This is a roundup of Bloomberg Tax’s three days of coverage from the American Bar Association’s fall tax conference in San Francisco. Our reporters were there to bring you the details of upcoming guidance, changes to a popular real-time auditing program, and the agency’s compliance efforts.
Read up on what you missed.
Partnership Compliance
The IRS is focused on improving partnership tax compliance, and 11 changes to key partnership tax forms—Form 1065, for partners, and the Schedule K-1, are part of those efforts. The changes are focused on improving the information the IRS gathers from partnerships, IRS Chief Counsel Michael Desmond said.
The office is implementing an elective, multi-year training program—at the end of which participating attorneys will earn the equivalent of a “light” LLM degree, Desmond said. The first component of that program will deal with partnership issues.
Oh, and About Those Rules: The agency on Friday released final rules (T.D. 9877) aimed at bottom-dollar guarantees, in which partners essentially guarantee partnership debt with the assurance that they would generally never have to pay it back.
Desmond got instant feedback from practitioners during ABA. “People were reading off their BlackBerrys out in the hallway there, so I got a bit of an earful on that,” he said.
Regulations Are Coming
In June the IRS issued two sets of proposed regulations that, according to deputy associate chief counsel at the IRS Daniel McCall, will likely come out separately since they aren’t “intrinsically linked.”
Guidance under tax code Section 958 for determining stock ownership and a high-tax exclusion under Section 951 on the global intangible low-taxed income may have been issued simultaneously but the latter rules may move faster.
The agency is very close to releasing its next priority guidance plan. In fact, it could come as soon as Oct. 7, according to IRS officials.
The first priority will be TCJA regulations including hybrid mismatch rules—which are very far along—as well as rules on foreign tax credits, a proposal under the high-tax exclusion under GILTI, international pieces of 163(j), and more. The second priority will be regulations with components about to expire.
EPA on Opportunity Zones
The Environmental Protection Agency has asked the IRS for language in final opportunity zone regulations that would promote investment in “brownfield sites,” or contaminated areas. The IRS is looking closely at that idea, an official said.
The opportunity zones tax break was created in the 2017 tax law.
Clarifying in final rules that investments in the assessment, remediation, and redevelopment of brownfield properties are within the scope of the opportunity zone program will incentivize investors to pump money into those sites, EPA said. This type of development is “integral to the primary purpose” of the opportunity zones incentive, the EPA said in 2018 comments.
Dance Break
Here’s something you don’t see at every tax conference: Sons of BOSS, a group of ABA lawyers, performed their tax-inspired songs Thursday night.
Tax Court Updates
There are about 18 pending passport cases before the Tax Court, Judge L. Paige Marvel said.
The IRS can ask the State Department to deny or revoke passports to taxpayers with seriously delinquent tax debt of $52,000 or more.
“I think it remains to be seen how many of these cases we see and whether or not this serves as a wake-up call to taxpayers to get in there and try to work something out so that they do not have to go through this certification process,” she said.
E-Filing: Petitions may be able to be filed electronically at Tax Court as soon as this spring, Marvel said.
The Tax Court began permitting electronic filing of stipulated decisions reflecting settlements between parties on Sept. 30.
Backlog: The Tax Court is making progress on its backlog. More than 25,000 cases were pending at the end of last month. Aysha Bagchi has more.
Audit Program Changes
The IRS may restrict its popular real-time auditing program to large public corporations, an official said.
The IRS can learn more from public companies, because they are required to disclose more information than their private counterparts, said Gloria Sullivan, director of the Western Compliance Practice Area in the IRS’s Large Business and International division.
More transparency means less risk for the agency when dealing with companies in the Compliance Assurance Program. The program lets businesses work with a team of IRS auditors to ensure they comply with the tax code in the current year instead of getting audited years later.
Endowment Tax
There are two thresholds for colleges facing a 1.4% tax on endowment income: the number of tuition-paying students and the value of assets. The IRS is hearing a lot of interest in how broadly it defines “student,” Amber MacKenzie, senior attorney at the IRS Office of Associate Chief Counsel, said at the American Bar Association tax section meeting in San Francisco.
For the purposes of calculating the Section 4968 tax, a college must have at least 500 tuition-paying students during the preceding taxable year, and the aggregate fair market value of its assets at the end of the preceding taxable year must be at least $500,000 per student.
The wealthy schools facing the tax, like Harvard University, have asked the agency to adjust how it categorizes students. The IRS issued proposed rules on the calculation in June.
Undoing Transactions?
The IRS may write a “revision provision” that could partially or fully undo transactions that occurred during a gap in the effective dates of international tax rules.
“We have heard from a number of practitioners that may have some or many clients who would be interested in some unwind of these transactions, so that is another area we’re considering,” said Daniel McCall, deputy associate chief counsel at the IRS.
U.S. shareholders that may have gotten a future tax benefit from a transaction during the gap period could be subject to anti-abuse rules under tax code Section 245A dividends received deduction rules or the Section 951A global intangible low-taxed income rules.
Those transactions would have occurred between Jan. 1, 2018, and Nov. 30, 2018, after the Section 965 repatriation tax calculations and before the GILTI effective date.
Speed Reads
- New Hires: The IRS Office of Chief Counsel is bringing on about 100 new employees. Allyson Versprille has more.
- Crypto: IRS Chief Counsel Michael Desmond made a surprise appearance at a panel saying the agency is seeing a “very serious compliance problem” as taxpayers fail to include crytpocurrency assets on their returns. Allyson Versprille has more. The agency has also revised tax forms and increased cryptocurrency-specific training to boost its efforts to combat tax avoidance within the industry. Ally Versprille has more.
- Double Taxation: The digital tax plan from the OECD could still lead to double taxation for some multinational companies, Liz Chien, vice president of global tax at Ripple Labs Inc. said. Sony Kassam has more.
- Tax Preparation: The tax section plans to expand pro bono tax preparation for members of the military. Aysha Bagchi has more.
- Child Tax Credit: The Amish, barred from claiming the child tax credit because they are opposed to obtaining Social Security numbers, may have to turn to Congress for help—not the IRS. Allyson Versprille has more.
- Collection Notices: The IRS has been studying taxpayer behavior to find ways to increase tax payments. It will roll out a revised collection notice next year in response to those tests. Allyson Versprille has more.
- DOJ Tax Departure: Gilbert Rothenberg, chief of the Appellate Section of the Department of Justice’s Tax Division, will be leaving the department on Nov. 1.
- Wayfair Impact: Many states avoided adopting federal rules for global intangible low-taxed income because they are expecting plenty of revenue from online sales taxes. Laura Mahoney has more.
- In Case You Missed It: Kelly Philips Erb, the TaxGirl, is writing a weekly column for Bloomberg Tax. This week, she wrote about why it’s important to come armed with details when you’re working with the IRS.
Learn more about Bloomberg Tax or Log In to keep reading:
See Breaking News in Context
From research to software to news, find what you need to stay ahead.
Already a subscriber?
Log in to keep reading or access research tools and resources.