On January 2, 2019, the outgoing Chair of the House Ways and Means Committee, Kevin Brady (R-TX), released the Tax Technical and Clerical Corrections Act (the Bill), addressing several technical issues associated with the Tax Cuts and Jobs Act (P.L. 115-97) (TCJA). The Bill includes certain provisions that, if enacted, would affirm Congress’ intent that taxpayers with an overpayment with respect to an installment payment of the transition tax under Internal Revenue Code (Code) Section 965 should be able to claim a credit or refund with respect to such amount. The provisions in the Bill with respect to Code Section 965 overpayments are largely consistent with similar draft legislation introduced on November 26, 2018 (the Retirement, Savings and Other Tax Relief Act of 2018 and the Taxpayer First Act of 2018, or H.R. 88; see prior discussion here). In particular, the Bill provides that where a taxpayer that made an election under Code Section 965(h)(1) to pay the net tax liability under Section 965 in installments has filed a request for a credit or refund with respect to an overpayment, the Internal Revenue Service cannot take any installment into account as a liability for purposes of determining whether an overpayment exists. If enacted, the Bill would permit taxpayers to claim a refund or credit with respect to an installment payment of the taxpayer’s transition tax under Code Section 965. Continue Reading Section 965 Transition Tax Overpayment Addressed in Technical Corrections

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 24 – 28, 2018:

December 28, 2018: The IRS released final regulations concerning the public approval requirement under section 147(f) of the Code for tax-exempt private activity bonds issued by state and local governments.

December 28, 2018: The IRS released proposed regulations addressing when tax-exempt bonds are treated as retired for purposes of sections 103 and 141 through 150 of the Code.

December 28, 2018: The IRS released Revenue Procedure 2019-12, providing safe harbors under section 162 of the Code for certain payments made to organizations described in section 170(c) of the Code, in reaction to the reduction, under the Tax Cuts and Jobs Act, in the deductibility of state and local taxes.

The weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice) was not released by the IRS on Friday. 

Special thanks to Le Chen in our 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 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.

On December 13, 2018, US Department of the Treasury and the Internal Revenue Service (IRS) released proposed regulations for the Base Erosion and Anti-Abuse Tax (the BEAT), which was added to the Code as part of the 2017 Tax Act. The proposed regulations provide helpful guidance on a range of important topics and generally go a long way toward a reasonable implementation of a very challenging statute. There is one aspect of the proposed regulations, however, that may be an unwelcome surprise for many taxpayers; the proposed regulations treat stock consideration in non-cash transactions as BEAT “payments,” thereby creating the potential for BEAT liability in situations involving certain liquidations, tax-free reorganizations and other non-cash transactions.

Located in section 59A, the BEAT imposes a minimum tax on US corporations (and certain foreign corporations, which are not the focus of this Insight) that consistently have annual gross receipts of $500 million or more and claim more than a de minimis amount of “base erosion tax benefits” for a taxable year. In general, as base erosion tax benefits increase, a corporate taxpayer’s BEAT liability increases.

The proposed regulations, which are generally proposed to be effective for tax years beginning after December 31, 2017, include guidance for determining the base erosion payments that will give rise to annual base erosion tax benefits. Prop. Reg. § 1.59A-3(b) applies the same four categories of base erosion payments found in section 59A(d) for amounts paid or accrued to a related foreign party. The two categories that should affect the most taxpayers are the general category for currently deductible items and the special category for the acquisition of depreciable or amortizable property. With respect to this latter category, the acquisition price of the property will constitute the base erosion payment, but only the amount of any depreciation or amortization deductions claimed in a tax year will produce a base erosion tax benefit for purposes of computing the BEAT.

Continue Reading Proposed BEAT Regulations | Tax-Free Transactions May Give Rise to a Liability

Recently proposed legislation would provide taxpayers who made an election under Internal Revenue Code (Code) Section 965(h) to pay the transition tax over eight years through installment payments the ability to claim a refund or credit of any overpayment with respect to such amounts.

If enacted, taxpayers would be able to claim a refund or credit on an overpayment with respect to their first installment payment under Code Section 965(h).

On November 26, 2018, House Ways and Means Committee Chair Kevin Brady, R-Texas, introduced the Retirement, Savings and Other Tax Relief Act of 2018 and the Taxpayer First Act of 2018 (H.R. 88), which was subsequently revised on December 17, 2018 (the Bill). The Bill is a broad tax package that includes certain tax extenders, retirement savings proposals, Internal Revenue Service (IRS) improvement legislation and several technical corrections to the Tax Cuts and Jobs Act (P.L. 115-97).

Continue Reading Tax Reform Insight: Congress Offers a Glimmer of Hope for Taxpayers with Section 965 Transition Tax Overpayment

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 10 –14, 2018:

December 10, 2018: The IRS issued Notice 2018-99, providing interim guidance on sections 274 and 512 of the Code, as amended by the Tax Cuts and Jobs Act, dealing with nondeductibile expenses for employer-provided parking.

December 10, 2018: The IRS issued Notice 2018-100, providing relief to tax-exempt organizations from penalties for underpayments related to nondeductible expenses for employer-provided parking under section 512 of the Code, as amended by the Tax Cuts and Jobs Act.

December 12, 2018: The IRS posted a set of FAQs to its website, answering questions regarding return filing and payment obligations under the transition tax of section 965 of the Code.

December 13, 2018: The IRS issued proposed regulations revising withholding requirements under the Foreign Account Tax Compliance Act (FATCA).

December 13, 2018: The IRS issued proposed regulations providing guidance on the Base Erosion and Anti-Abuse Tax (BEAT) of section 59A of the Code, enacted as part of the Tax Cuts and Jobs Act.

December 13, 2018: The IRS issued Revenue Procedure 2019-10, providing procedures for an insurance company to obtain automatic consent to change its accounting method to comply with section 807(f) of the Code, as amended by the Tax Cuts and Jobs Act.

December 14, 2018: The IRS issued Notice 2018-96, providing a phase-out schedule for the qualified plug-in electric drive motor vehicle credit on vehicles sold by Tesla, Inc.

December 14, 2018: The IRS issued Notice 2019-01, providing initial guidance on issues, arising from the enactment of the Tax Cuts and Jobs Act, related to previously taxed earnings and profits under section 959 of the Code.

December 14, 2018: The IRS issued Notice 2019-02, providing the 2019 optional standard mileage rates for use in computing deductible expenses in operating an automobile, plus related information.

December 14, 2018: The IRS issued Notice 2019-03, providing the monthly update to interest rates used for pension plan funding and distribution purposes.

December 14, 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.

On November 28, 2018, the IRS issued a memorandum to its Appeals division employees, providing guidance on how and where to conduct Appeals conferences with taxpayers. As we have previously reported, the IRS Appeals division has been in flux for the last several years constrained by limited resources, retiring Appeals Officers, and an ever-growing case load. Because taxpayers have a right to seek redress before an independent Appeals Officer, the IRS has been exploring different ways to use technology to hold virtual taxpayer conferences. Numerous taxpayers, however, continue to believe that an in-person conference is the most efficient and beneficial way to resolve their differences with the IRS. Apparently, the IRS recognizes this as well.

In a memorandum to Appeals employees, the IRS provides “interim” guidance for in-person conferences. The memo includes revisions to the Internal Revenue Manual. Of particular note is the ability of IRS Appeals to send cases to offices that can accommodate in-person conferences. Additionally, there is a clear mandate to hold Appeals conferences (upon approval of a manager) in “other federal buildings, when feasible and necessary to provide a conference opportunity.”

Practice Point: We are big fans of in-person Appeals Conferences. Although holding a conference over the phone or through some internet portal may save travel time and expense, it is typically a poor substitution for face-to-face negotiations. Consider how much easier it is to tell your daughter that she cannot go to the mall with her friends on the phone versus to an in-person plea! An Appeals Officer measures the settlement possibilities by a “hazards of litigation” standard. Part of that analysis may include sizing up the taxpayer and representative, their case, and willingness to “go all of the way.”

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 3 – 7, 2018:

December 4, 2018: The IRS issued a news release granting taxpayers an extra day, until Thursday, December 6, 2018, to file any return or pay any tax originally due on Wednesday, December 5, 2018, in light of the Executive Order closing all federal agencies on December 5, 2018, as a mark of respect for President George H.W. Bush.

December 4, 2018: The IRS issued Notice 2018-95, providing transition relief from the “once-in-always-in” condition for excluding part-time employees under Treas. Reg. § 1.403(b)-5(b)(4)(iii)(B).

December 6, 2018: The IRS in Revenue Ruling 2018-32 released the interest rates for underpayments and overpayments applicable for the calendar quarter beginning January 1, 2019.

December 7, 2018: The IRS issued Notice 2018-97, providing initial guidance on the application of section 83(i) of the Code, enacted in the Tax Cuts and Jobs Act, which allows qualified employees of privately held corporations to defer paying income tax—for up to five years—on the value of qualified stock options and restricted stock units granted to them by their employers.

December 7, 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.

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of November 26 – 30, 2018:

November 26, 2018: The IRS issued the proposed regulations under Code Section 163(j) regarding the limitations on business interest expense deductions after the enactment of the Tax Cuts and Jobs Act.

November 26, 2018: The IRS released basic questions and answers regarding the limitations on business interest deductions under Code Section 163(j).

November 27, 2018: The IRS issued Revenue Procedure 2018-59, which provides a safe harbor that allows taxpayers to treat certain infrastructure trades or businesses as real property trades or businesses solely for purposes of qualifying as an electing real property trade or business under Code Section 163(j)(7)(B).

November 28, 2018: The IRS issued the proposed regulations under Code Section 904, providing guidance on the new foreign tax credits rules as amended by the Tax Cuts and Jobs Act.

November 29, 2018: The IRS issued Revenue Procedure 2018-60, which provides the procedures to obtain the automatic consent of the Commissioner under Code Section 446 and Treasury Regulation Section 1.446-1(e) to change a method of accounting to comply with Code Section 451(b), as amended by the Tax Cuts and Jobs Act.

November 30, 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 Alex Cheng-Yi Lee in our DC office for this week’s roundup.