Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of November 25 – 29, 2019.

November 26, 2019: The IRS issued a News Release regarding a Revenue Procedure that updates the rules for using per diem rates to substantiate, under section 274 and Treas. Reg. § 1.274-5,  the amount of ordinary and necessary business expenses paid or incurred while traveling away from home, including employees’ lodging, meals, and incidental expenses. The IRS noted that taxpayers are not required to use a method described in the Revenue Procedure and may instead substantiate actual allowable expenses provided they maintain adequate records.

November 26, 2019: The IRS released the Fall 2019 Statistics of Income Bulletin, which is issued quarterly by the Statistics of Income Division of the IRS and provides the most recent statistics available from tax and information returns filed by US taxpayers. The bulletin focused on high-income individual income tax return data from 2016, individual noncash charitable contributions from 2017, and partnership returns from 2017.

November 26, 2019: The IRS issued Interim Guidance under Internal Revenue Manual 4.31.9 that outlines field examination procedures for use by LB&I and SB/SE employees when auditing partnership returns under the centralized partnership audit regime. The guidance applies to partnerships for taxable years beginning after December 31, 2017, and partnerships that elect into the BBA regime for taxable years beginning after November 2, 2015, and before January 1, 2018.

November 26, 2019: The IRS issued Interim Guidance under Internal Revenue Manual 11.3.13 that provides guidance on processing FOIA requests for access to tax records protected by section 6103 where required identification or authorization has not been established by the requester. Effective immediately, such requests will be denied citing FOIA exemption (b)(3)/ section 6103 and appeal rights will be granted.

November 26, 2019: The IRS issued a News Release noting the approaching tax filing season and cautioning taxpayers not to rely on receiving refunds by a certain date. The IRS explained that though most refunds are issued in less than 21 days, various transactions—including year-end and holiday bonuses, stock dividends, capital gain distributions from mutual funds and stocks, bonds, virtual currency, and real estate sold at a profit—can delay a taxpayer’s refund.

November 29, 2019: The IRS released a Treasury Decision in which it announced a correcting amendment to final regulations and removal of temporary regulations (T.D. 9623) that were published in the Federal Register on July 3, 2013. The final regulations relate to the application of section 108(i) to partnerships and S corporations and provide guidance regarding the deferral of discharge of indebtedness income and original issue discount deductions by a partnership or an S corporation with respect to reacquisitions of applicable debt instruments after December 31, 2008 and before January 1, 2011. The amendment removes the sectional authority for Treas. Reg. § 1.108(i)-2T to read as follows: “Authority: 26 U.S.C. 7805, unless otherwise noted.”

November 29, 2019: The IRS released a notice that cancels a December 9, 2019, public hearing on proposed regulations under sections  1291, 1297, and 1298 regarding the determination of ownership in a passive foreign investment company within the meaning of section 1297(a) and the treatment of certain income received or accrued by a foreign corporation and assets held by a foreign corporation for purposes of section 1297.

November 29, 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 November 18 – 22, 2019.

November 19, 2019: The IRS published final regulations that affect United States persons with direct or indirect ownership interests in certain foreign corporations. The regulations provide rules regarding the attribution of ownership of stock or other interests for purposes of determining whether a person is a related person with respect to a controlled foreign corporation under section 954(d)(3). In addition, the final regulations provide rules for determining whether a controlled foreign corporation is considered to derive rents in the active conduct of a trade or business for purposes of computing foreign personal holding company income.

November 19, 2019: The IRS posted Large Business and International active compliance campaigns. The campaigns include: (1) Costs that Facilitate an IRC 355 Transaction; (2) Form 1120-F Delinquent Returns Campaign; (3) IRC 199 – Claims Risk Review; (4) IRC 457A – Deferred Compensation Attributable; (5) Nonresident Alien Individual (NRA) Tax Credits; and (6) Post Offshore Voluntary Disclosure Program (OVDP) Compliance.

November 19, 2019: The IRS added section 7122-related (offers in compromise) questions and answers on whether Form 8821 allows a taxpayer to appoint a third party to represent them before the IRS on an offer in compromise (negative) and on whether a spouse’s income must be included on Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, even if the spouse doesn’t owe taxes (affirmative).

November 19, 2019: The IRS issued interim guidance to update the process by which the IRS accepts requests for confirmation that the government received a filed FinCEN Form 114 (formerly TD F 90-22.1), Report of Foreign Bank and Financial Accounts (FBAR). The IRS will no longer accept verbal verification requests. All requests must be submitted in writing.

November 20, 2019: The IRS issued a news release on its annual report for 2019, including recommendations to the IRS on new and continuing issues in tax administration. The 2019 Public Report includes recommendations on over 20 issues, which cover a broad range of topics and concerns, including guidance relating to the Tax Cuts and Jobs Act.

November 20, 2019: The IRS published questions and answers about the new qualified business income deduction (the section 199A deduction) that may be available to individuals, including many owners of sole proprietorships, partnerships and S corporations, and some trusts and estates. This deduction, created by the 2017 Tax Cuts and Jobs Act, allows non-corporate taxpayers to deduct up to 20% of their qualified business income, plus 20% of qualified real estate investment trust dividends and qualified publicly traded partnership income.

November 21, 2019: The IRS’s National Taxpayer Advocate blog posted highlights of the Taxpayer First Act and its impact on the Taxpayer Advocate Service and taxpayer rights.

November 21, 2019: The IRS published a notice of public hearing on proposed regulations regarding the timing of income inclusion under section 451.  The public hearing is being held on Tuesday, December 10, 2019, at 10:00 am. 

November 22, 2019: The IRS issued final regulations addressing the effect of recent legislative changes to the basic exclusion amount allowable in computing Federal gift and estate taxes. The final regulations will affect donors of gifts made after 2017 and the estates of decedents dying after 2025.

November 22, 2019: The IRS published a correction to TD 9613, regrading reduced 2009 estimated income tax payments for individuals with small business income.

November 22, 2019: The IRS released an issue snapshot on certain bonds subject to section 147(d) (regarding rehabilitation requirement for financing acquisitions of existing property) that: (1) covers when a violation of the rehabilitation expenditure exception under Section 147(d)(2) occurs; and (2) provides audit tips for detecting such violations. 

November 22, 2019: The IRS published a notice of the tier 2 tax rates for calendar year 2019 as required by section 3241(d). Tier 2 taxes on railroad employees, employers, and employee representatives are one source of funding for benefits under the Railroad Retirement Act. 

November 22, 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 November 11–15, 2019.

November 11, 2019: The IRS released Delegation Order 30-9 announcing the delegation of authority to withhold cases from IRS Appeals and deny requests for Appeals review in cases designated for litigation. The delegation order is effective November 7, 2019.

November 12, 2019:  The IRS announced a significant increase in enforcement actions for syndicated conservation easement transactions.

November 14, 2019: The IRS issued a News Release regarding a Revenue Procedure that updates the rules for using the optional standard mileage rates in computing the deductible costs of operating an automobile for business, charitable, medical or moving expense purposes. The guidance also provides rules to substantiate, under section 274(d) and Treas. Reg. § 1.274-5, the amount of an employee’s ordinary and necessary travel expenses reimbursed by an employer using the optional standard mileage rates. The IRS noted that for any taxable year during the suspension period ending January 1, 2026, a taxpayer is not permitted to claim miscellaneous itemized deductions, including unreimbursed employee travel expenses using the standard mileage rates.

November 15, 2019: The IRS issued Proposed Regulations that set forth proposed requirements for group health plans and health insurance issuers in the individual and group markets to disclose cost-sharing information upon request. In addition, plans and issuers would be required to make such information available on an internet website and, if requested, through non-internet means. The proposed regulations also include proposals to require plans and issuers to disclose in-network provider negotiated rates, and historical out-of-network allowed amounts through two machine-readable files posted on an internet website, thereby allowing the public to have increased access to health insurance coverage information. The proposed regulations are scheduled to be published in the Federal Register on November 27, 2019. Public comments regarding the contemplated rules must be received by January 14, 2020.

November 15, 2019:  The IRS announced steps to conduct special compliance efforts for individual and business taxpayers to ensure fairness in the tax system.  The IRS indicated the goal is to help resolve tax compliance issues by meeting face-to-face with taxpayers with ongoing tax issues. The IRS will focus these efforts in areas where there have been a limited number of revenue officers available due to declining IRS resources.

November 15, 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 and 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 November 4–8, 2019.

November 4, 2019: The IRS posted a new Large Business and International active compliance campaign on Section 965 transition tax as enacted under the 2017 TCJA. The IRS stated that the goal of the campaign is to promote compliance with Section 965. The treatment stream will include conducting examinations as well as providing technical assistance to teams on Section 965, with a focus on identifying and addressing taxpayer populations with potential material compliance risk. The IRS anticipates that returns selected as part of the Section 965 campaign will also be risked and, if appropriate, examined for other material issues, especially issues related to TCJA planning.  For our coverage of this campaign, see here.

November 6, 2019: The IRS issued a Revenue Procedure and a News Release announcing the tax year 2020 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. The tax year 2020 adjustments are generally used on tax returns filed in 2021.

November 8, 2019: The IRS published Proposed Regulations providing guidance relating to the life expectancy and distribution period tables that are used to calculate required minimum distributions from qualified retirement plans, individual retirement accounts and annuities, and certain other tax-favored employer-provided retirement arrangements. The life expectancy tables and applicable distribution period tables were developed based on mortality rates for 2021 and would provide longer life expectancies than the tables in the existing regulations. Public comments regarding the contemplated rules must be received by January 7, 2020.

November 8, 2019: The IRS released a Revenue Procedure providing the list of automatic changes to which the automatic change procedures in Revenue Procedure 2015-13, as clarified and modified by other listed guidance. The revenue procedure is effective for a Form 3115 filed on or after November 8, 2019, for a year of change ending on or after March 31, 2019. It supersedes the previous list in Rev. Proc. 2018-31.

November 8, 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 and Jenni Saperstein in our Chicago office for this week’s roundup.

On November 6, 2019, President Trump announced his intent to nominate Ms. Alina Ionescu Marshall and Mr. Christian N. Weiler to serve as Judges on the United States Tax Court (Tax Court). Mr. Travis Greaves was previously approved by the Senate Finance Committee to be a Tax Court Judge and is awaiting confirmation by the Senate. Judge Mark V. Holmes, who is currently a senior Judge on the Tax Court, was previously renominated by President Trump and is awaiting action by the Senate Finance Committee. For our prior coverage related to Mr. Greaves and Judge Holmes, see here.

According to the White House Announcement and other publicly available information, Ms. Marshall is currently Counsel to the Chief Judge of the Tax Court in Washington, DC, a position she has been in since 2013. Prior to that, she was an associate at West & Feinberg, P.C. (2012–2013), clerked at the Tax Court (2010–2012), was an associate at Freshfields Bruckhaus Deringer US LLP (2004–2009), and was an associate at Milbank, Tweed, Hadley & McCloy LLP (2002–2004). She also was an Adjunct Professor of Law at Georgetown University Law Center (2011–2013). Ms. Marshall obtained a JD from the University of Pennsylvania Law School (2002) and her undergraduate degree from Yale University (1999).

According to the White House Announcement and other publicly available information, Mr. Weiler is currently a partner at Weiler & Rees, LLC, in New Orleans, where he has practiced since 2006. His practice includes all areas of tax law, with an emphasis on tax controversy and litigation matters. Mr. Weiler obtained an LLM from Southern Methodist University Dedman School of Law (2006), a JD from Loyola University New Orleans College of Law (2005), and his undergraduate degree from Louisiana State University (2001).

The Tax Court is composed of 19 presidentially appointed members, as well as senior judges serving on recall and special trial judges. Currently, there are 17 presidentially appointed members, meaning that two vacancies exist. At first blush, it seems odd that there are four candidates for two vacancies.  However, under IRC Section 7447(b)(1), Tax Court Judges are subject to mandatory retirement upon attaining the age of 70. Judge L. Paige Marvel and Judge Albert G. Lauber will both turn 70 within the next few months; thus, it appears that the two new nominations will be for their positions on the Tax Court.

Practice Point: Since being sworn in, President Trump has nominated eight individuals to be Tax Court Judges (four nominees have previously been confirmed), and has taken an approach of announcing the nominations earlier rather than later. For more information on the Tax Court appointment and reappointment process, see here. As the make-up of the Tax Court changes, it is important for taxpayers and practitioners that may be appearing before the new Judges to familiarize themselves with the Judges and stay informed of recent developments regarding the Court.

On November 4, 2019, the Internal Revenue Service (IRS) announced a new Large Business and International (LB&I) compliance campaign regarding Section’s 965 transition tax under the Tax Cuts and Jobs Act (TCJA). This is one of several dozen compliance campaigns that LB&I has announced since the initial 13 campaigns were identified in 2017, and is part of LB&I’s larger goals of improving return selection, identifying issues representing a risk of noncompliance and making the greatest use of limited resources. We have written at length regarding the IRS’s campaigns. Click here for prior coverage of the IRS’s campaigns. This announcement comes just over a month after the Treasury Inspector General for Tax Administration (TIGTA) issued a report questioning the effectiveness and efficiency of campaign issue selection. We wrote about the TIGTA report here. The IRS is presumably heeding TIGTA’s recommendation and is focused on Section 965 because of the substantial dollars associated with compliance. A list of all campaigns can be found here (the newest campaign is found under the tab “IRC 965”).

Section 965 was part of tax reform in the TCJA. It generally imposes a transition tax on a US shareholder’s pro rata share of accumulated earnings and profits of certain foreign corporations, as if those earnings had been repatriated to the US. The new campaign will focus examinations on US-based multinational companies’ 2017 and 2018 returns to ensure compliance with the transition tax in Section 965. The campaign will also provide technical assistance to IRS teams working on Section 965 issues, with a focus on identifying and addressing taxpayer populations with potential material compliance risk.

Practice Point: Multinational taxpayers should be mindful of this new campaign and aware of any compliance issues they may face. Taxpayers should be aware that returns selected for the transition tax campaign will also be examined for other material issues, especially those related to TCJA planning.

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of October 28 – November 1, 2019.

October 30, 2019: The IRS issued an Action on Decision in which it recommended nonacquiesence in a franchise transfer case Greenteam Materials Recovery Facility PN v. Commissioner, T.C. Memo 2017-2012, which held that certain partnerships’ contracts qualified as franchises under section 1253 and were therefore entitled to capital-gains treatment. The IRS stated that both case law and the plain language of section 1253 provide that the sale or exchange of a franchise that is not otherwise a capital asset under section 1221 is not treated as the sale or exchange of a capital asset under section 1253(a) merely because the transferor does not retain any significant power, right, or continuing interest in the franchise.

October 31, 2019: The IRS and the Department of the Treasury issued an advanced notice of proposed rulemaking (ANPRM) announcing their intent to issue “more streamlined and targeted” proposed regulations regarding the treatment of certain interests in corporations as stock or indebtedness. The ANPRM indicates that the proposed regulations would substantially modify the funding rule and eliminate the per se application of the funding rule. Therefore, a debt instrument would not be treated as funding a distribution or economically similar transaction solely due to temporal proximity. The proposed regulations instead would apply the funding rule to a debt instrument only if its issuance has a sufficient factual connection to a distribution to a member of the taxpayer’s expanded group or an economically similar transaction. Thus, a debt instrument issued without such a connection to a distribution or similar transaction would not be treated as stock. The proposed regulations would apply only to tax years beginning on or after the date those rules are finalized. Public comments regarding the contemplated rules must be received by February 3, 2020.

October 31, 2019: The IRS released a Treasury Decision that removes the section 385 documentation regulations, which set forth minimum documentation requirements that ordinarily must be satisfied for certain related-party interests in a corporation to be treated as indebtedness for federal tax purposes. According to the Treasury Decision, it was “determined that the burdens imposed on taxpayers by the [documentation rules] outweigh the regulations’ intended benefits.” But Treasury and the IRS, however, continue to evaluate documentation-related issues, and may subsequently propose a substantially simplified and streamlined version with a prospective effective date.

November 1, 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 and 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 October 21 – 25, 2019.

October 21, 2019: The IRS issued a news release in which it announced the launch of its second annual International Charity Fraud Awareness Week. The IRS joined an international coalition to raise awareness and share practices to help charities and other not-for-profit organizations avoid fraud and stop financial crime. The campaign features an online hub where counter-fraud experts can share webinars, help sheets and case studies.

October 22, 2019: The IRS provided procedures to Chief Counsel attorneys for working and coordinating cases with issues involving virtual currency, including digital assets, digital currency, crypto-assets, and cryptocurrency. Issues that involve virtual currency that are not addressed by Notice 2014-21 or other public guidance, and that involve novel issues or issues likely to attract national attention are required to be coordinated with the National Office.

 October 23, 2019: The IRS released a fact sheet in which it explained that certain tax treatments and employment tax rules can apply to family members working in the family business. The fact sheet stated that if spouses carry on a business together and share in its profits and losses, they may be partners whether or not they have a formal partnership agreement. It further explained how spouses can make a qualified joint venture election if they wish to avoid partnership status.

October 24, 2019: The IRS released two issue snapshots on self-dealing of Private Foundations involving the sale or exchange of property and on self-dealing of Private Foundations involving the lending of money or another extension of credit.

October 25, 2019: The IRS issued final regulations providing guidance on new information reporting obligations under section 6050Y related to reportable policy sales of life insurance contracts and payments of reportable death benefits. No reporting is required under section 6050Y for reportable policy sales made and reportable death benefits paid after December 31, 2017, and before January 1, 2019. The final regulations also provide guidance on the amount of death benefits excluded from gross income under section 101 following a reportable policy sale.  The final regulations affect parties involved in certain life insurance contract transactions, including reportable policy sales, transfers of life insurance contracts to foreign persons, and payments of reportable death benefits. The final regulations are scheduled to be published in the Federal Register on October 31, 2019.

October 25, 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 and Jenni Saperstein in our Chicago office for this week’s roundup.

On September 28, 2019, the Treasury Inspector General for Tax Administration (TIGTA) issued a report titled Initial Compliance Results Warrant a More Data-Driven Approach to Campaign Issue Selection.

As the name of the report describes, the TIGTA analyzed whether the Internal Revenue Service (IRS) audit campaigns were effective and efficiently administered. We have written at length regarding the IRS’s “campaign” methodology:

The report questions how the IRS selected the campaigns it has unleashed on taxpayers. Upon inspection, it appears that the IRS did not have a systematic approach to choosing which issue would become a campaign. Instead, the approach was seemingly ad hoc, and was open to employee suggestions instead of empirical analysis. The TGITA suggests that going forward the IRS use a more data-driven selection process for its campaigns. The idea would be to analyze where the IRS could get the biggest bang for its resource bucks in terms of dollars as well as compliance goals. Accordingly, the TGITA recommends the IRS adopt a formal process for selecting and prioritizing issues for campaigns, and the IRS use actionable metrics, based in part on compliance results, to select the most productive inventory.

Practice Point:  We have heard in the past that some campaigns were based on issues that revenue agents and other field personnel identified, but it was never clear whether the IRS was applying a systematic approach. We expect now that the IRS will be more mindful with its approach, focusing on issues with substantial dollars associated with them, and also where the IRS wants to ensure taxpayer compliance with the Internal Revenue Code.

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of October 14 – October 18, 2019.

October 15, 2019: The IRS published a news release that discusses several tax benefits available to military families as part of National Work and Family Month.  

October 15, 2019: The IRS published guidance on corporate bond weighted average interest rates and the permissible range of interest rates used to calculate pension plan minimum funding for plan years beginning in October 2019. The IRS updated the yield curve and 24-month segment rates, the 30-year Treasury securities interest rates, and the minimum present value segment rates. 

October 16, 2019: The IRS released a Statistics of Income Bulletin. The statistics show how many Forms 709 were filed in 2018. The report also indicates the amount of gifts given by asset type and gender, including stocks, bonds, real estate, partnership and other business interests. 

October 16, 2019: The IRS published a statement on how it handles passport certifications for people with significant tax debt. In July, the IRS temporarily suspended passport certification procedures on passports for anyone who had a case open with the Taxpayer Advocate Service (TAS). After initially agreeing to that request, the IRS has now reversed its position. The IRS has determined that a blanket, systemic exception for anyone with an open TAS case is overly broad and could undermine the effectiveness of the statute enacted by Congress in the Fixing America’s Surface Transportation Act to collect a seriously delinquent tax debt. 

October 18, 2019: The IRS published interim guidance on partnership audit procedures. The memorandum provides guidance for appeals employees on new case procedures for different phases of the Bipartisan Budget Act of 2015 (BBA) centralized partnership audit regime, including: (1) Early Election into BBA; (2) Administrative Adjustment Request; (3) Notice of Proposed Partnership Adjustment ; (4) Modification Disputes; and (5) Notice of Final Partnership Adjustment.

October 18, 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.