Washington Tax Update

| 5/9/2019

Regulatory and administrative update

As they continue to publish regulations to implement the Tax Cuts and Jobs Act (TCJA), the U.S. Department of the Treasury and the IRS recently released proposed regulations implementing opportunity zone tax credits. Additionally, the Office of Management and Budget currently is reviewing proposed regulations implementing the limitation on the deduction for state and local taxes and a related notice, as well as proposed regulations regarding IRC Section 451(b) and IRC Section 451(c).

Despite the progress on the publication of proposed regulations, the pace toward finalization seems slower. Even when final regulations have been published, for instance in the case of the IRC Section 199A qualified business deduction and the IRC Section 965 transition tax, many taxpayers continue to express the need for more guidance. In what appears to be a response to these requests, the IRS recently published frequently asked questions on IRC Section 199A on its website.

Treasury and the IRS also published Notice 2019-30, the annual solicitation for recommendations from the public regarding projects to be included on the priority guidance plan for the 2019-2020 plan year. The notice states that the focus of Treasury and the IRS remains on projects to implement the TCJA and that decisions about whether non-TCJA projects on the 2018-2019 plan will be carried forward will be based on available resources. Suggestions must be submitted by June 7, 2019, to be considered for the 2019-2020 plan.

Finally, the Large Business and International (LB&I) operating division at the IRS recently approved the following three new campaigns focused on international tax issues:
  1. Captive services provider campaign: Issues subject to examination and soft letters relate to IRC Section 482 transfer pricing between foreign captive subsidiary services providers and other members of a multinational group.
  2. Offshore private banking campaign: Issues subject to examination and soft letters relate to noncompliance with respect to offshore private bank transactions and accounts.
  3. Loose filed Forms 5471 campaign: The goal of the campaign is to increase compliance with the requirement that Form 5471, “Information Return of U.S. Persons With Respect to Certain Foreign Corporations,” must be attached to a tax return by the return’s due date (including extension) and cannot be mailed to the IRS loose or unattached to a return.

Legislative update

Increased animosity between Congress and the White House has most insiders worried that the parties might be unable to find common ground on any tax issue for the foreseeable future. While many hoped that negotiations could begin on TCJA corrections and on certain credit extensions, little progress has been made. The most hoped for tax legislative item, reform of the IRS, has hit a speed bump due to member concerns about whether private companies that administer the Free File system for the IRS have been limiting the ability of taxpayers to access that system.

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