On November 2, 2015, the Bipartisan Budget Act of 2015, (the Act), H.R. 1314, 114 Congress/Public Law No. 114-74, made significant changes to the rules governing US federal income tax audits of partnerships (New Audit Rules). The New Audit Rules are codified at Internal Revenue Code Sections 6221 through 6241. On August 4, 2016, the IRS released temporary and proposed regulations relating to certain aspects of the New Audit Rules. And, on December 6, 2016, technical corrections to the New Audit Rules (Technical Corrections) were introduced in both the House of Representatives, H.R. 6439, and in the Senate, S. 3506.
We previously provided an overview of the time limits imposed on the Internal Revenue Service (IRS) for assessing federal tax. The general rule is that the IRS must assess tax within three years from the later of the due date of the original tax return or the date it was filed. If the IRS does not assess tax during this period, it is foreclosed from doing so in the future. Note that the filing of an amended return does not restart or extend the limitations period. There are numerous exceptions to this rule, including if there is a substantial omission of income, fraud, failure to file a return, extension by agreement and failure to provide certain information regarding foreign transactions. We discussed many of these exceptions in Seeking Closure on Tax Positions: A Look at Tax Statutes of Limitation and Omitted Subpart F and GILTI Income May Be a Statute of Limitations Trap for the Unwary. Below, we discuss the rules and considerations for consenting to extending the time to assess federal tax.
Internal Revenue Code (Code) Section 6501(c)(4) provides that, except in the case of estate taxes, taxpayers (or their duly authorized representative) and the IRS may consent in writing to an extension of the limitations period for assessment. Importantly, such an agreement must be executed before the limitations period expires. In other words, assuming no other exception applies to the general three-year rule, an agreement to extend the limitations must be executed within the later of three years from the date the tax return was due or filed. If executed after that date, the consent is invalid. Thus, a late-filed consent cannot revive an otherwise closed limitations period. Under Code Section 6511(c), extending the statute of limitations on assessment also extends the period for filing a claim for credit or refund to six months after the expiration of the extended assessment period.
Form 872, Consent to Extend the Time to Assess Tax, is generally used to effectuate an agreed extension to a certain date, however, other versions of the form may be used for different types of taxpayers or issues (e.g., Form 872-M, Consent to Extend the Time to Make Partnership Adjustments, is used for partners subject to the centralized partnership audit regime under the Bipartisan Budget Act of 2015). Form 872-A, Special Consent to Extend the Time to Assess Tax, may be used to extend the limitations period for an indefinite period (referred to as an Open-Ended Consent). An Open-Ended Consent ends 90 days after the mailing by the IRS of written notification of termination or receipt by the IRS of written notification of termination from the taxpayer (both actions are accomplished through the use of Form 872-T, Notice of Termination of Special Consent to Extend the Time to Assess Tax), or the mailing of a notice of deficiency. The IRS’s views on Open-Ended Consents are summarized in
Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 14 – December 18, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.
December 14, 2020: The IRS released Notice 2020-88 updating and amplifying procedures for Phase III of the section 48A advanced coal credit.
December 16, 2020: The IRS issued Revenue Ruling 21-01 providing various rates for determining the issue price of certain debt instruments issued for property.
December 16, 2020: The IRS issued Notice 21-01 delaying mandatory e-filing of Form 4720 by private foundations and announcing certain other changes.
December 18, 2020: The IRS released TD 9932 containing final regulations under Section 162(m) related to the employer deduction for certain employee remuneration in excess of $1 million.
December 18, 2020: The IRS released Internal Revenue Bulletin 2020-52, dated December 21, 2020, containing the following highlights: Rev. Rul. 2020-81 (Administrative); TD 9912 (Administrative); TD 9933 (Exempt Organizations); TD 9934 (Income Tax); TD 9935 (Income Tax).
December 18, 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 Brian Moore in our Washington, DC, 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 31, 2020 – September 4, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.
September 1, 2020: The IRS released for publication in the federal register final regulations providing additional guidance on the base erosion and anti-abuse tax (BEAT) imposed on certain large corporate taxpayers with respect to certain payments made to foreign related parties. The final regulations affect corporations with substantial gross receipts that make payments to foreign related parties.
September 1, 2020: The IRS announced the launch of the Bipartisan Budget Act (BBA) Centralized Partnership Audit Regime webpage. The Centralized Partnership Audit Regime replaces the Tax Equity and Fiscal Responsibility Act (TEFRA) and the electing large partnership rules. The centralized partnership audit regime, or BBA, is generally effective for tax years beginning January 2018. Under the BBA, the IRS generally assesses and collects any understatement of tax (called an imputed underpayment) at the partnership level.
September 1, 2020: The IRS published a memorandum providing guidance on the Bipartisan Budget Act of 2015 (BBA) until Internal Revenue Manual (IRM) 8.19 is revised. The guidance covers: (1) Appeals TEFRA Team (ATT) and Technical Guidance (TG) referrals; (2) Tax Court rules on BBA partnership proceedings; (3) Tax Computation Specialist (TCS) assistance; (4) Tried Cases and Counsel Settlements; (5) Tax Court Decision Appealed and Final Decision from Appeal; and (6) Department of Justice (DOJ) cases.
September 1, 2020: The IRS announced its intention to issue regulations addressing the application of sections 951 and 951A of the Internal Revenue Code (Code) to certain S corporations (as defined in section 1361(a)(1)) with accumulated earnings and profits, as described in section 316(a)(1) (AE&P). The notice also announces that the US Department of the Treasury and the IRS intend to issue regulations addressing the treatment of qualified improvement property (QIP) under the alternative depreciation system (ADS) of section 168(g) for purposes of calculating qualified business asset investment (QBAI) for purposes of the foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) provisions. Comments should be submitted by November 2, 2020.
September 1, 2020: The IRS requested comments on Revenue Procedure 2015-40 (that provides guidance for taxpayers who believe that the actions of the United States, a treaty country or both result or will result in taxation that is contrary to the provisions of an applicable tax treaty) to submit the requested information in order to receive assistance from the IRS official acting as the US competent authority. Comments are due on or before November 2, 2020.
September 3, 2020: The IRS released the fourth quarter update to the 2019–2020 Priority Guidance Plan. The fourth quarter update to the 2019-2020 plan reflects 53 additional projects which have been published [...]
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 [...]
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.
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 [...]
Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 17 – 21, 2018:
December 18, 2018: The IRS issued a news release providing guidance on excess business loss limitations and net operating losses following changes made by the Tax Cuts and Jobs Act.
December 19, 2018: The IRS issued Revenue Ruling 2019-03, providing various prescribed rates for federal income tax purposes for January 2019.
December 19, 2018: The IRS issued Revenue Procedure 2019-06, prescribing discount factors used in computing unpaid losses under section 846 of the Code, as amended by the Tax Cuts and Jobs Act.
December 19, 2018: The IRS issued Notice 2019-04, extending temporary dyed fuel relief, initially provided in Notice 2017-30, through December 31, 2019.
December 20, 2018: The IRS issued proposed regulations implementing anti-hybrid provisions under sections 245A(e) and 267A of the Code, enacted as part of the Tax Cuts and Jobs Act.
December 20, 2018: The IRS issued proposed regulations dealing with the treatment of the sale of US trade or business partnership interests by foreign partners under section 864(c)(8) of the Code, enacted as part of the Tax Cuts and Jobs Act.
December 20, 2018: The IRS issued Revenue Procedure 2019-09, updating guidance on when a taxpayer has provided adequate disclosure of tax positions for the purpose of avoiding penalties.
December 20, 2018: The IRS issued Notice 2019-06, informing taxpayers of its intent to issue proposed regulations addressing special enforcement matters under section 6241(11) of the Code, with regard to the centralized partnership audit regime.
December 21, 2018: The IRS issued final regulations implementing the centralized partnership audit regime under sections 6221 through 6241 of the Code.
December 21, 2018: The IRS issued Revenue Procedure 2019-08, providing guidance on deducting expenses under section 179(a) of the Code and deducting depreciation under section 168(g), as amended by the Tax Cuts and Jobs Act.
December 21, 2018: The IRS issued Notice 2019-05, expanding the list of hardship exemptions from the individual shared responsibility payment under section 5000A of the Code.
December 21, 2018: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).
Special thanks to Le Chen in our DC office for this week’s roundup.
Wrapping Up August – and Looking Forward to September
Top August Posts You Might Have Missed
Upcoming Tax Controversy Activities in September
Our lawyers will present on key tax topics during the month of September. We hope to see you.
September 12, 2018: Elizabeth Chao, Britt Haxton, Kristen Hazel, Sandra McGill, Nina Siewert and Diann Smith are presenting on various state and local, US and international tax topics at the Tax in the City® event in Seattle, WA, including a presentation about Post-Wayfair. Please click here to register.
September 19, 2018: Linda Doyle, Kristen Hazel, Becky Martin and Jane May are presenting “Anatomy of a Whistleblower Case” at the inaugural Dallas Tax in the City® event in Dallas, TX. Please click here to register.
September 19, 2018: Laura Gavioli, Kristen Hazel, Alysse McLoughlin, Denise Mudigere and Marty Pugh are presenting are presenting on various state and local, US and international tax topics, including a presentation about Partnership Audit Rules and a presentation about Post-Wayfair, at the inaugural Dallas Tax in the City® event in Dallas, TX. Please click here to register.
September 19, 2018: Steve Kranz and Eric Carstens are speaking at the Tax Executives Institute Seattle Chapter Meeting regarding the South Dakota v. Wayfair Supreme Court decision in Seattle, WA.
September 20, 2018: Mary Kay Martire is presenting “Audits and Beyond—Tips, Traps, and War Stories” at the Taxpayers’ Federation of Illinois’ Annual Conference in Rolling Meadows, IL.
September 20, 2018: Catherine Battin is presenting “So Wayfair Happened—What’s Next?” at the Taxpayers’ Federation of Illinois’ Annual Conference in Rolling Meadows, IL.
September 24, 2018: Tom Jones is presenting “Tax Law Developments Affecting Middle Market Captives” at the Self Insurance Institute of America in Austin, TX.
September 27, 2018: Andrew Roberson, Mark Thomas and Todd Welty are presenting on “Common Issues in Trusts and Estate Tax Controversies” at McDermott’s 2018 Trusts and Estates Controversy Forum in Chicago, IL.
Presented below is our summary of significant IRS guidance and relevant tax matters for the week of August 13 – 17, 2018:
August 13, 2018: The IRS and Treasury withdrew and re-proposed certain portions of proposed regulations regarding the new partnership audit regime. These proposed regulations make changes to four different regulation packages under the new rules.
August 15, 2018: Revenue Procedure 2018-42 extends the deadline for submitting on-cycle applications for opinion letters or pre-approved defined contribution plans.
August 17, 2018: The IRS published Revenue Ruling 2018-23, announcing the applicable federal rates for September 2018.
August 17, 2018: The IRS released their weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandum and Chief Counsel Advice).
Special thanks to Kevin Hall in our DC office for this week’s roundup.