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Weekly IRS Roundup August 27 – 31, 2018

Presented below is our summary of significant IRS guidance and relevant tax matters for the week of August 27 – 31, 2018:

August 27, 2018: The IRS announced changes to its Compliance Assurance Process (CAP) program. We posted about the changes to CAP here.

August 28, 2018: In Notice 2018-70, the IRS announced that it will issue proposed regulations clarifying the definition of a “qualifying relative” for various purposes, including the new $500 credit for certain dependents.

August 30, 2018: The Office of Management and Budget (OMB) completed its review of a proposal to remove parts of the Internal Revenue Code Section 385 regulations, which address the treatment of debt among members of an expanded affiliated group.

August 31, 2018: The IRS released Revenue Procedure 2018-58, which includes the current list of jurisdictions subject to reporting requirements for certain deposit interest paid to nonresident alien individuals.

August 31, 2018: The IRS published statistics regarding US source income payments to foreign persons reported on Form 1042-S.

August 31, 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.




Busy Start to Trump Administration Bodes Major Changes Are on the Way

In the first few weeks of the Trump administration, we have seen several indications that tax lawyers are going to be busy keeping up with the shifting sands of tax reform.

We learned from an Executive Order released on January 30, 2017 that for every new regulation that will be issued, two regulations must be eliminated In a release on February 2, 2017, the Office of Management and Budget (OMB) clarified the edict explaining that it applies only to significant regulatory actions issued between January 20 and September 30, 2017.  This would apply to any regulation that:  (1) has annual effect on the economy of $100 million or more or adversely affects the economy; (2) created serious inconsistencies or otherwise interferes with action taken or planned by another agency; or (3) raises a novel legal or policy issue.

Officials at the Internal Revenue Service (IRS) have stated that the IRS will not issue much guidance in the near future, but will be focusing its limited resources on comprehensive tax reform. Accordingly, other than necessary releases (for example, monthly interest rates), we expect based on comments from the IRS that there will be a substantial slow-down in the issuance of revenue rulings, revenue procedures and other types of published guidance. However, the IRS will continue to release private guidance, such as private letter rulings and chief counsel advice memoranda. Indeed, the IRS has indicated that it will look to open up the process for private letter rulings, and is seeking input from practitioners regarding important subjects.

In other news, the Senate last night confirmed Steven Mnuchin as the Secretary of the Treasury by a narrow margin of 53-47. With a new captain at the helm, and the Trump Administration’s stated desire for major tax reform, we expect a new direction for Treasury and substantial resources devoted to what our tax system may look like in the future.

Practice Point: It remains to be seen how the recent Executive Order will impact guidance from the Treasury and IRS, but all signs point to a slow-down in the issuance of published guidance. We expect that with less guidance, there is a potential for more controversy. For the foreseeable future, taxpayers and their advisors should to continue to monitor these new developments and how it may impact their operations.




GAO Reports on IRS Guidance Procedures

The United States Government Accountability Office (GAO) recently released a report regarding how the Internal Revenue Service (IRS) communicates tax guidance to the public.This report was prepared following bipartisan requests from members of both houses of Congress.

The GAO report: (1) analyzed documents that defined IRS guidance types; (2) reviewed the IRS’s policies and procedures for issuing guidance; (3) reviewed literature on the IRS’s issuance of guidance; (4) interviewed individuals at relevant government and tax practitioner organizations; and (5) reviewed IRS guidance issued during 2013 through 2015. Below is a chart included in the GAO report that illustrates various forms of guidance, and the weight that the IRS says attaches to each.

GAO blog post

The GAO found that the IRS uses many different forms of guidance to communicate its interpretation of tax laws to the public, but considers only the Internal Revenue Bulletin (IRB) guidance to be authoritative. The IRS’s statement that only IRB guidance is authoritative could be considered an oversimplification. We previously wrote (here, here, and here) about how deference principles may apply to various forms of guidance.

The GAO found further that while the IRS has detailed procedures for identifying, prioritizing, and issuing new guidance, the IRS lacks procedures for documenting the decision about what form of guidance to issue.

(more…)




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