Revised guidance for organizations applying for a determination letter to recognize qualification for §501(c)(4) status has been issued by the IRS in Rev. Proc. 2018-10..  The new guidance requires the request be made by filing Form 1024-A, Application for Recognition of Exemption Under Section 501(c)(4).  This new form is to be used instead of Form 1024 for such organizations to optionally file for such a determination letter. 

The organizations, while they must notify the IRS of their existence and their assertion that they qualify for §501(c)(4) status within 60 days of formation under other procedures, are not required to go through the determination letter process.  Nevertheless, such an organization may wish to obtain the certainty that comes with the letter and therefore will file this form, though the application will also require submission of a user fee for the IRS to process the request.

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The IRS has clarified how a provision in the Tax Cuts and Jobs Act that no longer will allow the recharacterization of rollovers from traditional IRAs to a Roth IRA as being made to a regular IRA.  TCJA repeals the ability to recharacterize a Roth IRA conversion as a transfer to a traditional IRA for taxable years after December 31, 2017.  [IRC §408A(d)(6)(B)(iii)]

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The IRS will begin sending information to the State Department on “seriously delinquent” taxpayers as required by the Fixing America’s Surface Transportation Act (2015).  Those taxpayers will face denial, revocation or limitation of their passport.  Details of how this will be handled is found in Notice 2018-1.

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One of the longstanding “rules of thumb” of tax research is to be careful not to rely upon a single court decision that seems to be an “outlier,” especially when it comes from a U.S. District Court which is a court that does not specialize in tax law cases.  This turned out to be true in the case of Green v. United States where a decision from an Oklahoma District Court was reversed on appeal by the Tenth Circuit Court of Appeals (Case No. 16-6371).

We had covered the District Court decision on the Current Federal Tax Developments website when the opinion was published in November of 2015.[1]  The IRS had several objections, including whether any deduction should be allowed.  But on appeal the IRS limited its objection to the amount of the contribution, not whether a contribution deduction should be allowed to the taxpayer.

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The United States Supreme Court has agreed to hear South Dakota's appeal in the case of State of South Dakota v. Wayfair, SD SC, Case No. 28160. (Order Granting Certiorari, January 12, 2018)

South Dakota enacted a law that required out of state sellers who sell over $100,000 in a year and have 200 or more distinct transactions to collect and remit sale tax for the state of South Dakota regardless of whether or not the seller has nexus with the state of South Dakota.

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The Financial Accounting Standards Board (FASB) has now posted a Staff Q&A that specifically outlines what private and not-for-profit entities who wish to apply the SEC guidance on deferred taxes found in Staff Accounting Bulletin 118 should do.

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The Joint Committee on Taxation has issued its annual report on expiring tax provisions (List of Expiring Federal Tax Provisions 2017-2027, JCX-1-18). 

This document provides a detailed list by year of expiring and expired provisions.  The list of most immediate interest contains the provisions that expired in 2016.  

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Previously we had discussed action by the Securities and Exchange Commission to deal with the changes to deferred taxes required by the law known as the Tax Cuts and Jobs Act (see SEC Issues Interpretative Bulletin on Applying ASC 740 in Light of TCJA).  The SEC issued Staff Accounting Bulletin No. 118 that provided guidance to public companies on how to deal with issues arising from the difficulties in computing the proper deferred tax adjustments in time to report for December 31, 2017 financial statements.

The Financial Accounting Standards Board met on January 10, 2018 to discuss other implications of TCJA on reporting and measurement for deferred taxes under ASC 740.  Ken Tysiac of the Journal of Accountancy posted a report of that meeting on the Journal’s website (“FASB Addresses Financial Reporting Impacts of New Tax Law”, January 10, 2018 [1]).

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He who hesitates is lost the saying goes, and in taxes that is often very true when facing statute of limitations to fix a problem.  But in Information Letter INFO 2017-0028 the IRS “solved” the taxpayer’s problem from 2006, largely by pointing it there really wasn’t the problem the taxpayer thought existed.

While we don’t know for sure why the taxpayer decided to look back at his actions in 2006 at this late date, he did so and contacted his Congressman who contacted the IRS.  The taxpayer in 2006 had rolled 401(k) funds from his employer’s plan to a traditional IRA.  However, the 401(k) included after-tax contributions and the taxpayer indicated he had “inadvertently” rolled those funds into a traditional IRA rather than a Roth IRA.  The taxpayer was asking how he could get credit for the taxes he had paid on those funds.

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Some partnerships will be authorized under the Centralized Partnership Audit Regime (CPAR) to elect to opt out of the centralized exams if they meet certain requirements.  Reg. 301.6221(b)-1 (TD 9829) provides the details for which partnerships can opt out and how they will go about doing so.

CPAR, which takes effect for returns filed for years beginning on or after January 1, 2018, represents a major change in how partnership returns will be examined.  By default, a tax will be determined and assessed at the partnership level (IRC §6221(a)).  In the alternative, a partnership subject to CPAR can elect to push out the adjustments to the partners in the year under review (IRC §6226).

Congress provided an option for some partnerships to elect out of CPAR and instead be taxed under traditional partnership exam rules (what were the small partnership examinations under the now repealed TEFRA rules).  Note that the election is an annual election, so electing to opt out of CPAR for 2018 does not require the partnership to opt out for 2019, nor will the partnership be opted out for 2019 unless the partnership both qualifies to make the election and files a timely election.

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With the upcoming limitation to $10,000 annually for any deduction for state and local taxes on Schedule A, questions arose about being able to prepay taxes before the end of 2017 to obtain the unlimited deduction rather than face the $10,000 cap beginning in 2018.  Congress shut down any thought of prepaying 2018 income taxes, treating any payment of 2018 taxes made in 2017 as being paid in 2018 (IRC §164(b)(6) after revision by the Tax Cuts and Jobs Act).

With prepaying income tax shut down, taxpayers began to think about prepaying property taxes, with a number of localities providing methods to advance pay taxes for 2018.  But if a tax has not yet been assessed or billed, can that tax be deemed “paid” under IRC §164(a)?

In response to these developments, the IRS issued News Release IR-2017-210, IRS Advisory: Prepaid Real Property Taxes May Be Deductible in 2017 if Assessed and Paid in 2017.  The news release provides information on the types of payments made before the end of 2017 that can be deducted on the 2017 return.

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