TAX CONTROVERSY 360
TAX CONTROVERSY 360
McDermott Will & Schulte’s real-time tax disputes insights
TAX CONTROVERSY 360
McDermott Will & Schulte’s real-time tax disputes insights
Tax Reform
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IRS Implementation of Tax Reform Continues to Move Forward

by | May 24, 2018 | , ,

The Internal Revenue Service (IRS) has been busy in recent months working on implementing the recent tax reform legislation. The latest announcement by the IRS focuses on the $10,000 cap on the amount of state and local taxes that can be deducted for federal income tax purposes. In a press release and release of guidance in the form of Notice 2018-54, the IRS announced that proposed regulations will be issued addressing this issue to help taxpayers understand the relationship between federal charitable contribution deductions in exchange for a tax credit against state and local taxes owed. The press release, Notice and forthcoming proposed regulations are in response to workarounds by various high property tax states allowing local governments to set up charitable organizations that can accept property tax statements. Based on these materials, it is anticipated that the IRS will disagree with the workarounds:

The Treasury Department and the IRS intend to propose regulations addressing the federal income tax treatment of transfers to funds controlled by state and local governments (or other state-specified transferees) that the transferor can treat in whole or in part as satisfying state and local tax obligations. The proposed regulations will make clear that the requirements of the Internal Revenue Code, informed by substance-over-form principles, govern the federal income tax treatment of such transfers. The proposed regulations will assist taxpayers in understanding the relationship between the federal charitable contribution deduction and the new statutory limitation on the deduction for state and local tax payments.

The IRS’s website provides information on the latest IRS news releases, fact sheets and statements. Additionally, we have a dedicated webpage with insights on significant developments related to tax reform.



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LB&I Announces Six New Campaigns

by and | May 22, 2018 | , ,

On May 21, 2018, the Internal Revenue Service (IRS) Large Business and International Division (LB&I) announced the identification and selection of six new campaigns. These new campaigns follow the initial 13 campaigns announced on January 31, 2017, followed by 11 campaigns announced on November 3, 2017, and 5 campaigns announced on March 13, 2018. (more…)



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Treasury Releases Report on Regulatory Reform Accomplishments

by | Apr 30, 2018 | , ,

On April 24, 2018, the US Department of the Treasury (Treasury) released a report (Report) outlining the efforts undertaken to-date by Treasury to implement the president’s regulatory reform agenda.  The efforts have been in furtherance of President Trump’s Executive Order 13771 and Executive Order 13789 calling for a reduction in regulatory burdens and costs.

The Report highlights Treasury’s extensive efforts to support President Trump’s regulatory reform agenda.  In particular, the Report provides that Treasury has:

  • Reduced its regulatory agenda by approximately 100 regulations from its Fall 2017 agenda
  • Issued a notice to eliminate almost 300 “deadwood” tax regulations that are duplicative or obsolete
  • Withdrawn two regulations deemed “significant” in an October 2017 report (see prior discussion here)
  • Issued a series of reporting providing specific recommendations to make the US financial regulatory system more efficient

The Report also provides that, since the issuance of Executive Order 13771 (outlining the Trump administration’s “one-in-two-out” principle), Treasury has focused on burden-reducing measures and that no new “regulatory” actions have been undertaken.  Rather, actions from Treasury’s fall 2017 agenda have either been identified as “deregulatory” or have not yet been classified.

The Report also notes that Treasury has also undertaken a retrospective review of significant recent tax regulations pursuant to Executive Order 13789 and identified eight regulations for rescission or modification (largely consistent with the October 2017 report).

Treasury has indicated that these actions will “advance the President’s policy of regulatory efficiency in support of lower individual and corporate compliance burdens.”

Practice Point:  Taxpayers should continue to monitor Treasury’s action with respect to regulatory reform, especially in light of the regulatory process in connection with US tax reform.



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A 360-Degree View: March and April 2018

by | Apr 5, 2018 | , ,

Wrapping Up March – and Looking Forward to April

Top March Posts You May Have Missed

White House Intends to Nominate Michael J. Desmond to High-Level Roles in the IRS and the Department of Treasury

The IRS May Be Coming for Your Bitcoins

Tax Court Judicial Conference This Week in Chicago

Upcoming Tax Controversy Activities in April

Our lawyers will present on key tax topics during the month of April. We hope to see you soon.

April 24, 2018: Todd Welty, Kristen Hazel, Elizabeth Erickson, John Lutz and Andrew Roberson will present “Taking Reasonable Positions and Retroactive Regulations” at McDermott’s Inaugural Tax Symposium in our Chicago office. The panel will address Gottesman, the ability of IRS to issue retroactive regulations, IRS authority issues, and impacts on return positions.

Led by our senior practitioners, our 2018 Symposium is a must-attend event for senior tax and employee benefits leaders seeking to optimize the opportunities and navigate the risks brought about by tax reform legislation.

April 30, 2018: Thomas Jones will present “Captive Insurance Tax Reform Update” at the Captive Insurance Council of the District of Columbia in Washington, DC. Captive Insurance has undergone a number of changes since the tax reform movement and our partner Tom Jones will cover the new regulations that your organization should be aware of.



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Deference Provided to Regulations When There’s a Drafting Error

by and | Apr 4, 2018 | ,

The Tax Act created two new foreign tax credit limitation baskets – one for foreign branch income (new section 904(d)(1)(B)) and one for any amount includible in gross income under section 951A (i.e., GILTI) – however, it failed to amend section 904(d)(2)(H)(i) to reflect these changes to section 904(d)(1). As a result of this oversight, section 904(d)(2)(H)(i) currently instructs the taxpayer to treat foreign taxes imposed on amounts that do not constitute income under US principles as imposed on income described in the foreign branch income basket. In light of legislative history and Treasury regulations, such a failure to amend the Code appears to be a drafting error. This article addresses the relevant case law that, on balance, supports applying section 904(d)(2)(H)(i) as if its language and cross-reference had been properly amended.

Access the full article.



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IRS Funding Woes Realized? Audit Rate at 15-Year Low!

by and | Mar 30, 2018 | , , , , ,

A shrinking Internal Revenue Budget (IRS) budget has meant that fewer agents are available to make sure that the tax laws are being enforced. We have reported previously about how Congress has decreased the IRS’s budget.  In 2017, the audit rate fell to its lowest levels in 15 years because of a shrinking IRS budget and workforce. Indeed, your chance of being audited fell to 0.6% in 2017, the lowest rate since 2002. Similarly, tax collection levies fell 32% from the prior year, and the IRS filed 5% fewer liens year-over-year. Detailed information from the IRS can be found here.

Practice Point. The decreased funding of the IRS in the wake of bipartisan disagreements seems to have quelled in recent weeks. We have seen movement to get the IRS more funding in the wake of tax reform but it remains to be seen whether some of those funds will be used to increase the enforcement functions of the IRS. We anticipate, however, an increase in enforcement activity as a result of some of the positions taken by taxpayers in anticipation of tax reform and the myriad of interpretive questions that are expected to result from the new tax laws.



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Federal Tax Reform Reaches the States

by | Mar 20, 2018 | ,

As the Tax Cuts and Jobs Act (TCJA) has rolled out at the federal level, its impacts have been felt widely in the field of state and local taxation. McDermott’s Inside Salt blog has published a series of posts over the last few months addressing the different effects of the TCJA at the state level throughout the country, which can be found here. This week, Inside Salt addresses TCJA’s effects in New York, Idaho, Iowa and Minnesota.

For McDermott’s comprehensive insights into federal tax reform, please visit our federal tax reform website.



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Are LB&I’s Campaigns Stuck in the Trenches?

by | Mar 14, 2018 | , , ,

In January 2017, the Internal Revenue Service (IRS) Large Business & International (LB&I) Division released its announcement related to the identification and selection of its campaigns. The primary purpose of the campaigns was to end the resource intensive continuous audit program (where the LB&I audits a large taxpayer year after year for decades) and a move to an issue focused coordinated approach. LB&I originally identified 13 campaign issues and in November 2017, identified 11 additional campaigns and on March 13, 2018, identified 5 additional campaigns. We have extensively discussed LB&I’s campaign examination process including posts on Understanding LB&I “Campaigns”, Run for Cover – IRS Unveils Initial “Campaigns” for Audit, IRS Continues to Barrage Taxpayers with New Campaigns.

At the March 9 meeting of the Federal Bar Association Section on Taxation, an LB&I executive indicated that the rollout of the campaigns may have hit a snag. John Hinding, Director of Cross Border Activities at LB&I, reported that “the campaign work is still a minority of our work,” and its implementation has been slow going. According to Hinding, “A lot of the issue spotting that we’d like to do is driven by data analysis, and changes to systems to allow that is a lengthy process to get in place.” (more…)



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