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Weekly IRS Roundup February 13 – February 19, 2022

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of February 13, 2022 – February 19, 2022. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

February 14, 2022: The IRS issued a news release announcing the launch of a resource page that provides taxpayers with 2022 filing season updates, including updates concerning the resolution of unprocessed returns from the 2021 filing season.

February 15, 2022: The IRS issued Revenue Ruling 2022-4, providing various prescribed interest rates for federal income tax purposes for March 2022.

February 15, 2022: The IRS issued a news release announcing the release of an updated Form 14457, which relates to the IRS Voluntary Disclosure Practice for criminal prosecution. The updates include an expanded section on the reporting of virtual currency.

February 15, 2022: The IRS issued a news release, providing an update to a Fact Sheet containing answers to frequently asked questions regarding the tax treatment of emergency grants for higher education, which were introduced pursuant to pandemic-related legislation.

February 16, 2022: The IRS issued a news release recommending that taxpayers use the online resources on its homepage as their first resource for tax inquiries and provided links to certain commonly used resources.

February 16, 2022: The IRS issued a news release, warning tax professionals to be alert for a new phishing scam designed to steal tax preparation software account credentials.

February 16, 2022: The IRS issued a news release, soliciting applications for Taxpayer Advocacy Panel membership, an advisory body that receives taxpayer feedback and makes suggestions for improving IRS customer service.

February 16, 2022: The IRS issued a news release, setting forth additional transition relief (in the form of an additional exception for certain taxpayers for tax year 2021) from the requirement to file the new Schedules K-2 and K-3 relating to partnerships and flow-through entities.

February 17, 2022: The IRS issued Notice 2022-09, providing the monthly update to certain interest rates used for pension plan funding and distribution purposes.

February 17, 2022: The IRS issued a news release, reminding taxpayers with income from a farming or fishing business to file returns and pay taxes that are due by March 1, 2022, unless they have made estimated tax payments.

February 17, 2022: The IRS issued a news release, providing an update to a Fact Sheet containing answers to frequently asked questions regarding the 2021 Recovery Rebate Credit, enacted as part of the American Rescue Plan Act of 2021 (ARPA).

February 18, 2022: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

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IRS Chief Counsel Signals Increased Tax Enforcement

The Internal Revenue Service (IRS) Chief Counsel is the chief legal advisor to the Commissioner of Internal Revenue on all matters pertaining to the interpretation, administration and enforcement of the Internal Revenue Laws. In this regard, the IRS Office of Chief Counsel is responsible for litigating cases in the US Tax Court. Such cases can arise from examinations conducted by different divisions within the IRS, such as the Large Business & International (LB&I), Small Business/Self Employed (SB/SE), Tax Exempt & Government Entities (TE/GE) and Wage & Investment (W&I) Divisions.

On January 21, 2022, the IRS Office of Chief Counsel announced plans to hire up to 200 additional attorneys to assist with litigation efforts. The announcement specifically notes that new hires are necessary “to help the agency combat syndicated conservation easements, abusive micro-captive insurance arrangements and other tax schemes.” They will also help the IRS manage its increasing caseload as part of its multiyear effort to combat what it believes are abusive schemes and to ensure that the appropriate taxes and penalties are paid. The new hires will be located around the country and focus on audits of complex corporate and partnership issues.

Additionally, there are a significant number of cases before the Tax Court that involve conservation easements and micro-captive insurance arrangements. The IRS’s attack on the donation of conservation easements is well known in the tax world. To date, the IRS has largely been successful in these cases based on non-valuation arguments that easement deeds do not comply with the applicable regulations. However, in the recent Hewitt v. Commissioner case, the US Court of Appeals for the Eleventh Circuit dealt a significant blow when it held that the IRS’s interpretation of Treas. Reg. § 1.170A-14(g)(6)(ii) was arbitrary and capricious and violated the Administrative Procedure Act because the US Department of the Treasury failed to respond to significant comments submitted during the notice-and-comment process. Many conservation easements are within the Eleventh Circuit’s jurisdiction and other appellate courts are expected to weigh in soon, which could result in the IRS and taxpayers proceeding to trial on valuation issues. Valuation issues are inherently fact intensive and will require the IRS to utilize substantial resources to litigate.

Practice Point: Much has been written about the trend of decreased enforcement by the IRS over the past several years, owing in part to decreased or stagnant funding from US Congress. Tax litigation, particularly in fact intensive cases involving valuation issues and transactions the IRS (but not necessarily the courts) deemed abusive, requires the expenditure of substantial resources by the IRS. The IRS has signaled that it is ready to reverse the trend. All IRS tax controversies start with the examination of the taxpayer’s positions on the return. We have seen an increase in IRS audit activity in the last year or so, especially with medium-sized businesses and high-net-worth individuals. The Chief Counsel is assembling his “army” to litigate positions developed during the examination. It’s a good time for taxpayers [...]

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Weekly IRS Roundup December 6 – December 10, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 6, 2021 – December 10, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

December 6, 2021: The IRS published updated guidance on requesting estate tax closing letters and transcript request procedures.

December 6, 2021: The US Treasury Inspector General for Tax Administration (TIGTA) released a semiannual report to US Congress, summarizing the accomplishments of the TIGTA from April 1, 2021, through September 30, 2021. The TIGTA’s Office of Audit completed 52 audits, and its Office of Investigations completed 1,430 investigations. Its combined audit and investigative efforts resulted in the recovery, protection and identification of monetary benefits totaling more than $9 billion.

December 6, 2021: The IRS issued guidance for employers regarding the retroactive termination of the Employee Retention Credit. The Infrastructure Investment and Jobs Act, which was enacted on November 15, 2021, amended the law so that the Employee Retention Credit applies only to wages paid before October 1, 2021 (unless the employer is a recovery startup business).

December 7, 2021: The IRS published a news release encouraging taxpayers to take important actions this month to help them file their federal tax returns in 2022, including special steps related to Economic Impact Payments and advance Child Tax Credit payments. A special page, updated and available on IRS.gov, outlines the steps taxpayers can take now to make tax filing easier next year.

December 7, 2021: The IRS published frequently asked questions (FAQs), providing guidance on what certain pass-through businesses should do in the absence of updated forms for the 2021 tax year. The tax year 2021 forms, to which Schedules K-2 and K-3 must be attached, have not yet been finalized. The FAQs address questions concerning whether Schedules K-2 and K-3 must be attached to tax year 2020 forms for partnerships or S corporations with 2021 short tax years or, in the case of Form 8865, filers of Form 8865 with 2021 short tax years.

December 7, 2021: The IRS published a memorandum providing interim guidance for in-person conference procedures. The guidance provides that the IRS Independent Office of Appeals (IRS Appeals) will use its best efforts to schedule the in-person conference at a location that is reasonably convenient for both the taxpayer and the IRS Appeals. This guidance does not modify any temporary procedures in place due to COVID-19.

December 8, 2021: The IRS released guidance for IRS Appeals employees working Tax-Exempt/Government Entities (TE/GE)-sourced cases. For TE/GE-sourced cases in which a taxpayer or representative raises a new issue, provides new information or advances a new theory or an alternative legal argument to the IRS Appeals, the IRS Appeals employee is required to follow the instructions provided by the IRS.

December 10, 2021: The [...]

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Weekly IRS Roundup November 15 – November 19, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of November 15, 2021 – November 19, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

November 15, 2021: The IRS published a news release announcing the launch of a new online tool designed to help US withholding agents comply with their reporting and withholding responsibilities with respect to IRS Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. The tool performs a quality review of data before submitting to the IRS. Use of the tool does not change a withholding agent’s obligations to file Form 1042-S with the IRS and furnish a copy to the payee.

November 15, 2021: The IRS published a news release announcing that victims of wildfires that began July 14, 2021, now have until January 3, 2022, to file various individual and business tax returns and make tax payments.

November 16, 2021: The IRS published a news release announcing that, effective November 15, 2021, tax professionals are able to order up to 30 Transcript Delivery System transcripts per client through the Practitioner Priority Service line. This is an increase from the previous 10 transcripts per client limit.

November 16, 2021: The IRS published a news release regarding Notice 2021-63, which details how the temporary 100% business deduction for food or beverages from restaurants applies to taxpayers properly applying the rules of Revenue Procedure 2019-48 when using per diem rates.

November 17, 2021: The IRS published a news release announcing that victims of Hurricane Ida throughout Mississippi now have additional time—until January 3, 2022—to file various individual and business tax returns and make tax payments.

November 17, 2021: The Internal Revenue Service Advisory Council (IRSAC) published a news release announcing its annual report for 2021, which includes recommendations to the IRS regarding new and continuing issues in tax administration. The 2021 report includes recommendations on 24 issues, covering a broad range of topics. The IRSAC is a federal advisory committee that provides an organized public forum for the discussion of relevant tax administration issues between IRS officials and representatives of the public. IRSAC members offer constructive observations regarding current or proposed IRS policies, programs and procedures.

November 17, 2021: The IRS published a news release announcing it unveiled a new how-to video series enabling taxpayers to avoid potential scams by considering and applying for an Offer in Compromise themselves and to avoid paying excessive fees to companies advertising outlandish claims.

November 17, 2021: The IRS published a news release announcing the launch of an improved identity verification and sign-in process that enables more people to securely access IRS online tools and applications.

November 17, 2021: The IRS’s National Taxpayer Advocate published a blog post indicating that US Congress [...]

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Weekly IRS Roundup November 1 – November 5, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of November 1, 2021 – November 5, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

November 1, 2021: The IRS released a memorandum, providing guidance on the refund recoupment process for employees of Specialty Collection Offer in Compromise. Beginning with offers accepted on or after November 1, 2021, the offer in the compromise refund recoupment process will no longer be applicable for offsetting tax periods included on Form 656.

November 1, 2021: The IRS released a memorandum, extending certain temporary guidance related to taxpayer contact, initial contact and asset evaluations with respect to Internal Revenue Manual SBSE-05-0321-0019, Extension of Temporary Guidance for Field Collection and Specialty Collection Offers in Compromise Procedures During the COVID-19 Pandemic and Resumption of NFTL Procedures. The memorandum also extends the waiver that requires a field call prior to acceptance of certain Offers in Compromise in accordance with IRM 5.8.4.8(10) until January 31, 2022. The temporary guidance regarding Notice of Federal Tax Lien (NFTL) determinations and filings was not extended.

November 2, 2021: The IRS released the IRS Chief Counsel code and subject matter directory for November 2021.

November 3, 2021: The IRS published a news release, reminding taxpayers that a special tax provision will allow more Americans to easily deduct up to $600 in donations to qualifying charities on their 2021 federal income tax return. A temporary law change now permits them to claim a limited deduction on their 2021 federal income tax returns for cash contributions made to qualifying charitable organizations.

November 3, 2021: The IRS published FAQs concerning carried interest reporting details for partnerships. The purpose of the FAQs is to provide guidance relating to both pass-through entity filing and reporting requirements and owner taxpayer filing requirements in accordance with US Department of the Treasury (Treasury) regulations revised in T.D. 9945 (concerning guidance under Section 1061, which recharacterizes certain net long-term capital gains of a partner that holds one or more applicable partnership interests as short-term capital gains).

November 3, 2021: The IRS published a news release, announcing that victims of Hurricane Ida in parts of Connecticut now have until January 3, 2022, to file various individual and business tax returns and make tax payments.

November 3, 2021: The IRS and Treasury published a notice and request for comments concerning third-party disclosure requirements in IRS regulations. Written comments are due on or before January 3, 2022.

November 5, 2021: The IRS published a practice unit concerning expense allocation and apportionment when calculating a foreign tax credit under Section 904. The practice unit was revised to correct an error and supersedes the August 29, 2016, practice unit with the same title.

November 5, 2021: The IRS and Treasury
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Weekly IRS Roundup June 14 – June 18, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of June 14, 2021 – June 18, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

June 14, 2021: The IRS issued a news release unveiling updates to its online Non-Filer Sign-Up Tool, expanding the scope of the tool to assist families who do not normally file tax returns to register for and receive monthly advance payments of the Child Tax Credit (as expanded by the American Rescue Plan of 2021).

June 15, 2021: The IRS issued Revenue Ruling 2021-12, providing various prescribed interest rates for federal income tax purposes for July 2021.

June 16, 2021: The IRS issued corrections to final regulations published on January 5, 2021, regarding simplified accounting rules for small businesses under sections 263A, 448, 460 and 471 of the Code.

June 16, 2021: The IRS issued Notice 2021-37, providing the monthly update to certain interest rates used for pension plan funding and distribution purposes.

June 17, 2021: The IRS issued Revenue Procedure 2021-28, providing procedures for taxpayers to change to the alternative depreciation system of accounting under section 168(g) of the Code with respect to certain residential real property placed in service prior to 2018 as required by the Taxpayer Certainty and Disaster Tax Relief Act of 2020.

June 17, 2021: The IRS issued Revenue Procedure 2021-29, providing simplified procedures for certain partnerships to file amended partnership returns to comply with the procedures for tax accounting with respect to residential real property discussed in Revenue Procedure 2021-28.

June 18, 2021: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Le Chen in our Washington, DC, office for this week’s roundup.




Section 965 Statutes of Limitations for Partnerships

On May 26, 2020, the Internal Revenue Service (IRS) issued PMTA 2020-08 to provide guidance on the period of limitations for Internal Revenue Code (IRC) section 965, transition tax-related adjustments of partnerships. Typically, pursuant to IRC section 6501, the IRS has three years to assess a tax liability for a tax year. However, IRC section 6501(e)(1)(C) states that if the taxpayer omits from gross income an amount properly includible in income under IRC section 951(a), the tax may be assessed at any time within six years after the return was filed. Moreover, this special six-year limitation on assessment applies to the entire tax liability reportable on that return. Because special assessment and adjustment rules apply to partnerships, the IRS issued guidance on how the rules are applicable to certain partnerships and partners with section 965-related items.

For a deferred foreign income corporation’s (DFIC) last taxable year beginning before January 1, 2018, IRC section 965 imposes a one-time tax on a US shareholder’s pro rata share of the DFIC’s earnings and profits (E&P) otherwise deferred from US taxation. The IRS describes three steps for the calculation under IRC section 965: (1) IRC section 965(a) deems the DFIC to repatriate its untaxed E&P through a subpart F inclusion in the US shareholder’s gross income equal to the greater of its E&P as of two measurement dates in 2017; (2) IRC section 965(b) reduces the IRC section 965(a) inclusion by the E&P deficits of the US shareholder’s other foreign corporations; and (3) IRC section 965(c) provides for a deduction (based on the aggregate IRC section 965(a) inclusion amount and on cash positions) that has the effect of reducing the effective rate of US tax on the US shareholder’s IRC section 965(a) inclusion.

With respect to partnerships, in the guidance the IRS indicated that it can make three broad categories of adjustments that affect the computation of IRC section 965 amounts. Revisions could be made to the tax attributes and financial data underlying the computation of the IRC section 965(a) inclusion, the IRC section 965(c) deduction and foreign tax amounts. Such adjustments could affect the IRC section 965(a) inclusion amount and IRC section 965(c) deduction amount reportable by the partnership and affect the IRC section 965(a) inclusion and the IRC section 965(c) deduction reported by the partners. Accordingly, the IRS outlined how to apply the assessment and adjustment period rules apply when there are partners with IRC section 965-related items arising from partnerships subject to different procedures and audit regimes.

Under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), the IRS indicated it can make adjustments at any time provided the period for assessing tax attributable to the adjustments is open. The IRC section 965(a) inclusion amount and the IRC section 965(c) deduction amount reported by the partnership may be adjusted for the required reporting year if either: (1) the partner’s IRC section 6501 period of limitations on assessing tax attributable to adjustments to partnership items has not [...]

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Weekly IRS Roundup October 22 – 26, 2018

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.




M&A Tax Aspects of Republican Tax Reform Framework

The outline of pending tax reform provisions remain vague, but a significant impact on M&A activity is expected by way of corporate tax cuts, interest deductibility, changes to the expensing of capital investments, a reduction of the pass-through tax rate and changes to our international (territorial) tax system.

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Do Partnerships Now Need to Reserve for Taxes?

The Bipartisan Budget Act of 2015, P.L. 114-74, added new partnership audit rules, which are generally effective for tax years beginning in 2018. These new rules will allow the Internal Revenue Service (IRS) to assess and collect tax due on partnership adjustments at the entity level. Some partnerships will be able to elect out of these rules. For partnerships that cannot elect out, practitioners are pondering whether the new audit rules will cause partnerships, historically pass through entities for tax purposes, to now be required to make a tax provision/reserve on their financial statements. In a tiered partnership context, even if an upper-tier partnership has elected out of the regime, practitioners are wondering whether the upper-tier partnership may still need to make a tax provision/reserve if a lower-tier partnership elects to push out adjustments to its partners, resulting in an entity level tax for the upper-tier partnership.

See our prior discussion of the new partnership audit rules. Also see Tax Notes Today, “New Partnership Audit Rules Could Require Tax Provision Review,” June 3, 2016.




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