Document summaries for the week of Jan. 4, 2021

Tax document summaries for the week of Jan. 4–8, 2021, covering employee benefits, IRS procedure, and more.

CORPORATIONS

Final regs. on carbon oxide sequestration credit

The IRS issued final regulations on the Sec. 45Q carbon oxide sequestration credit. T.D. 9944 (1/6/21).

 

EMPLOYEE BENEFITS

COVID-19 relief provided for employers using the automobile lease valuation rule

In response to the ongoing COVID-19 pandemic, the IRS is providing temporary relief for employers and employees using the automobile lease valuation rule to determine the value of an employee’s personal use of an employer-provided automobile for income inclusion, employment tax, and reporting purposes. During the COVID-19 pandemic, if certain requirements are satisfied, employers and employees that are using the automobile lease valuation rule may instead switch to the vehicle cents-per-mile valuation rule to determine the value of an employee’s personal use of an employer-provided automobile beginning as of March 13, 2020. For 2021, employers and employees may revert to the automobile lease valuation rule or continue using the vehicle cents-per-mile valuation rule. Notice 2021-7 (1/4/21) (see related news story).

Revised procedures issued for exempt organization employee plan determination letters

The IRS provided revised procedures for determination letters and letter rulings issued by the Tax Exempt and Government Entities Division, Employee Plans Rulings and Agreements Office. Rev. Proc. 2021-4 (1/4/21).

 

EXEMPT ORGANIZATIONS

Revised procedures issued for EO determination letters

The IRS set forth procedures for issuing determination letters on issues under the jurisdiction of the director, Exempt Organizations (EO) Rulings and Agreements. Specifically, it explains the procedures for issuing determination letters on tax-exempt status, private foundation status, and other determinations related to exempt organizations. The revenue procedure also provides guidance on applicable user fees for requesting determination letters. Rev. Proc. 2021-5 (1/4/21).

IRS modifies procedures for submitting Form 1024-A

The IRS issued a new revenue procedure that modifies Rev. Proc. 2021-5 by updating the procedures for Exempt Organizations determination letters for Form 1024-A, Application for Recognition of Exemption Under Section 501(c)(4) of the Internal Revenue Code, which is the application used to apply for recognition of exemption as an entity described in Sec. 501(c)(4), to be electronically submitted. The new revenue procedure modifies Rev. Proc. 2021-5 to provide that electronic submission is the exclusive means of submitting a completed Form 1024-A, except for submissions eligible for the 90-day transition relief provided for in Section 4 of the new procedure. Rev. Proc. 2021-8 (1/5/21).

 

INDIVIDUALS

Taxpayers not entitled to deduction for donation of house

The Fourth Circuit affirmed a district court decision that taxpayers were not entitled to a charitable deduction for the value of a house they donated to a charitable organization that disassembled some of the structure and salvaged useful components because the taxpayers had not donated their entire interest in the property under Maryland law. Mann, No. 19-1793 (4th Cir. 1/6/21).

 

INTERNATIONAL

IRS issues annual international no-rulings list

The IRS updated the list of areas of the Code under the jurisdiction of the associate chief counsel (International) on which the IRS will not issue letter rulings or determination letters. Rev. Proc. 2021-7 (1/4/21).

 

IRS PROCEDURE

IRS revises letter ruling and information letter procedures

The IRS issued revised procedures for letter rulings and information letters issued by these associate chief counsel offices: Corporate; Employee Benefits, Exempt Organizations, and Employment Taxes; Financial Institutions and Products; Income Tax and Accounting; International; Passthroughs and Special Industries; and Procedure and Administration. The procedure also revises how determination letters are issued by the Large Business and International, Small Business/Self Employed, Wage and Investment, and Tax Exempt and Government Entities divisions. Rev. Proc. 2020-1 is superseded. Rev. Proc. 2021-1 (1/4/21).

TAM procedures updated

The IRS explained when and how an associate chief counsel office provides a technical advice memorandum (TAM). It also explained a taxpayer’s rights when a field office requests a TAM. Rev. Proc. 2020-2 superseded. Rev. Proc. 2021-2 (1/4/21).

IRS revises domestic no-rulings list

The IRS provided a revised list of areas of the Code under the jurisdiction of these associate chief counsel offices on which the Service will not issue letter rulings or determination letters: Corporate; Financial Institutions and Products; Income Tax and Accounting; Passthroughs and Special Industries; Procedure and Administration; and Employee Benefits, Exempt Organizations, and Employment Taxes. Rev. Proc. 2020-3 is superseded. Rev. Proc. 2021-3 (1/4/21).

IRS obsoletes prior guidance relating to PPP loan forgiveness and deductible expenses

The IRS issued a ruling that obsoletes Notice 2020-32 and Rev. Rul. 2020-27 due to the enactment of Section 276(a) of the COVID-Related Tax Relief Act of 2020 in the Consolidated Appropriations Act, 2021, P.L. 116-260. Under Section 276(a), no amount is includible in the gross income of an eligible recipient of a Paycheck Protection Program (PPP) loan by reason of the forgiveness of PPP indebtedness, and, additionally, no deduction will be denied, no tax attribute will be reduced, and no basis increase will be denied by reason of this exclusion from gross income. Rev. Rul. 2021-2 (1/6/21).

Final regs. issued on interest expense deductions under Sec. 163(j)

The IRS issued final regulations that provide additional guidance regarding the limitation on the business interest expense deduction under Sec. 163(j) to reflect amendments made by the law known as the Tax Cuts and Jobs Act, P.L. 115-97, and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136. T.D. 9943 (1/6/21) (see related news story).

 

PARTNERSHIPS

IRS finalizes carried interests regulations

The IRS issued final regulations on the tax treatment of carried interests under Sec. 1061. T.D. 9945 (1/8/21) (see related news story).

 

STATE & LOCAL TAXES

IRS addresses bonds appeals procedures

The IRS issued procedures for an issuer of tax-advantaged bonds to request an administrative appeal to the Independent Office of Appeals (Appeals) within the IRS of a proposed adverse determination made by the office that is responsible for examinations of tax-advantaged bonds, presently the Office of Tax Exempt Bonds (and including any successor IRS office performing those examinations, the TEB Examination Office), with respect to issues within the scope of the procedures. The procedures apply to Proposed Adverse Bond Determinations or Arbitrage Rebate Claim Denials issued by the TEB Examination Office on or after Feb. 4, 2021, and no user fee applies to either a request for an appeal under this guidance or to a closing agreement resulting from the appeal. Rev. Proc. 2021-10 (1/5/21).

 

TAX ACCOUNTING

Final regs. issued on income inclusion and advance payments under Sec. 451

The IRS issued final regulations under Secs. 451(b) and (c), as amended by the law known as the Tax Cuts and Jobs Act, P.L. 115-97, providing guidance on the timing of income inclusion under an accrual method of accounting, including the treatment of advance payments for goods, services, and certain other items. T.D. 9941 (1/4/21) (see related news story).

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TECHNOLOGY

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TAX RELIEF

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.