We are pleased to share that partner and blog editor Kevin Spencer was recognized as a leading author in the Lexology Legal Influencers Q2 2021 for Corporate – US. He is acknowledged for his continued contributions of high-quality legal content.
Through our various blogs, thought leadership pieces and tax-focused events, we are dedicated to maintaining our position as a leading firm for tax work and keeping clients abreast of significant and relevant topics in the industry.
Our Tax Practice Group recently wrote an article for the American Bar Association’s quarterly newsletter on pro bono matters entitled, “A Team Effort by Tax Helpers.” The article discusses our recent pro bono efforts, which includes teaming up with a low income taxpayer clinic in a docketed Tax Court case. (The full article can be accessed here.)
As we have written in the past, we believe tax practitioners should strive to assist low income taxpayers in their disputes with the Internal Revenue Service to ensure taxpayers of limited means have access to full and adequate representation. We know many other law firms and tax volunteers provide such pro bono services and we look forward to continuing to help those in need.
US law enforcement continues to make no secret of their efforts to work closely with experts and overseas partners to prosecute those involved in virtual currency transactions who attempt to rely on its purported anonymity to commit financial crimes. Tuesday’s arrest of Roman Sterlingov, a dual citizen of Russia and Sweden and alleged operator of Bitcoin Fog, in Los Angeles is a clear case that these efforts are paying dividends. In a criminal complaint filed by the US Attorney’s Office for the District of Columbia, Sterlingov is accused of laundering hundreds of millions of dollars’ worth of bitcoin. According to a statement of facts accompanying the complaint filed in the District of Columbia, Sterlingov was allegedly running “an illicit bitcoin money transmitting and money laundering service.” (Case 1:21-mj-00400-RMM Document 1-1 Filed 04/26/21.) Notably, investigators from the Internal Revenue Service (IRS) and Federal Bureau of Investigation (FBI) were able to obtain records of Sterlingov’s True Name accounts at several cryptocurrency exchanges. Investigators also analyzed bitcoin transactions, email records, financial records and internet service provider records. The investigation and arrest come at a time when the IRS, together with other enforcement agencies, are taking a hard look at cryptocurrency activity and have recently issued John Doe summonses to two virtual currency exchanges.
The collaboration with private experts and international partners is clear from the press release issued by the US Department of Justice (DOJ). In recognizing the many agencies that assisted in the investigation, the DOJ specifically stated that essential support was provided by Excygent, which is described on its website “as a highly specialized, professional services firm that assists organizations in both the public and private sectors with cybercrime investigative and analysis capabilities.” The DOJ also listed several US agencies that provided invaluable assistance and went on to include international partners: Europol, the Swedish Economic Crime Authority, the Swedish Prosecution Authority, the Swedish Police and the General Inspectorate of Romanian Police, Directorate for Combatting Organized Crime and the Directorate for Investigating Organized Crime and Terrorism. This ability to collaborate successfully will most likely serve as a blueprint for future investigations.
Practice Point: As we noted in our blog post, “Finding John Doe: IRS Steps up Enforcement Efforts to Take the Anonymity Out of Virtual Currency,” the time is now for those who have engaged in a virtual currency transaction to assess any potential tax and criminal implications, and businesses in this industry should carefully review their policies and processes to ensure that they address potential tax avoidance and anti-money laundering risks associated with their operations. The IRS is working closely with its new partners (i.e., industry experts and foreign law enforcement) to address any noncompliance. As announced recently by US President Joe Biden, he plans to give them the resources to do more on enforcement.
We greatly appreciate our readers over the past year and are pleased to share that we were recently recognized as the #1 Firm for tax thought leadership in the 2021 JD Supra Readers’ Choice Awards, which acknowledge top authors and firms for their thought leadership in key topics during all of last year. In addition, partner and blog editor Andrea Kramer was recognized as a “Top Author” for tax.
Through our various blogs, thought leadership pieces and tax-focused events, we are dedicated to maintaining our position as a leading firm for tax work and keeping clients abreast of significant and relevant topics in the industry.
Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 18 – May 22, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.
May 18, 2020: The U.S. Tax Court announced that comments to the proposed amendments to the Rules of its Practice and Procedure should be emailed to Stephanie A. Servoss, Clerk of the Court, at Rules@ustaxcourt.gov. The Tax Court has not received mail since March 19, 2020.
May 18, 2020: The IRS added approximately 3,500 phone operators to answer Economic Impact Payment (EIP) questions.
May 19, 2020: The Large Business & International (LB&I) released information regarding the Swiss Bank Program Campaign. The program allows Swiss financial institutions to provide information on the U.S. persons with beneficial ownership of foreign financial accounts. The campaign will address noncompliance of such taxpayers.
May 20, 2020: The IRS announced that Andy Keyso has been selected to serve as the Chief of the IRS Independent Office of Appeals, the IRS announced. For more information on Mr. Keyso and IRS Appeals, see our write-up here.
May 21, 2020: The IRS announced that the 2020 IRS Nationwide Tax Forums will be held virtually in 2020 with a series of live-streamed webinars beginning this July. The 2020 Nationwide Tax Forums will begin on July 21 and continue through August 20.
May 22, 2020: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).
Special thanks to Emily Mussio in our Chicago office for this week’s roundup.
On May 20, 2020, the Internal Revenue Service (IRS) announced that Andy Keyso has been named Chief of the IRS Independent Office of Appeals. He replaces Donna Hansberry, who retired in December 2019.
Mr. Keyso is a long time veteran of the IRS, with more than 25 years of service. During his career, he has held numerous positions within the IRS, including serving as the IRS Chief of Staff, 18 years in various positions in the IRS Office of Chief Counsel, including as Associate Chief Counsel of the Income Tax and Accounting Division. Mr. Keyso also served as Special Counsel to the Chief Counsel and as an attorney in the Procedure and Administration Division. Before coming to Washington, DC, Mr. Keyso worked in the field as a revenue agent in the former Newark, New Jersey District, where he later served as a technical advisor to the Chief, Examination Division. Since July 2017, Mr. Keyso has been the Deputy Chief of Appeals and acting Appeals Chief.
Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 11 – May 15, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.
May 12, 2020: The IRS issued proposed regulations concerning the application of IRC § 162(f), as amended by the Tax Cuts and Jobs Act. The proposed regulations provide that taxpayers may not deduct amounts that, pursuant to court orders or settlement agreements, are paid to, or at the direction of, governments in relation to the violation of any law or the investigation or inquiry into the potential violation of any law.
May 13, 2020: The IRS and the Department of Treasury provided a notice of public hearing for the source of income from certain sales of property under IRC § 863 on June 3, 2020.
May 15, 2020: The IRS expanded partner for Economic Impact Payments to provide information in multiple languages to aid with outreach.
May 15, 2020: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).
Special thanks to Emily Mussio in our Chicago 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 May 4 – May 8, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.
May 7, 2020: The IRS issued proposed regulations that provide guidance for estates and trusts clarifying that certain deductions of estates and non-grantor trusts are not miscellaneous itemized deductions. The proposed regulations also provide guidance on determining the character, amount and allocation of deductions in excess of gross income succeeded to by a beneficiary on the termination of an estate or non-grantor trust.
May 8, 2020: The Large Business & International (LB&I) Division of the IRS released an update to the Practice Unit titled Official Versus Free Market Exchange Rate. The update covers determining the appropriate exchange rate used to translate foreign currency amounts. The unit supersedes the previously published Practice Unit with the same title published on December 20, 2016. It was updated to include Argentina as a hyperinflationary economy.
May 8, 2020: The LB&I Division released a Practice Unit on the Overview of IRC 986(c) Gain or Loss Prior to Tax Cuts and Jobs Act of 2017 to address foreign currency gain or loss on the distribution of previously taxed income by a controlled foreign corporation to a US shareholder.
May 8, 2020: The LB&I Division released a Practice Unit on IRC 481(a) Adjustments for IRC 263A Accounting Method Changes. The updated Practice Unit focuses on a change to the treatment of IRC § 263A costs that require the IRS to compute an IRC § 481(a) adjustment and notify the taxpayer that it is treating the accounting method issue as a change in accounting method and also provides examples of such change.
May 8, 2020: The LB&I Division released a Practice Unit on the Foreign Earned Income Exclusion Adjustment. The materials outline the steps on calculating the exclusion adjustment, which include: (1) determining the amount of foreign income excluded; (2) determining the amount of foreign taxes allocable to excluded foreign income; and (3) computing the foreign earned income exclusion adjustment.
May 8, 2020: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).
Special thanks to Emily Mussio in our Chicago office for this week’s roundup.
In response to a series of questions posed in a November 2019 letter from Senator Menendez (D-NJ), the Treasury Inspector General for Tax Administration (TIGTA) issued a letter on April 15, 2020, analyzing carbon oxide credits under Internal Revenue Code (IRC) section 45Q. For tax years between 2010 and 2019, TIGTA found that up to 87% of the value of the credits claimed were not in compliance with Environmental Protection Agency (EPA) monitoring, reporting, and verification requirements.
IRC section 45Q provides a credit to taxpayers that capture and sequester carbon oxide. The credit was initially enacted into law in 2008, then substantially revised in 2018. As part of the revisions, the credit was expanded from solely carbon dioxide capture to include a broader set of carbon oxide emissions. This substantially expanded the class of taxpayers eligible to claim the credit. Although Treasury released some guidance in February 2020, there are still many unresolved questions about the expanded carbon oxide credit, and many taxpayers are waiting to move forward with additional projects pending release of that guidance.
The TIGTA analysis covers tax years 2010–2019, so it will primarily include carbon dioxide projects. The letter reports that only 10 out of the 672 taxpayers who claimed the IRC section 45Q credit received over $1 million in credits, and these 10 taxpayers represent 99.86% of the total value of all IRC section 45Q credits, around $1.02 billion. An examination of return data found that 87% of the credits claimed by these 10 taxpayers may have been improper because there was not an approved EPA monitoring, reporting, and verification plan in place when the credits were claimed. TIGTA reported that the IRS had already taken action against 4 of these 10 taxpayers—disallowing approximately 60% of the improperly claimed credits. Additional enforcement activity may target taxpayers who claimed large amounts of carbon sequestration credits.
Practice Point: Taxpayers considering investing in carbon oxide sequestration projects should perform extensive diligence on the project and make sure that they technically meet the requirements. We expect that carbon sequestration projects may come under increased scrutiny and result in more audits going forward. Spending the time and resources to ensure that your project conforms to the rules will save you money if the IRS denies your credits. Additionally, make sure to contemporaneously document your efforts to follow the rules; this may assist in penalty abatement if asserted.
More than three years ago, the Internal Revenue Service (IRS) revised the Internal Revenue Manual to provide IRS Appeals Division (Appeals) with discretion to invite representatives from the IRS Examination Division (Exam) and IRS Office of Chief Counsel (Counsel) to the Appeals conference. The IRS also started a three-year initiative for taxpayers under the Large Business & International (LB&I) Division with cases assigned to Appeals Team Case Leaders (ATCLs). Under the initiative, LB&I personnel from Exam and Counsel were invited to the non-settlement portion of the taxpayer’s Appeals conference to test whether the participation of both parties would assist Appeals in narrowing and resolving complex factual and legal differences.
The IRS announced that the initiative ended on May 1, 2020. The IRS has invited comments from the public about the initiative and its effectiveness. Such comments should be submitted by August 31, 2020.
Subscribe
