stock buybacks Archives - TAX CONTROVERSY 360

Weekly IRS Roundup December 19 – December 23, 2022

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 19, 2022 – December 23, 2022.

December 19, 2022: The IRS released Internal Revenue Bulletin 2022-51, which highlights the following:

Revenue Ruling 2022-23: This revenue ruling announces the interest rates for the first quarter of 2023. The new interest rates are as follows:
- Overpayments: 7%
- Overpayments for corporations: 6%
- Corporate overpayments for portion exceeding $10,000: 4.5%
- Underpayments: 7%
- Large corporate underpayments: 9%

Announcement 2022-26: This announcement notifies taxpayers that payments made to property owners under Suffolk County’s Septic Improvement Program are not required to be included in gross income for federal income tax purposes.

Revenue Ruling 2022-24: This revenue ruling provides tables for covered compensation related to qualified pension, profit-sharing and stock bonus plans under Section 401(l)(5)(E) and related income tax regulations for the 2023 plan year. The taxable wage base is $160,200 for the 2023 tax year (up from $147,000 in 2022) for purposes of determining covered compensation.

Announcement 2022-24: This announcement lists the organizations that no longer qualify for 501(c)(3) and 170(c)(2) status.

Announcement 2022-25: This announcement notifies potential donors of a stipulated decision by the US Tax Court in declaratory judgment proceedings under Section 7428.

Announcement 2022-27: This announcement reminds state and local housing credit agencies of the deadline related to certain allocation of housing credit dollar amounts under Section 42.

December 19, 2022: The IRS and the US Department of the Treasury (Treasury) issued guidance related to the Sustainable Aviation Fuel (SAF) credit. Notice 2023-06 explains the requirements for the fuel to be eligible for the SAF credit, how to claim the credit and who must be registered. The SAF credit was introduced in the Inflation Reduction Act of 2022 (IRA) and applies to a qualified fuel mixture containing sustainable aviation fuel for certain uses or sales in the 2023 and 2024 calendar years.

December 19, 2022: The Treasury announced a timeline for providing additional information on key tax provisions for the IRA. Before the end of the year, the Treasury will provide: (1) FAQs on the tax credit for energy-efficient home improvement projects and residential energy property; (2) initial guidance on the corporate alternative minimum tax; and (3) initial guidance on the excise tax on stock buybacks. Beginning January 1, 2023, consumers and businesses will be able to access tax benefits from many of the IRA’s climate provisions.

December 20, 2022: The IRS issued Notice 2023-4, which provides the percentage increase for calculating the qualifying payment amounts for items and services furnished during 2023 with respect to Sections 9816 and 9817 of the Internal Revenue Code, Sections 716 and 717 of the Employee Retirement Income Security [...]

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It’s Official: President Biden Signs the Inflation Reduction Act into Law, IRS to Receive Increased Funding

On August 16, 2022, US President Joe Biden signed into law the Inflation Reduction Act of 2022 (Act). A press release from the White House touts the Act as one that will “lower the costs for families, combat the climate crisis, reduce the deficit, and finally ask for the largest corporations to pay their fair share.” The press release provides a numerical summary of the Act’s impact on the healthcare, clean energy and tax sectors.

As we previously discussed, the Act provides for a significant increase in funding for the Internal Revenue Service (IRS). IRS Commissioner Chuck Rettig shared the following written statement regarding the Act:

The signing of the historic reconciliation package marks a transformational moment for our agency—and an opportunity for the future of tax administration. The IRS has struggled for many years with insufficient resources to fulfill our important mission. During the next 10 years, these funds will help us in many areas, including adding critical resources to not just close the tax gap but meaningfully improve taxpayer service and technology. This will allow the IRS to provide services to taxpayers in the manner they expect and deserve. The act also includes a wide range of tax law changes that we will have to implement very quickly.

Given the scope of the bill, keep in mind these changes will not be immediate. It’s a 10-year plan, and it will take time to put these provisions into place. More details will be available in coming months.

We have a lot of hard work in front of us to deliver on the high expectations this historic funding will provide. But I have great confidence IRS employees are up to the task—and will deliver for Americans as they have countless times before in the history of our agency.

The Act also contains several new provisions relating to the corporate alternative minimum, a tax on stock buybacks, and tax credits for clean energy use and production. These provisions will require immediate guidance given that they are effective for taxable years beginning after December 31, 2022.

Practice Point: The IRS has its work cut out for it. It is critical that timely guidance be provided to taxpayers impacted by the Act’s new provisions to allow for proper planning and modeling. Additionally, the IRS needs to create and execute a plan to improve its technology and customer service.

Update as of August 18, 2022: US Secretary of the Treasury Janet Yellen has issued a memorandum to Commissioner Rettig, directing the IRS to produce, within six months, an operational plan detailing how the additional funding would be deployed over the next decade. Secretary Yellen specifically stated that she would like the IRS to work closely with Deputy Secretary of the Treasury Wally Adeyemo “to identify specific operational initiatives and associated timelines that will improve taxpayer service, modernize technology, and increase equity in our system of tax administration [...]

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