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Treasury and IRS Guidance will not Address Qualified Improvement Property

During an ABA Tax Section meeting in Atlanta on October 5, 2018, officials from the Treasury Department and the IRS announced that they will not be able to provide an administrative fix for the drafting error in the qualified improvement property provision of section 168(k).  Rather, the officials stated that Congress must make a technical correction, as the agencies do not have...

IRS to Issue Proposed Regulations on Market Discount

The IRS and Treasury Department have recently announced (Notice 2018-80) that they plan to issue guidance providing that market discount is not includible in income under section 451(b), which was added to the Code by the Tax Cuts and Jobs Act.  Under section 451(b), accrual method taxpayers generally must include an amount in gross income no later than when it is included in income in...

Comments on Sections 162 and 6050X Requested by IRS

The IRS has invited the public to comment on transitional guidance for the new reporting requirements under section 162(f) and new section 6050X, which was added by the Tax Cuts and Jobs Act, with respect to fines, penalties and other amounts. The comment period is open through November 5, 2018. Read the Notice here: Notice 2018-19172 Read more here: IRS Seeks Comment On Planned Biz...

Section 168(k) Administrative Solutions Possible for QIP Error; Partnership Remedial Allocations

On August 16, the Senate Finance Committee sent a letter to Treasury clarifying the drafting error in the Tax Cuts and Jobs Act that failed to make qualified improvement property (QIP) eligible for 100% bonus depreciation under section 168(k). Ellen Martin, a tax policy adviser in the Treasury Office of Tax Legislative Counsel, commented that the letter was welcome but may not be...

IRS Releases Preliminary Guidance Clarifying Section 162(m) Deduction Limitations

The IRS released Notice 2018-68, which provides preliminary guidance on section 162(m). As amended by the Tax Cuts and Jobs Act, section 162(m) disallows the deduction for performance-based executive compensation and expands the definition of “covered employees” for the $1 million deduction limitation. The Notice provides that “covered employees” include the chief executive officer and...

Presentation by Proposed Section 168(k) Regulations Team Provides Insight Into Significant Policy Decisions

On August 21, 2018, the Federal Bar Association hosted at Eversheds Sutherland’s Washington, D.C. office, a panel discussion with the team of IRS and Treasury professionals who drafted the proposed regulations for section 168(k).  Kathy Reed and Betsy Binder of the IRS Office of Chief Counsel were joined by Ellen Martin of the Department of the Treasury, as well as Barbara Young, Vice...

Regulations on Bonus Depreciation Are Mostly as Expected

The proposed regulations addressing section 168(k) bonus depreciation largely conform to expectations, however there were a few unanticipated elements. In her recent comments to the press, Ellen McElroy of Eversheds Sutherland (US) LLP highlighted the IRS’ failure to address the drafting error that left qualified improvement property ineligible for bonus depreciation. McElroy also...

Proposed Full Expensing Regulations Released

The IRS has released regulations on the full expensing provisions under section 168(k), as amended by the Tax Cuts and Jobs Act.  That section allows businesses to fully expense certain business assets. Read more: REG-104397-18.

Full Expensing Regulations Ready for Publication

On July 30, 2018, the Office of Management and Budget (“OMB”) waived its review of the Internal Revenue Service’s (“IRS”) proposed regulations that implement the full expensing provisions of the 2017 tax act. The full expensing provisions allow temporary 100% expensing for certain business assets. With the OMB review complete, the IRS may publish the proposed regulations in the Federal...

The Tax Cuts and Jobs Act Could Impact Intangible Valuation

Thomas Amendolari, a senior economist at the Treasury Department, recently stated that many of the fundamental aspects of determining the discount rate, for purposes of valuing intangible transfers under the section 482 regulations, may be affected by the 2017 TCJA. While the economic effects of the TCJA may increase discount rates, Amendolari noted that it is not yet certain and...

The White House Office of Management and Budget Has Not Yet Reviewed any New Tax Law Rules

Based on a new arrangement between the White House Office of Management and Budget (OMB) and Treasury, regulations and other guidance that have policy or economic significance will undergo a compliance review by the OMB. A senior administration official recently stated that Treasury and IRS have not yet sent any new tax regulations or guidance to the OMB for review, despite officials...

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...

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...

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...

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...


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