Document summaries for the week of Dec. 7, 2020
Tax document summaries for the week of Dec. 7–11, 2020, covering employee benefits, partnerships, and more.
Final regs. on qualified plan loan rollovers
The IRS issued final regulations on the extended rollover period for qualified plan loan offsets enacted by the law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97. T.D. 9937 (12/8/20) (see related news story).
IRS issues monthly corporate yield curve and segment rates
The IRS issued guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Sec. 417(e)(3), and the 24-month average segment rates under Sec. 430(h)(2). In addition, the IRS provided guidance as to the interest rate on 30-year Treasury securities under Sec. 417(e)(3)(A)(ii)(II), as in effect for plan years beginning before 2008, and the 30-year Treasury weighted average rate under Sec. 431(c)(6)(E)(ii)(I). Notice 2020-87 (12/11/20).
IRS issues Q&A guidance with respect to provisions in the SECURE Act
The IRS issued guidance in the form of questions and answers with respect to Section 102 and Section 103 of the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, P.L. 116-94. Section 102 of the SECURE Act increases the 10% cap for automatic enrollment safe-harbor plans while Section 103 of the SECURE Act eliminates certain safe-harbor notice requirements for plans that provide for safe-harbor nonelective contributions and adds new provisions for the retroactive adoption of safe-harbor status for those plans. Notice 2020-86 (12/9/20).
Final regs. on qualified transportation fringe benefits
The IRS issued final regulations implementing changes to Sec. 274 that disallow a deduction for the expense of any Sec. 132(f) qualified transportation fringe provided to an employee, effective for amounts paid or incurred after Dec. 31, 2017. T.D. 9939 (12/10/20) (see related news story).
Final regs. issued on group health plan fixed-amount cost-sharing requirements
The IRS, along with the Department of Labor’s Employee Benefits Security Administration and the Department of Health and Human Services, issued final regulations on group health plans and group health insurance coverage that amend current rules to provide greater flexibility for certain health plans to make changes to certain types of fixed-amount cost-sharing requirements without causing a loss of so-called grandfather status under the Patient Protection and Affordable Care Act, P.L. 111-148. T.D. 9928 (12/11/10).
Form 1040 and 1099 constitute 'return' starting limitation period
The Fifth Circuit overturned a district court decision and held that a taxpayer’s Form 1040, U.S. Individual Income Tax Return, and Forms 1099 that he filed with the IRS constituted a “return” for purposes of starting the Sec. 6501(a) three-year statute of limitation, and therefore the IRS’s claims against him were time barred. Quezada, No. 19-51000 (5th Cir. 12/11/20).
No Tax Court opinions or orders will be issued during transition to new DAWSON case management system
The Office of Chief Counsel issued guidance to Chief Counsel attorneys and support staff on navigating the U.S. Tax Court’s ongoing transition from the current eAccess case management system to its new DAWSON (Docket Access Within a Secure Online Network) case management system and advised that, as part of the transition, there is a blackout period for new electronic filings that began on Nov. 20, 2020, and will continue until DAWSON is available to practitioners and taxpayers. According to the Chief Counsel’s Office, the Tax Court anticipates the blackout period for electronic filings will end no later than Dec. 27, 2020, and, to assist taxpayers and practitioners during the transition period, the Tax Court does not intend to issue any opinions or orders during the transition period. CC-2021-002 (12/9/20).
IRS issues guidance on settlement of syndicated conservation easement transactions before Tax Court
The IRS issued guidance on settlement options being offered by the Office of Chief Counsel in Notice 2017-10 syndicated conservation easement (SCE) transactions with respect to certain cases pending before the U.S. Tax Court. The Chief Counsel’s Office noted that the use of SCE transactions has led to increased IRS enforcement efforts and litigation and, as a result, some partnerships and their partners who participated in such transactions have expressed an interest in exploring settlement options. CC-2021-001 (12/9/20).
Partners cannot deduct insurance premiums on policy that reimburses them for reductions in tax benefits
The Office of Chief Counsel advised that a partnership cannot deduct, under either Sec. 162(a) or Sec. 212, the cost of premiums paid for an insurance policy that contemplates reimbursing partners in a partnership for an adjustment that reduces the tax benefits they are entitled to claim for a charitable contribution made by the partnership (i.e., a “tax insurance” policy). The Chief Counsel’s Office noted that the policy does not provide, fund, or reimburse any services or materials related to preparing returns, determining a tax liability, or contesting such liability but rather reimburses the partners for their minimum proper federal income tax, an amount not deductible under Sec. 275. CCA 202050015 (12/11/20).
IRS issues transition relief for employers claiming work opportunity credit
The IRS is providing transition relief for certain employers claiming the work opportunity tax credit under Sec. 51. Specifically, the IRS is extending the 28-day deadline for certain employers to request certification that an individual hired on or after Jan. 1, 2018, and before Jan. 1, 2021, is a member of a designated community resident targeted group or a qualified summer youth employee targeted group. Notice 2020-78 (12/11/20).
Taxpayer must use accrual method and recognize promissory note in income
The Ninth Circuit affirmed a Tax Court decision that a taxpayer was required to use the accrual method because it needed to account for inventory and, under the accrual method, was required to include the amount of a promissory note in income in the year at issue. King Solarman, Inc., No. 20-70373 (9th Cir. 12/11/20).
Business meal deductions after the TCJA
This article discusses the history of the deduction of business meal expenses and the new rules under the TCJA and the regulations and provides a framework for documenting and substantiating the deduction.
Quirks spurred by COVID-19 tax relief
This article discusses some procedural and administrative quirks that have emerged with the new tax legislative, regulatory, and procedural guidance related to COVID-19.