The Internal Revenue Service (IRS) has issued PMTA 2018-016, reaffirming its position that for taxpayers making an election under Internal Revenue Code (Code) Section 965(h) to pay the transition tax over eight years through installment payments, any overpayments of 2017 tax liabilities cannot be used as credits for 2018 estimated tax payments or refunded, unless and until the overpayment amount exceeds the full eight years of installment payments.
The IRS’s position has affected many taxpayers, and practitioners expressed their concerns to the IRS to no avail.
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.
Presented below is our summary of significant IRS guidance and relevant tax matters for the week of August 6 – 10, 2018:
August 6, 2018: The IRS and Treasury issued final regulations, which provide guidance regarding the new partnership audit rules. The regulations describe the procedure for designating a partnership representative and the partnership representative’s authority. They also address the time, form and manner of an election to apply the new audit regime to prior partnership tax years.
August 6, 2018: The IRS published Revenue Procedure 2018-40, which describes procedures for small businesses to obtain automatic consent for changing an accounting method to a new method established under the TCJA (P.L. 115-97).
August 7, 2018: The IRS published an updated subject matter directory, available here.
August 8, 2018: The IRS published proposed regulations under new section 199A, which provides a 20 percent deduction for qualifying income earned by certain non-corporate taxpayers during tax years beginning after December 31, 2018. The proposed regulations address which taxpayers are eligible for the deduction and provide guidance regarding the computation of the deduction.
August 8, 2018: The IRS released Notice 2018-64, which includes a proposed revenue procedure that would provide guidance regarding calculating W-2 wages for purposes of the section 199A deduction.
August 10, 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.
Presented below is our weekly roundup for July 30 – August 3, 2018 on significant IRS guidance and relevant tax matters.
July 31, 2018: In Notice 2018-58, the IRS stated that it intends to issue regulations clarifying new rules governing section 529 contributions.
July 31, 2018: The IRS published three new frequently asked questions (Certifications and Period Reviews FAQs 14-16) regarding Foreign Account Tax Compliance Act (FATCA) compliance for qualified intermediaries and qualified derivatives dealers related to account documentation review.
August 1, 2018: The IRS issued proposed regulations addressing the one-time section 965 “transition tax” imposed on US shareholders of certain foreign corporations.
August 1, 2018: Final regulations granted taxpayers a single non-automatic 30-day extension to file Form W-2.
August 2, 2018: A report published by the Treasury Inspector General for Tax Administration (TIGTA) made eight recommendations to the IRS for improving security over taxpayer data.
August 3, 2018: The IRS released proposed regulations under section 168(k), providing guidance regarding the additional first-year depreciation deduction for certain property placed in service between September 28, 2017 and December 31, 2022. The proposed regulations address the interaction of section 168(k) and certain partnership tax rules as well as other topics.
Special thanks to Kevin Hall in our DC office for this week’s roundup.
On March 28, 2017, the US Tax Court (Tax Court) issued its opinion in Good Fortune Shipping SA v. Commissioner, 148 T.C. No. 10, upholding the validity of Treas. Reg. § 1.883-4. The taxpayer had challenged the validity of the regulation’s provision that stock in the form of “bearer shares” cannot be counted for purposes of determining the more-than-50-percent ownership test under Internal Revenue Code (Code) section 883(c)(1), but the Tax Court held that the regulation was valid under the two-step analysis of Chevron USA, Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984), and applied it in ruling for the Internal Revenue Service (IRS). We previously discussed the Tax Court’s opinion here. The taxpayer appealed the Tax Court’s decision to the US Court of Appeals for the District of Columbia Circuit (DC Circuit).
We previously posted on the Order by the US District Court for the Western District of Texas in Chamber of Commerce of the United States of America, et al. v. Internal Revenue Service, Dkt. No. 1:16-CV-944-LY (W.D. Tex. Sept. 29, 2017). To recap, the district court held that Treas. Reg. § 1.7874-8T was unlawfully issued because it violated the Administrative Procedures Act (APA) by not providing affected parties with notice and an opportunity to comment on the temporary regulations. In addition to the APA analysis, the court’s Order was noteworthy for its conclusion that the plaintiff’s claims were not barred by the Anti-Injunction Act because the regulations did not involve assessment or collection of tax.
As we updated our readers, the government appealed the Order to the Court of Appeals for the Fifth Circuit. However, the case was stayed while the regulation underwent notice and comment. And, on July 11, 2018, Treasury and the Internal Revenue Service issued final regulations addressing inversion standards. On July 26, 2018, the government moved to dismiss its appeal with prejudice as moot. The Fifth Circuit has granted the government’s motion, thus ending the dispute.
Because the case was dismissed by the Fifth Circuit, the district court’s Order remains on the books. But what value does that Order have? As a technical matter, district court opinions are not precedential. However, lack of precedential value does not render the Order meaningless. If another court addressing a similar issue were to find the district court’s analysis to be well-reasoned and thorough, it might consider it persuasive on deciding the issue. One would certainly expect that a subsequent court would, at a minimum, have to address the Order if faced with a similar issue. For more reading on the precedential and persuasive value of opinions and order, see here.
Practice Point: The Order in the Chamber of Commerce case may be helpful to taxpayers desiring to challenge regulations on APA grounds and provides authority for a pre-enforcement challenge. It remains to be seen whether other courts will find the Order persuasive.
Presented below is our weekly roundup for July 23 – 27, 2018 on significant IRS guidance and relevant tax matters.
July 20, 2018: The IRS has updated its FAQ list for the Foreign Account Tax Compliance Act (FATCA) including new questions and answers regarding the IRS’s updated processing system and certifications for compliance.
July 23, 2018: In Publication 5118, the IRS released the July updated version of the FATCA Online Registration User Guide. This includes, among other additions, changes to enable for financial institutions to submit certifications of pre-existing accounts and periodic certifications.
July 27, 2018: The IRS issued TD 9836 containing final regulations regarding the substantiation and reporting rules for cash and noncash charitable contributions. The regulations provide guidance to individuals, partnerships and corporations.
July 27, 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 Christy Vouri-Misso and Greg Berson in our DC office for this week’s roundup.
On July 18, 2018, the Internal Revenue Service (IRS) released a Practice Unit advising IRS agents on the framework to follow in analyzing the tax treatment of transaction costs incurred by taxpayers in executing business practices. The latest Practice Unit provides guidance to IRS examiners in determining whether transaction costs must be capitalized or can be immediately deducted, and focuses on the so-called INDOPCO regulations contained in Treasury Regulation § 1.263-5. (For more information and background, see here.)
According to the Practice Unit, there is a three-step process applied to analyze a transaction costs issue:
Determine whether the taxpayer is the proper legal entity to take the transaction costs into account for tax purposes;
Determine whether the costs facilitate the transaction; and
Determine how the taxpayer should treat facilitative costs it must capitalize.
The key considerations and outcomes for each step are illustrated in the Practice Unit as follows:
Practice Point: Determining whether transaction costs must be capitalized or can be deducted is sometimes a difficult process. The IRS has attempted to create bright-line rules in this area, but invariably there are factual situations not covered by the INDOPCO regulations and disputes that may arise. Understanding the IRS’s approach to examining transaction costs, as set forth in this Practice Unit, may assist taxpayers under examination in resolving these types of issues.
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.
Presented below is our weekly roundup for July 9 – 13, 2018 on significant IRS matters.
July 9, 2018: The IRS released Internal Revenue Bulletin No. 2018-28 including: Notice 2018-48 (lists the population census tracts designated as qualified opportunity zones); Notice 2018-59 (provides two methods for taxpayers to begin construction for the investment tax credit under Section 48); Announcement 2018-11 (Office of Professional Responsibility [OPR] announces recent disciplinary sanctions); Rev. Rul. 2018-20 (rendering obsolete several previous revenue rulings); and Rev. Proc. 2018-35 (modifying Rev. Proc. 2018-31 regarding accounting methods for citrus plant replanting costs).
July 11, 2018: The IRS issued final regulations (T.D. 9834) addressing inversion transactions structured to avoid the purposes of sections 7874 and 367 and other post-inversion tax avoidance transactions.
July 13, 2018: The IRS issued proposed regulations (REG-103474-18) related to the Code section 6695(g) return preparer penalty amending previous guidance to reflect changes made by 2017 federal tax reform.
July 13, 2018: The IRS released it weekly list of written determination (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.
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