Weekly IRS Roundup May 13 – May 17, 2024

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 13, 2024 – May 17, 2024.

May 13, 2024: The IRS released Internal Revenue Bulletin 2024-20, which includes proposed regulations concerning the excise tax on stock buybacks under § 4501 of the Internal Revenue Code (Code). The proposed regulations are generally consistent with the guidance previously provided in Notice 2023-2. The proposed regulations also include guidance on reporting and payment of the Code § 4501 excise tax.

May 14, 2024: The IRS announced that, contrary to recent reports, there will be no changes to Native American tribes’ access to federal tax payment offsets through state arrangements.

May 14, 2024: The IRS reminded US citizens and resident aliens living abroad to file and pay their taxes.

May 14, 2024: The IRS warned taxpayers not to fall for inaccurate social media advice and tax scams centered around the Fuel Tax Credit, the Sick and Family Leave Credit and household employment taxes that led taxpayers to file inflated refund claims during the 2023 tax season.

May 14, 2024: The IRS released census tract geographic identifiers that are eligible for Code § 30C using 2015 and 2020 delineations of census tract boundaries, which can be accessed at Appendix A and Appendix B, respectively.

May 15, 2024: The IRS reminded businesses to check their tax returns for signs of incorrect Employee Retention Credit (ERC) claims and listed signs that an ERC claim could be incorrect.

May 15, 2024: The IRS released Notice 2024-42, which specifies updated static mortality tables for defined benefit pension plans under Employee Retirement Income Security Act of 1974 (ERISA) provisions for valuation dates occurring during the 2025 calendar year. The notice also includes a modified unisex version of the mortality tables for determining minimum present values under ERISA for distributions with annuity starting dates that occur during stability periods beginning in the 2025 calendar year.

May 15, 2024: The IRS released Revenue Ruling 2024-12, which provides the June 2024 applicable federal rates.

May 15, 2024: The IRS released Notice 2024-40, which provides the 24-month average corporate bond segment rates for May 2024, the yield curve and segment rates for single-employer plans and the 30-year Treasury securities interest rates.

May 16, 2024: The IRS released Notice 2024-41, which modifies Section 3.04 of Notice 2023-38 by revising the contents of the “Applicable Projects” list. The notice also provides a safe harbor under which taxpayers may elect to qualify for the domestic content bonus credit. Learn more here.

May 16, 2024: The IRS extended the deadline to file federal individual and business tax returns and make tax payments for certain individuals and businesses in Ohio that [...]

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IRC Section 280E Will No Longer Apply if Marijuana Is Rescheduled

On May 16, 2024, the US Department of Justice submitted a Notice of Proposed Rulemaking (NPRM) to reschedule marijuana from Schedule I to Schedule III within the Controlled Substances Act.

As the NPRM recognizes, this action would have a significant economic impact on a substantial number of businesses – specifically, medical and recreational marijuana dispensaries – because Internal Revenue Code (IRC) Section 280E “bars businesses from claiming tax deductions for otherwise allowable expenses where the business ‘consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act.’” Thus, “[i]f marijuana is ultimately transferred to schedule III, [IRC] section 280E would no longer serve as a statutory bar to claiming deductions for those expenses.” Because IRC Section 280E’s impact has meant marijuana businesses were not able to deduct their ordinary and necessary business expenses when computing their taxable income, the reversal of IRC Section 280E could be a gamer changer for the industry.

Businesses currently impacted by IRC Section 280E are now asking whether they will be able to claim refunds for deductions and other tax benefits that Section 280E previously denied them. In other words, will the rescheduling be treated as retroactive for tax purposes?

Nothing in the NPRM speaks to this question, and the answer may likely be determined at the discretion of the US Department of the Treasury and the Internal Revenue Service (IRS) in anticipated future guidance. If the rescheduling is implemented during a tax year (without a stated effective date), taxpayers may be able to apply the treatment to the entire tax year in which the change was made.

Practice Point: Taxpayers in the marijuana industry should consider whether to file protective refund claims for past tax years before definitive guidance is issued. As we have previously reported here and here, a taxpayer can file a “protective” refund claim that is expressly contingent on a specified future event, like guidance from the Treasury to the effect that the rescheduling of marijuana is retroactive to open tax years prior to the change. The Supreme Court of the United States has endorsed protective refund claims to toll the statute of limitations and thereby protect a taxpayer’s right to claim the refund if a favorable event should occur. But taxpayers should keep in mind that, in the IRS’s view, meritless protective refund claims made without “reasonable cause” can be subject to substantial penalties under IRC Section 6676. Therefore, when determining whether to file a protective refund claim, taxpayers should first consider consulting with a tax advisor on the pros and cons of filing.

Weekly IRS Roundup May 6 – May 10, 2024

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 6, 2024 – May 10, 2024.

May 6, 2024: The IRS released Internal Revenue Bulletin 2024-19, which includes the following:

  • Revenue Ruling 2024-09, which provides the May 2024 applicable federal rates.
  • Notice 2024-35, which provides guidance related to certain specified required minimum distributions for certain stock bonus, pension and profit-sharing plans described in Internal Revenue Code (Code) § 401(a). The notice also announces that the IRS intends to issue related final regulations that will apply for calendar years beginning on or after January 1, 2025.
  • Revenue Procedure 2024-20, which provides the domestic asset and liability percentages and domestic investment yields needed by foreign life insurance companies, foreign property and liability insurance companies to compute their minimum effectively connected net investment income under Code § 842(b). The revenue procedure also provides instructions for computing foreign insurance companies’ estimated tax liabilities.
  • Treasury Decision 9990, which amends the definition of short-term, limited-duration insurance for purposes of exclusion from the definition of “individual health insurance coverage” under the Public Health Service Act and provides regulations regarding requirements for hospital indemnity or other fixed indemnity insurance to be considered an excepted benefit in the group and individual health insurance markets.
  • Revenue Procedure 2024-21, which provides issuers of qualified mortgage bonds (as defined in § 143(a)) and issuers of mortgage credit certificates (as defined in § 25(c)) with the nationwide average purchase price for residences located in the United States and the average area purchase price safe harbors for residences located in statistical areas in each state, the District of Columbia and US territories.
  • Announcement 2024-20, which revokes the § 501(c)(3) determination for specified organizations and stipulates that contributions made to said organizations by individual donors are no longer deductible under Code § 170(b)(1)(A).

May 6, 2024: The IRS recognized two of its teams that reached the finals for the Samuel J. Heyman Service to America Medals as part of the 2024 Public Service Recognition Week. These teams included the Paperless Processing Initiative Team for its efforts to digitize IRS correspondence and two CI special agents for spearheading an investigation that led to a $3.4 billion cryptocurrency seizure and forfeiture.

May 6, 2024: The IRS reminded one million taxpayers who did not file their 2020 tax returns that they may still be eligible for a refund if they file by the May 17, 2024, deadline. The IRS estimates that more than $1 billion in refunds remain unclaimed as a result.

May 6, 2024: The IRS provided general tips for taxpayers upon receipt of mail from the IRS. In particular, taxpayers should remember to carefully read all IRS letters, save copies for their records and timely dispute notices where applicable.

May 6, 2024: The IRS
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Understanding the IRC’s Excessive Refund Claim Penalty

Recently, the Internal Revenue Service (IRS) has been asserting the Internal Revenue Code Section 6676 penalty much more frequently in examinations and in court. For example, in 2023, a government counterclaim in the US District Court for the Middle District of Georgia sought to recover Section 6676 penalties in Townley v. United States. And, internal IRS guidance requires examiners to consider whether to assert the penalty in every case in which a refund is disallowed.

In light of these factors, and major questions being raised in high-profile tax cases like Moore v. United States, which is currently pending before the Supreme Court of the United States, taxpayers are wondering whether the penalty can be asserted as a protective refund claim.

Read more here.

Weekly IRS Roundup April 29 – May 3, 2024

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of April 29, 2024 – May 3, 2024.

April 29, 2024: The IRS released Internal Revenue Bulletin 2024-18, which includes the following:

  • Notice 2024-33, which provides a limited waiver of the addition to tax under Section 6655 of the Internal Revenue Code (Code) to the extent the addition to tax would be attributable to an underpayment of estimated corporate alternative minimum tax under Section 55 due April 15, 2024.
  • Notice 2024-34, which provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Section 417(e)(3) of the Code, the 24-month average segment rates under Section 430(h)(2), the interest rate on 30-year Treasury securities under Section 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, and the 30-year Treasury weighted average rate under Section 431(c)(6)(E)(ii)(I).

April 29, 2024: The IRS issued Notice 2024-36, which provides guidance on the procedures for allocating credits under Section 48C and announces a second round of credits under Section 48C(e) for participation in the Qualifying Advanced Energy Project Credit program.

April 29, 2024: The IRS reminded small businesses to take advantage of the many tax resources available to them through the Small Business and Self-Employed Tax Center on IRS.gov.

April 30, 2024: The IRS announced that it is accepting applications for Tax Counseling for the Elderly and Volunteer Income Tax Assistance grants, which allows eligible organizations to apply for annual funding to provide free federal tax return preparation assistance for up to three years.

April 30, 2024: The IRS issued Notice 2024-37, which provides additional guidance and safe harbors regarding sustainable aviation fuel credits under Sections 40B and 6426(k) of the Code.

May 1, 2024: The IRS warned taxpayers and tax professionals about common scams and schemes, including online account help from third-party scammers, phishing, unscrupulous tax return preparers, offer in compromise mills and employee retention credit scams.

May 1, 2024: The IRS encouraged entrepreneurs to put data security safeguards in place to protect their financial, personal and employee information from scams and cybercriminals.

May 1, 2024: The IRS reminded taxpayers that it provides relief when an emergency measures declaration is issued, supplementing governmental efforts to provide emergency services. The IRS also provides relief when a major disaster declaration offering “individual assistance” is issued, which allows individuals and households to apply to the Federal Emergency Management Agency for financial and direct services.

May 1, 2024: The IRS issued Revenue Procedure 2024-24, which outlines procedures for requesting private letter rulings involving “spin-off” transactions subject to Section 355. Notice 2024-38, issued in conjunction with Revenue Procedure 2024-24, requests feedback on these procedures.

May 1, 2024: The IRS reminded taxpayers to [...]

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