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Weekly IRS Roundup May 30 – June 2, 2023

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 30, 2023 – June 2, 2023.

May 30, 2023: The IRS released Internal Revenue Bulletin 2023-22, which highlights the following:

  • Notice 2023-39: This notice describes proposed amendments to Section 148 that the US Department of the Treasury (Treasury) and the IRS intend to issue regarding an exception to arbitrage investment restrictions applicable to bonds on which the interest is excludable from gross income under Section 103(a) (tax-exempt bonds). Specifically, the forthcoming proposed regulations will amend Section 1.148-11(d)(1)(i)(F) regarding whether certain perpetual trust funds created and controlled by states that are pledged as credit enhancements to guarantee tax-exempt bonds will be treated as replacement proceeds of the guaranteed bonds for purposes of the arbitrage investment restrictions on tax-exempt bonds under Section 148.
  • Revenue Procedure 2023-23: This procedure provides the 2024 inflation-adjusted amounts for Health Savings Accounts as determined under Section 223, as well as the maximum amount that may be made newly available for excepted benefit health reimbursement arrangements provided under Section 54.9831-1(c)(3)(viii) of the Pension Excise Tax Regulations.
  • Notice 2023-40: This notice sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates used under Sec. 417(e)(3)(D) and the 24-month average segment rates applicable for May 2023. This notice also provides the 30-year Treasury rates, as reflected by the application of Sec. 430(h)(2)(C)(iv).
  • Notice 2023-38: This notice provides the general rules taxpayers must satisfy to qualify for the domestic content bonus credit amounts and the related recordkeeping and certification requirements. The guidance also describes a safe harbor regarding the classification of certain components in representative types of qualified facilities, energy projects or energy storage technologies.

May 30, 2023: The IRS released Tax Tip 2023-73, reminding taxpayers that the extended deadline to file their 2019 tax returns for unclaimed refunds is July 17, 2023. Taxpayers usually have three years to file; however, the deadline was postponed due to the COVID-19 pandemic.

May 30, 2023: The IRS requested comments on Form 1041, U.S. Income Tax Return for Estates and Trusts, related Schedules D, I, J and K-1, and Form 1041-V. Comments should be received on or before July 31, 2023.

May 30, 2023: The IRS reminded taxpayers living and working abroad to file their 2022 federal income tax return by the June 15 deadline. This applies to both US citizens and resident aliens abroad, including those with dual citizenship.

May 31, 2023: The Treasury and the IRS announced guidance for applicants investing in solar- and wind-powered electricity generation facilities. Notice 2023-17 established the Low-Income Communities Bonus Credit Program back in February 2023 and provided initial guidance for potential applicants. The proposed regulations request comments on certain definitions [...]

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Weekly IRS Roundup May 31 – June 3, 2022

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 31, 2022 – June 3, 2022. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

May 31, 2022: The IRS issued a press release, reminding taxpayers living and working outside the United States that their 2021 federal income tax return is due on June 15, 2022. The deadline applies to both US citizens and resident aliens abroad, including those with dual citizenship. The press release also contains other information to assist said taxpayers with their filings.

June 1, 2022: The IRS issued the first part of its “Dirty Dozen” tax scams for 2022, focusing on the following items:

  • Use of Charitable Remainder Annuity Trust (CRAT) to Eliminate Taxable Gain. In this transaction, appreciated property is transferred to a CRAT. Taxpayers improperly claim the transfer of the appreciated assets to the CRAT, which in and of itself gives those assets a step-up in basis to fair market value as if they had been sold to the trust. The CRAT then sells the property but does not recognize gain because of the claimed step-up in basis. Next, the CRAT uses the proceeds to purchase a single premium immediate annuity (SPIA). The beneficiary reports, as income, only a small portion of the annuity received from the SPIA. Through a misapplication of the law relating to CRATs, the beneficiary treats the remaining payment as an excluded portion representing a return of investment for which no tax is due. Taxpayers seek to achieve this inaccurate result by misapplying the rules under sections 72 and 664.
  • Maltese (or Other Foreign) Pension Arrangements Misusing Treaty. In these transactions, US citizens or US residents attempt to avoid US tax by making contributions to certain foreign individual retirement arrangements in Malta (or possibly other foreign countries). In these transactions, the individual typically lacks a local connection, and local law allows contributions in a form other than cash or does not limit the amount of contributions by reference to income earned from employment or self-employment activities. By improperly asserting that the foreign arrangement is a “pension fund” for US tax treaty purposes, the US taxpayer misconstrues the relevant treaty to improperly claim an exemption from US income tax on earnings in, and distributions from, the foreign arrangement.
  • Puerto Rican and Other Foreign Captive Insurance. In these transactions, US owners of closely held entities participate in a purported insurance arrangement with a Puerto Rican or other foreign corporation with cell arrangements or segregated asset plans in which the US owner has a financial interest. The US-based individual or entity claims deductions for the cost of “insurance coverage” provided by a fronting carrier, which reinsures the “coverage” with the foreign corporation. The characteristics of the purported insurance arrangements typically include one or more of the following: implausible risks covered, non-arm’s length pricing and lack of [...]

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