Notice 2016-66 Archives - TAX CONTROVERSY 360

Taxpayers Already Seeking to Hold Treasury and IRS to Policy Statement

by Timothy S. Shuman and McDermott Will & Emery | Mar 20, 2019 | IRS Guidance, Uncategorized

On March 5, 2019, the US Department of Treasury (Treasury) issued a policy statement on the tax regulatory process. We previously wrote an article for Law360 on the policy statement, which can be accessed here. In our article, we noted the disclaimer language in the policy statement that “is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or inequity by any party against the United States, its departments, agencies, or entities, it officers, employees, or agents, or any other person.” We further noted that this same limiting language can be found in Executive Orders issued by the President of the United States, and that courts have generally rejected attempts to rely on such orders containing this language, although it might be possible to analogize the positions in the policy statement to the Internal Revenue Service’s (IRS) statements in CC-2003-014, which instructs IRS employees not to take positions contrary to IRS published guidance.

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Run for Cover—IRS Unveils Initial “Campaigns” for LB&I Audits

by Kevin Spencer, Robin L. Greenhouse, McDermott Will & Emery and McDermott Will & Emery | Feb 1, 2017 | IRS Audits, IRS Guidance, Uncategorized

They’re here! On January 31, 2017, the Internal Revenue Service (IRS) Large Business & International (LB&I) division released its much-anticipated announcement related to the identification and selection of campaigns. The initial list identifies 13 compliance issues that LB&I is focused on and lists the specific practice area involved and the lead executive for each campaign. Prior coverage of audit campaigns can be found here.

The initial list, along with descriptions of each campaign, is as follows:

Domestic Campaigns

Section 48C Energy Credits

This campaign is designed to ensure that only taxpayers whose advanced energy projects were approved by the Department of Energy, and who have been allocated a credit by the IRS, are claiming the credit. Apparently, there has been confusion regarding which taxpayers are entitled to claim the credits.

Micro-Captive Insurance

This campaign addresses certain transactions described in Notice 2016-66 in which a taxpayer reduces aggregate taxable income using contracts treated as insurance contracts and a related company that the parties treat as a captive insurance company. We previously blogged about Notice 2016-66 here. Captive insurance, along with basketing and inbound distribution, were three subject-matter specific campaigns announced during LB&I’s initial rollout last summer, as we discussed in our prior post on the subject.

Deferred Variable Annuity Reserves & Life Insurance Reserves

This campaign seeks to address uncertainties on issues important to the life insurance industry, including amounts to be taken into account in determining tax reserves for both deferred variable annuities with guaranteed minimum benefits, and life insurance contracts.

Distributors (MVPD’s) and TV Broadcasts

This campaign is targeted at multichannel video programming distributors and television broadcasters that may claim that groups of channels or programs are a qualified film for purposes of the Internal Revenue Code (Code) Section 199 deduction. The description indicates that LB&I has developed a strategy to identify taxpayers impacted by the issue and that it intends to develop training, including the development of a publicly published practice unit, published guidance, and issue based exams, to aid revenue agents. It appears that this campaign stems from various private guidance issued in 2010, 2014 and 2016 on these issues.

Related Party Transactions

This campaign is focused on transactions among commonly controlled entities that the IRS believes might provide a taxpayer a means to transfer fund from the corporation to related pass-through entities or shareholders. The campaign is aimed at the mid-market segment.

Basket Transactions

This campaign focuses on certain financial transactions described in Notices 2015-73 and 74, which relate to so-called basket transactions. Basketing was a topic named during LB&I’s initial campaign announcement last summer, along with captive insurance and inbound distribution.

Land Developers – Completed Contract Method

This campaign addresses the Service’s concern that large land developers that construct residential communities may improperly be using the completed contract method. This campaign appears to be a [...]

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IRS Identifies Certain 831(b) Captives As “Transactions Of Interest”

by Kristen E. Hazel and McDermott Will & Emery | Nov 11, 2016 | IRS Guidance, Uncategorized

In Notice 2016-66, the Treasury Department and the Internal Revenue Service (IRS) identified a particular § 831(b) “micro-captive” transaction as a “transaction of interest” for purposes of § 1.6011-4(b)(6) of the Regulations and §§ 6111 and 6112 of the Internal Revenue Code. The notice also alerts persons involved in such transactions to certain responsibilities and penalties that may arise from their involvement with these transactions.