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Weekly IRS Roundup May 20 – May 24, 2019

by | May 30, 2019 | ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 20 – May 24, 2019.

May 20, 2019: The IRS issued a news release announcing the release of its Data Book for 2018. The Data Book contains a summary of IRS activities for the year spanning October 1, 2018, through September 30, 2018. The information covered includes details regarding tax returns, refunds, examinations and appeals.

May 20, 2019: The IRS released Announcement 2019-06 correcting a typographical error in Notice 2019-32.

May 21, 2019: The IRS released Revenue Procedure 2019-26 providing tables of limitations on depreciation deductions and inclusion amounts for owners or lessors of passenger automobiles first placed in service or leased by the taxpayer during calendar year 2019.

May 22, 2019: The IRS released Notice 2019-39 providing guidance regarding the issuance of tax-exempt state and local bonds under Section 103 and on the issuance of tax-exempt Indian tribal government bonds under Section 7871.

May 23, 2019: The IRS issued a news release urging taxpayers who work multiple jobs or may be adding a summer job to complete a Paycheck Cleanup. The IRS recommends using the withholding calculator on IRS.gov to complete this task.

May 23, 2019: The IRS issued final regulations reducing the amount determined under Section 956 with respect to certain domestic corporations. The regulations exclude corporations that are United States Shareholders as defined in Section 951(b) from the application of Section 956.

May 24, 2019: The IRS issued a notice requesting applications for the Internal Revenue Service Advisory Counsel. Written nominations are required on or before June 10, 2019.

Special thanks to Terence McAllister in our New York office for this week’s roundup.



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Tax Court Announces Limited Entries of Appearance

by , and | May 29, 2019 | ,

The concept of limited scope representation is not a new one in the legal arena. Rule 1.2(c) of the ABA Model Rules of Professional Conduct provides that “A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent.” This rule has been broadly embraced by states. The idea of limited representation in Tax Court cases has been floating around for years. It has mostly come up in the context of pro se taxpayers who appear at calendars calls. There may be one or more volunteers willing to assist the taxpayer but are unable to enter an appearance on the spot for various reasons (e.g., inability to conduct a conflicts search, uncertainty as to whether the taxpayer will be responsive in the future, inability to determine whether case has merit). In this situation, the volunteer is usually not allowed to speak on the taxpayer’s behalf to the Court to try to assist with resolving the case and handling procedural matters.

In 2018, Special Trial Judge Carluzzo and Special Trial Judge Panuthos invited suggestions for better assisting unrepresented and low-income taxpayers in the Tax Court. In response, the American Bar Association Section of Taxation recommended that the Tax Court consider amending its rules to permit counsel to enter an appearance for a limited time or purpose. At the time of the recommendation, approximately 69% of all Tax Court petitioners and 91% of petitioners in small tax cases were self-represented. The Section of Taxation pointed out that many self-represented petitioners before the Tax Court do not understand the law or court rules and therefore are unable to make an effective legal argument. This results in inefficiencies in the Tax Court, as well as inequality because the IRS is always represented by counsel. (more…)



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A Notice of Deficiency Is Not Set in Stone

by and | May 28, 2019 | , , ,

A recent case decided by the United States Court of Appeals of the Tenth Circuit reminds taxpayers to be aware that the Internal Revenue Service (IRS) is not necessarily locked in to the positions and arguments stated in the Notice of Deficiency. In particular, the IRS is allowed to revise penalty determinations, or to make penalty determinations for the first time, during litigation in the Tax Court, notwithstanding any arguably inconsistent determination in the Notice of Deficiency.

In Roth v. Commissioner, 123 AFTR.2d 2019-1676 (10th Cir. 2019) , the taxpayers owned 40 acres of land in Prowers County, Colorado. In 2007, the taxpayers donated to the Colorado Natural Land Trust a conservation easement, which prohibited them from mining gravel upon the land. The taxpayers valued the easement at $970,000 and claimed charitable contribution deductions with respect to this amount on their 2007 and 2008 income tax returns.

The IRS examined the position, and determined that the easement was worth only $40,000. The revaluation resulted in underpayments of tax. The IRS revenue agent assigned to the case imposed an enhanced 40% gross valuation misstatement penalty pursuant to Internal Revenue Code (IRC) section 6662(h), because the claimed value of the easement had exceeded 200% of its actual value. The 40% penalty was approved on IRS administrative review, but due to an alleged clerical error, the Notice of Deficiency sent to the taxpayers listed only the standard 20% accuracy-related penalty under IRC section 6662(a).

The taxpayers filed a Petition in the US Tax Court. In its Answer, the IRS reasserted the 40% penalty. The taxpayers challenged the imposition of the enhanced penalty, citing IRC section 6751(b), which provides that a penalty can only be assessed pursuant to an approved “initial determination.” The taxpayers argued that the Notice of Deficiency was the “initial determination,” and because the enhanced penalty was not stated in the Notice of Deficiency, the IRS did not have the authority to impose a penalty in excess of the amount indicated thereon. The Tax Court ruled in favor of the IRS, considering itself bound by its decision Greav v. Commissioner (Graev III), 149 T.C. 485 (2017), which allows the IRS to assert additional penalties in an Answer to a taxpayer’s Tax Court petition.

The Tenth Circuit affirmed the Tax Court’s ruling. The Tenth Circuit rejected the taxpayers’ argument that the “initial determination” of a penalty was the amount shown on a Notice of Deficiency. The Tenth Circuit noted that IRC section 6212(a) provides that the IRS is authorized to send a Notice of Deficiency after having determined a tax deficiency, suggesting that the “initial determination” of a tax deficiency or penalty can occur prior to the sending of a Notice of Deficiency. The Tenth Circuit concluded that the 40% penalty determined by the IRS revenue agent was the “initial determination” for purposes of IRC section 6751(b).

The Tenth Circuit also cited Graev III for the proposition that an IRC section 6751(b) initial determination can be made by an IRS attorney in [...]

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IRS LB&I Sharpens Its Risk Analysis, Announces Large Corporate Compliance (LCC) Program

by | May 24, 2019 | , ,

Last week, the IRS unveiled a major change in how it identifies its biggest and most complex large corporations for examination. The move is part of the IRS’s broader efforts toward “portfolio management”—maximizing and modernizing its resources to focus upon areas of highest tax compliance risk.

The IRS’s Large Business and International Division (LB&I) has just begun greater use of data analytics to identify the population of its largest and most complex corporate taxpayers. This new Large Corporate Compliance (LCC) program replaces the Coordinated Industry Case (CIC) program and covers compliance oversight for LB&I’s largest corporate taxpayers. LCC is one of LB&I’s portfolio of compliance programs.

In a change from the prior system, which identified large cases on a manual and regional basis, LCC will automatically apply large case pointing criteria to select the LCC population. Pointing criteria include such items as gross assets and gross receipts.  According to the IRS press release announcing the change, LB&I believes that automatic pointing will allow “a more objective determination of the taxpayers that should be part of the population.” Further, LB&I expects that use of data analytics will allow it to select returns that “pose the highest compliance risk.”

Practice point: LB&I’s change to the LCC program and heightened use of data analytics are only the most recent developments in the Service’s recent plan to do more with less, deploying staff time to its highest compliance priorities. It is still uncertain whether and how CIC-specific procedures, like the availability of taxpayer disclosures under Rev. Proc. 94-69, will continue under the LCC program. Taxpayers subject to the former CIC regime would do well to monitor developments under the new LCC program closely.



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Sacked in Tax Court! Procedural Missteps by the IRS Leave the Government’s Blindside Exposed

by | May 23, 2019 | , , ,

In Kearse v. Commissioner, T.C. Memo 2019-53, the Tax Court held the Internal Revenue Service (IRS) abused its discretion as part of the taxpayer’s Collection Due Process hearing (CDP hearing) because the Appeals officer failed to properly verify that the assessment of the taxpayer’s unpaid 2010 liability was preceded by a duly mailed notice of deficiency.

The taxpayer, well-known to sports fans, was Jevon Kearse. Mr. Kearse, nicknamed “The Freak” for his athletic ability, played for 11 seasons in the National Football League and tallied 74 career sacks as a dominating defensive end. Based on the description of events by the Tax Court, Mr. Kearse’s attorneys outmaneuvered the IRS similar to the way Mr. Kearse had offensive tackles tripping over their shoestrings. (more…)



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Weekly IRS Roundup May 13 – May 17, 2019

by | May 20, 2019 | ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 13 – May 17, 2019.

May 13, 2019: The IRS released a statement regarding the National Taxpayer Advocate position announcing it as seeking candidates from the tax community to fill the vacancy.

May 13, 2019: The IRS released two draft forms. Form 8027 for employer tip reporting under Section 6053 and Form 8922 for reporting third-party sick pay under Section 3121.

May 14, 2019: The IRS released a statement regarding the recent CCH software outage advising taxpayers with a May 15 deadline who file late and do not file an extension to include the phrase “Late filed return due to CCH Software Outage” as a statement of reasonable cause.

May 16, 2019: The IRS issued Notice 2019-35 providing guidance on the corporate bond monthly yield curve, spot segment rates under Section 417(e)(3) and the 24-month average segment rates under Section 430(h)(2).

May 16, 2019: The IRS issued Revenue Ruling 2019-14 providing monthly tables of prescribed rates under numerous Code sections, including the applicable federal rate for the month of June 2019.

May 16, 2019: The IRS issued a news release announcing it was now accepting applications for the Tax Counseling for the Elderly (TCE) grant program. There is a May 31 deadline for applications.

May 16, 2019: The IRS issued a news release announcing that the Large Business and International Division (LB&I) began a new application of data analytics for determining the population of large and complex corporate taxpayers.

May 17, 2019: The IRS released Proposed Regulations under Section 954(d)(3) regarding the attribution of ownership of stock and other interests for determining whether a person is a related person with regard to a controlled foreign corporation (CFC).

Special thanks to Terence McAllister in our New York office for this week’s roundup.



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Weekly IRS Roundup May 6 – 10, 2019

by | May 13, 2019 |

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 6 – 10, 2019.

May 7, 2019: The IRS released Revenue Procedure 2019-22 updating Revenue Procedure 75-50 in order to reflect technological advances. Revenue Procedure 75-50 provides guidelines to determine whether a private school has adopted racially nondiscriminatory policies for tax exemption purposes.

May 7, 2019: The IRS released Notice 2019-33 requesting comments regarding possible normalization issues stemming from the decrease in the corporate tax rate under Section 11 of the Code.

May 7, 2019: The IRS issued a news release recognizing National Small Business Week and reminding taxpayers that a tax identification number will now be required when requesting an employer identification number.

May 8, 2019: The IRS released Notice 2019-34 providing the inflation-adjusted maximum value of employer provided vehicles first made available to employees for personal use in 2019.

May 9, 2019: The IRS released Revenue Ruling 2019-13 ruling that if a former S corporation makes a Section 301 cash distribution during its post termination period it should reduce its accumulated adjustments account to the extent of the proceeds of the redemption.

May 9, 2019: The IRS issued a news release highlighting tax reform changes that impact depreciation and expensing for businesses as part of a series of news releases during National Small Business Week.

May 10, 2019: The IRS released final regulations providing guidance regarding qualified business units subject to Section 987 of the Code and withdrawing foreign currency partnership allocation rules.

Special thanks to Terence McAllister in our New York office for this week’s roundup.



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Weekly IRS Roundup April 29 – May 3, 2019

by | May 6, 2019 | ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of April 29 – May 3, 2019.

April 29, 2019: The IRS issued a news release urging taxpayers who had not yet filed their tax returns to file now in order to minimize applicable penalties and interest.

April 30, 2019: The IRS issued a news release announcing the appointment of Monte A. Jackel to the position of special counsel to the Chief Counsel, Office of Chief Counsel. Jackel brings experience from both the public and private sector to the position.

May 1, 2019: The IRS announced the application period for low income taxpayer clinic grants will run from May 1, 2019 – June 17, 2019. The grants provide low income taxpayer clinics matching grants of up to $100,000 per year to develop, expand or maintain their programs.

May 1, 2019: The IRS released Revenue Procedure 2019-20 expanding its retirement plan determination letter program. The IRS now allows plan sponsors to submit determination letter applications for statutory hybrid plans and individually designed merged plans.

May 2, 2019: The IRS released Revenue Procedure 2019-21 providing guidance regarding the United States and area median gross income figures used by issuers of qualified mortgage bonds (defined in Section 143(a)), issuers of qualified mortgage certificates (defined in Section 25(c)) and in computing income requirements described in Section 143(f).

May 2, 2019: The IRS issued Notice 2019-32 requesting comments on issues arising under the carbon dioxide sequestration credit under Section 45Q in anticipation of Treasury and the IRS issuing regulations and other guidance under Section 45Q.

May 3, 2019: As part of the National Weather Service’s Hurricane Preparedness Week, the IRS issued a news release providing taxpayers advice regarding emergency preparation, and providing details on the IRS’ toll-free disaster hotline.

Special thanks to Terence McAllister in our New York office for this week’s roundup.



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Weekly IRS Roundup April 22 – 26, 2019

by | Apr 29, 2019 | ,

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

April 22, 2019: In an effort to reduce paperwork and respondent burden the IRS requested public comments on forms, reporting and recordkeeping requirements under numerous code provisions.

April 24, 2019: The IRS issued corrections to T.D. 9851 providing guidance on the income test used to determine whether a corporation may qualify as a regulated investment company (RIC).

April 24, 2019: The IRS issued Notice 2019-30 an annual notice, requesting recommendations for items that should be included in the 2019–2020 Priority Guidance Plan.

April 25, 2019: The IRS issued a news release seeking applications for the Electronic Tax Administration Advisory Committee (ETAAC). The ETAAC serves as a public forum for discussion of issues related to electronic tax administration.

April 25, 2019: IRS chief counsel Michael Desmond announced the appointment of Peter Blessing to the position of Associate Chief Counsel, International, Office of Chief Counsel.

April 26, 2019: The IRS issued a news release alerting taxpayers to the ability to perform a Paycheck Checkup using the IRS Withholding Calculator. The IRS particularly encouraged taxpayers to check their withholding in light of the many changes brought about by the Tax Cuts and Jobs Act (TCJA).

Special thanks to Terence McAllister in our New York office for this week’s roundup.



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What Happens At Exam, Stays At Exam!

by and | Apr 25, 2019 | , , , , ,

A recent case decided by the US Tax Court reminds us that when you litigate a case in Tax Court, what happened during the Internal Revenue Service (IRS) examination and Appeals bears very little relevance (if any) once you get to court. Generally, Tax Court’s proceedings are de novo, and the court looks solely to the IRS’s position in the Notice of Deficiency (Notice). The Revenue Agent’s Report and other statements made by the IRS before the issuance of the Notice are typically ignored.

In Moya v. Commissioner, 152 TC No. 11 (Apr. 17, 2019), the IRS determined deficiencies related to the disallowance of certain business expense deductions. The taxpayer did not assign error to the disallowance, but instead argued that the Notice was invalid because the IRS had violated her right to be informed and her right to be heard under an IRS news release and an IRS publication outlining various rights of taxpayers. Specifically, the taxpayer asserted that she had requested that her examination proceedings be transferred to California after she had moved from Las Vegas to Santa Cruz, and that the IRS had violated the her rights by providing vague and inconsistent responses to, and by ultimately denying, her request. (more…)



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