Eversheds Sutherland Tax Reform Law Blog
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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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IRS Issues Guidance Related to Determining Built-in Gain or Loss under Section 382

Recently released Notice 2018-30 provides that the two safe harbor approaches in Notice 2003-65–related to recognizing built-in gain or loss–will be determined without regard to the bonus depreciation rule under section 168(k). Section 382 imposes limits of the amount of built-in losses that can offset future taxable income following ownership change. The notice states that the additional first-year depreciation under section 168(k) for both the section 338 approach and, to the some degree, the section 1374 approach can create an inaccurate picture of the built-in gain or losses...
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State Tax After TCJA: Treatment Of International Income

The Tax Cuts and Jobs Act, P.L. 115-97,[1] made sweeping changes to the Internal Revenue Code, and will have far-reaching implications for state tax systems that broadly conform to the IRC. In this article for Law360, Eversheds Sutherland attorneys Jeffrey Friedman, Eric Tresh, Todd Lard and Todd Betor focus on the major state income tax implications of the TCJA’s international tax provisions, including: The transition tax imposed by revised IRC § 965; The foreign-source dividends received deduction, or DRD, allowed by new IRC § 245A; The tax on global intangible low-taxed income, or GILTI,...
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New York City: Penalty Relief Available for Certain Section 965 Underpayments

The New York City Department of Finance recently announced the availability of penalty abatements for certain taxpayers that have underpaid business taxes due to the inclusion of Section 965 income. NYC Finance Memorandum No. 18-4 (PDF) describes tax considerations and late payment penalty relief for NYC taxpayers affected by Section 965 and subject to the General Corporation Tax (GCT), the Banking Corporation Tax (BTX), and the Unincorporated Business Tax (UBT). Like many states and localities, New York City does not provide for the deferred payment of NYC tax attributable to net Section...
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IRS Considering the Definition of a “Trade or Business” under Section 163(j)

The IRS is in the process of defining a “trade or business” for purpose of determining what counts as business interest for the purposes of section 163(j). The text of the statute and Notice 2018-28 indicate that all income earned by a corporation is business interest, but questions still remain on whether a corporation that receives only passive dividend income is a business and whether interest paid by a partnership in which a C corporation is a partner should necessarily be classified as business interest. Read more: IRS Weighing Definitions of “Trade or Business,” “Business...
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Rhode Island: Section 965 Income Is not Deferrable for State Tax Purposes

The Rhode Island Department of Revenue recently released Advisory #2018-21 (PDF), which deals with “Section 965” income. The advisory states that the repatriation transition tax is not deferrable for Rhode Island state tax purposes. Section 965 Background On December 22, 2017, President Donald Trump signed into a law a bill popularly known as the Tax Cuts and Jobs Act (TCJA). A new Internal Revenue Code (IRC) provision introduced by the TCJA is Section 965, which provides for a transition tax on untaxed foreign earnings of certain specified foreign corporations as if those earnings had been...
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New Notice Requests Recommendations for the IRS and Treasury 2018-2019 Priority Guidance

Notice 2018-43 was released by the IRS, asking taxpayers for recommendations on the 2018-2019 Priority Guidance Plan. The Priority Guidance Plan is used each year by the Treasury and IRS to identify and prioritize what tax issues to prioritize and address through guidance such as regulations, rulings, procedures and notices.  According to the Notice, there has been focus on the implementation of the new tax law since its enactment. The Treasury and IRS expect to continue such focus through this year and throughout the future  2018-2019 plan. They will prioritize suggestions that would...
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IRS Releases Fact Sheet on Depreciation

The IRS recently released a factsheet that provides an overview of the changes to depreciation and expensing under the new tax law. The fact sheet addresses immediate expensing for section 179 property, first year bonus depreciation, limitations on luxury automobiles and personal use property, treatment of certain farm property, the applicable recovery period for real property, and the use of the alternative depreciation system for farming businesses. Read more: New rules and limitations for depreciation and expensing under the Tax Cuts and Jobs...
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What are the State Tax Implications of International Tax Reform?

What are the State Tax Implications of International Tax Reform? Jeff Friedman and others outline the key points at the COST 2018 Spring Audit Session/Income Tax Conference in snowy Boston, Massachusetts. These issues were also addressed in a recent article, “Waiting for the Other Shoe to Drop: State and Local Tax Implications of Federal Tax Reform – International Tax Provisions,” in Bloomberg Tax – Daily Tax Report: State by Jeff Friedman, Todd Betor and Michael Spencer.      ...
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Fiscal Year Taxpayers Reminded about Blended Corporate Tax Rate

Notice 2018-38, released April 16, reminds fiscal year taxpayers about the requirement to apply a blended tax rate under Section 15 of the Code to their taxable year that includes January 1, 2018.  The Tax Cuts & Jobs Act (the “TCJA”) changed the corporate tax rate, effective for taxable years beginning after December 31, 2017, in the middle of fiscal year taxpayers’ tax year. Under Section 15(a) of the Code, a corporation with a tax year that includes January 1, 2018, but does not start on that day, must apply a blended tax rate, calculated by applying the rates before and after the...
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Oregon Legislature Passes IRC Conformity Legislation, But Decouples from Certain Federal Tax Reform Provisions

On April 10, 2018, and April 13, 2018, Oregon Governor Kate Brown signed into law S.B. 1529 and S.B. 1528 (the Bills), respectively, which provide a series of changes to Oregon’s income tax laws in response to recent federal tax changes as part of the federal Tax Cuts and Jobs Act. Most notably, the Bills: (i) update the state’s IRC conformity date to December 31, 2017; (ii) decouple from the federal temporary dividend received deduction with respect to the transition tax under IRC § 965 by requiring an addback of the federal deduction allowed under IRC § 965(c); (iii) provide relief from...
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