AICPA recommends priorities for IRS tax guidance

On June 14, the AICPA submitted a letter to the IRS recommending priorities for guidance the Service should issue under the 2018-2019 IRS Priority Guidance Plan. In late April, the IRS in Notice 2018-43 asked the public to comment on items of tax guidance, including regulations, revenue rulings, revenue procedures, notices, and other guidance that should be priorities during the period July 1, 2018, to June 30, 2019.

The IRS noted that, because of limited resources, for its 2017-2018 guidance plan period it focused mostly on guidance necessary to implement P.L. 115-97, known as the Tax Cuts and Jobs Act (TCJA). But the IRS also noted that it would focus on items that are most important to taxpayers and for tax administration.

The AICPA’s more than 150 recommendations were prepared by the AICPA Tax Policy & Advocacy Division’s committees and its tax technical resource panels and approved by its Tax Executive Committee. The AICPA urged the IRS to, among other things, use the simplest approach to accomplish policy goals, provide safe-harbor alternatives, and offer clear and consistent definitions.

The following is a list of some of the issues the AICPA recommended the IRS focus on, organized by AICPA committee or tax technical resource panel (TRP).

For the Corporations & Shareholders Taxation TRP, the recommended priorities included guidance for the Sec. 163(j) business interest deduction limitations enacted by the TCJA and the treatment of pre-2018 recognized built-in losses.

The Employee Benefits Taxation TRP recommended guidance under the TCJA about Sec. 162(m)’s limit on executive compensation, the limitation on casualty losses to presidentially declared disasters’ effect on hardship distributions from 401(k) plans, and the definition of compensation in Sec. 415 as it relates to the new Sec. 199A deduction for qualified business income.

The Exempt Organizations Taxation TRP asked the IRS to prioritize guidance on computing unrelated business taxable income for separate trades and businesses under Sec. 512(a)(6), on taxation of employee fringe benefits under new Sec. 512(a)(7), and on the excise tax on excess remuneration paid by “applicable tax-exempt organizations” under Sec. 4960.

The Individual & Self-Employed Tax TRP’s long list of needed guidance began with 10 items under the TCJA, including guidance on how to calculate the $10,000 limitation on the deductibility of state and local taxes in specific situations. It also requested guidance on whether a child filing a tax return is eligible for the $12,000 standard deduction. Among the 10 items of requested guidance under existing law, the TRP asked for guidance on crowdfunding, the sharing economy in general, and virtual currency. In a previous comment letter, the AICPA issued detailed recommendations on FAQs the IRS should issue relating to virtual currency (see “New Guidance Needed on Virtual Currency Taxation,” in the August 2018 News Notes).

The International Taxation TRP also had a long list of recommended guidance, both under the TCJA and existing law. First on the list was guidance on calculating, reporting, and paying the transitionPlease note that we do not use footnotes in the Tax Clinic. All citations should be incorporated into the main text of the article. tax for deemed repatriated earnings under Sec. 965. The second was a request for guidance on global intangible low-taxed income. The first two issues for requested guidance under existing law were for regulations under Sec. 367 and clarification of various issues under the passive foreign investment company rules.

Penalty issues were the subject of recommendations from the AICPA IRS Advocacy & Relations Committee, including guidance on the reduced threshold for accuracy-related penalties for taxpayers claiming the Sec. 199A deduction, and transition rules and penalty relief for underpayments of income tax due to revisions of the withholding tables.

The Partnership Taxation TRP had 13 items of recommended guidance. These include requests for computational, definitional, and anti-avoidance guidance under Sec. 199A and Sec. 163(j). This panel also had a number of suggestions about centralized partnership audit regime guidance.

The S Corporation Taxation TRP asked for guidance under the TCJA on Sec. 199A, Sec. 163(j), and the Sec. 461(l) limitation on excess business losses of noncorporate taxpayers. Non-TCJA issues were led by guidance allowing worthless stock deductions under Sec. 165(g) for S corporations; the AICPA has advocated for this issue in the past.

The Tax Methods & Periods TRP’s first priority was guidance on new Sec. 168(k), the 100% bonus depreciation provision enacted by the TCJA.

The Tax Practice Responsibilities Committee asked for guidance on tax shelter definitions, the level of authority necessary to qualify for reasonable cause under Sec. 6676(a), and what criteria the IRS will apply before imposing the Sec. 6694 preparer penalty and referring cases to the IRS Office of Professional Responsibility.

Finally, the Trust, Estate & Gift Tax TRP requested guidance on what the tax effect will be once the TCJA-related exemptions from the estate, gift, and generation-skipping transfer tax sunset after 2025. This panel also asked the IRS to confirm whether trusts and estates can still deduct Sec. 67(e) amounts paid for tax preparation fees, trustee fees, accounting fees, and attorney fees, and how Sec. 199A applies to trusts and estates. The panel also had a large number of items of requested guidance on foreign and domestic issues for estates and trusts under the TCJA and previous law.