On April 8, 2020, the Internal Revenue Service (IRS) issued Rev. Proc. 2020-23 in response to the Coronavirus Aid, Relief and Economic Security (CARES) Act. Rev. Proc. 2020-23 eases restrictions on partnerships’ ability to file amended tax returns and issue amended Schedules K-1 in order for their partners to avail themselves of the retroactive tax relief provided by the CARES Act.
Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of April 6 – 10, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.
April 8, 2020: The IRS announced that four LB&I campaigns related to agricultural chemicals security credit, partial disposition election for buildings, restoration of sequestered alternative minimum tax credit carryforward and work opportunity tax credit have been retired. Even though these issues are no longer LB&I campaigns, such issues may still be identified and included in the scope of an LB&I examination.
April 8, 2020: The IRS released Revenue Procedure 2020-23, allowing for eligible partnerships to file amended partnership returns for taxable years beginning in 2018 and 2019 by using Form 1065, US Return of Partnership Income, checking the “Amended Return” box and issuing an amended Schedule K-1 to each of its partners.
April 9, 2020: The IRS issued Revenue Procedure 2020-24, which provides guidance regarding (i) an election under section 172(b)(3) to waive the carryback period for a net operating loss (NOL) arising in a taxable year beginning after December 31, 2017 and before January 1, 2020, (ii) excluding from the carryback period any taxable year in which the taxpayer has a section 965(a) inclusion, and (iii) for an NOL incurred in a taxable year that began before January 1, 2018 and ended after December 31, 2017, waiving or reducing the carryback period or revoking a prior election to waive the carryback period.
April 9, 2020: The IRS released Notice 2020-26, which provides for a six-month extension for the deadline for filing an application for a tentative carryback adjustment under section 6411 with respect to the carryback of an NOL that arose in any taxable year that began during calendar year 2018 and that ended on or before June 30, 2019.
April 10, 2020: The IRS issued Revenue Procedure 2020-22 to provide guidance regarding the election under section 163(j)(7)(B) to be an electing real property trade or business and the election under section 163(j)(7)(C) to be an electing farming business for purposes of the business interest expense deduction limitation under section 163(j).
April 10, 2020: The IRS and the Treasury Department launched a new web tool to allow people who do not normally file a tax return to register for Economic Impact Payments. The new web tool is intended to be simple and only take taxpayers a few minutes to register.
April 10, 2020: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).
Special thanks to Emily Mussio in our Chicago office for this week’s roundup.
In Notice 2020-23, the Internal Revenue Service further expanded relief for taxpayers in response to the Coronavirus (COVID-19) pandemic. Individuals, corporations, trusts, estates and other taxpayers that ordinarily would have had a filing, payment or other deadline between April 1, 2020, and July 15, 2020, now qualify for an extension.
The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, provides tax relief to taxpayers in certain situations. Some of these provisions may generate refunds for prior years, such as the relaxation of restrictions on the use of net operating losses (NOLs) and interest deductions as well as the retroactive availability of additional depreciation related to qualified improvement property. For our prior discussions of these, and other CARES Act provisions, see here.
Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of March 30 – April 3, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.
March 30, 2020: Economic impact payments will be sent out over the next three weeks. These payments will be distributed automatically, with no action needed by most people. However, some taxpayers who typically do not file returns will need to submit a simple tax return to receive the economic impact payment. The Treasury Department plans to develop a web-based portal for individuals to provide their banking information to the IRS for direct deposit of the economic impact payments.
March 31, 2020: The Treasury Department and the Internal Revenue Service launched the Employee Retention Credit to encourage businesses financially impacted by COVID-19 to keep employees on their payroll. The refundable tax credit is 50 percent of qualifying wages of up to $10,000 paid by an eligible employer. The credit is available to all employers regardless of size, including tax-exempt organizations, with two exceptions: state and local governments and their instrumentalities and small businesses who take small business loans.
April 1, 2020: The IRS issued corrections to T.D. 9889, which contains final regulations governing the extent to which taxpayers may elect the federal income tax benefits with respect to certain equity interests in a qualified opportunity fund. Such regulations, issued on January 13, 2020, contained errors that may be misleading to taxpayers. These corrections are effective as of April 1, 2020, applicable as of January 13, 2020, and will be published to the Federal Register on April 6, 2020.
April 1, 2020: The Treasury Department and the IRS announced that Social Security beneficiaries who are not typically required to file tax returns will not need to file an abbreviated tax return to receive an Economic Impact Payment (“EIP”). The IRS will use the information on Form SSA-1099 and Form RRB-1099 to generate $1,200 EIPs for those who did not file tax returns in 2018 or 2019. Recipients will receive the EIP as a direct deposit or by paper check, just as they would normally receive their benefits.
April 2, 2020: The IRS issued a warning about COVID-19 related scams. The IRS reiterated that the IRS will not to call you to verify or provide your financial information so you can get an EIP or your refund faster. Taxpayers should also be on the lookout for emails, text messages, websites and social media messages that request money or personal information. Scammers may emphasize the words “stimulus check” or “stimulus payment.” The official term is “economic impact payment.
April 3, 2020: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).
Special thanks to Emily Mussio [...]
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On March 25, 2020, the Internal Revenue Service (IRS) announced a new People First Initiative designed to provide relief to taxpayers on a variety of issues ranging from easing payment guidelines to postponing compliance actions in light of the challenges caused by the Coronavirus (COVID-19) pandemic. The initiative’s projected start date is April 1, 2020, and it is planned to continue through at least July 15, 2020. During this period, the IRS will avoid in-person contacts as much as possible while focusing on taking the steps necessary to protect all applicable statutes of limitation.
Recently, the US Federal District Court for the Southern District of Iowa in Meredith Corp. v. United States, No. 4:17-cv-00385 (S.D. Iowa Mar. 20, 2020), held that a magazine publisher was entitled to refund of federal income tax based for the Internal Revenue Code (IRC) section 199 domestic production deduction based upon the printing services performed by a contract manufacturer. At issue in the case was whether the publisher qualified as a printer of magazines for purposes of IRC section 199 despite hiring third-party printers to print its magazines. The Internal Revenue Service (IRS) argued that the third-party printers, not the magazine publisher, had the “benefits and burdens of ownership,” and thus only the third-party printers were eligible for the IRC section 199 deduction. The case involved tax years 2006 through 2012. The Tax Cuts and Jobs Act repealed IRC section 199 domestic production deduction for tax years after 2018.
Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of March 16 – 20, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.
March 17, 2020: The IRS published Rev. Rul. 2020-9 to provide various prescribed rates for federal income tax purposes for April 2020.
March 18, 2020: The US Tax Court announced that it will close effective March 18, 2020 until further notice. Mail will be held for delivery until the US Tax Court reopens. Taxpayers may comply with statutory deadlines for filing petitions or notices of appeal by timely mailing a petition or notice of appeal, which will be determined by the United States Postal Service’s postmark or the delivery certificate of a designated private delivery service. The eAccess and eFiling systems will remain operational. For more information, see here.
March 19, 2020: The IRS released clarifications to the Instructions for Form 1065-X, Amended Return or Administrative Adjustment Request (AAR). The clarifications relate to the changes resulting from the Bipartisan Budget Act of 2015.
March 20, 2020: The IRS announced that the due date for paying taxes and filing returns is pushed back from April 15, 2020 to July 15, 2020 for individuals and businesses in response to the COVID-19 outbreak. Associated interest, additions to tax and penalties for late payment will also be suspended until July 15, 2020 and begin to accrue on July 16, 2020. This relief is automatic, no forms need to be filed to qualify. State filing and payment deadlines vary and taxpayers should consult the rules of each applicable state. For more information, see here.
March 20, 2020: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).
Special thanks to Emily Mussio in our Chicago office for this week’s roundup.
The United States Supreme Court has picked up the pace this week, already issuing eight regular opinions and four opinions relating to orders as of today. We discuss the tax-related items here.
In Rodriguez v. FDIC, the question was how to decide which member of a consolidated group of corporations is entitled to a tax refund. The Internal Revenue Service (IRS) issued a refund to the designated agent of an affiliated group, but the dispute centered on how that refund should be distributed among the group’s members. Some courts have looked at state law to resolve the distribution issue while others crafted a federal common law rule providing that, in the absence of an unambiguous tax allocation agreement, the refund belongs to the group member responsible for the losses that led to the refund. The Supreme Court rejected the latter common law rule, finding that it was not a legitimate exercise of federal common lawmaking. In reaching its decision, the Court noted that federal judges may craft such types of rules only in limited areas and it must be “necessary to protect uniquely federal interest.” The Court, however, did not decide who, in the case before it, was entitled to the refund, but remanded the case for further proceedings.
In Baldwin v. United States, Justice Thomas dissented from the denial of certiorari in a case asking the Court to reconsider National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U.S. 967 (2005). We previously discussed Baldwin here, in which the US Court of Appeals for the Ninth Circuit held that, under Brand X, its prior construction of Internal Revenue Code section 7502 did not preclude a different interpretation by the IRS because the prior construction was based on filling a statutory gap in a reasonable manner. Because the IRS’s subsequent regulatory interpretation was reasonable (in light of ambiguous statutory language), the Ninth Circuit effectively overruled its prior precedent and accepted the IRS’s subsequent contrary interpretation.
Justice Thomas, the author of Brand X, had a change of heart and wrote that his dissent that the prior opinion appeared to be inconsistent with the Constitution, the Administrative Procedure Act (APA) and traditional tools of statutory construction. In his dissent, he called into question the continuing viability of Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), expressing the view that Chevron “is in serious tension with the Constitution, the APA, and over 100 years of judicial decisions.”
Practice Point: These latest developments from the Supreme Court should be noted by taxpayers and practitioners. As with the highly contested opinion in Kisor v. Wilkie last term, it is clear that many Justices are uncomfortable with granting a high level of deference to government agencies. Deference issues continue to be in the forefront in several tax cases, and likely will continue to be highly relevant in forthcoming challenges to many regulations in the wake of tax reform in 2017.
The IRS has released new informal guidance (“Questions and Answers”) regarding section 965, containing information on making successive installment payments, filing transfer agreements as a result of certain acceleration or triggering events, and other matters related to S corporation shareholders making the section 965(i) election.
Consistent with prior advice issued by the IRS (see coverage here and here), the Questions and Answers provide that the IRS cannot make a refund or apply as a credit any amount of an installment payment until the entire income tax liability is satisfied (i.e., any overpayments of an installment obligation will be used to satisfy future section 965 installment payments).
The Questions and Answers also provides details on payment obligations with respect to successive installment payments under section 965(h). In particular, the IRS will “make every effort to issue an installment notice and payment voucher” for each successive installment payment, but taxpayers who do not receive a notice may contact the IRS to obtain the amount to be paid.
The Questions and Answers reiterates that transfer agreements will be considered timely filed “only if filed within 30 days of the date that the acceleration event occurs” (i.e., relief is not available under §§ 301.9100-2 or -3 to file a late election).
In addition, S corporation shareholders that previously filed a section 965(i) election may enter into a consent agreement with the IRS within 30 days of the occurrence of the triggering event in order to pay the section 965 net tax liability in eight annual installments. The Questions and Answers clarify that a consent agreement does not take the place of a section 965(h) election, and that S corporation shareholder must also make a section 965(h) election to pay the section 965 net tax liability in eight annual installments. Finally, the Questions and Answers clarifies that the S corporation and the transferor of the S corporation shares remain jointly and severally liable for the section 965 tax liability after making a section 965(h) election to pay in eight annual installments.
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