Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of August 5 – 9, 2019.

August 5, 2019: The IRS issued a notice of withdrawal of directive LB&I-04-0118-005, which provided guidance on transfer pricing issue election for cost-sharing arrangement stock based compensation. For further coverage of this issue, see our recent post.

August 6, 2019: The IRS released a revenue procedure that provides simplified procedures for insurance companies to obtain automatic consent to change their method of accounting. The revenue procedure applies to any insurance company that changes its method of computing life insurance reserves to comply with Section 807, as amended by the 2017 tax act, Pub. L. No. 115-97, for the first taxable year beginning after December 31, 2017, and provides that adjustments under Section 481(a) are taken into account. The IRS also included insurance companies that change their methods of capitalizing and amortizing specified policy acquisition expenses to comply with Section 848, as amended by the 2017 tax act, for the first taxable year beginning after December 31, 2017. The IRS also stated that the provisions of Revenue Procedure 2015-13 apply to an insurance company covered by the scope of Revenue Procedure 2019-34.

August 7, 2019: The IRS released corrections to proposed regulations that provide several corrections to proposed regulations regarding the limitation on dividends received deduction available for former controlled foreign corporations.

August 7, 2019: The IRS released corrections to temporary regulations regarding the limitation on dividends received deduction available for former controlled foreign corporations.

August 7, 2019: The IRS released corrections to the preamble of final regulations regarding the limitation on dividends received deduction available for former controlled foreign corporations.

August 9, 2019: The IRS released proposed regulations that would provide guidance on classifying cloud transaction as either a provision of services or as a lease of property for international provisions of the tax code and that would modify the rules for classifying transactions involving computer programs by applying the rules to digital content transfers. The proposed regulations would provide a definition of cloud transaction, as a transaction through which a person obtains non-de minimis on-demand network access to computer hardware, digital content, or other similar resources. The proposed regulations would broaden the scope of existing Regulations Section 1.861-18 to apply to all transfers of digital content.

August 9, 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.

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 29 – August 2, 2019.

July 30, 2019: The IRS issued a list of answers to frequently asked questions in which it addressed questions regarding basis adjustments and the 50% of gross income test in the context of investments in Opportunity Zones as governed provided for within Section 1400Z-2.

July 31, 2019: The IRS issued a news release noting that it has issued a revenue procedure allowing a taxpayer to make a late election, or to revoke an election, for bonus depreciation under section 168(k) for certain property acquired by the taxpayer after September 27, 2017, and placed in service by the taxpayer during its taxable year that includes September 28, 2017.

August 1, 2019: The IRS issued amendments to the preamble for regulations issued to limit the charitable contribution deduction when receiving state and local tax credits. The correction was made by updating an Internal Revenue Bulletin citation for Notice 2019-12 to include the page number after the official publication. The notice provides a safe harbor for individuals who itemize deductions and makes a payment to a tax code Section 170(c) entity in return for a state or local tax credit to treat the portion of such payment that is or will be disallowed as a charitable contribution deduction under Section 170 as a payment of state or local tax for purposes of Section 164.

August 1, 2019: The IRS released proposed regulations providing corrections to previously issued proposed rules under tax code Section 958 (providing proposed regulations regarding the treatment of domestic partnerships for purposes of determining amounts included in the gross income of their partners with respect to foreign corporations) and under Section 951A (providing proposed regulations under GILTI provision 1.951A-2 regarding income subject to a high rate of foreign tax).

August 2, 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.

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 22–26, 2019.

July 22, 2019: The IRS issued a revenue procedure in which it issued indexing adjustments required by statute for certain provisions under tax code Section 36B. The IRS is updating the applicable percentage table used to calculate an individual’s premium tax credit for taxable years beginning in calendar year 2020 and the required contribution percentage for plan years beginning after calendar year 2019.

July 22, 2019: The IRS issued a revenue procedure in which it issued, under tax code Section 446, simplified procedures for insurance companies to obtain automatic consent to change method of accounting for discounting unpaid losses, expenses unpaid, estimated salvage recoverable, and unearned premiums attributable to title insurance, to comply with Section 846 as amended by the 2017 tax act. The IRS noted that, for taxable years beginning after December 31, 2017, and ending on or before December 31, 2019, the procedures provided are the exclusive procedures. One simplified method provided is that the requirement of Treasury Regulations Section 1.446-1(e)(3) to file a Form 3115 is waived for a taxpayer making a change in method of accounting under this revenue procedure.

July 22, 2019: The IRS issued a revenue procedure in which it issued salvage discount factors for the 2019 accident year, which must be used to compute the discounted estimated salvage recoverable under tax code Section 832. The IRS listed the discount factors for the 2019 accident year in separate tables for each line of business. The IRS explained that it determined all of the discount factors using the applicable interest rate under Section 846(c) for 2019, which is 2.94%, and by assuming all estimated salvage is recovered in the middle of each calendar year. These discount factors are effective for taxable years beginning after December 31, 2017.

July 23, 2019: The IRS issued a T.D. in which it released final regulations and effected the removal of temporary regulations related to allocation by a partnership of creditable foreign income taxes (IRC §704). These changes will be effective as of July 24, 2019. The regulations seek to improve the operation of an existing safe harbor rule that determines whether allocations of creditable foreign tax expenditures (CFTEs) are deemed to be in accordance with the partners’ interests in the partnership. Treasury Regulations Section 1.704-1(b)(4)(viii) provides a safe harbor under which allocations of CFTEs are deemed to be in accordance with the partners’ interests in the partnership. A comment requested revising the regulations to provide that disregarded payments between CFTE categories are taken into account in computing the net income in a CFTE category. The final regulations address that comment by adding a cross-reference to the disregarded payment rule for assigning income to an activity in Treas. Reg. Section 1.704-1(b)(4)(viii)(c)(3)(iv) in the paragraph that provides the basic definition of an activity to further highlight the interaction of those two paragraphs.

July 23, [...]

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