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Weekly IRS Roundup May 8 – May 12, 2023

By on May 15, 2023
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Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 8, 2023 – May 12, 2023.

May 8, 2023: The IRS released Internal Revenue Bulletin 2023-19, which highlights the following:

  • Revenue Procedure 2023-22: This revenue procedure provides qualified mortgage bond issuers and mortgage credit certificate issuers with (1) the nationwide average purchase price for residences located in the United States, and (2) the average area purchase price safe harbors for residences located in statistical areas in each state, the District of Columbia, Puerto Rico, the Northern Mariana Islands, American Samoa, the Virgin Islands and Guam.
  • Announcement 2023-14: This announcement provides the revocation of IRC 501(c)(3) Organizations for failure to meet the code section requirements. Contributions made to the organizations by individual donors are no longer deductible under IRC 170(b)(1)(A).
  • Notice 2023-34: This notice provides that convertible virtual currency should be treated as property for federal tax purposes and general tax principles applicable to property transactions apply to transactions using convertible virtual currency. This notice modifies Notice 2014-21 by revising a sentence in the background section to remove the statement that virtual currency does not have legal tender status in any jurisdiction, among other changes.
  • Revenue Procedure 2023-21: This revenue procedure provides the domestic asset/liability percentages and domestic investment yields needed by foreign life insurance companies and foreign property and liability insurance companies to compute their minimum effectively connected net investment income under Section 842(b) for taxable years beginning after December 31, 2021.
  • Revenue Ruling 2023-9: This revenue ruling provides the applicable federal rates for federal income tax purposes for May 2023. The short-term federal interest rate is 4.30%, the mid-term rate will drop to 3.57% and the long-term rate will fall to 3.72%

May 8, 2023: The IRS announced Saturday hours for May 13 in more than 40 locations across 25 states. The Saturday hours were to help taxpayers who may have a tax concern or questions about an IRS notice.

May 8, 2023: The IRS released Tax Tip 2023-63, providing IRS websites and other publications with tax-related disaster relief information that can help taxpayers.

May 9, 2023: The IRS announced that it will accept applications for Low Income Taxpayer Clinic (LITC) matching grants from May 8, 2023, to June 26, 2023. The funding will be for the 2023 calendar year. The IRS awards matching grants to qualifying organizations to develop, expand or maintain an LITC. An LITC must match every dollar of funding awarded by the IRS.

May 9, 2023: The IRS released Tax Tip 2023-64, highlighting the Taxpayer Bill of Rights and the right to challenge the IRS’s position.

May 10, 2023: The IRS released Notice 2023-39, which describes proposed amendments to [...]

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IRS Appeals Is Looking for Suggestions on Improving Conference Access

By and on May 12, 2023
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The Internal Revenue Service (IRS) has invited suggestions on improving conference options at the Independent Office of Appeals (IRS Appeals) for taxpayers and representatives who are not located near an IRS Appeals office. Specifically, IRS Appeals is inviting comments on:

  • Revising or replacing the “circuit riding” policy in IRM 8.6.1.5.1.1 to expand opportunities for timely in-person conferences for taxpayers living in certain states
  • Facilitating participation at in-person conferences when taxpayers and their representatives are not co-located
  • Best practices for conducting hybrid conferences, where some participants meet in person and others join by video or telephone
  • If a case must be transferred within IRS Appeals to facilitate an in-person conference, how best to avoid substantial delay in resolving the underlying tax dispute and
  • Encouraging participation in in-person and video conferences by taxpayers in historically marginalized communities or with limited English proficiency and ensuring accessibility by persons with disabilities.

Comments should be sent to ap.taxpayer.experience@irs.gov by July 10 for consideration.

Practice Point: COVID-19 prompted many modernizations at the IRS, including the expansion of remote technology resources. Taxpayers get to choose how to interact with IRS Appeals, but that choice, whether via telephone, video conference or in person, could impact their experience. Requests like these by the IRS are valuable opportunities that can affect how IRS Appeals operates in the future.



Weekly IRS Roundup October 31 – November 4, 2022

By on Nov 7, 2022
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Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of October 31, 2022 – November 4, 2022.

October 31, 2022: The IRS released Internal Revenue Bulletin 2022-44, which highlights the following:

  • Treasury Decision 9966: These final regulations increase the renewal user fee for enrolled retirement plan agents from $67 to $140 and also increase both the enrollment and renewal of enrollment user fees for enrolled agents from $67 to $140.
  • Proposed Regulations 113068-22: These proposed regulations relate to recordkeeping and reporting requirements for the average income test for purposes of the low-income housing credit.
  • Revenue Ruling 2022-19: This revenue ruling provides a rule for valuing noncommercial flights on employer-provided aircraft, including the three Standard Industry Fare Level (SIFL) rates: the Unadjusted SIFL Rate, the SIFL Rate Adjusted for PSP Grants, and the SIFL Rate Adjusted for PSP Grants and Promissory Notes.
  • Treasury Decision 9967: This document contains final and temporary regulations, which set forth guidance on the average income test for purposes of the low-income housing credit.

October 31, 2022: The IRS released COVID Tax Tip 2022-166, announcing that more than nine million people may qualify for tax benefits they did not claim by filing a 2021 federal income tax return. Many of these people may be eligible to claim some or all of the 2021 Recovery Rebate Credit, the Child Tax Credit and the Earned Income Tax Credit, among others, which were expanded last year under the American Rescue Plan Act of 2021 and other legislation.

November 1, 2022: The IRS released COVID Tax Tip 2022-167, alerting taxpayers in areas covered by certain Federal Emergency Management Agency disaster declarations that they may have more time to file their returns and may qualify for penalty relief under Notice 2022-36.

November 2, 2022: The IRS released COVID Tax Tip 2022-168, reminding people to review their tax withholdings to avoid tax surprises, such as a balance due or a larger-than-expected refund.

November 3, 2022: The IRS requested comments on three notices related to different aspects of extensions and enhancements of energy tax benefits in the Inflation Reduction Act of 2022. The IRS hopes that comments will aid the agency in drafting the related guidance items. Feedback should be submitted by December 3, 2022. The notices include:

  • Notice 2022-56, which requests comments related to the qualified commercial clean vehicles provisions and the alternative fuel vehicle refueling property
  • Notice 2022-57, which requests comments related to the carbon capture tax credit
  • Notice 2022-58, which requests comments related to the tax credit for the production of clean hydrogen and the clean fuel production tax credit.

November 3, 2022: The IRS
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IRS Appeals Revises Initial Contact Letter

By and on Oct 5, 2022
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The Internal Revenue Service Independent Office of Appeals (IRS Appeals) is the administrative forum for taxpayers to attempt to resolve tax disputes prior to litigation. Subject to certain exceptions, taxpayers can file a protest and have their dispute heard by IRS Appeals after adjustments are proposed at the examination level. Almost all disputes are resolved at the IRS Appeals level.

After a protest is submitted challenging the proposed adjustments, IRS Appeals will contact the taxpayer. This is accomplished through an initial contact letter, which provides general information on what to expect at IRS Appeals.

On October 4, 2022, IRS Appeals informed taxpayers that it is revising the initial contact letter in an effort to improve how taxpayers interact and communicate with it. The two revisions are:

  1. Clarifying that taxpayers and their representatives can choose whether they meet with IRS Appeals (e., by telephone, video or in-person) and that taxpayers and IRS Appeals can work together via mail or secure electronic messaging to resolve disputes.
  1. Providing the name and phone number of the IRS Appeals Officer’s manager to ensure that an appeal stays on track if additional help is needed.

IRS Appeals also indicated that it welcomes comments on the revisions, which can be submitted to ap.taxpayer.experience@irs.gov by December 2, 2022.

Practice Point: As we have discussed in the past, IRS Appeals plays a vital role in the resolution of tax controversy matters without the time, expense and uncertainty of litigation. The initial contact letter revisions should be helpful by allowing taxpayers to choose the manner in which they would like to interact with IRS Appeals and ensuring that cases progress through the process without unnecessary delays. In a typical case, we recommend an “in-person” conference with IRS Appeals, if practicable.



Weekly IRS Roundup September 26 – September 30, 2022

By on Oct 3, 2022
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Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of September 26, 2022 – September 30, 2022.

September 26, 2022: The IRS released Internal Revenue Bulletin 2022-39, which highlights the following:

  • REG-125693-19: These proposed regulations clarify issues that do not meet the definition of a federal tax controversy, exceptions to consideration by the IRS Office of Appeals (IRS Appeals), and procedural and timing requirements that must be met before IRS Appeals will consider an issue. The proposed regulations also provide the requirements a taxpayer must meet to receive the notice described in Internal Revenue Code (Code) Section 7803(e)(5) when the taxpayer requests consideration by IRS Appeals and the request is denied. More coverage of this issue can be found here.
  • Notice 2022-38: This notice publishes the inflation adjustment factor for the carbon oxide sequestration credit under § 45Q for calendar year 2022. This notice also informs taxpayers that 2022 will be the final calendar year for which they may claim a credit under Code Section 45Q(a)(1) and (2) for qualified carbon oxide that is captured by carbon capture equipment originally placed in service at a qualified facility before the date of enactment of the Bipartisan Budget Act of 2018.

September 26, 2022: The IRS issued Notice 2022-44, providing annual notice of the 2022 to 2023 special per diem rates for taxpayers to use when substantiating the amount of business expenses incurred while traveling away from home. Specifically, the notice addresses (1) the special transportation industry meal and incidental expenses rates, (2) the rate for the incidental expenses only deduction and (3) the rates and list of high-cost localities for purposes of the high-low substantiation method.

September 26, 2022: The IRS released Notice 2022-45, extending the deadline for amending an eligible retirement plan to reflect the Coronavirus Aid, Relief, and Economic Security Act and the Taxpayer Certainty and Disaster Tax Relief Act of 2020. Both allow for special tax treatment with respect to a coronavirus-related distribution or a qualified disaster distribution.

September 26, 2022: The IRS released Tax Tip 2022-147, highlighting five resources people can find on IRS.gov. These resources are:

  1. Taxpayer Bill of Rights
  2. How to apply for 501(c)3 status
  3. IRS tax volunteer opportunities
  4. Latest tax scams
  5. Interactive Tax Assistant

September 27, 2022: The IRS released Tax Tip 2022-148, providing the steps for becoming an IRS-authorized e-file provider.

September 27, 2022: The IRS announced that victims of storms and flooding in Alaska, which started on September 15, now have until February 15, 2023, to file various federal individual and business tax returns and make tax payments. The relief is available to anyone in an area designated by the Federal Emergency Management Agency [...]

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IRS Appeals Will Not Consider Regulatory Invalidity and Subregulatory Procedural Invalidity Challenges

By and on Sep 21, 2022
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In Mayo Found. for Med. Educ. & Rsch. v. United States, 131 S.Ct. 704 (2011), the Supreme Court of the United States made clear that administrative law rules apply to tax guidance like they do to other federal agency guidance. Since Mayo, the Supreme Court and other courts have provided further guidance—both in the tax and non-tax contexts—regarding the proper analysis in determining the validity of, and deference to, regulatory guidance.

Over the past decade, the number of taxpayer challenges to guidance issued by the Internal Revenue Service (IRS), whether in the form of regulations or subregulatory guidance (i.e., revenue rulings, revenue procedures, notices and announcements), has increased significantly. These challenges have taken a variety of forms, such as regulatory invalidity under Chevron USA, Inc. v. NRDC, 467 U.S. 837 (1984) and procedural invalidity under the Administrative Procedure Act (APA). Some successful challenges to the validity of IRS guidance and the ability to challenge such guidance in a pre-enforcement context include CIC Servs., LLC v. IRS, 141 S.Ct. 1582 (2021); United States v. Home Concrete & Supply, LLC, 132 S.Ct. 1836 (2012); Mann Construction, Inc. v. Commissioner, 27 F. 4th 1138 (6th Cir. 2022); Good Fortune Shipping SA v. Commissioner, 897 F.3d 256 (2018) and Liberty Global, Inc. v. United States, No. 1:20-cv-03501-RBJ (D. Colo. 2022). Many other challenges are pending both at the administrative level and in court.

The IRS and the US Department of the Treasury (Treasury) have noticed the increase in challenges to its published guidance. One important change is the more detailed discussions in preambles to final regulations regarding comments received and how the IRS views and incorporates said comments. This is a welcome development, although sometimes a tortuous one for taxpayers who must wade through hundreds of pages of preambles in some regulation packages. Another change, and the subject of this post, is the IRS’s views on how to deal with such challenges during the administrative process.

A federal tax controversy can involve three levels of review: Examination, Appeals and litigation. At the Examination stage, revenue agents and other IRS personnel develop the facts and determine whether an adjustment is warranted. Importantly, “hazards of litigation” are not considered at the Examination level, meaning, issues are viewed as binary—in favor of the IRS or the taxpayer—and not negotiated as a percentage of the item. However, at the Appeals level, the Appeals team weighs “hazards of litigation” to determine whether a case can be settled by the parties. Hazards of litigation are also considered at the litigation level.

Validly promulgated tax regulations are approved at the highest levels of the IRS, Treasury generally carry the force and effect of law and are binding on taxpayers and the IRS. Subregulatory guidance is also approved at senior levels of the IRS and the Treasury. At the Examination level, the IRS will not entertain challenges to the validity of [...]

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Weekly IRS Roundup September 12 – September 16, 2022

By on Sep 19, 2022
Posted In , , ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of September 12, 2022 – September 16, 2022.

September 12, 2022: The IRS released Internal Revenue Bulletin 2022-37, which highlights the following:

  • Treasury Decision 9965: These regulations establish certain requirements regarding the implementation of protections against balance billing provided under the No Surprise Act.
  • Notice 2022-37: This guidance assists taxpayers in complying with the final regulations under Section 871(m). The US Department of the Treasury (Treasury) and the IRS intend to amend Section 871(m) regulations, which will delay the effective date of certain rules in the final regulations and extend the phase-in period provided in Notice 2020-2 for two years.

September 12, 2022: The IRS released COVID Tax Tip 2022-139, reminding taxpayers of recently issued Notice 2022-36, which provides penalty relief from certain failure to file penalties in taxable years 2019 and 2020. The relevant penalties will be waived, abated, refunded or credited. The relief is designed to help struggling taxpayers affected by the COVID-19 pandemic and to allow the IRS to focus resources on processing backlogged tax returns and taxpayer correspondence.

September 12, 2022: The Treasury Inspector General for Tax Administration (TIGTA) released the Fiscal Year 2022 Statutory Review of Compliance With Notice of Federal Tax Lien Filing Due Process Procedures. TIGTA is required to determine annually whether lien notices issued by the IRS comply with the legal requirements set forth in the Internal Revenue Code. TIGTA recommended that the Director of Collection Policy for the Small Business/Self-Employed Division (1) reinforce Internal Revenue Manual (IRM) guidance to ensure that taxpayers’ representatives are notified of Notice of Federal Tax Lien filings and (2) correct an IRM reference on Written Communication to a Taxpayer’s Authorized Representative. The IRS agreed.

September 12, 2022: TIGTA released its report entitled, Reliance on Self-Certifications Resulted in Federal Agencies Awarding Contracts and Grants to Entities With Delinquent Federal Taxes; However, the IRS Is Making Progress on Establishing the Federal Contractor Tax Check System. TIGTA performed this audit because in Calendar Years 2015 and 2016, federal contracts were awarded to thousands of contractors with unpaid taxes that were most likely delinquent. Between October 2018 and December 2019, the federal government awarded 2.1 million federal contracts to more than 83,000 awardees. More than 3,000 contractors that received contracts owned $621.8 million in delinquent federal taxes, and 938 grantees received $22.7 billion in federal grants while owning $269.2 million in delinquent federal taxes.

September 12, 2022: The IRS issued minor corrections to Treasury Decision 9964, originally published August 16, 2022. The regulations define guidance for states regarding the process by which they may obtain or inspect certain returns and return information for the purpose of administering state laws governing certain tax-exempt organizations and their activities.

September [...]

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Courts Outline Boundaries of the Anti-Injunction Act Post-CIC Services

By , and on Aug 23, 2022
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Since the Supreme Court of the United States’ decision in CIC Servs., LLC v. IRS was issued in May 2021, courts have grappled with how to apply the Anti-Injunction Act (AIA) in other contexts. The US Court of Appeals for the Eleventh Circuit recently affirmed the dismissal of a lawsuit under the AIA in Hancock County Land Acquisitions, LLC v. United States, while the Court of Appeals for the First Circuit recently held that the AIA does not prevent a challenge to the Internal Revenue Service’s (IRS) use of John Doe summons in Harper v. Rettig.

In July, we posted about a circuit split between the Sixth and Eleventh Circuits over claimed Administrative Procedure Act (APA) violations. As discussed below, these post-CIC Services decisions are shaping the boundaries of challenges based upon the APA and the AIA.

THE ELEVENTH CIRCUIT

The taxpayer in this case reported a $180 million deduction for a conservation easement on land it owned in Mississippi. The IRS audited the taxpayer and requested an extension of the statute of limitations on assessment in Internal Revenue Code (IRC) Section 6501. The taxpayer initially declined, but 11 months after the request it agreed to extend the limitations period. At that point, the IRS had almost finished with its examination, and the parties never executed the extension. The IRS issued a Notice of Final Partnership Administrative Adjustment (FPAA), and the taxpayer was unable to pursue an administrative resolution with the IRS Office of Independent Appeals (IRS Appeals). The taxpayer filed suit in US federal district court, arguing, among other things, that the IRS violated the APA when it did not send the case to IRS Appeals, resulting in the taxpayer being deprived of pre-litigation administrative resolution of its tax dispute. The IRS moved to dismiss the complaint for lack of subject matter jurisdiction, which the district court granted.

On appeal, the taxpayer argued that the suit was not barred by the AIA, citing CIC Services. The Eleventh Circuit, however, explained that the three considerations that led to that conclusion in CIC Services were the “same three considerations [that] lead to the opposite conclusion here.” The Court found that the taxpayer: (1) would not be subject to any costs separate and apart from the tax penalty from the FPAA; (2) was on the cusp of liability when it filed its suit and (3) would not suffer any criminal punishment by following the AIA’s “familiar pay-now-sue-later procedure.” The Court stated, “at its heart, this suit is a ‘dispute over taxes,’” and it was far from clear that under no circumstances could the IRS prevail on the merits of the taxpayer’s claim.

THE FIRST CIRCUIT

In 2013, the taxpayer in this case opened an account with a digital currency exchange. He deposited bitcoin into his account in 2013 and 2014. In 2015, he started to liquidate his Bitcoin holdings, which lasted until 2016 when his holdings were depleted. At that [...]

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