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It was a busy week for the IRS and presented below is our weekly roundup for July 16 – 20, 2018 on significant IRS guidance and tax matters.

July 16, 2018: Last week the IRS issued Notice 2018-60 providing guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under § 417(e)(3), and the 24-month average rates under § 430(h)(2).

July 16, 2018: The IRS has released Notice 2018-61 clarifying the effect of § 67(g) on trusts and estates with the intent on publishing regulations in the near future.

July 16, 2018: The IRS released Internal Revenue Bulletin No. 2018-29 which includes Rev. Proc. 2018-37 providing specifications for the private printing of red-ink substitutes for the 2018 Forms W-2 and W-3. This procedure will be produced as the next revision of Publication 1141. Rev. Proc. 2017-42 is superseded.

July 17, 2018: Under Rev. Proc. 2018-38, the IRS instructed that organizations exempt from tax under § 501(a), other than those described in § 501(c)(3), are no longer required to report the names and addresses of their contributors on the Schedule B of their Forms 990 or 990-EZ.

July 17, 2018: In Rev. Rul. 2018-21 the IRS announced the Applicable Federal Rates for August 2018.

July 18, 2018: The IRS has released LB&I Process Unit Knowledge Base – Corporate/Business Issues & Credits regarding the rules for capitalizing transaction costs (legal fees, accounting fees, consulting fees, investment advisory service fees and other transaction costs) under Treas. Reg. 1.263(a)-5(a).

July 20, 2018: The IRS published T.D. 9835 amending the definition of qualified matching contributions (QMACs) and qualified nonelective contributions (QNECs) under regulations regarding certain qualified retirement plans.

July 20, 2018: The IRS released it weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandum, and Chief Counsel Advice).

Special thanks to Christy Vouri-Misso and Greg Berson in our DC office for this week’s roundup.

On May 3 and 4, 2018, the 3rd International Conference on Taxpayer Rights was held in The Netherlands. Participants from every continent (except Antarctica) attended the conference, which focused on good governance and legal remedies. From a US perspective, there were significant discussions on the Taxpayer Bill of Rights (which we have previously written about here. Overall, the conference was tremendously insightful and helpful in understanding tax issues throughout the world and we are very appreciative for being allowed to participate in the panel discussion on Preventing Disputes 2: Taxpayer Rights in the Administrative Phase.

Videos of each panel discussion are now available on YouTube:

Day One:

Day Two:

 

The 4th International Conference on Taxpayer Rights will be held May 23-24, 2019, in Minneapolis, Minnesota. The focus will be on administrative positions and transparency, with issues such as how governments issue guidance, how taxpayers learn about guidance and how much weight is afforded to guidance. More information can be found here.

Presented below is our weekly roundup for June 18-22, 2018 on significant IRS guidance and relevant tax matters.

June 18, 2018: The IRS issued Internal Revenue Bulletin No. 2018-25 including: Rev. Rul. 2018-17 (withholding and reporting payments from IRAs to state unclaimed property funds under Internal Revenue Code (Code) Section 3405); and REG-102951-16 (proposing amendments to rules for determining whether information returns must be filed electronically).

June 18, 2018: In IR-2018-139 the IRS stated that people with disabilities can now put more money into their tax-favored ABLE accounts and may, for the first time, qualify for the Saver’s Credit for low- and moderate-income workers.

June 19, 2018: The IRS published Rev. Rul. 2018-19 listing the applicable federal interest rates for July 2018.

June 19, 2018: The IRS proposed regulation REG-131186-17 to reinstate T.D. 9787, including allocations of excess nonrecourse liabilities of a partnership among other changes and removing T.D. 9788.

June 19, 2018: The IRS released a Practice Unit on “Interest Capitalization for Self-Constructed Assets,” which identifies taxpayers subject to Code Section 263A(f) and covers the steps involved in determining how much interest must be capitalized to the basis of designated property.

June 20, 2018: IRS published Rev. Proc. 2018-35 modifying Rev. Proc. 2018-31, to not apply Section 263A to replanting costs for lost or damaged citrus plants pursuant to Code Section 263A(d)(2)(C).

June 21, 2018: The IRS published Notice 2018-48 listing the population census tracts designations by the Treasury for qualified opportunity zones relevant to new Code Section 1400Z-2.

June 22, 2018: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandum and Chief Counsel Advice).

Special thanks to Christy Vouri-Misso and Greg Berson in our DC office for this week’s round-up.

The second meeting of McDermott’s Tax in the City® initiative in Seattle was held on May 22, 2018 at the Amazon headquarters. McDermott established Tax in the City® in 2014 as a discussion and networking group for women in tax aimed to foster collaboration and mentorship, and to facilitate in-person connections and roundtable events around the country. With the highest attendance rate of any Tax in the City® event to date, the May meeting featured a CLE/CPE presentation about Ethical Considerations around Tax Reform by Elizabeth Chao, Kirsten Hazel, Jane May and Erin Turley, followed by a roundtable discussion about recent tax reform insights led by Britt Haxton, Sandra McGill and Diann Smith.

Here’s what we covered at last week’s Tax in the City® Seattle:

  • Tax Reform: Ethical Considerations – Because of tax reform, taxpayers face increased uncertainty and will likely face increased IRS/state scrutiny for their 2017 & 2018 returns. Therefore, it’s crucial for taxpayers to be intentional about post-reform planning and compliance, including by coordinating among various departments (federal tax, state and local tax, employee benefits, treasury, operations, etc.). Taxpayers should understand the weight of various IRS/state revenue authority guidance, the IRS’s authority to issue retroactive regulations within 18 months of passing legislation, and how to take reasonable positions in the absence of guidance. They should also understand when the IRS has longer than three years to assess tax, including when there is an omission of global intangible low taxed income (GILTI) or when the tax relates to the section 965 transition tax.
  • Tax Reform Changes to Employee Compensation and Benefit Deductions – Post-tax reform, all employees of US public companies, private companies with US publicly traded debt, and foreign issuers with ADRs traded on the US market are covered employees subject to the $1 million limit for deductible compensation. Though a grandfather rule applies if existing contracts are not materially modified, key questions about how to apply this rule remain. Tax reform eliminated the employer deduction for transportation subsidies (other than bicycle subsidies). It also reduced employers’ ability to deduct meal and entertainment expenses, and removed employers’ and employees’ ability to deduct moving expenses.
  • Supreme Court Update: Wayfair – Jurisdiction to Tax – Following the Wayfair oral arguments, it is difficult to predict whether the Supreme Court will uphold as constitutional South Dakota’s tax on online retailers. Wayfair raises the fundamental question of when the courts should settle tax issues, and when they should wait for Congress to act.
  • Interaction of Cross-Border Tax Reform Provisions – Income of a US multinational is subject to varying rates of US tax depending on where it is earned. The US parent’s income from selling to US customers will be subject to the full rate of 21 percent and its income from selling to foreign customers will generally be subject to the foreign derived intangible income (FDII) rate of 13.125 percent. If the income is earned by a controlled foreign corporation (CFC), then amounts above a deemed tangible asset return generally will be subject to 10.5 percent US tax as GILTI. Taxpayers cannot analyze these provisions in isolation. Because the new provisions sometimes interact in unintuitive ways, it is crucial to do models to determine the impact of various transactions. For instance, if the US parent must pay a royalty to a CFC, then that payment may cause the base erosion and anti-abuse tax (BEAT) to apply, which could eliminate any tax benefit from having an intangible return earned by the CFC.
  • Tax Reform: Spotlight on Partnerships – Several tax reform provisions do not clearly indicate how they apply to partnerships. One key question is whether the 50 percent GILTI deduction should be applied at the partner or partnership level.
  • EU Proposal to Tax Income from Digital Commerce – On March 21, the European Commission made two proposals regarding the taxation of digital activities in the EU. First, it proposed expanding the definition of permanent establishment (PE) to include companies that have no physical presence in a country but meet a minimum threshold of annual revenues or users there (a digital PE).  Second, it proposed a 3 percent tax on gross revenues from the sale of data generated from user-provided information, digital activities which allow users to interact with one another, and online advertising.

We invite all tax professionals who identify as female to continue the conversation and share tax developments with the official LinkedIn group for Tax in the City®! Click here to join.

The next Tax in the City® meeting will take place in New York on June 21. Please contact Mia Dubinets if you’d like to be added to the New York Tax in the City® mailing list, and register for the June event. Additionally, stay tuned for information regarding an inaugural Dallas Tax in the City® meeting in fall 2018!

Wrapping Up January – and Looking Forward to February

We invite you to view all of the topics we discussed over the last month and take a look at the upcoming tax controversy events where our lawyers will be speaking in February.

Upcoming Tax Controversy Activities in February:

February 15, 2018: David Noren will be presenting “Tax disruption: Adjusting to the shifting transfer pricing landscape” at the 2018 Tax Council Policy Institute Symposium in Washington, DC.

Wrapping Up December – and Looking Forward to January

You can view all of the topics we discussed over the last month, and take a look at the upcoming tax controversy events where our lawyers will be speaking in January.

Upcoming Tax Controversy Activities in January:

January 23, 2018: Diann Smith will be presenting “State Transfer Pricing Audits: Effective Strategies to Minimize Your Risk” at the 27th Annual Ohio Tax Conference in Columbus, Ohio.

January 24, 2018:  Stephen Kranz is presenting “Handling State Tax Controversies to Win!!” at the 27th Annual Ohio Tax Conference in Columbus, Ohio, solving tax problems holistically to achieve success, understanding the offensive and defensive tools available and the avenues for relief when interacting with the government, planning and building the team to effectively work all avenues the government offers, tools available including FOIA, policy solutions, and litigation, with Jeff McGhehey, Senior Manager, Indirect Tax, The Home Depot.

McDermott Will & Emery is pleased to announce our Captive Insurance team was named “Law Firm of the Year” at the 2017 US Captive Services Awards in Burlington, Vermont. Elizabeth Erickson, partner in our US & International Tax practice group, was on-site to accept the award on behalf of the Firm.

The judges noted that, “McDermott Will & Emery’s varied legal practice ensures captive clients can go to the firm on a range of issues – from claims and tax to regulatory and transactional.” The judges were impressed by the Firm’s “impressive book of case work and deep understanding of the captive sector.”

This is the second year in a row that McDermott earned a significant award from Captive Review. In 2016, the Firm received the “Onshore Law Firm of the Year” award for its contributions to the captive market through legal expertise and innovation, strategic vision and business winning client care. In past years, the Firm has also been named “Tax Advisory Firm of the Year” and “Captive Healthcare Specialist of the Year.”

McDermott’s Captive Insurance team provides integrated tax, corporate, regulatory and insurance coverage, and reinsurance claims and disputes services to captives and industry participants in high-profile matters affecting the global insurance and reinsurance markets. The team includes McDermott’s insurance coverage practitioners who have decades of experience litigating and resolving high-exposure coverage and reinsurance disputes throughout the United States and in offshore jurisdictions, as well as precedential and other sensitive matters affecting CGL, D&O, E&O, EPL, property, crime, marine, legacy and other lines of business.

For more information on the 2017 US Captive Service Awards, please click here.

by Reciprocity Studio