TAX CONTROVERSY 360
TAX CONTROVERSY 360
McDermott’s Real-Time Tax Disputes Insights
TAX CONTROVERSY 360
McDermott’s Real-Time Tax Disputes Insights
IRS
Subscribe to IRS's Posts

Weekly IRS Roundup July 8 – July 12, 2024

by , and | Jul 17, 2024 | ,

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 8, 2024 – July 12, 2024.

July 8, 2024: The IRS released Internal Revenue Bulletin 2024-28, which includes, among other things:

  • Announcement 2024-28, which revokes the Internal Revenue Code (Code) 501(c)(3) determination for specified organizations and stipulates that contributions made to said organizations by individual donors are no longer deductible under Code § 170(b)(1)(A).

July 9, 2024: The IRS warned tax professionals about new and evolving scams targeting business and taxpayer information where identity thieves pose as new clients, use phishing emails and employ elaborate schemes involving calls and texts.

July 10, 2024: The IRS issued general guidelines for the registration process for the Code § 45Z Clean Fuel Production Credit, as outlined in Notice 2024-29. These guidelines cover the application process and how claim procedures will operate when the clean fuel producer is a disregarded entity.

July 11, 2024: The IRS announced it has collected more than $1 billion in past-due taxes from high-net-worth individuals and will continue to monitor activities involving large corporations and partnerships and aircraft use.

July 11, 2024: The IRS warned car dealers and sellers about evolving phishing and smishing scams involving fraudulent attempts to trick recipients into clicking suspicious links, providing personal information or downloading malware. Dealerships are advised to remain vigilant and avoid unsolicited messages or links in emails and texts.

July 12, 2024: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).



read more

Weekly IRS Roundup July 1 – July 5, 2024

by , and | Jul 11, 2024 | , ,

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 1, 2024 – July 5, 2024.

July 1, 2024: The IRS released Internal Revenue Bulletin 2024-27, which includes the following:

  • Notice 2024-52, which provides the applicable reference price and the credit amount used for determining the Marginal Well Production Credit under 45I of the Internal Revenue Code (Code) for qualified natural gas production from qualified marginal wells for tax years beginning in calendar year 2024.
  • Announcement 2024-27, which revokes the Code § 501(c)(3) determination for specified organizations and stipulates that contributions made to said organizations by individual donors are no longer deductible under Code § 170(b)(1)(A).

July 1, 2024: The IRS reminded homeowners who make energy-efficient improvements to their homes that they may qualify for home energy tax credits, such as the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit, to offset the costs of making such improvements. Qualifying taxpayers should file Form 5695, Residential Energy Credits, with their tax return.

July 2, 2024: The IRS launched the Protect Your Clients; Protect Yourself campaign to help tax professionals guard against tax-related identity theft. This initiative aims to raise awareness about security threats and provide guidance for maintaining strong security in a series of eight news releases coinciding with the IRS Nationwide Tax Forum, which features webinars to educate tax professionals on security-related topics.

July 2, 2024: The IRS released Revenue Procedure 2024-30, which modifies Revenue Procedure 2024-23 to provide procedures under Code § 446 for obtaining automatic consent to change accounting methods to the Allowance Charge-off Method described in proposed Treasury Regulation § 1.166-2. This method determines when a debt instrument held by a regulated financial company is conclusively presumed to be worthless for purposes of the bad debt rules under Code § 166.

July 3, 2024: The IRS reminded individuals and businesses in parts of Alaska, Maine and Rhode Island affected by disaster declarations that their 2023 federal income tax returns and tax payments are due on July 15, 2024.

July 3, 2024: The IRS warned about a new scam involving tax return preparers misrepresenting the rules for claiming clean energy credits that taxpayers cannot ultimately benefit from and leading to potential compliance actions and repayment obligations.

July 5, 2024: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).



read more

Weekly IRS Roundup June 17 – June 21, 2024

by , and | Jun 27, 2024 | ,

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of June 17, 2024 – June 21, 2024.

June 17, 2024: The IRS released Internal Revenue Bulletin 2024-25, which includes the following:

  • Revenue Ruling 2024-12, which provides the June 2024 applicable federal rates.
  • Treasury Decision 9993, which provides final regulations on the election under Internal Revenue Code (Code) 6418 to transfer eligible energy credits, effective July 1, 2024.
  • Treasury Decision 9997, which reduces the cost of applying for or renewing a preparer tax identification number from $21 to $11.
  • Proposed Regulations, which would remove the “associated property rule” and related rules from the regulations on interest capitalization requirements for improvements to “designated property” under Code 263A(f) and clarify the definition of “improvement” in the existing regulations.

June 17, 2024: The IRS announced the establishment of a new dedicated group within the Office of Chief Counsel that will focus on developing guidance for partnerships, specifically with respect to the use of “basis shifting” transactions by related-party partnerships.

June 17, 2024: The IRS released guidance intended to target certain transactions that use the basis adjustment provisions in Code §§ 734, 743, 754 and 755 to shift basis to depreciable property through partnership transactions. This guidance includes:

  • Revenue Ruling 2024-14, which identifies three types of basis shifting transactions involving related parties that, according to the IRS, should be disallowed for lack of economic substance.
  • Notice 2024-54, which announces the IRS’s intent to propose regulations under Code §§ 732, 734, 743 and 755 that, if finalized, are intended to take effect on or after June 17, 2024. The regulations would identify several types of “covered transactions” in which basis step-ups resulting from partnership transactions would be disallowed. Unlike Revenue Ruling 2024-14, these regulations would not depend on a covered transaction lacking economic substance.
  • Proposed Regulation § 1.6011-18, which would identify certain partnership basis shifting transactions as “transactions of interest,” which generally must be disclosed to the IRS.

June 17, 2024: The IRS provided general tips for taxpayers benefiting from educational assistance programs under Code § 127 with respect to the treatment of certain educational expenses, qualified education loans and working condition fringe benefits.

June 17, 2024: The IRS released Notice 2024-53, which provides the 24-month average corporate bond segment rates for June 2024, yield curve and segment rates for single-employer plans and 30-year Treasury securities interest rates.

June 18, 2024: The IRS announced the release of final regulations for taxpayers who satisfy certain prevailing wage and apprenticeship (PWA) requirements regarding the construction, alteration or repair of certain clean energy facilities or properties, projects or equipment. Taxpayers who satisfy these PWA requirements are eligible for increased credit or deduction amounts for certain clean energy [...]

Continue Reading



read more

Weekly IRS Roundup June 10 – June 14, 2024

by , and | Jun 25, 2024 | , ,

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of June 10, 2024 – June 14, 2024.

June 10, 2024: The IRS released Internal Revenue Bulletin 2024-24, which includes the following:

  • Revenue Ruling 2024-11, which provides the interest rates under 6621 of the Internal Revenue Code (Code) for tax underpayments and overpayments for the calendar quarter beginning July 1, 2024. The underpayment and overpayment interest rates will remain the same for the third calendar quarter of 2024.
  • Notice 2024-36, which provides the timeline for the second 2024 allocation round of the Qualifying Advanced Energy Project Credit program under Code 48C(e) and supersedes Appendices A, B and C of Notice 2023-44.
  • Notice 2024-39, which provides the inflation adjustment factor for the carbon oxide sequestration credit under Code § 45Q for taxpayers who make an election under § 45Q(b)(3) for calendar year 2024.
  • Notice 2024-40, which updates the corporate bond weighted average interest rate for plan years beginning May 2024, the 24-month average segment rates, the funding transitional segment rates applicable for May 2024 and the minimum present value transitional rates for April 2024.
  • Notice 2024-41, which provides a new elective safe harbor for taxpayers seeking to qualify their energy projects for the 10% Domestic Content Bonus Credit. The notice also modifies Notice 2023-38 by expanding the list of Applicable Projects to include hydropower and pumped hydropower storage facilities, among other changes.
  • Proposed Regulations, which provide guidance on information reporting requirements for transactions with foreign trusts and the receipt of large foreign gifts under Code § 643(i), 679, 6039F, 6048 and 6677 (the foreign trust and gift provisions). The proposed regulations would also provide that certain loans from a foreign trust and the use of trust property are reportable events.
  • Announcement 2024-22 and Announcement 2024-23, which revoke the Code § 501(c)(3) determination for specified organizations and stipulate that contributions made to said organizations by individual donors are no longer deductible under Code § 170(b)(1)(A).
  • Announcement 2024-24, which notifies taxpayers of the applicable Reference Standard 90.1 required under Code § 179D(c)(2) as part of the definition of energy efficient commercial building property, effective May 17, 2024.

June 10, 2024: The IRS highlighted options for taxpayers who missed the April filing deadline to file their 2023 federal income tax returns and reminded those taxpayers to pay the amounts owed as soon as possible to limit penalties and interest charges.

June 10, 2024: The IRS reminded taxpayers that the second quarter estimated tax payment deadline is June 17, 2024.

June 10, 2024: The IRS advised that most individual and business taxpayers can use the Online Payment Agreement service to set up a payment plan, including an installment agreement, to pay off an [...]

Continue Reading



read more

Supreme Court Rules Against Taxpayers in IRC Section 965 Case

by , and | Jun 21, 2024 | ,

On June 20, 2024, the Supreme Court of the United States issued a 7-2 opinion in Moore v. United States, 602 U.S. __ (2024), ruling in favor of the Internal Revenue Service (IRS).

Moore concerned whether US Congress and the IRS could tax US shareholders of controlled foreign corporations (CFCs) on those corporations’ earnings even though the earnings were not distributed to the shareholders. The case specifically focused on the so-called “mandatory repatriation tax” under Internal Revenue Code (IRC) Section 965, a one-time tax on certain undistributed income of a CFC that is payable not by the CFC but by its US shareholders. Some viewed the case as hinging upon whether Congress has the power to tax economic gains that have not been “realized.” (i.e., In the case of a house whose value has appreciated from $500,000 to $600,000, the increased value is “realized” only when the house is sold and the additional $100,000 reaches the taxpayer’s coffers.)

However, Justice Brett Kavanaugh, joined by Chief Justice John Roberts and Justices Sonia Sotomayor, Elena Kagan and Ketanji Brown Jackson, rejected that position on the ground that the mandatory repatriation tax “does tax realized income,” albeit income realized by a CFC. On this basis, they reasoned that the question at issue was whether Congress has the power to attribute realized income of a CFC to (and tax) US shareholders on their respective shares of the undistributed income. This group of justices ultimately decided Congress does have the power.

The majority went out of its way to avoid expressing any opinion as to whether Congress can tax unrealized appreciation, with Justice Amy Coney Barrett’s concurrence and Justice Clarence Thomas’s dissent asserting that it cannot. Perhaps the Court was signaling a distaste for the Billionaire Minimum Income Tax proposed by US President Joe Biden, which would impose a minimum 20% tax on the total income of the wealthiest American households, including both realized and unrealized amounts, among other Democratic proposals.

Practice Point: We previously noted that certain taxpayers should consider filing protective refund claims contingent on the possibility that Moore would be decided in favor of the taxpayers. In light of the case’s outcome, however, those protective claims are now moot.



read more

Weekly IRS Roundup June 3 – June 7, 2024

by , and | Jun 13, 2024 | , ,

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of June 3, 2024 – June 7, 2024.

June 3, 2024: The IRS released Internal Revenue Bulletin 2024-23, which includes Revenue Procedure 2024-23. The revenue procedure provides an updated list of tax accounting method changes for which IRS consent will be automatically granted pursuant to Form 3115, Application for Change in Accounting Method.

June 5, 2024: The IRS announced it has accepted more than one million taxpayer submissions via the Document Upload Tool since it launched in 2021. The Document Upload Tool enables taxpayers and tax professionals to securely upload required tax documents online at IRS.gov.

June 5, 2024: The IRS outlined factors to help taxpayers distinguish hobbies from true business activities and reminded them that payments received for goods and services through payment apps, such as Cash App and Venmo, are taxable income.

June 5, 2024: The IRS issued Notice 2024-46, which provides that payments made by Norfolk Southern to individuals affected by the 2023 train derailment incident in East Palestine, Ohio, are considered “qualified disaster relief payments,” which should be excluded from gross income if they are not otherwise covered by insurance.

June 6, 2024: The IRS announced that eligible contractors who build new energy efficient homes or substantially reconstruct existing homes into qualified energy efficient homes may be eligible for a tax credit of up to $5,000 per home. The credit amount depends on the type of home, the home’s energy efficiency and the date the home was purchased or leased.

June 7, 2024: The IRS issued Notice 2024-48, which provides the requirements for qualifying under the Statistical Area Category or the Coal Closure Category in Notice 2023-29 to determine taxpayers’ eligibility for the Energy Community Bonus Credit amounts or rates under Internal Revenue Code (Code) §§ 45, 45Y, 48 and 48E.

June 7, 2024: The IRS issued Revenue Procedure 2024-26, which provides additional procedures for qualified manufacturers of new clean vehicles to submit records demonstrating their compliance with certain requirements under Code §§ 30D(d) and (e) to be eligible for the clean vehicle tax credit.

June 7, 2024: The IRS extended the deadline to file federal individual and business tax returns and make tax payments for certain individuals and businesses in Kentucky that were affected by severe weather that started April 2, 2024. The new deadline is November 1, 2024. The extended deadline is available to taxpayers in any area designated by the Federal Emergency Management Agency (FEMA), including individuals and households that reside or have a business in the following counties: Boyd, Carter, Fayette, Greenup, Henry, Jefferson, Jessamine, Mason, Oldham, Union and Whitley.

June 7, 2024: The IRS extended the deadline to file federal individual and business tax returns and make [...]

Continue Reading



read more

Weekly IRS Roundup May 27 – May 31, 2024

by , and | Jun 6, 2024 | , ,

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 27, 2024 – May 31, 2024.

May 28, 2024: The IRS released Internal Revenue Bulletin 2024-22, which includes the following:

  • Revenue Procedure 2024-25, which provides the inflation-adjusted limits related to health savings accounts and high deductible health plans under 223 of the Internal Revenue Code (Code) for calendar year 2025.
  • Treasury Decision 9995, which provides final regulations on clean vehicle tax credits under Code § 25E and 30D for the purchase of qualifying new and previously owned clean vehicles and the transfer and receipt of previously owned clean vehicle credits, effective July 5, 2024.
  • Treasury Decision 9996, which provides final regulations on obtaining extensions for allocating generation-skipping transfer (GST) tax exemptions and making specific GST-related elections for individuals and estates that did not make timely allocations or elections. By obtaining an extension, the effective date of a taxpayer’s GST-related election or allocation may date back to the original transfer date.

May 28, 2024: The IRS reminded US citizens and resident aliens abroad, including those with dual citizenship or on duty in the military, to file their 2023 federal income tax return by June 17, 2024.

May 28, 2024: The IRS announced that the application portal for the 2024 Low-Income Communities Bonus Credit Program, which increases the amount of energy investment tax credits for clean energy investments in low-income communities and on Native American land, is open for submissions.

May 29, 2024: The IRS released proposed regulations on the new technology-neutral clean electricity production tax credit in Code § 45Y and the clean electricity investment tax credit in Code § 48E, which are available for projects placed in service after December 31, 2024. The regulations provide rules for calculating greenhouse gas emissions rates, petitioning for provisional emissions rates and determining eligibility for these credits.

May 29, 2024: The IRS reminded taxpayers that certain common summertime activities, such as part-time work, business travel and home improvements, may result in tax benefits and reporting requirements.

May 30, 2024: The IRS announced that Direct File, a tax preparation program that allows eligible taxpayers to file their federal income tax returns for free directly through the IRS, will become a permanent option beginning in the 2025 filing season.

May 30, 2024: The IRS announced Fumino (Fumi) Tamaki as its new Chief Taxpayer Experience Officer.

May 31, 2024: The IRS issued Notice 2024-49, which provides the registration requirements for the Code § 45Z Clean Fuel Production Credit for clean fuels produced beginning January 1, 2025. The IRS urges qualifying fuel producers to register by July 15, 2024, since, among other requirements, fuel producers seeking to claim the credit must be registered at the time the fuel is produced.

[...]

Continue Reading


read more

Weekly IRS Roundup May 20 – May 24, 2024

by , and | May 31, 2024 | , ,

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 20, 2024 – May 24, 2024.

May 20, 2024: The IRS released Internal Revenue Bulletin 2024-21, which includes the following:

  • Treasury Decision 9992, which includes final regulations on the standards under which a qualified investment entity, such as a real estate investment entity, would be “domestically controlled” for purposes of 897(h)(2) of the Internal Revenue Code (Code), effective as of April 25, 2024. The final regulations are generally consistent with the proposed regulations previously issued on December 29, 2022, and include a 10-year transition rule for certain existing structures.
  • Notice 2024-37, which provides guidance on the availability of the Sustainable Aviation Fuel (SAF) Tax Credit found in Code 40B as both an income tax credit and an excise tax credit under Code §§ 6426 and 6427. The notice also provides additional safe harbors under which the SAF’s life cycle greenhouse gas emissions reduction percentage can be calculated.
  • Revenue Procedure 2024-24, which provides procedures for requesting private letter rulings for transactions intended to qualify under Code 355 as tax-free spin-offs. The guidance was accompanied by Notice 2024-38, which requests taxpayer comments with respect to all provisions in the guidance.
  • Announcement 2024-18, which lists disciplinary sanctions for certain professionals, including lawyers, certified public accountants and appraisers, for violating the regulations governing practice before the IRS set out in Circular 230.
  • Announcement 2024-21, which revokes the Code § 501(c)(3) determination for specified organizations and stipulates that contributions made to said organizations by individual donors are no longer deductible under Code § 170(b)(1)(A).
  • Supplemental guidance accompanying the proposed regulations from December 26, 2023, relating to the Code 45V tax credit for the production of clean hydrogen and the Code § 48(a)(15) election to treat clean hydrogen production facilities as energy property.

May 20, 2024: The IRS was recognized for its financial management and performance reporting in its 2023 Agency Financial Report.

May 21, 2024: The IRS provided an overview of tax deductions, housing allowances and other tax benefits that homeowners can use to save money and offset related costs.

May 22, 2024: The IRS provided year-round tax planning pointers to help taxpayers stay organized and facilitate their tax planning. Among other things, the IRS suggests creating a system to keep tax records together; checking withholdings using the IRS withholding estimator; and notifying USPS, employers and the IRS of any address or name changes.

May 22, 2024: The IRS announced that the Qualifying Advanced Energy Project Credit Program Applicant Portal (Code § 48C Portal), which provides a tax credit for investments in advanced energy projects, is open for concept paper submissions. Submissions [...]

Continue Reading



read more

United States v. Eaton: IRS Summons Power Overrides EU Privacy Laws

by and | May 31, 2024 | , ,

A US federal district court judge recently endorsed the broad investigative powers of the Internal Revenue Service (IRS) in United States v. Eaton Corp., No. 1:23-mc-00037, May 16, 2024 (N.D. Ohio). During its audit of Eaton’s transfer pricing of a royalty arrangement with Eaton’s Irish affiliate, the IRS sought performance evaluations of certain employees of the affiliate. Eaton declined to provide the evaluations citing relevancy and legal objections based on EU privacy laws. The IRS subsequently served Eaton with an administrative summons seeking the evaluations.

In the ensuing summons enforcement action, Eaton initially prevailed before a magistrate judge on both grounds. However, the IRS persuaded the district court judge to reject the magistrate’s recommendation and enforce the summons.

The district court judge rejected Eaton’s position that a heightened relevancy standard applies when the IRS seeks personal information, such as employee valuations. The judge distinguished between civil discovery disputes where such a standard might apply and summons enforcement disputes, which engage the broad authority of the IRS to seek information that may be relevant to its audit. While the IRS’s case for relevancy could have been stronger, the judge nonetheless found that the IRS had sufficiently supported the connection between potential information in the evaluations and its audit of the royalty arrangement.

The district court judge also ruled that the European Union’s General Data Protection Regulation (GDPR) did not bar the IRS’s legitimate exercise of its audit powers. The judge acknowledged that the GDPR generally prohibits the transfer of personal information, such as employee valuations, outside of the EU. However, the judge also found that exceptions to that prohibition applied where the IRS properly requested the information as part of its audit function and the EU Member State (in this case Ireland) had entered into a treaty with the United States that addressed corporate cross-border relationships and sought generally to combat tax evasion by resident entities. Comity concerns did not prevent enforcement of the summons according to the judge.

Practice Point: Given the effort the IRS expended in this case to obtain marginally relevant information, we clearly see the effects of increased audit resources at work and of the IRS’s mandate to target large corporate taxpayers. While there are certainly instances in every audit where a taxpayer should not expend resources just to fight a battle, the difficulty in cases like this is that absent this decision, Eaton likely felt bound to adhere to the GDPR for the sake of the employees working for its Irish affiliate.



read more

BLOG EDITORS

Kevin Spencer

Evan Walters

STAY CONNECTED

Subscribe

TOPICS

ARCHIVES

jd supra readers choice top firm 2023 badge