Eversheds Sutherland Tax Reform Law Blog
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State Tax Reform Roundtables

The Tax Executives Institute’s (TEI) State and Local Tax Committee is holding a series of State Tax Reform Roundtables to enable SALT professionals to stay abreast of state tax developments associated with the Tax Cuts and Jobs Act, to engage with subject-matter experts, and to hear from peers regarding their “boots on the ground” knowledge and experience. This series of calls will create a platform for all members to learn, share and engage about issues of interest. Each call will highlight a particular topic and will provide a general update of state tax reform developments. Partners Jeff...
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New Rev. Proc. Provides that Citrus Replanting Costs Not Included in Automatic Accounting Method Changes

Released Tuesday, Rev. Proc. 2018-35 provides that the new automatic change procedures under Rev. Proc. 2018-31 do not apply section 263A to replanting costs for damaged or lost citrus plants. Section 263A generally requires taxpayers to include the costs of certain property produced or acquired for resale to be included in inventory costs. However, under section 263A(d)(2)(A) as revised by the 2017 tax act, such costs associated with replanting plants following certain loss or damage are not included. Rev. Proc. 2018-35 provides that a taxpayer wanting to change its method of accounting...
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House Budget Would Extend Individual TJCA Provisions

On June 19, 2018, the House Budget Committee released a 10-year budget plan that, if passed, would provide a vehicle to extend the individual tax provisions enacted under the TJCA past their current expiration date in 2025 through the budget reconciliation process. To help reduce the cost of extending the cuts, the budget plan requires committees to submit legislation to reduce the federal deficit by $150 billion over the next ten years. The committee has not yet announced a timeline for passage of the budget proposal or any additional tax legislation. Read more: House GOP Budget Would...
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Legislation for Phase 2 of Tax Reform Expected in August

House Ways and Means Committee Chair Kevin Brady indicated that Republicans hope to have a proposal for healthcare and additional tax changes by August. While the contents of the bill remain uncertain, potential topics include: permanent individual income tax provisions, retirement savings, the treatment of capital gains, and employer incentives for helping to pay back student loan debt. However, it is unclear as to whether the bill would also contain technical corrections. Read More: Brady Pushing for Phase 2 Tax Bill and Healthcare Details by...
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Guidance on Section 199A May Halt Benefitting Firms

The Treasury Department may issue guidance on section 199A in response to workarounds taken by law and accounting firms. The new section 199A provides a 20% deduction for qualifying pass-through businesses. Since its enactment, offices have been broken down into separate businesses to take advantage of the deduction; future guidance may halt this technique. According to an official at the Treasury Department, issuing guidance on section 199A is a top priority. Read more here: Firms Mulling Spinoffs for 20 Percent Deduction: Think...
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Congressman States that the TCJA will not be Amended, Despite EU Criticism

Rep. Peter Roskam, a Republican member of the House Ways and Means Committee, stated at a conference that, despite criticism from EU officials, Congress does not intend to amend the Tax Cuts and Jobs Act (TJCA). Some EU officials have been particularly critical of the foreign-derived intangible income provision, arguing that the provision essentially acts as an export subsidy which could violate the World Trade Organization’s trade policies. Roskam dismissed the criticism, stating that the TCJA is not a subsidy and that the law provides “fair and equitable treatment of tax policy.” Read...
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The IRS Releases Additional Guidance on Penalties Related to the Transition Tax

The IRS announced that it will waive the estimated tax penalty for taxpayers subject to the transition tax under section 965 in certain instances, such as (1) for any taxpayer that improperly applied a 2017 overpayment to a 2018 estimated tax liability, and (2) for any individual that missed the April 18, 2018 deadline for making the first payment. Read more: IRS offers penalty, filing relief to many subject to new transition tax on foreign earnings; Questions and Answers about Reporting Related to Section 965 on 2017 Tax...
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Potential Phase Two of Tax Legislation Focuses on Making Individual Tax Changes Permanent

House Republicans intend to roll out a second package of tax cuts this summer. The focus of the new bill is to make the individual tax cuts permanent, but it may also include other changes, such as cutting capital gains taxes and including incentives to boost business innovation. House Ways and Means Committee Chairman Kevin Brady anticipates that the new bill would be approved in the House before the midterm elections in early fall. Read more: Five things to know about Trump tax cuts: Phase...
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IRS to Crackdown on SALT Deduction Cap Workarounds

The IRS intends to issue regulations pertaining to states’ attempts to subvert the state and local tax deduction cap. The Tax Cuts and Jobs Act imposed a $10,000 ($5,000 for married individuals filing separately) limit on state and local tax deductions for federal income tax purposes. Certain states, including New York, New Jersey, and Connecticut, have enacted legislation to allow taxpayers to claim a federal tax deduction in excess of the SALT cap. The pending regulations will emphasize that federal income tax substance-over-form principles, not state laws, dictate the characterization of...
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Committee Hearing Discusses Tax Reform Impact and Next Steps

The House Ways and Means Committee held a hearing last Wednesday, May 16th, where Republicans and Democrats continued to be divided in their evaluations of the recent tax reform and its effects on jobs, the economy, and investment. In opening statements, Richard Neal criticized the new law for giving “83 percent of the tax savings to the top one percent.” Testimony during the hearing included criticism of the law for mainly benefiting big businesses and also optimism for the future economic effects of the law.  Republicans are currently planning for “Tax Reform 2.0” to make individual tax...
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Indiana Enacts IRC Conformity Bill, Decouples from Certain Federal Tax Reform Provisions

On May 14, 2018, Indiana Governor Eric Holcomb signed into law H.B 1316 (the Bill). The Bill provides a number of changes to Indiana’s tax laws, including responding to provisions of the federal Tax Cuts and Jobs Act. Some notable provisions of the Bill include: updating Indiana’s conformity to the Internal Revenue Code from January 1, 2016 to February 11, 2018, effective for taxable years beginning on or after January 1, 2018; specifying that any IRC amendments made by an act passed by Congress prior to February 11, 2018, other than the 21st Century Cures Act or the Disaster Tax Relief and...
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The Upcoming FAA Authorization May Not Contain Any Technical Corrections to the Tax Legislation

House Ways and Means Chairman Kevin Brady has indicated that the upcoming Federal Aviation Administration (“FAA”) reauthorization bill is unlikely to contain additional technical corrections to the 2017 tax bill, despite containing a tax title. Congress had previously passed, in the 2018 Consolidated Appropriations Act, a technical correction to fix a provision that encouraged farmers to sell to cooperatives instead of private companies along with a Democrat-driven expansion of a low-income housing incentive. However, it is unclear whether Democrats, who largely felt left out of the tax...
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IRS Provides Timeline for Tax Reform Guidance

During the ABA Section of Taxation meeting in Washington, D.C. on May 12, David Kautter, the acting IRS commissioner, provided a rough timeline as to when IRS intends to release guidance related to the 2017 tax act. Kautter stated that a notice regarding section 965 (the so-called transition tax) may be released in the next two weeks and that proposed regulations are slated for release in mid to late July. Additionally, Kautter expects proposed regulations to be released for GILTI and section 168(k) in late summer, for section 163(j) in late summer or early fall, and for BEAT in November or...
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Rev. Proc. Offers Automatic Accounting Change for 606 Book-Tax Accounting Conformity

An automatic method change is now available for taxpayers wishing to change their accounting method to comply with the new financial accounting standards issued by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) (“Topic 606”). Under the new standards of Topic 606, taxpayers recognize revenue from contracts with customers based on a five step process reflecting the expected consideration.  Recently published Rev. Proc. 2018-29 provides taxpayers with an automatic method change, resulting in easier filing and more book-tax conformity....
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No Rules or Answers: Notices to Just Provide Notice

Rather than provide “subregulatory guidance” or answer specific questions, future notices will simply notify taxpayers of regulations to come. According to Catherine Hughes of the Treasury’s Office of Tax Policy, the Treasury and IRS will not create new rules, but give a “heads up” of what proposed regulations are in the works. This has been seen in recent notices, including Notice 2018-41, which stated the intent for future regulations and asked for comments. Read more: Treasury, IRS Not Creating New Rules with Tax Act...
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