Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 22–26, 2019.
July 22, 2019: The IRS issued a revenue procedure in which it issued indexing adjustments required by statute for certain provisions under tax code Section 36B. The IRS is updating the applicable percentage table used to calculate an individual’s premium tax credit for taxable years beginning in calendar year 2020 and the required contribution percentage for plan years beginning after calendar year 2019.
July 22, 2019: The IRS issued a revenue procedure in which it issued, under tax code Section 446, simplified procedures for insurance companies to obtain automatic consent to change method of accounting for discounting unpaid losses, expenses unpaid, estimated salvage recoverable, and unearned premiums attributable to title insurance, to comply with Section 846 as amended by the 2017 tax act. The IRS noted that, for taxable years beginning after December 31, 2017, and ending on or before December 31, 2019, the procedures provided are the exclusive procedures. One simplified method provided is that the requirement of Treasury Regulations Section 1.446-1(e)(3) to file a Form 3115 is waived for a taxpayer making a change in method of accounting under this revenue procedure.
July 22, 2019: The IRS issued a revenue procedure in which it issued salvage discount factors for the 2019 accident year, which must be used to compute the discounted estimated salvage recoverable under tax code Section 832. The IRS listed the discount factors for the 2019 accident year in separate tables for each line of business. The IRS explained that it determined all of the discount factors using the applicable interest rate under Section 846(c) for 2019, which is 2.94%, and by assuming all estimated salvage is recovered in the middle of each calendar year. These discount factors are effective for taxable years beginning after December 31, 2017.
July 23, 2019: The IRS issued a T.D. in which it released final regulations and effected the removal of temporary regulations related to allocation by a partnership of creditable foreign income taxes (IRC §704). These changes will be effective as of July 24, 2019. The regulations seek to improve the operation of an existing safe harbor rule that determines whether allocations of creditable foreign tax expenditures (CFTEs) are deemed to be in accordance with the partners’ interests in the partnership. Treasury Regulations Section 1.704-1(b)(4)(viii) provides a safe harbor under which allocations of CFTEs are deemed to be in accordance with the partners’ interests in the partnership. A comment requested revising the regulations to provide that disregarded payments between CFTE categories are taken into account in computing the net income in a CFTE category. The final regulations address that comment by adding a cross-reference to the disregarded payment rule for assigning income to an activity in Treas. Reg. Section 1.704-1(b)(4)(viii)(c)(3)(iv) in the paragraph that provides the basic definition of an activity to further highlight the interaction of those two paragraphs.
July 23, 2019: The IRS released an announcement stating that it would hold a public hearing on REG-105476-18, relating to the withholding of tax and information reporting with respect to certain dispositions of interests in partnerships engaged in the conduct of a trade or business within the United States, scheduled for August 26, 2019. Speakers’ outlines of topics to be discussed at the hearing must be received by August8, 2019.
July 25, 2019: The IRS issued a revenue procedure in which it provided for a six-month extension to file Form 1065 to certain eligible partnerships. The IRS stated that a timely filed Form 1065 will be treated as a timely and appropriately filed request for a six-month extension of the deadline to file the Form 1065. The relief applies to partnerships under the 2015 BBA that haven’t elected the application of tax code Section 6221(b), timely filed Form 1065, and timely furnished all Schedules K-1 required. Eligible partnerships should write on the top of the superseding Form 1065 “SUPERSEDING FORM 1065 PURSUANT TO REVENUE PROCEDURE 2019-32.”
July 26, 2019: The IRS issued a news release noting that it has begun sending letters to taxpayers with virtual currency transactions that either (1) potentially failed to report income and pay the resulting tax from virtual currency transactions or (2) did not report their transactions properly.
July 26, 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.