Document Summaries for the week of March 21, 2022

Tax document summaries for the week of March 21–25, 2022, covering corporations, IRS procedure, and more.

CORPORATIONS

Butane does not qualify as an alternative fuel under Sec. 6426

The Fifth Circuit affirmed a district court decision holding that butane is not a liquefied petroleum gas for purposes of Sec. 6426(d)(2) and therefore is not an "alternative fuel" that can be mixed with a "taxable fuel" to qualify for the tax credit under Sec. 6426(e). Vitol, Inc., No. 20-20237 (5th Cir. 3/23/22).

 

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 2022-14 (3/21/22).

IRS reproposes unified plan rule exception

The IRS issued proposed regulations providing an exception from the "unified plan rule" for multiple-employer plans when one or more participating employers in the plan fail to take required actions. REG-121508-18 (3/25/22) (see related news story).

 

EMPLOYMENT TAXES

IRS nonacquiesces to Eleventh Circuit's CSX Corp. holding

The IRS announced that it will not acquiesce to the Eleventh Circuit's decision in CSX Corp., 18 F.4th 672 (11th Cir. 2021). Specifically, the IRS does not agree with the holding that relocation benefits provided by a railroad to its employees are exempt from Railroad Retirement Tax Act taxation under Sec. 3231(e)(1)(iii). AOD 2022-2 (3/21/22).

 

EXEMPT ORGANIZATIONS

IRS suspends various exempt organization notices

The IRS announced that it is suspending its issuance of 10 notices generally sent to tax-exempt organizations about late return filings. Exempt Organizations Update (3/25/22) (see related news story).

 

INDIVIDUALS

IRS finalizes FAQs on COVID-relief payments by Indian tribal governments and Alaska native corporations

The IRS issued a final fact sheet of frequently asked questions (FAQs) providing general information for individuals on payments made by Indian tribal governments and Alaska native corporations under various COVID-relief acts. FS-2022-23 (3/25/22).

 

IRS PROCEDURE

IRS ruling addresses confidentiality and disclosure of returns and return information

The IRS ruled that (1) government employees who receive returns or return information pursuant to disclosures under Sec. 6103(c), like all designees who receive returns or return information pursuant to taxpayer consent, are subject to the disclosure restrictions of Sec. 6103(a); but (2) government employees who receive returns or return information pursuant to disclosures under Sec. 6103(k)(6) or Sec. 6103(e), other than Sec. 6103(e)(1)(D)(iii) (relating to certain shareholders), are not subject to the disclosure restrictions of Sec. 6103(a) with regard to the returns or return information received. As a result of this ruling, Rev. Rul. 2004-53 is modified and superseded. Rev. Rul. 2022-7 (3/21/22).

Tax Court finds that IRS complied with Sec. 6751 in assessing penalties

The IRS granted summary judgment to the IRS after concluding that the IRS complied with Sec. 6751(b)(1) in assessing penalties relating to a taxpayer's conservation easement deduction that the IRS denied. The Tax Court agreed that the initial determination of the penalties in question was communicated in a notice of final partnership administrative adjustment (FPAA), which was issued two months after the examining agent secured her supervisor's approval. The court also rejected the taxpayer's contention that supervisory approval came too late because the "initial determination" occurred five months earlier, when the examining agent mentioned her penalty recommendations during a telephone call with the taxpayer's representative. Oxbow Bend, LLC, T.C. Memo. 2022-23 (3/21/22).

IRS issues SIFL rates for first half of 2022

The IRS issued the standard industry fare level (SIFL) rates used for valuing noncommercial flights on employer-provided aircraft for flights taken from Jan. 1, 2022, through June 30, 2022. The ruling contains (1) the unadjusted SIFL rate; (2) the SIFL rate adjusted for payroll support program (PSP) grants; and (3) the SIFL rate adjusted for PSP grants and promissory notes. Rev. Rul. 2022-6 (3/18/22).

2022 calendar-year population figures posted

The IRS issued the resident populations of the 50 states, the District of Columbia, Puerto Rico, and the insular areas for purposes of determining for the 2022 calendar year (1) the Sec. 42(h) state housing credit ceiling; (2) the Sec. 146 private activity bond volume cap; and (3) the Sec. 142(k) private activity bond volume limit. Notice 2022-12 (3/21/22).

IRS inefficiencies contributed to IRS backlog, TIGTA reports

The Treasury Inspector General for Tax Administration (TIGTA) reported that inefficiencies in staffing, equipment, and procedures contributed to the IRS's inability to meet timeliness standards for the majority of taxpayers' cases last year. TIGTA Rep't No. 2022-46-027 (3/23/22) (see related news story).

Ninth Circuit reverses penalty approval

The Ninth Circuit reversed a Tax Court holding in a 2–1 decision. The Tax Court had held that a Sec. 6707A penalty could not be assessed against the taxpayer because the IRS had failed to obtain written managerial approval of the penalty prior to issuance of the 30-day Appeals letter proposing the penalty. Disagreeing, the Ninth Circuit held that Sec. 6751(b) merely requires written supervisory approval before assessment of the penalty or, if earlier, before the relevant supervisor loses discretion whether to approve the penalty assessment. The panel reversed the Tax Court's decision and remanded the case. Laidlaw's Harley Davidson Sales, Inc., No. 20-73420 (9th Cir. 3/25/22).

Crude oil export tax is unconstitutional, Fifth Circuit holds

The Fifth Circuit affirmed a district court decision holding that Sec. 4611(b) imposes an export tax and not a user fee and therefore it violates the Export Clause in the U.S. Constitution (Art. I, §9, cl. 5). Trafigura Trading LLC, No. 21-20127 (5th Cir. 3/24/22).

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.