Document summaries for the week of Aug. 10, 2020
Tax document summaries for the week of August 10–14, 2020, covering corporations, individuals, and more.
Corrections to T.D. 9900
The IRS announced three corrections to T.D. 9900, which provided guidance on net operating losses of consolidated groups. Announcement 2020-11 (8/10/20).
IRS clarifies normalization requirements following TCJA corporate tax reduction
The IRS issued a revenue procedure under Sec. 168 to clarify the normalization requirements following the corporate tax rate reduction provided in Section 13001 of the law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97. The revenue procedure applies to public utilities subject to normalization that have a difference in tax rates due to accelerated depreciation resulting from the corporate tax rate reduction. Rev. Proc. 2020-39 (8/14/20).
Employee plan ruling request fees to increase
The IRS announced that user fees for requests for letter rulings and determination letters submitted to Employee Plans Rulings and Agreements will increase in four categories, effective Jan. 4, 2021. Announcement 2020-14 (8/12/20).
Minimum funding standards for community newspaper pension plans
The IRS provided guidance on the election of alternative minimum funding standards for certain community newspaper defined benefit pension plans under Sec. 430(m), which was added by the Setting Every Community Up for Retirement Enhancement Act of 2019, P.L. 116-94. Notice 2020-60 (8/13/20).
Executive order defers payroll taxes
A presidential memorandum deferred the withholding, deposit, and payment of certain payroll taxes paid from Sept. 1 through Dec. 31, 2020. The deferral applies to the employee portion of the old-age, survivors, and disability insurance tax under Sec. 3101(a) and Railroad Retirement Act Tier 1 tax under Sec. 3201 for any employee whose pretax wages or compensation during any biweekly pay period generally is less than $4,000. Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster (8/8/20) (see related news story).
Final regs. issued on payments to charitable organizations
The IRS issued final regulations on the treatment of payments made to charitable organizations in return for consideration, including in return for state and local tax credits. T.D. 9907 (8/10/20) (see related news story).
Failure to sign tax return leads to dismissal of refund action
The Court of Federal Claims granted the government’s motion to dismiss the taxpayers’ complaint seeking a tax refund because the taxpayers did not sign their tax returns in the year at issue, meaning the court did not have subject matter jurisdiction to decide their claim. Gregory, No. 19-386T (Fed. Cl. 8/10/20).
IRS reopens Non-Filers tool for people with qualifying children
The IRS announced that it is reopening the registration period for federal beneficiaries who did not receive the $500 per child economic impact payments earlier this year. People with qualifying children who receive Social Security retirement, survivor or disability benefits, Supplemental Security Income (SSI), Railroad Retirement benefits, and Veterans Affairs Compensation and Pension (C&P) benefits and did not file a tax return in 2018 or 2019 can use the IRS’s Non-Filers tool through Sept. 30 to enter their qualifying children’s information. The IRS anticipates issuing these payments by mid-October. IR-2020-180 (8/14/20).
Management companies are not customers for purposes of determining rental activity
The Ninth Circuit affirmed a district court decision holding that the taxpayers’ operation of vacation properties was not “rental activity” under Sec. 469 because the management companies that marketed and rented the properties were not “customers” for purposes of calculating the average period of use. Eger, No. 19-17022 (9th Cir. 8/13/20).
Seneca Nation treaties do not create exemption from federal tax
In an issue of first impression, the Second Circuit affirmed a Tax Court decision holding that income a couple earned from selling gravel mined from Seneca Nation land is taxable income that is not excluded by either of two treaties between the United States and the Seneca Nation. Perkins, No. 19-2481 (2d Cir. 8/12/20).
Consultant failed to report income and failed to substantiate deductions; penalties upheld
The Tax Court held that a taxpayer, who was unemployed in 2010 and who worked as an independent medical consultant for 2011 through part of 2015, failed to include certain amounts in gross income and, with few exceptions, failed to substantiate her entitlement to deductions for medical expenses and business expenses beyond those already allowed by the IRS or conceded at or after trial. The court also upheld the assessment by the IRS of accuracy-related penalties for years 2010 through 2013 and additions to tax for years 2013 through 2015. Sham, T.C. Memo. 2020-119 (8/12/20).
Announcement on treatment of NAFTA references in U.S.–Switzerland tax treaty
The United States and Switzerland announced that references to the North American Free Trade Agreement in the U.S.–Switzerland income tax treaty will be understood to be references to the United States–Mexico–Canada Agreement, once that agreement goes into effect. Announcement 2020-10 (8/10/20).