Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of January 6 – January 10, 2020.

January 6, 2020: The IRS issued a News Release confirming that the 2019 tax filing season will be open for individual filers—and that the IRS will begin accepting and processing 2019 tax year returns—on January 27, 2020. The IRS explained that though taxpayers may prepare returns through the IRS’ Free File program before that date, the IRS will begin processing these returns when their systems open on January 27. The IRS also noted that the deadline to file 2019 tax returns and to pay any tax owed is April 15, 2020.

January 8, 2020: The Acting National Taxpayer Advocate released her 2019 Annual Report to Congress, highlighting challenges such as the implementation of the Taxpayer First Act, inadequate taxpayer service and limited funding of the agency. Also released was the third edition of the National Taxpayer Advocate’s Purple Book, which presents 58 legislative recommendations designed to strengthen taxpayer rights and improve tax administration. Among other issues, the Report emphasized that the IRS is struggling to meet its stated Mission because it is underfunded, and stressed that the IRS should use the Taxpayer First Act as an opportunity to identify taxpayer needs and preferences and to develop initiatives to meet them.

January 9, 2020: The IRS issued a News Release reminding taxpayers that signing up for direct deposit is the fastest way to receive their federal tax refund. The IRS explained that by using direct deposit, a taxpayer could split their refund into up to three financial accounts, including Individual Retirement Accounts.

January 9, 2020: The IRS issued a News Release announcing the launch of the Gig Economy Tax Center on IRS.gov, citing the various resources that will make it easier for taxpayers to find information about the tax implications for both the companies that provide the services and for the individuals who perform them. The IRS touted the Center’s necessity, given that many gig workers do not receive a W-2 or a Form 1099 but must still pay taxes on that income.

January 10, 2020: The IRS issued proposed regulations that revise the applicability dates for previously proposed regulations under section 382(h), delaying the applicability of those proposed rules and providing transition relief for eligible taxpayers. The proposed regulations were initially published in September 2019 and would revise the rules in §§1.382-2 and 1.382-7, affecting the determination of the net built-in gains and losses and recognized built-in gains and losses under section 382(h) that, in turn, affect the limitation under section 382 on net operating losses and disallowed business interest expense under section 163(j).

January 10, 2020: The IRS released a supplement to the 2019 instructions for Form 1042-S, Foreign Person’s US Source Income Subject to Withholding. The instructions now reflect proposed regulations that would reduce taxpayers’ burdens with respect to certain requirements under FATCA. The instructions also now include the revised backup withholding tax rate of 24%, as enacted by the TCJA.

January 10, 2020: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Jenni Saperstein in our Chicago office for this week’s roundup.

On January 6, 2020, the IRS Whistleblower Office released its annual report to Congress. The Office reported that it collected $616.8 million in fiscal year 2019 as a result of information provided by whistleblowers, out of which $120.3 million was paid out as whistleblower awards, for net collections of $496.5 million. This is a decrease from the $1.13 billion in net collections in fiscal year 2018 (which has been described as an outlier year), but an increase from the $156.6 million in net collections in fiscal year 2017. A total of 3,640 whistleblowers filed claims in fiscal year 2019, including 282 whistleblowers from outside of the United States.

Practice Point:  Whistleblower actions are a good reminder to make sure that your privileged and confidential tax information remains in the hands and minds of only those employees and officers who have a need to know. A disgruntled or terminated employee may take the opportunity to play the “whistleblower lottery,” removing sensitive and privileged material and handing it over to the IRS. With the start of the new year, it’s a worthwhile investment of time and resources to make sure your sensitive tax strategies and information are stored and protected.

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 30, 2019 – January 3, 2020.

December 30, 2019:  The IRS issued a news release announcing an agreement with Free File, Inc. that is designed to bring more clarity for taxpayers choosing to use free online software during the 2020 filing season. The IRS hopes for the agreement to make the Free File program more taxpayer-friendly while strengthening consumer protections in several key areas.

December 31, 2019:  The IRS issued a news release regarding a notice that provides the optional 2020 standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical or moving expense purposes. The notice also provides the amount that taxpayers must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate (FAVR) plan. The guidance is generally effective for deductible transportation expenses paid or incurred on or after January 1, 2020.

January 2, 2020:  The IRS officially set January 13, 2020, as the publication date in the Federal Register for final regulations on investments in qualified opportunity zones.

January 2, 2020:  The IRS issued its annual revenue procedures listing no-rule areas under the jurisdiction of the Associate Chief Counsels (Corporate, Financial Institutions and Products, Income Tax and Accounting, Passthroughs and Special Industries, Procedure and Administration, and Tax Exempt and Government Entities). The revenue procedures provide a detailed list of areas in which letter rulings and determination letters will not be issued, under any circumstances. The revenue procedures also provide a detailed list of areas in which letter rulings and determination letters will not ordinarily be issued, but may be issued under unique and compelling circumstances. 

January 2, 2020:  The IRS issued a revenue procedure that provides determination letter procedures for applications, including applicable user fees for requesting determination letters. It provides specific procedures for determination letter requests for recognition of exempt status under section 501 and section 521, as well as for determination letter requests on Form 8940. It provides additional guidance on the exhaustion of administrative remedies for purposes of declaratory judgment under section 7428. The IRS provided a list of significant changes from the prior year’s guidance.

January 2, 2020:  The IRS issued a revenue procedure that provides determination letter procedures on matters under the Tax Exempt and Government Entities Division’s Employee Plans Rulings and Agreements Office. Again, the IRS provided a list of significant changes from the prior year’s guidance.

January 2, 2020:  The IRS issued a revenue procedure detailing procedures regarding when and how an Associate office provides technical advice through a technical advice memorandum (TAM). The revenue procedure also provides guidance regarding taxpayers’ rights when a field office requests a TAM regarding a tax matter.

January 3, 2020: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice). 

Special thanks to Jenni Saperstein in our Chicago office for this week’s roundup.

Code Sec. 367(a) and (d) subject to taxation a transfer of tangible and intangible property by a U.S. person to a foreign corporation in an otherwise tax-free transaction. While for many years exceptions were provided for transfers of certain types of property, the Tax Cuts and Jobs Act (“TCJA”) amended Code Sec. 367, removing the exceptions and broadening the definition of intangible property.

Specifically, Code Sec. 367(a)(1) provides generally that gain realized on the transfer of property by a U.S. person to a foreign corporation is subject to taxation. Former Code Sec. 367(a)(3) had provided an exception for property transferred to a foreign corporation for use in an active trade or business outside the United States. For example, this exception was available for the transfer of a foreign plant and equipment. The exception did not apply to a transfer of inventory, accounts receivable, intangible property within the meaning of former Code Sec. 936(h)(3) (B), or foreign currency. The TCJA eliminated this exception, such that gain on a transfer of property by a US person to a foreign corporation is now subject to immediate taxation, except for property subject to Code Sec. 367(d).

Access the full article.

Originally published by International Tax Journal: November/December 2019

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 16 – 20, 2019.

December 16, 2019: The IRS released a notice extending the phase-in period for the enforcement and administration of section 871(m) of the IRC. The notice extends the transition relief provided in Notice 2018-72, 2019-40 I.R.B. 522, for two years. As a result, the regulations under section 871(m) will not apply to any payment made with respect to a non-delta-one transaction issued before January 1, 2023. The IRS noted that the anti-abuse rule provided in §1.871-15(o) will continue to apply during the phase-in years.

December 16, 2019: The IRS issued final regulations providing guidance regarding a corporation’s distribution of stock or securities of a controlled corporation without the recognition of income, gain or loss. More specifically, the regulations address how to determine whether a corporation is a predecessor or a successor of a distributing controlled corporation for purposes of section 355(e) of the IRC. The regulations also address the extent to which section 355(f) causes a distributing corporation—and in some cases, its shareholders—to recognize income or gain on the distribution of stock or securities of a controlled corporation. The final regulations became effective on December 18, 2019.

December 17, 2019: The IRS issued final regulations relating to certain financial products that provide for payments that are contingent upon or determined by reference to US source dividend payments. The regulations define the term broker for purposes of section 871(m) of the IRC, and provide guidance on how to identify which party to a potential section 871(m) transaction is responsible for determining whether that transaction qualifies as a section 871(m) transaction if multiple brokers or dealers are involved. The final regulations withdraw the temporary regulations under Treas. Reg. § 1.871-15T.

December 17, 2019: The IRS released a revenue ruling that provides various prescribed rates for federal income tax purposes for January 2020. These rates include the applicable federal rates for the current month for purposes of both section 1274(d) and section 1288(b) of the IRC, the adjusted federal long-term rate and the long-term tax-exempt rate in section 382(f), and the federal rate for determining the present value of an annuity, among others.

December 17, 2019: The IRS released a revenue procedure providing that the third six-year remedial amendment cycle for pre-approved defined benefit plans begins on May 1, 2020, and ends on January 31, 2025. The on-cycle submission period for providers to submit applications for opinion letters for pre-approved defined benefit plans begins on August 1, 2020, and ends on July 31, 2021.

December 19, 2019: The IRS issued a news release regarding final regulations that provide details about investment in qualified opportunity zones (QOZ). The final regulations provide guidance for taxpayers eligible to make an election to temporarily defer the inclusion of certain eligible gain from gross income. The regulations permit the deferral of all or part of a gain that would otherwise be included in income for corresponding amounts that are invested into a qualified opportunity fund; the gain is deferred until an inclusion event or Dec. 31, 2026, whichever is earlier. The regulations provide a list of inclusion events.

December 20, 2019: The IRS issued proposed regulations under section 162(m) of the IRC, which limits the deduction for certain employee remuneration in excess of $1,000,000 for federal income tax purposes. The proposed regulations implement the amendments made to section 162(m) by the Tax Cuts and Jobs Act. The IRS requests comments by February 18, 2020, and has scheduled a public hearing for March 9, 2020.

December 20, 2019: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Jenni Saperstein in our Chicago office for this week’s roundup.

The US Senate today passed a package of tax extenders as part of the year-end appropriations act that the US House of Representatives passed on December 17, 2019. President Trump is expected to sign the legislation before the end of the day tomorrow to avoid a government shutdown. The package includes a one-year extension of the production tax credit (PTC) under section 45 for wind and other technologies. It also includes limited extension of other energy tax incentives that were set to expire and a retroactive extension for some credits that had already expired in 2018. Most of the credits will now expire at the end of 2020, setting up the prospect of a broader tax extenders deal during lame duck session after the 2020 election.  The bill also included a one-year extension through 2020 of the new markets tax credit under Section 45D at $5 billion.

Extension of Energy Tax Credits

Many energy tax credits and incentives are scheduled to expire or begin to phase out at the end of 2019 or have already expired. The Further Consolidated Appropriations Act will extend the expiration date to the end of 2020 for many credits. The package did not include an extension or expansion of the Investment Tax Credit (ITC), disappointing the solar industry. The extenders package also did not include the proposed expansion of the ITC for energy storage technology or the extension of energy credits for offshore wind facilities. Continue Reading Senate Passes Tax Extenders Deal That Includes Extension of Renewable Energy Incentives

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 9 – 13, 2019.

December 10, 2019: The IRS issued a notice providing that the requirement to report partners’ shares of partnership capital on the tax basis method will not be effective for 2019 for partnership taxable years beginning in calendar 2019. Instead, the requirements will be effective beginning in 2020 (for partnership taxable years that begin on or after January 1, 2020). The notice also defines a partner’s share of “net unrecognized Section 704(c) gain or loss” for purposes of partnership reporting.

December 10, 2019: The Joint Committee on Taxation released a report detailing proposed provisions of the “Restoring Tax Fairness for States and Localities Act.” The bill would increase the maximum state and local tax deduction that married couples can claim in 2019 and would eliminate the limitations on the maximum state and local tax deduction in 2020 and 2021. The bill would also increase the top marginal individual income tax rate under temporary rules.

December 11, 2019: The IRS issued a notice providing guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under section 417(e)(3), and the 24-month average segment rates under section 430(h)(2). The notice also provides guidance regarding both the interest rate on 30-year Treasury securities under section 417(e)(3) as well as the 30-year Treasury weighted average rate under section 431(c)(6).

December 13, 2019: The IRS issued proposed regulations that provide amendments to regulations under sections 162, 164 and 170 of the IRC. The proposed regulations reflect current law regarding the application of section 162 to a taxpayer that makes a payment or transfer to an entity described in section 170(c) for a business purpose; the regulations also provide safe harbors under section 162 to provide certainty for such payments. The regulations also provide a safe harbor under section 164 for payments made to an entity described in section 170(c) by individuals who itemize deductions and receive or expect to receive a state or local tax credit in return. The proposed regulations are scheduled to be published in the Federal Register on December 17, 2019. Public comments regarding the contemplated rules must be received by January 31, 2020.

December 13, 2019: The IRS released a revenue procedure clarifying that all plan amendments that both relate to a plan’s hardship distribution provisions and that are effective no later than January 1, 2020, shall be treated as integral to the required amendments under newly-updated sections 401(k) and 401(m). The revenue procedure also extended the deadline for pre-approved plans to adopt an interim amendment relating to those regulations.

December 13, 2019: The IRS released a revenue ruling providing that the base period T-bill rate for the period ending September 30, 2019, is 2.32%. Section 995(f)(1) of the IRC provides that a shareholder of a domestic international sales corporation (a “DISC”) shall pay annual interest equal to the product of the shareholder’s DISC-related deferred tax liability, as defined in section 995(f)(2).

December 13, 2019: The IRS issued a statistics of income report regarding corporation income tax returns line item estimates in 2015. The report contains estimates of frequencies of taxpayer entries and estimates of monetary amounts recorded on various lines and schedules of corporate tax returns.

December 13, 2019: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice). 

Special thanks to Jenni Saperstein in our Chicago office for this week’s roundup.

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 2 – 6, 2019.

December 2, 2019: The IRS issued final regulations providing guidance relating to the determination of the foreign tax credit as well as guidance relating to changes made by the 2017 US tax law. The regulations finalize the proposed regulations that were published on December 7, 2018. The regulations also finalize proposed regulations on overall foreign losses that were published on June 25, 2012, as well as certain portions of proposed regulations published on November 7, 2007, relating to a US taxpayer’s obligation to notify the IRS of a foreign tax redetermination. The final regulations will be effective upon their date of publication in the federal register.

December 2, 2019: The IRS issued proposed regulations that also provide guidance relating to the determination of the foreign tax credit. The proposed regulations relate to the allocation and apportionment of deductions and creditable foreign taxes, to foreign tax redeterminations, to the availability of foreign tax credits under the Transition Tax and to the application of the foreign tax credit limitation to consolidated groups. The IRS has requested that written or electronic comments as well as requests for a public hearing be received by February 5, 2019.

December 2, 2019: The IRS issued final regulations implementing the base erosion and anti-abuse tax (the BEAT tax). The regulations finalize the proposed regulations that were published on December 21, 2018, and provide detailed guidance regarding which taxpayers will be subject to section 59A, the determination of what is a base erosion payment, the method for calculating the base erosion minimum tax amount, and the required BEAT tax resulting from that calculation. The final regulations are effective as of December 6, 2019.

December 2, 2019: The IRS issued proposed regulations that also provide guidance regarding the BEAT tax imposed on certain large corporate taxpayers with respect to certain payments made to foreign related parties. The proposed regulations would affect corporations that have substantial gross receipts that also make payments to foreign related parties. The IRS has requested that written or electronic comments as well as requests for a public hearing be received by February 4, 2020.

December 2, 2019: The IRS issued a revenue procedure that replaced Rev. Proc. 2019-09 and that identifies when a taxpayer’s disclosure on his income tax return with respect to an item or position is adequate both to reduce the understatement of income tax under section 6662(d) (relating to the substantial understatement aspect of the accuracy-related penalty) as well as to avoid the tax return preparer penalty under section 6694(a) (relating to understatements due to unreasonable positions). The IRS explained that this revenue procedure does not apply to other penalty provisions, and that it will apply to any income tax return filed on 2019 tax forms for a taxable year beginning in 2019, and to any income tax return filed in 2020 on 2019 tax forms for short taxable years beginning in 2020.

December 3, 2019: The IRS released the advance original issue discount (OID) tables for January through October of 2019. The IRS noted that the tables will be reposted in January 2020 to include information received in November and December of 2019.

December 6, 2019: The IRS issued a revenue ruling stating that overpayment and underpayment interest rates for the calendar quarter beginning January 1, 2020, will not change from the prior quarter. The rates will be 5% for overpayments (but 4% for corporations’ overpayments), 2.5% for the portion of a corporate overpayment exceeding $10,000, 5% for underpayments and 7% for large corporate underpayments. The revenue ruling will appear in the Internal Revenue Bulletin 2019-52, dated December 23, 2019.

December 6, 2019: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Jenni Saperstein in our Chicago office for this week’s roundup.