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Weekly IRS Roundup September 30 – October 4, 2019

by | Oct 8, 2019 | ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of September 30 – October 4, 2019.

September 30, 2019: The IRS published a draft of the tax year 2019: (i) Form 1065, US Return of Partnership Income; (ii) its Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc.; (iii) Form 1120-S, US Income Tax Return for an S Corporation; and (iv) its Schedule K-1, Shareholder’s Share of Income, Deductions, Credits, etc. The IRS intends the changes to the form and schedule to improve the quality of the information reported by partnerships both to the IRS and the partners of such entities and to improve the data available for the IRS’s compliance selection processes. This draft gives tax practitioners a preview of the changes and software providers the information they need to update systems before the final version of the updated forms and schedules are released in December. There is a limited window period (30 days) for taxpayers to provide comments on the forms to the IRS.

October 1, 2019: The Treasury and the IRS issued a revenue procedure that limits the inquiries required by US persons to determine whether certain foreign corporations are controlled foreign corporations. The revenue procedure also allows certain unrelated minority US shareholders to rely on specified financial statement information to calculate their subpart F and GILTI inclusions and satisfy reporting requirements with respect to certain CFCs if more detailed tax information is not available. It also provides penalty relief to taxpayers in the specified circumstances. The revenue procedure announces that the IRS intends to amend the instructions for Form 5471 to reduce the amount of information that certain unrelated minority US shareholders of the CFC are required to provide. It will also limit the filing requirements of US shareholders who only constructively own stock of the CFC solely due to downward attribution from another person.

October 2, 2019: The Treasury and the IRS released proposed regulations relating to the modification of section 958(b) by the TCJA. The proposed regulations provide relief to taxpayers affected by the repeal of section 958(b)(4), which provided that the downward attribution rules of section 318 were not to be applied so as to consider a United States person as owning stock owned by a foreign person. The regulations also propose modifications to existing regulations that are intended to ensure that the operation of certain rules is consistent with their application before the repeal of section 958(b)(4). The proposed regulations affect United States persons that have ownership interests in or that make or receive payments to or from certain foreign corporations. The modifications relate to the following: (i) section 267 (Deduction for Certain Payments to Foreign Related Persons); (ii) section 332 (Liquidation of Applicable Holding Company); (iii) section 367(a) (Triggering Event Exception for other Dispositions or Events under Treas. Reg. § 1.367(a)-8(k)(14)); (iv) section 672 (CFC’s Ownership of a Trust); (v) section 706 (Taxable Year of a Partnership); (vi) section 863 [...]

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Weekly IRS Roundup September 23 – 27, 2019

by | Sep 30, 2019 | ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of September 23 – 27, 2019.

September 24, 2019: The IRS issued a notice that provides a safe harbor under which a rental real estate enterprise will be treated as a trade or business for purposes of section 199A and the regulations thereunder. The IRS explained that if the safe harbor requirements are met, the rental real estate enterprise will be treated as a single trade or business as defined in section 199A(d) for purposes of applying the regulations under section 199A. Each rental real estate enterprise will be treated as a single trade or business if the following requirements are satisfied during the taxable year with respect to the rental real estate enterprise: (1) separate books and records are maintained to reflect income and expenses for each enterprise; (2) for enterprises in existence less than four years, 250 or more hours of rental services are performed per year; (3) taxpayer maintains contemporaneous records on hours of services performed, description of services, dates of services, and who performed such services; and (4) taxpayer attaches a statement with information such as a description of the properties, to a timely filed original return for each year in which the enterprise relies on the safe harbor. 

September 26, 2019: The Treasury and the IRS released proposed regulations that: (1) clarify the application of the employer shared responsibility provisions and certain nondiscrimination rules to reimbursement arrangements (HRAs) and other account-based group health plans integrated with individual health insurance coverage or Medicare (individual coverage HRAs); (2) provide certain safe harbors with respect to the application of those provisions to individual coverage HRAs; and (3) facilitate the adoption of individual coverage HRAs by employers by permitting taxpayers to rely on the proposed regulations. The proposed regulations would affect employers, employees and their family members, and plan sponsors.

September 27, 2019: The IRS released a Statistics of Income Bulletin focusing on individual income tax returns. The report contains data on sources of income, adjusted gross income, exemptions, deductions, taxable income, income tax, modified income tax, tax credits, self-employment tax, and tax payments. The report makes classifications by tax status, size of adjusted gross income, marital status, type of tax computation and age.

September 27, 2019: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Robbie Alipour in our Chicago office for this week’s roundup.



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Weekly IRS Roundup September 16 – 20, 2019

by | Sep 23, 2019 | , , ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of September 16 – 20, 2019.

September 16, 2019: The IRS issued a news release about time-limited settlement offers made to eligible taxpayers under audit who participated in certain micro-captive insurance transactions.

September 17, 2019: The Treasury and the IRS released a Chief Counsel Notice advising Chief Counsel attorneys about the prior Policy Statement on the Tax Regulatory Process issued by the Treasury and the IRS on March 5, 2019. We previously wrote about the Policy Statement here. The Chief Counsel Notice advises that any matter implicating any aspect of the Policy Statement must be coordinated with the Office of Associate Chief Counsel (Procedure & Administration).

September 17, 2019: The IRS issued a notice expanding the emergency housing and compliance monitoring relief that is provided in Rev. Proc. 2014-49, 2014-37 I.R.B. 535, and Rev. Proc. 2014-50, 2014-37 I.R.B. 540 to Butte, Los Angeles and Ventura counties in California due to the California wildfires.

September 17, 2019: The IRS set September 24, 2019, as the Federal Register publication date for final and proposed regulations on increase of benefit and expansion of qualifying property for additional first year depreciation deduction.

September 18, 2019: The IRS released a revenue ruling prescribing various rates for federal income tax purposes for October 2019: (1) applicable federal rates for purposes of section 1274(d); (2) adjusted applicable federal rates for purposes of section 1288(b); (3) adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f); (4) appropriate percentages for determining the low-income housing credit described in section 42(b)(1); and (5) the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520.

September 19, 2019: The IRS issued final regulations amending the rules relating to hardship distributions from section 401(k) plans. The final regulations reflect statutory changes affecting section 401(k) plans, including changes made by the Bipartisan Budget Act of 2018. The regulations affect participants in, beneficiaries of, employers maintaining and administrators of plans that include cash or deferred arrangements or provide for employee or matching contributions.

September 2019: The IRS released a Statistics of Income Bulletin focusing on gift taxes. The article provides data on donors, donees, and types and amounts of gifts given during 2010 to 2016.

Special thanks to Robbie Alipour in our Chicago office for this week’s roundup.



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The Internal Revenue Service Is Expanding the 2020 Compliance Assurance Process

by and | Sep 17, 2019 | , , ,

The Large Business and International Division of the Internal Revenue Service (IRS) developed the Compliance Assurance Process (CAP) program to improve large corporate taxpayer compliance with US federal tax obligations through the use of real-time issue resolution tools and techniques.

On September 12, 2019, the IRS announced that it was accepting applications—for the first time since 2015—from new corporate taxpayers that meet the eligibility requirements for the CAP program. The application period for the 2020 CAP year begins on September 16, 2019, and ends on October 31, 2019. Generally, applicants must meet the following requirements in order to be eligible to apply for CAP: (1) applicants must have assets of $10 million or more; (2) applicants must be a US publicly traded corporation with a legal requirement to prepare and submit SEC Forms 10-K, 10-Q, and 8-K; and (3) the applicant must not be under investigation by, or in litigation with, any government agency that would otherwise limit the IRS’s access to current tax records.

Taxpayers interested in applying for the 2020 CAP year must submit an application with several forms:

  • Form 14234 – CAP Application
  • Form 14234-A – CAP Research Credit Questionnaire
  • Form 14234-B – Material Intercompany Transactions Template
  • Form 14234-C – Taxpayer Initial Issues List
  • Form 14234-D – Tax Control Framework Questionnaire

If the taxpayer also meets the eligibility and suitability criteria, the application will be forwarded for an evaluation of the application. Accepted taxpayers will be notified in writing by the Territory Manager assigned to the taxpayer.

However, acceptance is not automatic; the IRS, in its sole discretion, may reject the application when warrants by the facts and circumstances of the application or in the interest of sound tax administration. If an application is rejected, the taxpayer will be notified in writing and provided with the reasons why it was not accepted.

Further information regarding the IRS’s CAP program may be found here. Earlier coverage of the IRS’s 2018 recalibration of the CAP program can be found here.

Practice Point: The CAP program is a valued tool for many large corporate taxpayers. Eligible taxpayers that are interested in the CAP program for 2020 should prepare and submit an application as soon as possible.



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Weekly IRS Roundup September 9 – 13, 2019

by | Sep 16, 2019 | ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of September 9 – 13, 2019.

September 9, 2019: The IRS released a revision to its Internal Revenue Manual that clarifies procedures to assess late filing penalties involving two or more late Forms W-2 received by the Social Security Administration-Combined Annual Wage Reporting.

September 9, 2019: The IRS issued a news release announcing that the third quarter deadline for estimated tax payments is September 16, 2019. The release details who needs to pay estimated tax, how the estimated tax works, and how and when to pay. The IRS also highlighted that the Tax Withholding Estimator is now more mobile-friendly and replaces the Withholding Calculator on IRS.gov.

September 10, 2019: The IRS released proposed regulations that provide guidance on the items of income and deduction that are included in the calculation of built-in gains and losses under section 382, and reflects numerous changes made to the Code by the enactment of recent tax legislation. The proposed regulations would adopt as mandatory the net unrealized built-in gain (NUBIG) and net unrealized built-in loss (NUBIL) harbor computation under Section 1374, and provided in Notice 2003-65, with modifications, such as clarification on amounts included in the NUBIG/NUBIL computation and items that could be realized built-in gain and realized built-in loss during the recognition period. The proposed regulations do not incorporate the Section 338 approach. The proposed regulations would not allow cancellation of indebtedness (COD) income to be included in calculating NUBIG/NUBIL, but propose to limit the extent to which excluded COD income is treated as realized built-in gain. Notice 87-79, Notice 90-27, Notice 2003-65, and Notice 2018-30 are withdrawn and incorporated, as appropriate, into the proposed regulations.

September 11, 2019: The IRS issued a news release announcing that Darren Guillot has been selected as the Deputy Commissioner for Collection and Operations Support in the Small Business/Self-Employed Division (SB/SE) and De Lon Harris has been selected as the Deputy Commissioner for Examination. Guillot will direct and oversee programs impacting taxpayers who file personal, corporate, flow-through, employment, excise and estate and gift returns. Harris will provide executive oversight of SB/SE examination programs designed for taxpayers who file personal, corporate, flow-through, employment, excise and estate and gift returns.

September 12, 2019: The IRS issued a news release announcing the expansion of the Compliance Assurance Process for 2020. New corporate applicants who meet eligibility requirements can apply for the Compliance Assurance Process. The application period runs September 16 to October 31, 2019, and the IRS will inform applicants if they are accepted into the program around January 31, 2020.

September 13, 2019: The IRS submitted to the Office of the Federal Register final regulations providing guidance on the additional first year depreciation deduction under section 168(k). The IRS rejected calls from the retail, restaurant and construction industries to fix the “retail glitch” administratively, noting that Congress must address the clerical error in the Tax Cuts [...]

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Weekly IRS Roundup September 2 – 6, 2019

by | Sep 9, 2019 | ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of September 2 – 6, 2019.

September 3, 2019: The IRS issued a notice in which it released the applicable amount for the health care annual fee imposed on covered entities for 2020. That amount is $15,522,820,037. The applicable amount is determined by multiplying the fee for the 2018 base year ($14,300,000,000) by premium adjustment percentage for 2020 (1.0855118907) and rounded to the nearest dollar, the IRS stated. The fee will apply in 2020 unless legislation extends the fee suspension in place for 2019.

September 3, 2019: The IRS issued two treasury decisions, here and here, which each contain corrections to final regulations regarding the designation and authority of the partnership representative under the centralized partnership audit regime.

September 5, 2019: The IRS issued a proposed regulation in which it introduced proposed rules that would provide guidance on the timing of income inclusion under tax code Section 451 of advance payments for goods, services, and other items. The proposed regulations would provide both a deferral method of accounting for taxpayers that do not have an applicable financial statement (AFS), in addition to taxpayers that have an AFS. The proposed regulations would provide a definition of advance payment, and advance payment acceleration provisions. The proposed regulations, however, would not provide an accelerated cost offset, as suggested in some comments.

September 5, 2019: The IRS issued a proposed regulation in which it introduced proposed rules regarding the timing of income inclusion under tax code Section 451. The proposed rules would provide that the AFS income inclusion rule generally applies to accrual method taxpayers with an AFS when the timing of income inclusion for one or more items of income is determined using the all events test. The AFS must cover the entire year, the IRS noted. The proposed regulations would define what is an AFS.

September 6, 2019: The IRS issued a proposed regulation in which it introduced proposed rules that would update information reporting regulations under tax code Section 6033 that are generally applicable to organizations exempt from tax under Section 501(a) to reflect statutory amendments and reporting relief announced through IRS guidance that have been made since the current regulations were adopted, particularly with respect to tax-exempt organizations required to file an annual Form 990 or 990-EZ. Specifically, the proposed regulations would include adding items in Section 6033(b)(10) and Section 6033(b)(11) to the list of items required to be reported, adding more statutory reporting requirements for controlling organizations, sponsoring organizations, and supporting organizations, amending the gross receipts threshold, clarification on Section 527 organizations, and requiring only Section 501(c)(3) and Section 527 organizations to continue providing names and addresses of contributors.

September 6, 2019: The IRS issued a revenue procedure to comply with proposed regulations (REG-104870-18 and REG-104554-18), affecting Treasury Regulations Section 1.451-3 and Regulations Section 1.451-8. The revenue procedure serves to modify the procedure [...]

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Weekly IRS Roundup August 26 – 30, 2019

by | Sep 3, 2019 | ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of August 26 – 30, 2019.

August 26, 2019: The IRS released a Treasury Decision in which it issued correcting amendments to TD 9866 (i.e., the global intangible low-taxed income (GILTI) and Foreign Tax Credit Regulations pertaining to IRC §951A). The correcting amendments to Treasury Regulations Section 1.951A-2 include in the second sentence of paragraph (c)(4)(iv)(A)(2)(i), removing the language “paragraph (c)(4)(ii)(A)” and adding “paragraph (c)(4)(iii)(A)” in its place, and in the third sentence, removing the language “paragraph (c)(4)(ii)(B)” and adding “paragraph (c)(4)(iii)(B)” in its place, among other changes.

August 27, 2019: The IRS released a revenue procedure in which it added Georgia to the list of countries for which the United States has an automatic exchange of deposit interest information as related to certain nonresident alien individuals. This revenue procedure supersedes Rev. Proc. 2018-36.

August 28, 2019: The IRS issued a news release and a revenue procedure in which it announced that interest rates will remain the same for the calendar quarter beginning October 1, 2019, as they were in the prior quarter. Specifically, those rates are 5% for overpayments (4% for corporations), 2.5% for the portion of a corporate overpayment exceeding $10,000, 5% for underpayments, 7% for large corporate underpayments and, for taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

August 29, 2019: The IRS released a revenue procedure in which it set forth 2018 annual percentages for Foreign Insurance Companies carrying on US business. Specifically, the domestic asset/liability percentage was set at 118.3% for foreign life insurance companies and 201.2% for foreign property and liability insurance companies. The revenue procedure also published domestic investment yields of 4.5% for foreign life insurance companies and 3.5% for foreign property and liability insurance companies. The IRS stated that a foreign insurance company must compute its estimated tax payments for its investment income for such taxable years by using the greater of its actual effectively connected net investment income or its minimum net investment income using these percentages, except that such company may continue to use the prior year’s percentages, as published in Revenue Procedure 2018-45, if the due date of an installment is less than 20 days after the current procedure is published in the Internal Revenue Bulletin.

August 30, 2019: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Alex Ruff in our Chicago office for this week’s roundup.



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Weekly IRS Roundup August 19 – 23, 2019

by | Aug 26, 2019 | ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of August 19 – 23, 2019.

August 20, 2019: The IRS released a proposed regulation that provides corrections to proposed rules that would provide an exception to the unified plan rule for defined contribution multiple employer plans where the employer fails to satisfy qualification requirement or to provide information to determine compliance.

August 22, 2019: The IRS released a proposed regulation that provides special valuation rules for employers and employees to use in determining the amount to include in an employee’s gross income for personal use of an employer-provided vehicle. Notice 2019-08 was issued to implement amendments made to tax code Section 280F, by the 2017 tax act, Pub. L. No. 115-97. In an effort to be consistent with the substantial increase in the dollar limitation on depreciation deductions under Section 280F(a), the proposed regulations would increase, effective for the 2018 calendar year, the maximum base fair market value of a vehicle for use of the fleet-average or vehicle cents-per-mile valuation rule to $50,000. The IRS also stated that to comply with Notice 2019-34, it expects that the inflation-adjusted maximum fair market value for a vehicle for purposes of the fleet-average and vehicle cents-per-mile valuation rules will be included in an annual notice.

August 22, 2019: The IRS issued a notice in which it stated that forthcoming regulations will provide that a domestic partnership or S corporation may apply the rules in Proposed Treasury Regulations Section 1.951A-5, in their entirety, for taxable years that ended before June 22, 2019. The IRS also stated in its notice that a domestic partnership or S corporation will not be liable for penalties for failures under tax code Section 6698, Section 6699, Section 6722, or similar provisions because of a failure to act consistently with Proposed Treasury Regulations Section 1.951A-5 before June 22, 2019. However, to qualify for relief, the domestic partnership or S corporation must provide notice to each partner or shareholder.

August 22, 2019: The IRS released a Treasury Decision in which it released corrections to T.D. 9866, containing final regulations on determining the amount of global intangible low-taxed income (GILTI) included in the gross income of certain US shareholders of foreign corporations, including US shareholders that are members of a consolidated group.

August 23, 2019: The IRS issued a notice in which it stated that the nondiscrimination relief for closed defined benefit plans provided for in Notice 2014-5 is extended to plan years beginning before 2021 if certain conditions outlined in its Notice 2019-49 are satisfied. Notice 2014-5 permits a DB/DC plan that includes a closed defined benefit plan and that satisfies certain conditions set forth in the notice to demonstrate satisfaction of the nondiscrimination in amount requirement of Treasury Regulations Section 1.401(a)(4)-1(b)(2) on the basis of equivalent benefits even if the DB/DC plan does not meet any of the existing eligibility conditions for testing on that basis under [...]

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Weekly IRS Roundup August 12 – 16, 2019

by | Aug 19, 2019 | ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of August 12 – 16, 2019.

August 12, 2019: The IRS issued a news release announcing that John Moriarty has been selected as the new associate chief counsel, Income Tax and Accounting. The Income Tax and Accounting (ITA) Division in Washington, DC, provides legal advisory services regarding fundamental rules of the federal tax system, including a wide variety of income tax and tax accounting issues. Mr. Moriarty has served as deputy associate chief counsel (ITA) since April 2012. In 2017, he served as acting associate chief counsel, Passthroughs and Special Industries for 11 months. He has helped guide ITA through implementation of the recent Tax Cuts and Job Act. Prior to joining the Office of Chief Counsel, Moriarty was a tax attorney with several private-sector organizations.

August 12, 2019: The IRS released a revision to its Internal Revenue Manual that would provide additional guidance to better explain who can bind Corporations and Consolidated Groups in the statute extension process and examples of how to enter the information on the statute extension forms.

August 13, 2019: The IRS released a revision to its Internal Revenue Manual that would clarify actions examiners must take to analyze and document Currency Transaction Report data during an audit. Financial institutions, including casinos, must report each receipt and each withdrawal of currency exceeding $10,000 by filing a FinCEN Currency Transaction Report (CTR), the IRS explained. The guidance is effective immediately.

August 13, 2019: The IRS released a revision to its Internal Revenue Manual that would provide for updated acceptable Form 4506, Request for Copy of Tax Return, series revisions. Forms 4506 must have an acceptable revision date in order to process, the IRS stated. Instructions for third party-transcript requests were also added.

August 14, 2019: The IRS issued a revenue ruling in which it stated that an individual’s failure to cash a distribution check in the current year does not permit the individual to exclude the amount of the designated distribution from gross income under tax code Section 402(a) and does not alter the employer’s withholding obligations under Section 3405 or Form 1099-R reporting obligations under Section 6047(d). The ruling also noted that Treasury and the IRS continue to analyze issues that arise in other situations involving uncashed checks from eligible retirement plans described in Section 402(c)(8)(B), including situations involving missing individuals with benefits under those plans.

August 16, 2019: The IRS issued a revenue ruling in which it released the prescribed rates for federal income tax purposes for September 2019, including the applicable federal rates (AFR) under tax code Section 1274(d); the adjusted applicable federal rates (adjusted AFR) under Section 1288(b); the adjusted federal long-term rate and the long-term tax-exempt rate under Section 382(f); the appropriate percentages for determining the low-income housing credit under Section 42(b)(1); and the federal rate for determining the present value of an annuity, an interest for life or [...]

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