Eversheds Sutherland Tax Reform Law Blog
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OMB Receives Proposed Foreign Tax Credit Regs for Review

The Office of Management and Budget (OMB) received proposed foreign tax regulations for review on November 7. The regulations include guidance on allocation of expenses to the section 951A Global Intangible Low-Taxed Income (GILTI) basket for purposes of determining the foreign tax credit limitation, as well as transition rules for excess foreign tax credit carryforwards. The regulations are to receive expedited review, according to a Treasury official. Read more: Proposed U.S. Foreign Tax Credit Regs Submitted for OMB...
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Treasury and IRS Issue Proposed Regulations for Section 956

Treasury and the IRS have issued proposed regulations (REG-114540-18) that would reduce the inclusion determined under section 956 for certain domestic corporations that own stock in controlled foreign corporations.   The proposed regulations are intended to harmonize the application of section 956 and the participation exemption system (section 245A) enacted under the Tax Cuts and Jobs Act.  Public comments on the proposed regulations are due within 30 days of their publication in the Federal Register. Read Proposed Regulations: REG-114540-18: Amount Determined Under Section 956 for...
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OIRA Receives Proposed Section 163(j) Regulations for Review

The Office of Information and Regulatory Affairs (OIRA) received draft proposed regulations under section 163(j), addressing the limitation on business interest deductions, on October 25, according to the Office of Management and Budget’s website. As amended by the Tax Cuts and Jobs Act (TCJA), section 163(j) generally limits business interest expense deductions to the sum of business interest income, 30% of adjusted taxable income, and floor plan financing interest. Existing questions regarding section 163(j) include how to allocate business interest between businesses that are exempt and...
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IRS Releases Opportunity Zone Guidance

On October 19, 2018, the IRS released proposed regulations (REG-115420-18) concerning opportunity zones (sections 1400Z-1 and 1400Z-2). Opportunity zones were created by the Tax Cuts and Jobs Act and allow tax benefits for investments in low-income communities, through what are termed qualified opportunity funds. Among other items, the proposed regulations provide taxpayers with guidance on what kinds of taxable gains can be deferred by investors, the timeframe for investing in qualified opportunity funds, and the manner in which investors may elect to defer specified gains. The IRS also...
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Proposed Foreign Tax Credit and Section 163(j) Regulations to be sent to OIRA

On October 18, 2018, Lafayette G. Harter III, the deputy assistant secretary for international tax affairs for the Department of Treasury, announced that the proposed regulations focusing on foreign tax credits under section 904 are likely to be sent to the Office of Information and Regulatory Affairs (OIRA) for review on October 19 or the following week. Harter also announced that proposed regulations focusing on section 163(j), which limits the deductibility of business interest, will also be sent to OIRA within days. Harter stated that the proposed foreign tax credit regulations provide...
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Treasury Guidance May Shield Opportunity Zone Transfers From Capital Gains Tax

In a conversation with reporters, Senator Tim Scott, who helped draft the Tax Cuts and Jobs Act, stated that he has encouraged Treasury and the IRS to adopt guidance that would allow investors to transfer funds between opportunity zones without subjecting the transfers to federal capital gains tax. His comments are in reference to new section 1400Z-2 of the Code, which was added by the Tax Cuts and Jobs Act and allows deferral of certain gains arising from investments in opportunity zones. Without such guidance, transfers of investments between opportunity zones may not qualify for deferral...
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Treasury Confirms Issuance of Transition Tax Regulations by the End of the Year

Brenda Zendt, special adviser to the Treasury Office of International Tax Counsel, corroborated a prior report that the Treasury Department intends to issue final Section 965 regulations by the end of 2018. Treasury deputy assistant secretary for international tax affairs, Chip Harter, previously commented on the deadline while discussing Treasury’s goal to issue proposed regulations, within the next six weeks, for sections 163(j) interest limitation and 267A anti-hybrid rules, foreign tax credits, and for the base erosion and anti-abuse tax. Read More: U.S. Treasury Hopes for Final...
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Treasury Official Clarifies Section 199A De Minimis Rules

The proposed regulations under new section 199A, which allows a 20% deduction for qualifying business owners, provide a de minimis rule which generally provides that a business will not be treated as a disqualified “specified service trade or business” if less than 5% or 10% of the gross receipts (depending on the amount of the business’s gross receipts) are attributable to certain barred services.  At the ABA Tax Conference, Audrey Ellis, attorney-advisory within Treasury’s Office of Tax Legislative Counsel, clarified that if a taxpayer with a business subject to the 10% threshold receives...
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IRS To Extend Transfer Agreement Deadline

Section 965, enacted by the TCJA, imposes a one-time transition tax on certain U.S. shareholders. The proposed regulations under section 965 require corporations that have elected to make transition tax payments pursuant to an eight-year installment plan and have transferred substantially all of their assets to another corporation file certain transfer agreements by October 9. At the ABA Tax Conference, Daniel McCall, IRS deputy associate chief counsel, stated that the IRS plans to release imminently additional guidance on how and where to file such agreements, and thus, taxpayers will not...
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Proposed GILTI Regulations to Be Published in Federal Register

The proposed regulations for the global intangible low-taxed income (“GILTI”) under section 951A (REG-104390-18) are set to be published in the Federal Register on October 10. Released on September 13, the regulations set forth new reporting requirements and rules for calculating GILTI inclusions. Public comments on the proposed GILTI regulations must be received by December 9. 2018, 60 days after their publication in the Federal Register. Read the Proposed Regulations: REG-104390-18 Read More: Proposed regulations under GILTI provisions released in Federal...
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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 authority to administratively amend the “clear language in the statute.”  Section 168(k) was amended by the Tax Cuts and Jobs Act and was intended to allow qualified improvement property to qualify for full expensing...
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IRS Provides Interim Guidance on Expenses for Business Meals

The Treasury Department and IRS issued Notice 2018-76, offering interim guidance under section 274 of the Code. The guidance provides that taxpayers may treat certain business meal expenses as non-entertainment and may continue to deduct 50 percent of food and beverage expenses associated with operating their business or trade, so long as the expenses are not extravagant and the taxpayer was present. Under section 274, taxpayers are prohibited from deducting expenses related to entertainment, amusement, or recreation. The IRS and Treasury Department intend to publish proposed regulations...
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IRS Releases Additional Guidance on Section 965

The Treasury and the IRS have published Notice 2018-78, containing additional guidance on the proposed regulations for Section 965, which were published on August 9, 2018. The Notice provides that the final regulations (i) will not require taxpayers to make a binding basis election until at least 90 days after finalization of the proposed regulations; (ii) will permit all members of consolidated groups that are U.S. shareholders of a specified foreign corporation to be treated as a single U.S. shareholder for purposes of the exception to treating certain items as cash under proposed...
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House Approves Three New Tax Bills

On September 27, 2018, the House approved two bills that are part of a second package of tax law changes advanced by House Republicans (“Tax Reform 2.0”). The first bill would create universal savings accounts, expand the utility of section 529 education savings plans, and make the offering of employee retirement plans more accessible for small businesses. The second bill would provide additional benefits for start-up companies. Also, on September 28, 2018, the House approved a third bill, which would make permanent the individual tax cuts enacted by the 2017 Tax Cuts and Jobs Act. Read the...
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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 their financial statements. Read more: IRS Provides Guidance on Treatment of Market Discount
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