Supreme Court Invalidates IEEPA Tariffs

In under a minute

• On Feb. 20, 2026, the U.S. Supreme Court issued a ruling invalidating tariffs imposed under the International Emergency Economic Powers Act (IEEPA).
• While the Supreme Court determined the tariffs were unlawfully imposed, the court’s ruling does not address the mechanism by which any refunds would be administered.
• As a result, significant uncertainty remains regarding the timing and process to obtain any potential refunds, and any reimbursement framework ultimately established could be administratively complex and protracted.
• The possibility of refunds raises a range of financial reporting implications under U.S. GAAP, including questions about disclosures that might be required.
• Following the court’s ruling, President Donald Trump announced that the administration will impose new tariffs under other statutes, including under Section 122 of the Trade Act of 1974.

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The legal backdrop: Overview of the IEEPA tariffs ruling

In early 2025, Trump declared a series of national emergencies and invoked IEEPA to impose broad tariffs in response. These included a 10% “Liberation Day” tariff imposed in April 2025 on most imports as part of a series of country-specific reciprocal measures tied to concerns over foreign trade imbalances and unfair economic practices. In addition, separate targeted tariffs were implemented in February 2025 on certain countries, at higher rates, in response to concerns related to fentanyl trafficking.

After several lower federal courts found the IEEPA tariffs to be unlawful, the Supreme Court agreed to review those decisions. On Feb. 20, 2026, the Supreme Court held, in a 6-3 decision, that IEEPA does not authorize the president to impose tariffs, thereby striking down the duties imposed under that statute.

What’s next

The Supreme Court’s ruling does not address how refunds of the IEEPA tariffs might be administered. However, courts historically have held that the federal government may not retain amounts collected under unlawful tariff programs. Accordingly, if history prevails, importers that paid those tariffs might seek refunds from the government.

Notwithstanding historical precedent, significant uncertainty remains. The court’s decision does not include a retroactive order authorizing refunds, nor does it provide guidance on refund administration. Given the volume of IEEPA tariff entries and estimates that more than $170 billion could be at issue, the refund process could be complex and protracted, potentially requiring importers to file timely claims with U.S. Customs and Border Protection (CBP) to preserve potential refund rights. Eligibility criteria and the scope of recoverable amounts also could become points of dispute. Some importers already have initiated litigation to preserve potential refund rights.

Despite the Supreme Court’s ruling, future executive or legislative action could introduce additional uncertainty. For example, on the same day as the court’s decision, Trump signed a proclamation imposing a new global tariff under Section 122 of the Trade Act of 1974. While Section 122 authorizes tariffs for up to 150 days, Trump indicated the administration also is considering expanding the use of other statutory authorities, including Section 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962, to support new or continuing tariffs on a more permanent basis.

Financial reporting considerations

Entities should evaluate the potential financial reporting implications of the Supreme Court’s decision, including disclosure requirements under U.S. GAAP. Depending on specific facts and circumstances, the following considerations could be relevant for entities with fiscal years ended Dec. 31, 2025.

• Subsequent events. If the Supreme Court’s ruling was issued after an entity’s balance sheet date but before its financial statements were issued or available to be issued, the ruling generally would represent a nonrecognized subsequent event under Topic 855, “Subsequent Events.” In that case, the effects of the ruling would not be recognized in the financial statements. However, the entity would need to consider whether disclosure of the ruling is necessary to keep the financial statements from being misleading. If so, Topic 855 requires disclosure of the nature of the event and an estimate of its financial effect, or a statement that such an estimate cannot be made.
• Significant estimates. Entities might need to provide disclosure regarding the use of significant estimates, as required by Topic 275, “Risks and Uncertainties.”
• SEC reporting considerations. Securities and Exchange Commission (SEC) registrants also should evaluate whether disclosure of tariffs and potential tariff refunds is necessary in management’s discussion and analysis (MD&A), risk factors, the business section, or other relevant sections of their filings.

Crowe observation: Beyond the near-term disclosure considerations, the court’s ruling also could give rise to additional accounting implications in subsequent reporting periods. For example, if an entity concludes it has a right to a tariff refund, it should evaluate whether recognition of that right is appropriate and, if so, the timing of recognition. In addition, if an entity has an obligation to share refunds with customers, it should assess how that obligation affects its accounting for revenue contracts under Topic 606, “Revenue From Contracts With Customers.” Entities should determine whether their existing accounting policies appropriately address these and other refund-related financial reporting matters and update those policies as necessary in light of their specific facts and circumstances.

What to do now: A practical checklist

Given the ongoing uncertainty regarding refunds and the potentially short window to act following the Supreme Court’s ruling, entities should begin preparing now. The following steps can position entities to respond efficiently to the court’s ruling and what might come next.

• Assess exposure. Identify all import entries that include IEEPA-based tariff payments to understand potential refund magnitude.
• Organize supporting documentation. Gather invoices, entry summaries (CBP Form 7501), broker statements, and proof of tariff payments into a central repository. A well-organized and complete set of documentation will streamline any future claims or protests.
• Review contractual arrangements. Evaluate customer contracts to determine how tariff costs were allocated and whether any refund-sharing arrangements might arise. Begin preparing for potential refund allocation discussions.
• Preserve refund rights:
  • Unliquidated entries. Prepare to file post-summary corrections (PSCs) promptly. While import entries generally remain unliquidated for up to 314 days after entry, the window to file a PSC often closes up to 60 days earlier.
  • Liquidated entries. Track protest deadlines (typically 180 days after liquidation) and consider whether protective protests are warranted.
  • Other preservation measures. Evaluate whether requesting extensions of liquidation or pursuing litigation might be necessary to preserve refund rights.
• Coordinate early with customs broker and trade counsel. Align on roles, timelines, and procedural steps so the organization is prepared to act quickly now that the court has ruled the tariffs were unlawful.
• Evaluate financial reporting implications. Consider potential impacts and consult with accounting advisers as needed. As with many developments at the intersection of law and financial reporting, well-reasoned judgment and transparent disclosure are critical.

FASB materials reprinted with permission. Copyright 2026 by Financial Accounting Foundation, Norwalk, Connecticut. Copyright 1974-1980 by American Institute of Certified Public Accountants.