The IRS has updated the long (now 333 pages) document listing all of the automatic accounting method changes in Revenue Procedure 2018-31. This is the document that outlines the changes that can be made by attaching a Form 3115, Application for Change in Accounting Method, to the taxpayer’s tax return for the year of change (along with a copy to the IRS processing center in Covington, KY) rather than going through the process of applying for approval of the change and awaiting the IRS’s decision.

If you were hoping to see automatic change procedures outlined for changes added by the Tax Cuts and Jobs Act (TCJA), those are not in this document.  There were a few changes made to prior automatic changes (such as those impacting IRC §263A) to get ready for the new small business changes, but none of the small business changes, nor the revenue conformity change required for some businesses by IRC §451(b) as revised by TCJA are found in this document.

Image copyright kritchanut / 123RF Stock Photo

In Notice 2018-30 the IRS has modified certain safe harbor calculations for recognized built in gain (RBIG) and recognized built in loss (RBIL) as it relates to limitations under IRC §382.  The IRS has revised guidance found in Notice 2003-65 to modify the safe harbor rules found in the IRC §§338 and 1374 approaches described in that ruling.

IRC §382 serves to limit the ability to “buy losses” in an existing corporation, limiting the corporation’s ability to claim pre-ownership change losses against post-change taxable income.  That ability is limited by the §382(b) limitation for each taxable year.

Image copyright convisum / 123RF Stock Photo

The IRS, state taxing agencies and members of the nation’s tax industry in IRS News Release IR-2018-111 described a rising problem with identity theft aimed at small businesses and steps that are being taken to combat it.

The release begins by noting that the problem has been increasing recently:

In the past two years, the Internal Revenue Service has noted a sharp increase in the number of fraudulent filings of Forms 1120, 1120S and 1041 as well as Schedule K-1. The fraudulent filings apply to partnerships as well as estate and trust forms.

Image copyright pixelbliss / 123RF Stock Photo

In the case of Keenan v. Commissioner, TC Memo 2018-60, the taxpayers argued that they should not face penalties under IRC §6662.  They argued they had reasonably relied on the advice of their CPA and attorney/insurance agent in claiming a deduction of over $3,000,000 related to a Benistar 419 plan.

The taxpayers were back in court after the Ninth Circuit Court of Appeals had sent the case back down to the Tax Court to consider the taxpayer’s claims that their situation was different enough from that of the taxpayers in the Curcio case to justify a different result.  The taxpayers, who were one of many taxpayers facing proposed disallowance of deductions for Benistar 419 plans, had agreed to be bound by the result of a set of test cases involving similarly situated taxpayers that were all part of the Curcio decision.

Image copyright racorn / 123RF Stock Photo

Oklahoma Governor Mary Fallin has vetoed the expansion of Oklahoma’s out of state tattletale provision to require reporting to the state and creating penalties that had been found in SB 337 discussed here previously.  Note that she had previously signed legislation imposing more stringent tattletale responsibilities on marketplace and certain other remote sellers (HB 1019 passed as part of the Second Special Session and signed into law on April 10, 2018).

The Oklahoma legislature remains in session and, at least in theory, could override this veto.  We will keep an eye on this legislation to see if there is any further activity in this area.

Image copyright happystock / 123RF Stock Photo

The IRS has issued Notice 2018-41 which delays the requirement to file reports on certain sales of life insurance policies mandated by TCJA until the IRS issues final regulations on the provision.

An information return will need to be filed by each person who acquires a life insurance policy in a reportable policy sale under IRC §6050Y for sales completed after December 31, 2017.  A “reportable policy sale” is defined at IRC §101(a)(3)(B) as:

…[T]he acquisition of an interest in a life insurance contract, directly or indirectly, if the acquirer has no substantial family, business, or financial relationship with the insured apart from the acquirer's interest in such life insurance contract. For purposes of the preceding sentence, the term “indirectly” applies to the acquisition of an interest in a partnership, trust, or other entity that holds an interest in the life insurance contract.

Image copyright rawpixel / 123RF Stock Photo

The state of Colorado’s number of reports received from out of state sellers under its tattletale use tax law were “disappointing” in the words of Phil Horwitz, director of tax policy analysis for the Colorado Department of Revenue. Mr. Horwitz’s comments to the Multistate Tax Commission’s Uniformity Committee on April 25 were reported on by Tax Notes Today in an April 26 story.

The law took effect on July 1, 2017, with the first reports due by March 1, 2018.

Image copyright studiograndouest / 123RF Stock Photo

The Oklahoma legislature, fresh from passing a bill that requires marketplace vendors (such as Amazon, eBay, etc.) to either collect and remit sales taxes or send notices, has sent a new bill (Oklahoma SB 337) to the Governor’s desk that expands a “tattletale” disclosure rule that would apply to all out of state sellers who do not collect Oklahoma use tax.

“Tattletale” laws have sprung up in a number of states following Colorado’s victory in federal court for its statute (see Colorado Law Requiring Out of State Sellers to Report on Colorado Customers Who May Owe Use Tax Upheld by Tenth Circuit describing a Tenth Circuit ruling which the US Supreme Court refused to review).  In the oral arguments presented to the Supreme Court in South Dakota v. Wayfair (see Supreme Court Hears Oral Argument in Sales Tax Collection Case for more details) it was clear that the Colorado statute was the “alternative” if the Court decides to continue to require physical presence for a state to be able to force a vendor to collect sales tax.

Image copyright sabphoto / 123RF Stock Photo

The AICPA in a letter issued on April 19, 2018 has asked the IRS to reconsider its view, expressed in a change added to the questions and answers on the §965 transition tax, that any overpayments for taxpayers who elect to pay the tax in installments will not be refunded unless the entire balance of the tax is paid.

Image copyright abluecup / 123RF Stock Photo

You probably finished off your final returns, went home, relaxed and breathed a sigh of relief that one more tax season is over.

Except, it turns out, it isn't.  Due to the IRS's major computer system meltdown during most of deadline day, the IRS has announced we now have one more day to file returns and pay taxes, per News Release IR-2018-100, released about 7:00 pm EDT on April 17.

Image copyright takkemei / 123RF Stock Photo

Two more states have passed "tattletale" statutes for out of state sellers, both of which have been sent on for signatures by each state's governor. Both are based roughly on the Colorado law that the Tenth Circuit panel which included Neil Gorsuch found acceptable under federal law and which SCOTUS refused to hear an appeal related to.

Image copyright sabphoto / 123RF Stock Photo