McDermott’s Real-Time Tax Disputes Insights
Andy Roberson, Kevin Spencer and Emily Mussio recently authored an article for Law360 entitled, “A Look At Tax Code Section 199’s Last Stand.” The article discusses the IRS’s contentious history in handling Code Section 199 and the taxpayers’ continued battle to claim the benefit – even after its recent repeal.
Originally published in Law360, November 2018.
The Internal Revenue Service (IRS) Large Business and International (LB&I) Division continues to churn out new audit “campaigns.” The most recent announcement on October 30, 2018, identifies five new campaigns, which were identified through LB&I data analysis and suggestions from IRS employees. With the addition of these new campaigns, LB&I has now identified 50 campaigns since the program’s initial release on January 13, 2017.
The five new LB&I campaigns are listed verbatim by title and description.
Individual Foreign Tax Credit Phase II
Section 901 of the Internal Revenue Code alleviates double taxation through a dollar-for-dollar credit against U.S. tax on foreign-sourced income in the amount of foreign taxes paid on that income.
Individuals who meet certain requirements may qualify for the foreign tax credit. This campaign addresses taxpayers who have claimed the credit but do not meet the requirements. The IRS will address noncompliance through a variety of treatment streams, including examination. Continue Reading The LB&I Campaigns Keep Coming!
Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of October 22 – 26, 2018:
October 23, 2018: The IRS released an updated Form 1040 Schedule B for reporting interest and ordinary dividends and draft Form 1120 Schedule D instructions for reporting capital gains and losses. Both documents include changes made to reflect the Tax Cuts and Jobs Act.
October 25, 2018: The IRS released IRS Tax Reform Tax Tip 2018-166, which advises business owners of the basics regarding potential deductions under Internal Revenue Code Section 199A for domestic businesses operated as sole proprietorships or through partnerships, S corporations, trusts and estates.
October 25, 2018: The IRS released Internal Revenue Bulletin 2018-44, dated October 29, 2018, which includes REG-104872-18, Notice 2018-82 and Revenue Procedure 2018-51.
October 26, 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.
Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of October 15 – 19, 2018:
October 16, 2018: The IRS issued Rev. Proc. 2018-54, which sets forth procedural rules for certain taxpayers that hold investments in one or more segregated asset accounts to elect to treat certain mortgage-backed securities as having deemed issuers for purposes of the diversification requirements of Internal Revenue Code (Code) Section 817(h).
October 17, 2018: The IRS, in Qualified Intermediaries News, reminded entities seeking Qualified Intermediary, Withholding Partnership or Withholding Foreign Trust status with a withholding agreement effective in 2018 that the deadline for submitting the applications is November 16, 2018.
October 18, 2018: The IRS issued Notice 2018-81, which describes the manner in which taxpayers should notify the IRS of revocation of an election to aggregate or disaggregate certain church-related organizations from treatment as a single employer under Code Section 414(c)(2)(C) and (D).
October 18, 2018: The IRS issued Notice 2018-84, which clarifies the suspension of the personal exemption deduction in the newly-added section 151(d)(5) under certain rules in section 36B and section 6011.
October 19, 2018: The IRS issued proposed regulations for investment in opportunity zones, providing guidance on under new Code Section 1400Z-2 relating to gains that may be deferred as a result of a taxpayer’s investment in a qualified opportunity fund.
October 19, 2018: The IRS issued Rev. Rul. 2018-19, which provides guidance on the requirement of original use with respect to land purchased after 2017 in qualified opportunity zones.
October 19, 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.
Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of October 8 – 12, 2018:
October 8, 2018: IRS issued a special update in Questions and Answers about Reporting Related to Section 965 on 2017 Tax Returns, providing that transfer agreements under Prop. Reg. § 1.965-7 filed in accordance with the future guidance after the deadline, October 9, 2018, will nevertheless be considered timely filed.
October 9, 2018: IRS advised small business owners and self-employed individuals to use the resources it has provided, including a fact sheet highlighting the changes by the Tax Cuts and Jobs Act affecting them, to understand their tax responsibilities.
October 12, 2018: IRS released proposed regulations scheduled to be published in the Federal Register on October 17, 2018, which clarify how taxpayers may waive penalties for low-dollar mistakes as a result of incorrect information returns or inaccurate payee statements.
October 12, 2018: IRS filed proposed regulations removing Treas. Reg. § 1.451-5, which currently allow taxpayers to defer the inclusion of income from advance payments for goods and long-term contracts. Comments and public hearing requests are due by January 14, 2019.
October 12, 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.
Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of September 24 – 28, 2018:
September 25, 2018: The IRS announced a study regarding the active trade or business requirements under section 355(b) and stated that it is considering guidance on whether a business can qualify as an active trade or business if entrepreneurial activities, as opposed to investment or other non-business activities, take place with the purpose of earning income in the future, but no income has yet been collected in order to give more ventures access to tax-free spinoff under section 355(b).
September 25, 2018: The IRS issued a statement on the reorganization of the Advance Pricing and Mutual Agreement program, which will merge its economists and non-economists to facilitate the collaboration between team members and optimize economist involvement.
September 27, 2018: The IRS announced in Notice 2018-80 that it will issue proposed regulations providing that accrued market discount is not includable in income under section 451(b), which was added by 2017 tax reform.
September 27, 2018: The IRS issued a release reminding taxpayers ahead of the October 15 tax-filing extension deadline to be aware of criminal who continue to using devious tactics to steal money and personal information from unsuspecting taxpayers.
September 28, 2018: The IRs issued a discussion document regarding recalibration of the Compliance Assurance Process (CAP) program.
September 28, 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.
Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of September 17 – 21, 2018:
September 17, 2018: The Treasury Inspector General for Tax Administration (TIGTA) released a report reviewing whether the IRS complied with legal and internal guidelines governing the seizure of property for unpaid taxes.
September 17, 2018: TIGTA released a second report compiling statistical information reported by the IRS in order to provide information about how the IRS uses its compliance resources and the resulting tax collections.
September 18, 2018: The IRS published Revenue Ruling 2018-17, which provides the applicable federal interest rate for October 2018 and other interest rates.
September 19, 2018: The IRS published Revenue Procedure 2018-49, which allows taxpayers that early adopted a method of revenue recognition to change such method to one described in Section 16.11 of Revenue Procedure 2018-31. This is a very important method change that affects many taxpayers who have to comply with ASC 606.
September 20, 2018: The IRS announced in Notice 2018-72 that it intends to amend the section 871(m) regulations to delay the effective date of certain provisions.
September 21, 2018: Treasury and the IRS published proposed regulations that would remove from the section 385 regulations minimum documentation requirements that must be satisfied for certain related-party debt to be respected as such for tax purposes. We previously commented on this here.
September 21, 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 Kevin Hall 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 September 10 – 14, 2018:
September 10, 2018: The IRS announced the following five new Large Business & International compliance campaigns: (1) Internal Revenue Code (Code) Section 199 Claims Risk Review; (2) Syndicated Conservation Easement Transactions; (3) Foreign Base Company Sales Income: Manufacturing Branch Rules; (4) Form 1120F Interest Expense/Home Office Expense; and (5) Individuals Employed by Foreign Governments and International Organizations. We discuss these new campaigns in more detail here and have reported about previous LB&I campaigns in the below blog posts.
September 13, 2018: Treasury and the IRS released proposed regulations under Code Section 951A, the new tax on global intangible low-taxed income earned by controlled foreign corporations. The proposed regulations include a number of anti-abuse provisions.
September 13, 2018: The IRS published Revenue Procedure 2018-48, which provides guidance regarding how certain amounts included in income under Code Sections 951(a)(1) and 986(c) are treated for purposes of determining whether a REIT satisfies the Code Section 856(c)(2) gross income test.
September 14, 2018: The IRS issued Notice 2018-73, which provides updated interests rates and guidance regarding the corporate bond monthly yield curve.
September 14, 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 Kevin Hall 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 September 3 – 7, 2018:
September 4, 2018: The IRS reminded taxpayers that they have until September 28, 2018, to apply for the Offshore Voluntary Disclosure Program.
September 5, 2018: In response to taxpayer inquiries, the IRS clarified that taxpayers generally can deduct business-related payments to charities or governmental entities even if they also receive a state or local tax credit.
September 6, 2018: The IRS released a Practice Unit on “Determining an Individual’s Residency for Treaty Purposes.”
September 6, 2018: The IRS published Revenue Procedure 2018-47, which provides guidance to regulated investment companies regarding the application of the section 4982 excise tax to amounts included in income under the new Internal Revenue Code (Code) Section 965 transition tax.
September 7, 2018: The IRS published Revenue Ruling 2018-25, establishing the interest rates applicable to over- and under-payments of tax.
September 7, 2018: The IRS released PMTA 2018-016, concluding that it can use it math error authority, not only on intake and before refunds have been issued, but also anytime within the three-year statute of limitations period under Code Section 6501(a).
September 7, 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 Kevin Hall in our DC office for this week’s roundup.
On August 27, 2018, the Internal Revenue Service (IRS) announced that the Compliance Assurance Process (CAP) program will continue, with some modifications. As we previously discussed, the IRS began an assessment of the CAP program in August 2016 to determine if any recalibration was needed.
CAP is an IRS program that seeks to identify and resolve tax issues through open, cooperative, and transparent interaction between the IRS and Large Business and International (LB&I) taxpayers prior to the filing of a return. The goal of CAP is greater certainty of the treatment of tax positions sooner and with less administrative burden than conventional post-file audits. The program began in 2005, and became permanent in 2011. Several notable taxpayers publically disclose their involvement in the CAP program. Continue Reading IRS Announces That CAP Will Continue
