An Update on Tariffs and Protective Refund Claims

Tariffs have become one of the hottest topics of 2025. How long into the future they’ll stay in effect, however, and what lasting impact they may have, seems to change day-by-day. This uncertainty can be a major cause of concern for taxpayers, particularly businesses that are impacted by the tariffs. Amid this instability, attorneys and tax advisors are doing their due diligence to be able to keep their clients abreast of the fast-moving court decisions and changes and protected – including helping them find potential strategies for different scenarios.

Different Types of Tariffs Explained

The Constitution explicitly places the power to levy tariffs in the hands of Congress. However, as tariffs became more of a temporary measure imposed to put economic pressure on other countries, Congress passed laws delegating some of that power to the president. Tariffs are typically authorized under three main laws: Section 301 of the Trade Act of 1974 (Section 301), Section 232 of the Commerce Act (Section 232), and the International Emergency Economic Powers Act (IEEPA).

Tariffs levied under Section 301 are additional duties imposed by the United States on certain imported goods, mainly as a response to what the U.S. government (or the president) determines to be unfair trade practices by foreign nations. Section 301 authorizes the U.S. trade representative (“USTR”) to investigate and address unfair trade practices (e.g., tariff imposition) against foreign countries that violate trade agreements or engage in unjustifiable practices.

Tariffs levied under Section 232 of the Trade Expansion Act of 1962 are imposed if imports threaten national security, after the Department of Commerce has investigated the matter.

Enacted in 1977, the IEEPA grants the president broad authority to regulate a variety of international economic transactions in a declared national emergency, including the ability to “regulate importation.” Before 2025, the IEEPA had never been used to impose tariffs.

On April 2, 2025, under the IEEPA, a 10% global tariff on all United States imports was introduced, alongside increased reciprocal tariffs. On April 5, 2025, reciprocal tariffs and fentanyl tariffs on Canada, China, and Mexico were initiated, going from 10% to 20% eventually. There were also several China-specific reciprocal tariffs (ranging from 10% additional duty to 125% additional duty) introduced in April and May 2025. These tariffs are the subject of an ongoing court case. The claimants are contesting IEEPA tariffs on the grounds that they exceed presidential authority and lack a legitimate emergency basis.

Court Updates

On August 29, 2025, the Court of Appeals for the Federal Circuit affirmed the Court of International Trade’s (“CIT”) holding that the fentanyl and other reciprocal tariffs exceed the president’s authority under IEEPA and affirmed the CIT’s grant of declaratory relief that the tariff executive orders are invalid as contrary to law. However, the Federal Circuit stayed its ruling pending further appeal by the government.

On September 9, 2025, the Supreme Court granted the government’s appeal for a hearing, while noting that the tariffs will remain in place in the lead-up to oral arguments during the first week of November. The case that the Supreme Court will hear involves two sets of import tariffs, both of which President Trump enacted under IEEPA by declaring a national emergency. The first involves the tariffs announced in April (discussed above) and the second involves those tariffs on imports from Canada, China, and Mexico. While the Supreme Court could expediate this decision, arguments heard in the fall are typically released the following summer (that is, June 2026).

Tax Planning Observations

If the tariffs under the IEEPA are struck down, the government may need to refund the amounts collected under the tariffs (currently estimated around $210 billion). Taxpayers who have already paid tariffs may wish to explore how they can receive any refunds if the tariffs are struck down. One option is filing a protective refund claim. Filing protective refund claims can help clients who don’t want to miss the strict statutes of limitation on refund claims (one year for protests, for example). In addition, filing a protective refund claim is generally simple and inexpensive, outside of legal and administrative fees. Furthermore, the Supreme Court has previously recognized filing a protective refund even when the refund depends on the outcome of future court decisions.

Taxpayers who are considering filing a protective refund claim should consult with a trusted advisor to guide them through the process. Contact us below to see how we can help.