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Weekly IRS Roundup July 6 – July 10, 2020

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 6, 2020 – July 10, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here. July 6, 2020: The IRS added new frequently asked questions on the treatment of grants or loans to businesses through the Coronavirus Relief Fund established by the Coronavirus Aid, Relief and Economic Security (CARES) Act. The IRS stated that a government grant is taxable because the grant generally is not excluded from the business’s gross income except in narrow circumstances. A government loan, however, generally is not included in gross income except to the extent it is forgiven. If a government forgives all or a portion of the loan, then the amount forgiven is included in gross income and taxable unless an exclusion applies. If an exclusion applies, the IRS indicated the taxpayer may lose an...

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LB&I Announces Five New Campaigns

On July 2, 2018, the Internal Revenue Service (IRS) Large Business and International (LB&I) Division announced the identification and selection of five new campaigns. These new campaigns follow the initial 13 campaigns announced on January 31, 2017, followed by 11 campaigns announced on November 3, 2017, 5 campaigns announced on March 13, 2018, and six campaigns announced on May 21, 2018. The following are the five new LB&I campaigns by title and description: Restoration of Sequestered AMT Credit Carryforward LB&I is initiating a campaign for taxpayers improperly restoring the sequestered Alternative Minimum Tax (AMT) credit to the subsequent tax year. Refunds issued or applied to a subsequent year’s tax, pursuant to IRC Section 168(k)(4), are subject to sequestration and are a permanent loss of refundable credits. Taxpayers may not restore the sequestered amounts to their AMT credit carryforward. Soft letters will be mailed to taxpayers who are...

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IRS Continues to Barrage Taxpayers with New Campaigns

On November 3, 2017, the Internal Revenue Service (IRS) Large Business and International (LB&I) division identified 11 new examination compliance “campaigns.” We have extensively discussed LB&I’s “campaign” examination process, including posts on Understanding LB&I “Campaigns” and Run for Cover – IRS Unveils Initial “Campaigns” for LB&I Audits. The IRS identified the 11 new campaigns “through LB&I data analysis and suggestions from IRS compliance employees.” The new campaigns are: Form 1120-F Chapter 3 and Chapter 4 Withholding Campaign Swiss Bank Program Campaign Foreign Earned Income Exclusion Campaign Verification of Form 1042-S Credit Claimed on Form 1040NR Agricultural Chemicals Security Credit Campaign Deferral of Cancellation of Indebtedness Income Campaign Energy Efficient Commercial Building Property Campaign Corporate Direct (Section 901) Foreign Tax Credit Section 956 Avoidance Economic Development Incentives Campaign Individual...

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LB&I’s Final Campaigns Webinar: Section 48C Energy Credits and Completed Contract Method for Land Developers

On June 20, 2017, the Internal Revenue Service (IRS) Large Business and International Division (LB&I) hosted its final webinar regarding LB&I Campaigns. Our previous coverage of LB&I Campaigns can be found here. The webinar focused on two campaigns:  (1) Section 48C Energy Credits and (2) Land Developers – Completed Contract Method. Section 48C Energy Credit Campaign Section 48C provides a tax credit equal to 30 percent of the “qualified investment” in a “qualifying advanced energy project." This tax credit was created as part of American Recovery and Reinvestment Act of 2009 and was intended to encourage investment in domestic manufacturing and “new energy”-type projects. To claim the credit, taxpayers had to go through a rigorous application process. Much like a grant program, only certain projects were selected and awarded tax credits. The credit was subject to a nationwide limitation of $2.3 billion, which was allocated among eligible...

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Understanding LB&I “Campaigns” – The Second Webinar

On March 28, 2017, EY and the Internal Revenue Service (IRS) held a joint webcast presenting the Large Business & International’s (LB&I) new “Campaign” examination process. This was the IRS’s second in a planned eight-part series about Campaigns. The IRS speakers for the presentation were Tina Meaux (Assistant Deputy Commissioner Compliance Integration) and Kathy Robbins (Enterprise Activity Practice Area). We previously blogged about Campaigns on February 1, 2017 (link), and the first Campaigns webinar on March 8, 2017 (link). How Campaigns Are Developed:  LB&I’s new organizational structure includes Subject-Matter Practice Areas, Geographic Practice Areas, where the employees who conduct audits are located, and Headquarters and Support. Headquarters and Support (Compliance Integration) reviews ideas for new Campaigns and assigns the potential Campaigns to the appropriate Subject-Matter Practice Area for further review and development. For...

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IRS Campaign Focuses on Definition of “Qualified Film” Under Section 199

On January 31, the Internal Revenue Service (IRS) announced 13 Large Business & International (LB&I) “campaigns.”  One campaign targets deductions claimed by multi-channel video programming distributors (MVPDs) and TV broadcasters under section 199 of the Internal Revenue Code (IRC).  According to the IRS’s campaign announcement, these taxpayers make several erroneous claims, including that (1) groups of channels or programs constitute “qualified films” eligible for the section 199 domestic production activities deduction, and (2) MVPDs and TV broadcasters are producers of a qualified film when they distribute channels and subscription packages that include third-party content. IRC section 199(a) provides for a deduction equal to 9 percent of the lesser of a taxpayer’s “qualified production activities income” (QPAI) for a taxable year and its taxable income for that year.  A taxpayer’s QPAI is the excess of its “domestic production gross receipts”...

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