate transactions. Such arrangements will often be viewed as financing transactions, analogous to sales of future revenue under ASC 470, rather than derecognition events under ASC 860. Companies should review the contractual terms to determine whether derivative accounting under ASC 815 or a fair value election under ASC 825 may apply.

Subsequent Events

For financial statements covering periods that ended before the Supreme Court ruling but were issued afterward, the ruling represents a Type 2, nonrecognized subsequent event requiring disclosure of its nature and estimated financial effect. If recovery becomes probable after period-end but before issuance, companies applying the loss-recovery model should consider whether the new information provides additional evidence about conditions that existed at the balance-sheet date. Companies applying the gain-contingency model generally should not recognize the asset before realization, consistent with ASC 855’s treatment of gain contingencies.

What if You Passed Tariffs Through to Customers?

If customer contracts include tariff pass-through provisions, the ruling may result in a liability to the customer. Any obligation to refund customers should be evaluated under ASC 606. In some cases, a company may need to record a customer refund liability before recognizing its own refund asset from the government, particularly if a revenue reversal becomes probable first. Even without explicit contract language, customer claims, business practices, or public statements may create an implied obligation.

Disclosures

Companies should evaluate whether footnote disclosure is required under ASC 275 and consider related MD&A and risk-factor disclosures in SEC filings. Disclosures should be scaled to the materiality of the refund exposure and the related uncertainties.

Key Areas That Require Attention

Companies affected by IEEPA tariff refund claims should evaluate the accounting and financial reporting implications in light of their specific facts and circumstances. The accounting is complex and requires the evaluation of each entity’s facts and circumstances. Areas that may require particular attention include:

• Refund-asset recognition and measurement;
• Income statement and cash flow presentation;
• Subsequent-events analysis and disclosure requirements; and
• Potential effects on customer arrangements and refund obligations.

As the refund process continues to evolve, professional advisors can help companies assess these matters, document key judgments, and apply the relevant technical and accounting guidance to their specific circumstances.

As the refund process continues to evolve, EisnerAmper's professionals can help your organization assess these matters, and apply the relevant guidance to your specific facts and circumstances. Contact us to discuss your specific position.

This article was prepared with AI assistance and edited and enhanced by EisnerAmper professionals for accuracy and completeness. All technical content, analysis, and recommendations reflect the knowledge of our team.