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Weekly IRS Roundup April 19 – April 23, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of April 19, 2021 – April 23, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

April 19, 2021: The IRS issued a news release announcing the establishment of a new office, the IRS Office of Promoter Investigations (OPI), which will address promoters of abusive tax avoidance transactions, such as certain syndicated conservation easements and micro-captive insurance arrangements.

April 20, 2021: The IRS issued a news release reminding taxpayers of common filing errors that could delay the processing of returns and refunds.

April 21, 2021: The IRS issued a fact sheet and an accompanying news release, providing details about small business tax credits available under the American Rescue Plan Act of 2021 (ARPA), including credits for the cost of providing leave for employees who are unable to work because of COVID-19 and credits for the cost of providing leave for employees to receive, or recover from, COVID-19 vaccinations.

April 22, 2021: The IRS issued Revenue Procedure 2021-20 and an accompanying news release, providing a safe harbor for certain businesses that received COVID-related Paycheck Protection Program loans and did not deduct the associated expenses for the 2020 taxable year. In response to recent legislation permitting the deduction of such expenses, the Revenue Procedure provides that such businesses may deduct such expenses for the 2021 taxable year in lieu of filing an amended return for the 2020 taxable year.

April 22, 2021: The IRS issued Revenue Procedure 2021-21, waiving the residence requirements to qualify for benefits under section 911 of the Code for the 2020 taxable year, with respect to certain individual taxpayers who departed from Iraq after March 25, 2020.

April 22, 2021: The IRS issued a news release announcing a sixth round of Economic Impact Payments consisting of nearly two million payments totaling nearly $3.4 billion, bringing the total amount of disbursements under ARPA to approximately 161 million payments worth more than $379 billion.

April 23, 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.




Weekly IRS Roundup December 30, 2019 – January 3, 2020

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 30, 2019 – January 3, 2020.

December 30, 2019:  The IRS issued a news release announcing an agreement with Free File, Inc. that is designed to bring more clarity for taxpayers choosing to use free online software during the 2020 filing season. The IRS hopes for the agreement to make the Free File program more taxpayer-friendly while strengthening consumer protections in several key areas.

December 31, 2019:  The IRS issued a news release regarding a notice that provides the optional 2020 standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical or moving expense purposes. The notice also provides the amount that taxpayers must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate (FAVR) plan. The guidance is generally effective for deductible transportation expenses paid or incurred on or after January 1, 2020.

January 2, 2020:  The IRS officially set January 13, 2020, as the publication date in the Federal Register for final regulations on investments in qualified opportunity zones.

January 2, 2020:  The IRS issued its annual revenue procedures listing no-rule areas under the jurisdiction of the Associate Chief Counsels (Corporate, Financial Institutions and Products, Income Tax and Accounting, Passthroughs and Special Industries, Procedure and Administration, and Tax Exempt and Government Entities). The revenue procedures provide a detailed list of areas in which letter rulings and determination letters will not be issued, under any circumstances. The revenue procedures also provide a detailed list of areas in which letter rulings and determination letters will not ordinarily be issued, but may be issued under unique and compelling circumstances. 

January 2, 2020:  The IRS issued a revenue procedure that provides determination letter procedures for applications, including applicable user fees for requesting determination letters. It provides specific procedures for determination letter requests for recognition of exempt status under section 501 and section 521, as well as for determination letter requests on Form 8940. It provides additional guidance on the exhaustion of administrative remedies for purposes of declaratory judgment under section 7428. The IRS provided a list of significant changes from the prior year’s guidance.

January 2, 2020:  The IRS issued a revenue procedure that provides determination letter procedures on matters under the Tax Exempt and Government Entities Division’s Employee Plans Rulings and Agreements Office. Again, the IRS provided a list of significant changes from the prior year’s guidance.

January 2, 2020:  The IRS issued a revenue procedure detailing procedures regarding when and how an Associate office provides technical advice through a technical advice memorandum (TAM). The revenue procedure also provides guidance regarding taxpayers’ rights when a field office requests a TAM regarding a tax matter.

January [...]

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International Practice Units – Competent Authority

In recent months, the Internal Revenue Service (IRS) Large Business and International Division (LB&I) has issued a variety of international tax practice “units” as part of its process to improve tax compliance from identified groups of business taxpayers. The overall process also includes short descriptions of respective “campaigns” and briefly describes the agency’s designated, tailored treatment or treatments for each campaign.

Most recently, it issued a unit on the mutual agreement procedure (MAP), commonly referred to as the Competent Authority Process under bilateral tax treaties (Doc Control No. ISO/P/01_07_03-01). The purpose of the unit is to provide IRS examiners (for the most part, the unit does not address foreign-initiated adjustments) with clear guidance on their responsibility in situations where proposed adjustments will be made in a context in which the taxpayer could potentially face double taxation, consistent with the most recent revenue procedure (Rev. Proc.) 2015-40. The unit also provides a helpful checklist for taxpayers in such situations.

The unit amplifies the guidance in Rev. Proc. 2015-40 with respect to both issues arising in Advance Pricing and Mutual Agreement (APMA) and Treaty Assistance and Interpretation Team (TAIT) (for non-transfer pricing issues). The discussion is consistent with current practice. Critical issues addressed include the following. (more…)




IRS Issues Safe Harbors under Which the IRS Will Not Assert That a Corporation Lacks the Requisite ‘Control’ for Purposes of Section 355(a)

On July 15, 2016, the Internal Revenue Service (IRS) released Rev. Proc. 2016-40. This revenue procedure provides safe harbors in which the IRS will not assert that a distributing corporation, D, lacks control of another corporation, C, within the meaning of Code section 355(a)(1)(A) when D acquires putative control of C through C’s issuance of stock and C subsequently engages in a transaction that actually or effectively reserves the effect of the stock issuance. In general, D can only distribute the stock of C to D shareholders in a tax-free spin-off under Code section 355 if D has control of C within the meaning of Code section 368(c) immediately before the spin-off. To satisfy the control requirement of section 368(c), D must have 80 percent of the vote and 80 percent of each nonvoting class of C stock. Historically, in situations in which D owned less than 80 percent of the stock of C, D would satisfy this requirement by having C recapitalize its stock into “high vote” and “low vote” classes of stock immediately before the spin-off. D would then distribute the “high vote” stock with more than 80 percent of the vote of all C stock to D shareholders in a tax-free spin-off under section 355. However, publicly traded corporations often dislike having multiple classes of stock with different voting rights outstanding. As a result, when C becomes an independent publicly traded corporation following the spin-off, it often seeks to recapitalize its “high vote” and “low vote” classes of stock into a single class with identical voting rights. Prior to 2013, the IRS issued a number of private letter rulings permitting C to engage in such recapitalizations following its first regularly scheduled board meeting after a spin-off without retroactively causing the spin-off to fail to be tax-free under section 355. In 2013, the IRS announced it would no longer issue such rulings while it studied the issue.

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IRS Updates Appeals Procedures for Tax Court Cases

On March 23, 2016, the Internal Revenue Service (IRS) issued Rev. Proc. 2016-22, 2016-15 IRB 1, which clarifies and describes the practices for the administrative appeals process in cases docketed in the Tax Court.  The stated purpose of the revenue procedure is to facilitate effective utilization of appeals and to achieve earlier development and resolution of Tax Court cases.

Previously, the procedures for the appeals process of Tax Court cases was contained in Rev. Proc. 87-24, 1987-1 C.B. 720.  In October 2015, the IRS released a proposed revenue procedure updating the rules and requesting public comments.  Three substantive comments were received and considered by the IRS, resulting in changes to the proposed revenue procedure.  Rev. Proc. 2016-22 states that some of the suggestions that were not adopted may be addressed in other IRS guidance materials.

The general rule followed by the IRS is that all cases docketed in the Tax Court that have not previously been considered by IRS Appeals will be transferred to Appeals unless the taxpayer notifies IRS counsel that it wants to forego settlement consideration by Appeals.  This rule is subject to certain exceptions, most notably if the case has been designated for litigation by the IRS.  The revenue procedure also provides that “[i]n limited circumstances, a docketed case or issue will not be referred if Division Counsel or a higher level Counsel official determines that referral is not in the interest of sound tax administration.”  Although no definition is provided, examples are provided of: (1) a case involving a significant issue common to other cases in litigation for which the IRS maintains a consistent position; or (2) cases related to a case over which the Department of Justice has jurisdiction.  Referral to IRS Appeals will generally occur within 30 days of the case becoming at issue in the Tax Court, which can be either the date the Answer is filed by the IRS or a Reply (if required) is filed by the taxpayer.

The revenue procedure clarifies, and limits, the role of IRS counsel when a case is referred to Appeals.  Unlike Rev. Proc. 87-24, the new revenue procedure provides that Appeals has sole discretion to determine whether IRS counsel may participate in any settlement conference and will consider input from the taxpayer on this point.  It also clarifies that when a case is forwarded to Appeals for consideration, “Appeals has the sole authority to resolve the case through settlement until the case is returned to Counsel.”  In the past, taxpayers were concerned about the ability of IRS counsel to disrupt a settlement reached with Appeals.  If a settlement is reached with Appeals, IRS counsel’s involvement is ministerial in that counsel should only review any decision document signed by the taxpayer for accuracy and completeness before signing the decision document on behalf of the IRS and filing it with the Tax Court.

The new revenue procedure should also be a welcome development for estate tax cases given that there is no statutory provision to extend the [...]

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