Document Summaries for the week of Dec. 12, 2022

Tax document summaries for the week of Dec. 12–16, 2022, covering employee benefits, IRS procedure, and more.

EMPLOYEE BENEFITS

IRS updates weighted average interest rates, yield curves, and segment rates

The IRS issued a notice that provides 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 notice provides 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 2023-5 (12/16/22)).

 

IRS PROCEDURE

IRS provides clean vehicle tax credit criteria that manufacturers must meet

A new revenue procedure sets forth the procedures under Sec. 30D(d)(3) for qualified manufacturers to enter into a written agreement with the Secretary of the Treasury or her delegate to make periodic written reports to the Secretary providing vehicle identification numbers and such other information related to each vehicle manufactured by such manufacturer that is eligible for a clean vehicle credit as the Secretary may require. Vehicles eligible for the clean vehicle credit under Sec. 30D, the credit for qualified commercial clean vehicles under Sec. 45W, and the credit for previously owned clean vehicles under Sec. 25E, respectively, generally must be manufactured by a qualified manufacturer as described in Sec. 30D(d)(1)(C) and (d)(3). Rev. Proc. 2022-42 (12/12/22).

IRS procedure focuses on final qualified intermediary withholding agreements

A new revenue procedure sets forth the final qualified intermediary withholding agreement entered into under Regs. Sec. 1.1441-1(e)(5) that applies beginning Jan. 1, 2023. In general, this agreement (1) allows certain persons to enter into an agreement with the IRS to simplify their obligations as withholding agents for amounts paid to their account holders and allows certain persons to act as qualified derivatives dealers and assume primary withholding and reporting responsibilities on all dividend equivalent payments they make, and (2) allows foreign persons to enter into the agreement for purposes of the withholding and reporting required under Sec. 1446(a) and (f) with respect to their account holders holding interests in publicly traded partnerships. Rev. Proc. 2022-43 (12/13/22).

IRS updates procedure on adequate disclosures

The IRS issued a revenue procedure updating Rev. Proc. 2021-52 and identifying circumstances under which the disclosure on a taxpayer's income tax return with respect to an item or position is adequate for the purpose of reducing the understatement of income tax under Sec. 6662(d) (relating to the substantial understatement aspect of the accuracy-related penalty), and for the purpose of avoiding the tax return preparer penalty under Sec. 6694(a) (relating to understatements due to unreasonable positions) with respect to income tax returns. If the revenue procedure, which applies to 2022 tax forms, does not include an item or position, disclosure is adequate with respect to that item or position only if made on a properly completed Form 8275 or 8275-R, as appropriate, attached to the return for the year or to a qualified amended return. Rev. Proc. 2022-41 (12/12/22).

IRS issues financial report

The IRS issued its 2022 financial report. Pub. 5456, 2022 Agency Financial Report (12/15/22).

IRS issues January 2023 applicable federal rates

The IRS issued a ruling providing tables of prescribed rates for federal income tax purposes for January 2023. Table 1 contains the short-term, midterm, and long-term applicable federal rates (AFRs) for purposes of Sec. 1274(d); Table 2 contains the short-term, midterm, and long-term adjusted AFRs for purposes of Sec. 1288(b); Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in Sec. 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in Sec. 42(b)(1) for buildings placed in service in the current month (although, under Sec. 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, is not less than 9%);Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of Sec. 7520; Table 6 contains the deemed rate of return for transfers made during calendar year 2023 to pooled income funds described in Sec. 642(c)(5) that have been in existence for less than three tax years immediately preceding the tax year in which the transfer was made; and Table 7 contains the average of the applicable federal mid-term rates (based on annual compounding) for the 60-month period ending Dec. 31, 2022, for purposes of Sec. 7702(f)(11). Rev. Rul. 2023-1 (12/15/22).

 

TAX ACCOUNTING

Automatic approval available for changing research or experimental accounting methods

The IRS issued procedures under which taxpayers can obtain automatic IRS consent to change their methods of accounting for specified research or experimental expenditures to comply with Sec. 174, as amended by the law known as the Tax Cuts and Jobs Act of 2017, P. L. 115-97. As amended, Sec. 174 provides that such expenses are no longer deductible but instead are charged to a capital account and amortized ratably over the five-year period (15-year period in the case of any specified research or experimental expenditures which are attributable to foreign research within the meaning of Sec. 41(d)(4)(F)) beginning with the midpoint of the tax year in which such expenditures are paid or incurred. Rev. Proc. 2023-8 (12/15/22).

Tax Insider Articles

DEDUCTIONS

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.

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.