Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of October 7 – October 11, 2019.

October 7, 2019: The IRS announced that taxpayers who requested the six-month filing extension should complete their tax returns and file on or before the October 15 deadline.

October 8, 2019: The Treasury and the IRS released the 2019–2020 Priority Guidance Plan that sets forth guidance priorities. This plan prioritizes implementation of the Tax Cuts and Jobs Act, Pub. L. 115-97, 131 Stat. 2054 and of the Taxpayer First Act, Pub. L. 116-25, 133 Stat. 981, enacted on July 1, 2019. In addition, the 2019–2020 Priority Guidance Plan reflects the deregulatory policies and reforms described in Section 1 of Executive Order 13789 (April 21, 2017; 82 FR 19317) and Executive Order 13777 (February 24, 2017; 82 FR 12285).

October 9, 2019: The Treasury and the IRS published a correction to a notice of proposed rulemaking (REG-104870-18) that was published in the Federal Register on September 9, 2019. The proposed regulations cover the timing of an income inclusion under section 451 and reflect changes made by the Tax Cuts and Jobs Act.

October 9, 2019: The Treasury and the IRS published a notice of public hearing on proposed regulations, which cross-references temporary regulations under section 245A that limit the dividends received deduction available for certain dividends received from current or former controlled foreign corporations. The public hearing is being held on Friday, November 22, 2019. The IRS must receive outlines of the topics to be discussed at the public hearing by Monday, November 11, 2019.

October 9, 2019: The Treasury and the IRS issued proposed regulations that provide guidance on the tax consequences of the transition to the use of reference rates other than interbank offered rates (IBORs) in debt instruments and non-debt contracts. The proposed regulations address the possibility that an alteration of the terms of a debt instrument or a modification of the terms of other types of contracts to replace an IBOR to which the terms of the debt instrument or other contract refers with a new reference rate could result in the realization of income, deduction, gain, or loss for federal income tax purposes or could result in other tax consequences. The proposed regulations will affect parties to debt instruments and other contracts that reference an IBOR.

October 9, 2019:  The IRS issued guidance on the taxation of cryptocurrencies by releasing Rev. Proc. 2019-24 and Frequently Asked Questions on Virtual Currency Transactions. For a more detailed discussion of this guidance, see our post here. 

October 10, 2019: The IRS published draft instructions for Form 1040 and the new Form 1040-SR available to taxpayers age 65 and older.

October 11, 2019: The IRS published its nonacquiescence with GreenTeam Materials Recovery Facility PN v. Commissioner, T.C. Memo 2017-122 and, generally, indicated it will not follow the decision in disposing of cases involving other taxpayers. The IRS disagrees with the holding that the transfer of a non-capital asset is treated as the sale or exchange of a capital asset under section 1253(a) if the transferor does not retain any significant power, right or continuing interest in the asset.

October 11, 2019: The IRS issued a notice providing that taxpayers may relying on the October 2016 proposed regulations under section 385 on characterizing certain corporate interests as stock or indebtedness. The temporary regulations expire on October 13, 2019. A taxpayer may rely on the proposed regulations until further notice is given, if the taxpayer consistently applies the rules in the proposed regulations in their entirety.

October 11, 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 Robbie Alipour in our Chicago office for this week’s roundup.

It took five years, but the Internal Revenue Service (IRS) has finally released some guidance on the taxation of cryptocurrencies! On October 9, 2019, the IRS released Revenue Ruling 2019-24 and several “frequently asked questions” (and answers) which deal with some (but not all) of the federal income tax issues involved with cryptocurrencies.

Over the years, we have reported on the issues involved with cryptocurrencies, including the potential controversies that have ensued because of a lack of guidance.

The new guidance is welcomed by tax professionals and taxpayers. The guidance adopts traditional tax principles to deal with some of the unique aspects of cryptocurrencies. For example, the guidance addresses the tax treatment of so-called “hard forks” and whether the value of the “fork” which is “airdropped” into the taxpayer’s wallet constitutes taxable income.

Practice Point: Cryptocurrencies are a brave new world for most of us. Having thoughtful, current guidance is helpful to tax professionals and taxpayers, and will (hopefully) lead to better and more efficient administration of our tax system.

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of September 30 – October 4, 2019.

September 30, 2019: The IRS published a draft of the tax year 2019: (i) Form 1065, US Return of Partnership Income; (ii) its Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc.; (iii) Form 1120-S, US Income Tax Return for an S Corporation; and (iv) its Schedule K-1, Shareholder’s Share of Income, Deductions, Credits, etc. The IRS intends the changes to the form and schedule to improve the quality of the information reported by partnerships both to the IRS and the partners of such entities and to improve the data available for the IRS’s compliance selection processes. This draft gives tax practitioners a preview of the changes and software providers the information they need to update systems before the final version of the updated forms and schedules are released in December. There is a limited window period (30 days) for taxpayers to provide comments on the forms to the IRS.

October 1, 2019: The Treasury and the IRS issued a revenue procedure that limits the inquiries required by US persons to determine whether certain foreign corporations are controlled foreign corporations. The revenue procedure also allows certain unrelated minority US shareholders to rely on specified financial statement information to calculate their subpart F and GILTI inclusions and satisfy reporting requirements with respect to certain CFCs if more detailed tax information is not available. It also provides penalty relief to taxpayers in the specified circumstances. The revenue procedure announces that the IRS intends to amend the instructions for Form 5471 to reduce the amount of information that certain unrelated minority US shareholders of the CFC are required to provide. It will also limit the filing requirements of US shareholders who only constructively own stock of the CFC solely due to downward attribution from another person.

October 2, 2019: The Treasury and the IRS released proposed regulations relating to the modification of section 958(b) by the TCJA. The proposed regulations provide relief to taxpayers affected by the repeal of section 958(b)(4), which provided that the downward attribution rules of section 318 were not to be applied so as to consider a United States person as owning stock owned by a foreign person. The regulations also propose modifications to existing regulations that are intended to ensure that the operation of certain rules is consistent with their application before the repeal of section 958(b)(4). The proposed regulations affect United States persons that have ownership interests in or that make or receive payments to or from certain foreign corporations. The modifications relate to the following: (i) section 267 (Deduction for Certain Payments to Foreign Related Persons); (ii) section 332 (Liquidation of Applicable Holding Company); (iii) section 367(a) (Triggering Event Exception for other Dispositions or Events under Treas. Reg. § 1.367(a)-8(k)(14)); (iv) section 672 (CFC’s Ownership of a Trust); (v) section 706 (Taxable Year of a Partnership); (vi) section 863 (Space and Ocean Income and International Communications Income of a CFC); (vii) section 904 (Look-Through Rules and Active Rents and Royalties Exception to Categorization as Passive Category Income); (viii) section 958 (Rules for Determining Stock Ownership); (ix) section 1297 (PFIC Asset Test); and (x) section 6049 (Chapter 61 Reporting Provisions). Written or electronic comments and requests for a public hearing must be received by December 2, 2019.

October 2, 2019: The Treasury and the IRS released a correction to the notice of proposed rulemaking (REG-130700-14) for the section 861 regulations published in the Federal Register on August 14, 2019. The proposed regulations relate to classification of cloud transactions and transactions involving digital content. The correction provides that the notice of proposed rulemaking contains errors that may prove to be misleading and need to be clarified.

October 2, 2019: The IRS released a Statistics of Income Bulletin. The Fall 2019 edition of IRS Publication 6292, Fiscal Year Return Projections for the United States, provides US-level projections of the number of tax returns expected to be filed in Fiscal Year (FY) 2019 through FY 2026 by: (1) major return categories; and (2) business operating divisions.

October 4, 2019: The Treasury and the IRS released final regulations concerning how partnership liabilities are allocated for disguised sale purposes. The regulations replace existing temporary regulations with final regulations that were in effect prior to the temporary regulations and affect partnerships and their partners.

October 4, 2019: The Treasury and the IRS released final regulations addressing when certain obligations to restore a deficit balance in a partner’s capital account are disregarded under section 704, when partnership liabilities are treated as recourse liabilities under section 752, and how bottom dollar payment obligations are treated under section 752. The final regulations provide guidance necessary for a partnership to allocate its liabilities among its partners and affect partnerships and their partners.

October 4, 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 Robbie Alipour 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 September 23 – 27, 2019.

September 24, 2019: The IRS issued a notice that provides a safe harbor under which a rental real estate enterprise will be treated as a trade or business for purposes of section 199A and the regulations thereunder. The IRS explained that if the safe harbor requirements are met, the rental real estate enterprise will be treated as a single trade or business as defined in section 199A(d) for purposes of applying the regulations under section 199A. Each rental real estate enterprise will be treated as a single trade or business if the following requirements are satisfied during the taxable year with respect to the rental real estate enterprise: (1) separate books and records are maintained to reflect income and expenses for each enterprise; (2) for enterprises in existence less than four years, 250 or more hours of rental services are performed per year; (3) taxpayer maintains contemporaneous records on hours of services performed, description of services, dates of services, and who performed such services; and (4) taxpayer attaches a statement with information such as a description of the properties, to a timely filed original return for each year in which the enterprise relies on the safe harbor. 

September 26, 2019: The Treasury and the IRS released proposed regulations that: (1) clarify the application of the employer shared responsibility provisions and certain nondiscrimination rules to reimbursement arrangements (HRAs) and other account-based group health plans integrated with individual health insurance coverage or Medicare (individual coverage HRAs); (2) provide certain safe harbors with respect to the application of those provisions to individual coverage HRAs; and (3) facilitate the adoption of individual coverage HRAs by employers by permitting taxpayers to rely on the proposed regulations. The proposed regulations would affect employers, employees and their family members, and plan sponsors.

September 27, 2019: The IRS released a Statistics of Income Bulletin focusing on individual income tax returns. The report contains data on sources of income, adjusted gross income, exemptions, deductions, taxable income, income tax, modified income tax, tax credits, self-employment tax, and tax payments. The report makes classifications by tax status, size of adjusted gross income, marital status, type of tax computation and age.

September 27, 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 Robbie Alipour 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 September 16 – 20, 2019.

September 16, 2019: The IRS issued a news release about time-limited settlement offers made to eligible taxpayers under audit who participated in certain micro-captive insurance transactions.

September 17, 2019: The Treasury and the IRS released a Chief Counsel Notice advising Chief Counsel attorneys about the prior Policy Statement on the Tax Regulatory Process issued by the Treasury and the IRS on March 5, 2019. We previously wrote about the Policy Statement here. The Chief Counsel Notice advises that any matter implicating any aspect of the Policy Statement must be coordinated with the Office of Associate Chief Counsel (Procedure & Administration).

September 17, 2019: The IRS issued a notice expanding the emergency housing and compliance monitoring relief that is provided in Rev. Proc. 2014-49, 2014-37 I.R.B. 535, and Rev. Proc. 2014-50, 2014-37 I.R.B. 540 to Butte, Los Angeles and Ventura counties in California due to the California wildfires.

September 17, 2019: The IRS set September 24, 2019, as the Federal Register publication date for final and proposed regulations on increase of benefit and expansion of qualifying property for additional first year depreciation deduction.

September 18, 2019: The IRS released a revenue ruling prescribing various rates for federal income tax purposes for October 2019: (1) applicable federal rates for purposes of section 1274(d); (2) adjusted applicable federal rates for purposes of section 1288(b); (3) adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f); (4) appropriate percentages for determining the low-income housing credit described in section 42(b)(1); and (5) the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520.

September 19, 2019: The IRS issued final regulations amending the rules relating to hardship distributions from section 401(k) plans. The final regulations reflect statutory changes affecting section 401(k) plans, including changes made by the Bipartisan Budget Act of 2018. The regulations affect participants in, beneficiaries of, employers maintaining and administrators of plans that include cash or deferred arrangements or provide for employee or matching contributions.

September 2019: The IRS released a Statistics of Income Bulletin focusing on gift taxes. The article provides data on donors, donees, and types and amounts of gifts given during 2010 to 2016.

Special thanks to Robbie Alipour in our Chicago office for this week’s roundup.

The Large Business and International Division of the Internal Revenue Service (IRS) developed the Compliance Assurance Process (CAP) program to improve large corporate taxpayer compliance with US federal tax obligations through the use of real-time issue resolution tools and techniques.

On September 12, 2019, the IRS announced that it was accepting applications—for the first time since 2015—from new corporate taxpayers that meet the eligibility requirements for the CAP program. The application period for the 2020 CAP year begins on September 16, 2019, and ends on October 31, 2019. Generally, applicants must meet the following requirements in order to be eligible to apply for CAP: (1) applicants must have assets of $10 million or more; (2) applicants must be a US publicly traded corporation with a legal requirement to prepare and submit SEC Forms 10-K, 10-Q, and 8-K; and (3) the applicant must not be under investigation by, or in litigation with, any government agency that would otherwise limit the IRS’s access to current tax records.

Taxpayers interested in applying for the 2020 CAP year must submit an application with several forms:

  • Form 14234 – CAP Application
  • Form 14234-A – CAP Research Credit Questionnaire
  • Form 14234-B – Material Intercompany Transactions Template
  • Form 14234-C – Taxpayer Initial Issues List
  • Form 14234-D – Tax Control Framework Questionnaire

If the taxpayer also meets the eligibility and suitability criteria, the application will be forwarded for an evaluation of the application. Accepted taxpayers will be notified in writing by the Territory Manager assigned to the taxpayer.

However, acceptance is not automatic; the IRS, in its sole discretion, may reject the application when warrants by the facts and circumstances of the application or in the interest of sound tax administration. If an application is rejected, the taxpayer will be notified in writing and provided with the reasons why it was not accepted.

Further information regarding the IRS’s CAP program may be found here. Earlier coverage of the IRS’s 2018 recalibration of the CAP program can be found here.

Practice Point: The CAP program is a valued tool for many large corporate taxpayers. Eligible taxpayers that are interested in the CAP program for 2020 should prepare and submit an application as soon as possible.

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

September 9, 2019: The IRS released a revision to its Internal Revenue Manual that clarifies procedures to assess late filing penalties involving two or more late Forms W-2 received by the Social Security Administration-Combined Annual Wage Reporting.

September 9, 2019: The IRS issued a news release announcing that the third quarter deadline for estimated tax payments is September 16, 2019. The release details who needs to pay estimated tax, how the estimated tax works, and how and when to pay. The IRS also highlighted that the Tax Withholding Estimator is now more mobile-friendly and replaces the Withholding Calculator on IRS.gov.

September 10, 2019: The IRS released proposed regulations that provide guidance on the items of income and deduction that are included in the calculation of built-in gains and losses under section 382, and reflects numerous changes made to the Code by the enactment of recent tax legislation. The proposed regulations would adopt as mandatory the net unrealized built-in gain (NUBIG) and net unrealized built-in loss (NUBIL) harbor computation under Section 1374, and provided in Notice 2003-65, with modifications, such as clarification on amounts included in the NUBIG/NUBIL computation and items that could be realized built-in gain and realized built-in loss during the recognition period. The proposed regulations do not incorporate the Section 338 approach. The proposed regulations would not allow cancellation of indebtedness (COD) income to be included in calculating NUBIG/NUBIL, but propose to limit the extent to which excluded COD income is treated as realized built-in gain. Notice 87-79, Notice 90-27, Notice 2003-65, and Notice 2018-30 are withdrawn and incorporated, as appropriate, into the proposed regulations.

September 11, 2019: The IRS issued a news release announcing that Darren Guillot has been selected as the Deputy Commissioner for Collection and Operations Support in the Small Business/Self-Employed Division (SB/SE) and De Lon Harris has been selected as the Deputy Commissioner for Examination. Guillot will direct and oversee programs impacting taxpayers who file personal, corporate, flow-through, employment, excise and estate and gift returns. Harris will provide executive oversight of SB/SE examination programs designed for taxpayers who file personal, corporate, flow-through, employment, excise and estate and gift returns.

September 12, 2019: The IRS issued a news release announcing the expansion of the Compliance Assurance Process for 2020. New corporate applicants who meet eligibility requirements can apply for the Compliance Assurance Process. The application period runs September 16 to October 31, 2019, and the IRS will inform applicants if they are accepted into the program around January 31, 2020.

September 13, 2019: The IRS submitted to the Office of the Federal Register final regulations providing guidance on the additional first year depreciation deduction under section 168(k). The IRS rejected calls from the retail, restaurant and construction industries to fix the “retail glitch” administratively, noting that Congress must address the clerical error in the Tax Cuts and Jobs Act that prevents investments in qualified improvement property (QIP) from qualifying for bonus depreciation.

September 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 Robbie Alipour 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 September 2 – 6, 2019.

September 3, 2019: The IRS issued a notice in which it released the applicable amount for the health care annual fee imposed on covered entities for 2020. That amount is $15,522,820,037. The applicable amount is determined by multiplying the fee for the 2018 base year ($14,300,000,000) by premium adjustment percentage for 2020 (1.0855118907) and rounded to the nearest dollar, the IRS stated. The fee will apply in 2020 unless legislation extends the fee suspension in place for 2019.

September 3, 2019: The IRS issued two treasury decisions, here and here, which each contain corrections to final regulations regarding the designation and authority of the partnership representative under the centralized partnership audit regime.

September 5, 2019: The IRS issued a proposed regulation in which it introduced proposed rules that would provide guidance on the timing of income inclusion under tax code Section 451 of advance payments for goods, services, and other items. The proposed regulations would provide both a deferral method of accounting for taxpayers that do not have an applicable financial statement (AFS), in addition to taxpayers that have an AFS. The proposed regulations would provide a definition of advance payment, and advance payment acceleration provisions. The proposed regulations, however, would not provide an accelerated cost offset, as suggested in some comments.

September 5, 2019: The IRS issued a proposed regulation in which it introduced proposed rules regarding the timing of income inclusion under tax code Section 451. The proposed rules would provide that the AFS income inclusion rule generally applies to accrual method taxpayers with an AFS when the timing of income inclusion for one or more items of income is determined using the all events test. The AFS must cover the entire year, the IRS noted. The proposed regulations would define what is an AFS.

September 6, 2019: The IRS issued a proposed regulation in which it introduced proposed rules that would update information reporting regulations under tax code Section 6033 that are generally applicable to organizations exempt from tax under Section 501(a) to reflect statutory amendments and reporting relief announced through IRS guidance that have been made since the current regulations were adopted, particularly with respect to tax-exempt organizations required to file an annual Form 990 or 990-EZ. Specifically, the proposed regulations would include adding items in Section 6033(b)(10) and Section 6033(b)(11) to the list of items required to be reported, adding more statutory reporting requirements for controlling organizations, sponsoring organizations, and supporting organizations, amending the gross receipts threshold, clarification on Section 527 organizations, and requiring only Section 501(c)(3) and Section 527 organizations to continue providing names and addresses of contributors.

September 6, 2019: The IRS issued a revenue procedure to comply with proposed regulations (REG-104870-18 and REG-104554-18), affecting Treasury Regulations Section 1.451-3 and Regulations Section 1.451-8. The revenue procedure serves to modify the procedure to obtain automatic consent to change methods of accounting. The modifications affect accrual method taxpayers with an applicable financial statement and provided changes related to specified credit card fees.

September 6, 2019: The IRS issued a notice in which it provided penalty relief to taxpayers relying on Revenue Procedure 2018-38, which provided information reporting relief to exempt organization under tax code Section 501(a) that are required to file an annual Form 990, Return of Organization Exempt From Income Tax, or Form 990-EZ, Short Form Return of Organization Exempt From Income Tax. The IRS provided that it will not impose a penalty under Section 6652(c) for a taxable year ending on or after December 31, 2018, and on or prior to July 30, 2019. 

September 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 Alex Ruff 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 August 26 – 30, 2019.

August 26, 2019: The IRS released a Treasury Decision in which it issued correcting amendments to TD 9866 (i.e., the global intangible low-taxed income (GILTI) and Foreign Tax Credit Regulations pertaining to IRC §951A). The correcting amendments to Treasury Regulations Section 1.951A-2 include in the second sentence of paragraph (c)(4)(iv)(A)(2)(i), removing the language “paragraph (c)(4)(ii)(A)” and adding “paragraph (c)(4)(iii)(A)” in its place, and in the third sentence, removing the language “paragraph (c)(4)(ii)(B)” and adding “paragraph (c)(4)(iii)(B)” in its place, among other changes.

August 27, 2019: The IRS released a revenue procedure in which it added Georgia to the list of countries for which the United States has an automatic exchange of deposit interest information as related to certain nonresident alien individuals. This revenue procedure supersedes Rev. Proc. 2018-36.

August 28, 2019: The IRS issued a news release and a revenue procedure in which it announced that interest rates will remain the same for the calendar quarter beginning October 1, 2019, as they were in the prior quarter. Specifically, those rates are 5% for overpayments (4% for corporations), 2.5% for the portion of a corporate overpayment exceeding $10,000, 5% for underpayments, 7% for large corporate underpayments and, for taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

August 29, 2019: The IRS released a revenue procedure in which it set forth 2018 annual percentages for Foreign Insurance Companies carrying on US business. Specifically, the domestic asset/liability percentage was set at 118.3% for foreign life insurance companies and 201.2% for foreign property and liability insurance companies. The revenue procedure also published domestic investment yields of 4.5% for foreign life insurance companies and 3.5% for foreign property and liability insurance companies. The IRS stated that a foreign insurance company must compute its estimated tax payments for its investment income for such taxable years by using the greater of its actual effectively connected net investment income or its minimum net investment income using these percentages, except that such company may continue to use the prior year’s percentages, as published in Revenue Procedure 2018-45, if the due date of an installment is less than 20 days after the current procedure is published in the Internal Revenue Bulletin.

August 30, 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 Alex Ruff in our Chicago office for this week’s roundup.