Document Summaries for the week of Dec. 26, 2022

Tax document summaries for the week of Dec. 26–30, 2022, covering C corporations, individuals, and more.

C CORPORATIONS

Corporate alternative minimum tax guidance issued

The IRS issued a notice addressing the application of the corporate alternative minimum tax, as added to the Internal Revenue Code by the Inflation Reduction Act of 2022, P.L. 117-169. The notice provides interim guidance regarding certain time-sensitive issues intended to be addressed by forthcoming proposed regulations. Notice 2023-7 (12/27/22).

IRS guidance forthcoming on excise tax on repurchases of corporate stock

The IRS announced that it intends to issue proposed regulations addressing the application of the excise tax on repurchases of corporate stock under Sec. 4501, as enacted by the Inflation Reduction Act of 2022, P.L. 117-169. To provide taxpayers with interim guidance until the proposed regulations are published, the IRS in a notice described certain rules and procedures that it intends to include in those regulations. Notice 2023-2 (12/27/22).

 

INDIVIDUALS

IRS issues 2023 standard mileage rates; business rate increases

The IRS issued the optional standard mileage rates for 2023 for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes and the portion of the business standard mileage rate treated as depreciation for calculating reductions to basis. The rates are (1) 65.5 cents per mile driven for business use, up 3 cents from the rate in effect for the second half of 2022; (2) 22 cents per mile driven for medical or moving purposes, unchanged from the second half of 2022; and (3) 14 cents per mile driven in service of charitable organizations, also unchanged, as it is set by Sec. 170(i). The basis reduction rate is 28 cents per mile, 2 cents higher than for 2022. Notice 2023-03 (12/29/22) (see related news story).

Court agrees with IRS that taxpayer does not qualify for innocent-spouse relief

The Tax Court held that a taxpayer who requested innocent-spouse relief from tax liabilities on a joint return was ineligible for the requested relief. The court agreed with the IRS that the taxpayer had meaningfully participated in a prior deficiency case through counsel. The doctrine of res judicata therefore precluded her from raising her Sec. 6015 claim for the year that was the subject of that case, and the exception in Sec. 6015(g)(2) did not apply, the court held. Kechijian, T.C. Memo. 2022-127 (12/28/22).

 

INTERNATIONAL

Notice provides temporary relief relating to FFI requirements

The IRS issued temporary relief procedures for certain foreign financial institutions (FFIs) required to report U.S. taxpayer identification numbers (U.S. TINs) for certain preexisting accounts as defined in an applicable Model 1 intergovernmental agreement (IGA). If an FFI in an eligible Model 1 IGA jurisdiction (as further defined in the procedures) complies with the procedures, then the U.S. Competent Authority will not determine there is significant noncompliance with the FFI's obligations under the IGA solely as a result of its failure to report U.S. TINs associated with its preexisting accounts. Notice 2023-11 (12/30/22).

 

IRS PROCEDURE

Safe harbors provided for calculating Sec. 45W credit

The IRS issued a notice that provides a safe harbor regarding the incremental cost of certain qualified commercial clean vehicles placed in service in calendar year 2023 for purposes of calculating the tax credit for such vehicles under Sec. 45W, enacted by the Inflation Reduction Act of 2022, P.L. 117-169. According to the notice, a Department of Energy (DOE) analysis (1) calculated the incremental cost for compact plug-in hybrid electric vehicles to be less than $7,500, and (2) provides an incremental analysis of current costs for several representative classes of street vehicles with a gross vehicle weight rating of 14,000 pounds or more in calendar year 2023. The IRS will accept a taxpayer's use of the incremental cost published in the DOE analysis for the appropriate class of street vehicle to calculate the Sec. 45W credit amount. Notice 2023-9 (12/29/22). 

Forthcoming proposed regulations will define terms for Sec. 30D credit

The IRS announced that it intends to propose regulations defining certain terms relevant to requirements of the clean vehicle credit available under Sec. 30D for new clean vehicles placed in service after Dec. 31, 2022, as amended by the Inflation Reduction Act of 2022, P.L. 117-169. The regulations will define: (1) final assembly; (2) North America; (3) manufacturer's suggested retail price; (4) vehicle classifications for vans, sport utility vehicles, pickup trucks, and other vehicles; and (5) placed in service. Notice 2023-1 (12/29/22).

Tax Court affirms Whistleblower Office's final determination

The Tax Court granted summary judgment to the IRS and affirmed the IRS Whistleblower Office's (WBO's) final determination regarding a taxpayer's whistleblower award. The court held that the record reflected that the WBO followed proper administrative procedures and considered the taxpayer's arguments. Thus, the court held, the taxpayer failed to show that the WBO's action in making its final determination was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Luu, T.C. Memo. 2022-126 (12/28/22). 

Backup withholding required for payments to taxpayers with missing or incorrect TINs

The IRS Office of Chief Counsel advised an entity that it was required to report interest payments under Sec. 6041 and to back up withhold under Sec. 3406 when payees had missing or incorrect taxpayer identification numbers (TINs). According to the Chief Counsel's Office, the fact that the interest payments were based on amounts held in a trust did not change this obligation because the type of trust (redacted) was not exempt from backup withholding. CCA 202252008 (12/30/22).

 

TAX ACCOUNTING

IRS amends procedure for obtaining IRS consent for Sec. 174 method changes

The IRS issued a revenue procedure (modifying and superseding Rev. Proc. 2023-8) to provide procedures under Sec. 446 and Regs. Sec. 1.446-1(e) to obtain automatic IRS consent to change methods of accounting for specified research or experimental (R&E) expenditures to comply with Sec. 174 as amended by the law known as the Tax Cuts and Jobs Act, P.L. 115-97. The procedures apply to a taxpayer that changes its method of accounting for specified R&E expenditures (as defined under Sec. 174(b)) to the required Sec. 174 method (as defined in §7.02(1)(b) of the procedure) to comply with Sec. 174. Rev. Proc. 2023-11 (12/29/22).

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.