Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 24, 2018 – January 4, 2019. Tax news is very limited because of the government shut down:

December 31, 2018: The IRS released Notice 2019-09, providing interim guidance on section 4960 of the Code, enacted by the Tax Cuts and Jobs Act, regarding excise taxes on excess remuneration and excess parachute payments paid by certain tax-exempt organizations to covered employees.

December 31, 2018: The IRS released the final 2018 version of Form 8990, dealing with limitations on business interest expense deductions under section 163(j) of the Code.

December 31, 2018: The IRS released final instructions for the 2018 version of Form 1116, dealing with the foreign tax credit, reflecting changes made by the Tax Cuts and Jobs Act.

January 4, 2018: The IRS released final instructions for the 2018 version of Form 8990, dealing with limitations on business interest expense deductions under section 163(j) of the Code, reflecting changes made by the Tax Cuts and Jobs Act.

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

On January 2, 2019, the outgoing Chair of the House Ways and Means Committee, Kevin Brady (R-TX), released the Tax Technical and Clerical Corrections Act (the Bill), addressing several technical issues associated with the Tax Cuts and Jobs Act (P.L. 115-97) (TCJA). The Bill includes certain provisions that, if enacted, would affirm Congress’ intent that taxpayers with an overpayment with respect to an installment payment of the transition tax under Internal Revenue Code (Code) Section 965 should be able to claim a credit or refund with respect to such amount. The provisions in the Bill with respect to Code Section 965 overpayments are largely consistent with similar draft legislation introduced on November 26, 2018 (the Retirement, Savings and Other Tax Relief Act of 2018 and the Taxpayer First Act of 2018, or H.R. 88; see prior discussion here). In particular, the Bill provides that where a taxpayer that made an election under Code Section 965(h)(1) to pay the net tax liability under Section 965 in installments has filed a request for a credit or refund with respect to an overpayment, the Internal Revenue Service cannot take any installment into account as a liability for purposes of determining whether an overpayment exists. If enacted, the Bill would permit taxpayers to claim a refund or credit with respect to an installment payment of the taxpayer’s transition tax under Code Section 965. Continue Reading Section 965 Transition Tax Overpayment Addressed in Technical Corrections

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 17 – 21, 2018:

December 18, 2018: The IRS issued a news release providing guidance on excess business loss limitations and net operating losses following changes made by the Tax Cuts and Jobs Act.

December 19, 2018: The IRS issued Revenue Ruling 2019-03, providing various prescribed rates for federal income tax purposes for January 2019.

December 19, 2018: The IRS issued Revenue Procedure 2019-06, prescribing discount factors used in computing unpaid losses under section 846 of the Code, as amended by the Tax Cuts and Jobs Act.

December 19, 2018: The IRS issued Notice 2019-04, extending temporary dyed fuel relief, initially provided in Notice 2017-30, through December 31, 2019.

December 20, 2018: The IRS issued proposed regulations implementing anti-hybrid provisions under sections 245A(e) and 267A of the Code, enacted as part of the Tax Cuts and Jobs Act.

December 20, 2018: The IRS issued proposed regulations dealing with the treatment of the sale of US trade or business partnership interests by foreign partners under section 864(c)(8) of the Code, enacted as part of the Tax Cuts and Jobs Act.

December 20, 2018: The IRS issued Revenue Procedure 2019-09, updating guidance on when a taxpayer has provided adequate disclosure of tax positions for the purpose of avoiding penalties.

December 20, 2018: The IRS issued Notice 2019-06, informing taxpayers of its intent to issue proposed regulations addressing special enforcement matters under section 6241(11) of the Code, with regard to the centralized partnership audit regime.

December 21, 2018: The IRS issued final regulations implementing the centralized partnership audit regime under sections 6221 through 6241 of the Code.

December 21, 2018: The IRS issued Revenue Procedure 2019-08, providing guidance on deducting expenses under section 179(a) of the Code and deducting depreciation under section 168(g), as amended by the Tax Cuts and Jobs Act.

December 21, 2018: The IRS issued Notice 2019-05, expanding the list of hardship exemptions from the individual shared responsibility payment under section 5000A of the Code.

December 21, 2018: 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 DC office for this week’s roundup.

On December 13, 2018, US Department of the Treasury and the Internal Revenue Service (IRS) released proposed regulations for the Base Erosion and Anti-Abuse Tax (the BEAT), which was added to the Code as part of the 2017 Tax Act. The proposed regulations provide helpful guidance on a range of important topics and generally go a long way toward a reasonable implementation of a very challenging statute. There is one aspect of the proposed regulations, however, that may be an unwelcome surprise for many taxpayers; the proposed regulations treat stock consideration in non-cash transactions as BEAT “payments,” thereby creating the potential for BEAT liability in situations involving certain liquidations, tax-free reorganizations and other non-cash transactions.

Located in section 59A, the BEAT imposes a minimum tax on US corporations (and certain foreign corporations, which are not the focus of this Insight) that consistently have annual gross receipts of $500 million or more and claim more than a de minimis amount of “base erosion tax benefits” for a taxable year. In general, as base erosion tax benefits increase, a corporate taxpayer’s BEAT liability increases.

The proposed regulations, which are generally proposed to be effective for tax years beginning after December 31, 2017, include guidance for determining the base erosion payments that will give rise to annual base erosion tax benefits. Prop. Reg. § 1.59A-3(b) applies the same four categories of base erosion payments found in section 59A(d) for amounts paid or accrued to a related foreign party. The two categories that should affect the most taxpayers are the general category for currently deductible items and the special category for the acquisition of depreciable or amortizable property. With respect to this latter category, the acquisition price of the property will constitute the base erosion payment, but only the amount of any depreciation or amortization deductions claimed in a tax year will produce a base erosion tax benefit for purposes of computing the BEAT.

Continue Reading Proposed BEAT Regulations | Tax-Free Transactions May Give Rise to a Liability

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 10 –14, 2018:

December 10, 2018: The IRS issued Notice 2018-99, providing interim guidance on sections 274 and 512 of the Code, as amended by the Tax Cuts and Jobs Act, dealing with nondeductibile expenses for employer-provided parking.

December 10, 2018: The IRS issued Notice 2018-100, providing relief to tax-exempt organizations from penalties for underpayments related to nondeductible expenses for employer-provided parking under section 512 of the Code, as amended by the Tax Cuts and Jobs Act.

December 12, 2018: The IRS posted a set of FAQs to its website, answering questions regarding return filing and payment obligations under the transition tax of section 965 of the Code.

December 13, 2018: The IRS issued proposed regulations revising withholding requirements under the Foreign Account Tax Compliance Act (FATCA).

December 13, 2018: The IRS issued proposed regulations providing guidance on the Base Erosion and Anti-Abuse Tax (BEAT) of section 59A of the Code, enacted as part of the Tax Cuts and Jobs Act.

December 13, 2018: The IRS issued Revenue Procedure 2019-10, providing procedures for an insurance company to obtain automatic consent to change its accounting method to comply with section 807(f) of the Code, as amended by the Tax Cuts and Jobs Act.

December 14, 2018: The IRS issued Notice 2018-96, providing a phase-out schedule for the qualified plug-in electric drive motor vehicle credit on vehicles sold by Tesla, Inc.

December 14, 2018: The IRS issued Notice 2019-01, providing initial guidance on issues, arising from the enactment of the Tax Cuts and Jobs Act, related to previously taxed earnings and profits under section 959 of the Code.

December 14, 2018: The IRS issued Notice 2019-02, providing the 2019 optional standard mileage rates for use in computing deductible expenses in operating an automobile, plus related information.

December 14, 2018: The IRS issued Notice 2019-03, providing the monthly update to interest rates used for pension plan funding and distribution purposes.

December 14, 2018: 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 DC office for this week’s roundup.

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 3 – 7, 2018:

December 4, 2018: The IRS issued a news release granting taxpayers an extra day, until Thursday, December 6, 2018, to file any return or pay any tax originally due on Wednesday, December 5, 2018, in light of the Executive Order closing all federal agencies on December 5, 2018, as a mark of respect for President George H.W. Bush.

December 4, 2018: The IRS issued Notice 2018-95, providing transition relief from the “once-in-always-in” condition for excluding part-time employees under Treas. Reg. § 1.403(b)-5(b)(4)(iii)(B).

December 6, 2018: The IRS in Revenue Ruling 2018-32 released the interest rates for underpayments and overpayments applicable for the calendar quarter beginning January 1, 2019.

December 7, 2018: The IRS issued Notice 2018-97, providing initial guidance on the application of section 83(i) of the Code, enacted in the Tax Cuts and Jobs Act, which allows qualified employees of privately held corporations to defer paying income tax—for up to five years—on the value of qualified stock options and restricted stock units granted to them by their employers.

December 7, 2018: 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 DC office for this week’s roundup.

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of November 26 – 30, 2018:

November 26, 2018: The IRS issued the proposed regulations under Code Section 163(j) regarding the limitations on business interest expense deductions after the enactment of the Tax Cuts and Jobs Act.

November 26, 2018: The IRS released basic questions and answers regarding the limitations on business interest deductions under Code Section 163(j).

November 27, 2018: The IRS issued Revenue Procedure 2018-59, which provides a safe harbor that allows taxpayers to treat certain infrastructure trades or businesses as real property trades or businesses solely for purposes of qualifying as an electing real property trade or business under Code Section 163(j)(7)(B).

November 28, 2018: The IRS issued the proposed regulations under Code Section 904, providing guidance on the new foreign tax credits rules as amended by the Tax Cuts and Jobs Act.

November 29, 2018: The IRS issued Revenue Procedure 2018-60, which provides the procedures to obtain the automatic consent of the Commissioner under Code Section 446 and Treasury Regulation Section 1.446-1(e) to change a method of accounting to comply with Code Section 451(b), as amended by the Tax Cuts and Jobs Act.

November 30, 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.

Several changes in tax reform have a disparate impact on non-corporate US shareholders of foreign corporations compared with their corporate counterparts. Many such non-corporate shareholders face an expensive tax increase. They may attempt to mitigate this increase by transferring their shares to a US corporation or making a Section 962 election. This article examines the new rules governing US individuals who own foreign corporations and discusses the most significant recent changes, including a lack of participation exemption for US individuals who own foreign corporations and a higher transition tax rate. It further outlines new options for domestication of such foreign corporations.

Continue Reading.

Originally published in Bloomberg BNA Daily Tax Report – October 26, 2018 – Number 205.