The Joint Committee on Taxation has released the General Explanation Of Public Law 115-97, better known as the Blue Book on TCJA (JCS-1-18).

The 457 page document contains the staff’s explanation of the provisions in last year’s Tax Cuts and Jobs Act.  Blue Books for prior laws have often been referenced and consulted by the IRS in developing guidance, as well as being referred to by advisers when dealing with matters not yet covered by IRS guidance.

The IRS issued a news release (IR-2018-254) that states it gives additional information on the excess business loss rules of IRC §461(l) and net operating losses given the changes made in the Tax Cuts and Jobs Act (TCJA).

The IRS has now sent final regulations under IRC §199A (RIN 1545-BO71) and a new set of proposed regulations (RIN 1545-BP12) under that section related to REIT dividends and registered investment companies (mutual funds) to the Office of Information and Regulatory Affairs (OIRA) of the Office of Management and Budget for review.  The proposed regulations were sent to OIRA on December 13, 2018, while the final regulations followed on December 14, 2018.

Neither set of regulations are marked as economically significant, so OIRA has 45 days to complete the review of the regulations.  That review must be completed before the regulations can be released.

In Notice 2018-99 the IRS has provided guidance to employers and tax-exempt organizations attempting to deal with provisions in the Tax Cuts and Jobs Act dealing with employer-provided parking.

As the Notice explains:

As amended by the Act, § 274(a)(4) generally disallows a deduction for expenses with respect to QTFs provided by taxpayers to their employees, and § 512(a)(7) generally provides that a tax-exempt organization’s UBTI is increased by the amount of the QTF expense that is nondeductible under § 274.

The notice provides guidance on computing the amount of disallowed deduction (for taxable entities) and UBTI (for tax-exempt organizations) to be recognized under this provision.

Notice 2018-97 provides guidance to taxpayers about issues related to IRC §81(i), a provision added by the Tax Cuts and Jobs Act that allows employees in certain situations to defer recognition of income when receiving stock or having an interest in such stock vest.

The Notice as meant to provide some additional clarity in the application of this provision for three areas:

• The application of the requirement in section 83(i)(2)(C)(i)(II) that grants be made to not less than 80% of all employees who provide services to the corporation in the United States,

• The application of federal income tax withholding to the deferred income related to the qualified stock, and

• The ability of an employer to opt out of permitting employees to elect the deferred tax treatment even if the requirements under section 83(i) are otherwise met.

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The IRS has addressed how taxpayers will gain permission to change their methods of accounting to comply with changes made by Congress in the Tax Cuts and Jobs Act to IRC §451 (found at IRC §451(b)) that require a taxpayer with an “applicable financial statement” (AFS) who is recognizing revenue for tax purposes under the accrual basis using the all events test to treat the test as satisfied no later than when revenue is recognized in the AFS.  The guidance is found in Revenue Procedure 2018-60.

Beginning in 2010 cellular telephones were no longer considered “listed property” subject to the strict substantiation rules of IRC §274(d).  But, as was noted, in the case of Archuleta v. Commissioner, TC Summary Opinion 2018-55, that doesn’t mean that a taxpayer should not have documentation of the expense and what portion related to business use.

While taxpayers have a right to take disputes to the U.S. Tax Court and payment of the amount due is delayed until the proceeding is complete, under IRC §6673 the Court is authorized to impose up to a $25,000 penalty if it appears the Court was being used primarily to delay payment.  In the case of The Community Law Firm Inc. v. Commissioner, TC Memo 2018-198 the taxpayer was warned that their history suggested they were filing in the Tax Court principally to delay action and that continuing this practice could lead to the imposition of the penalty.

In the case of Thrasys, Inc. v. Commissioner, TC Memo 2018-199, the Tax Court found that the IRS was not entitled to summary judgment on the agency’s argument that the taxpayer had engaged in a prohibited change of accounting method.

A taxpayer is prohibited from changing an accounting method without IRS permission.  As the Tax Court explained:

A taxpayer generally “may adopt any permissible method of accounting” when filing his first return. Id. para. (e)(1); see Pac. Nat'l Co. v. Welch, 304 U.S. 191, 194 (1938). But a taxpayer who “changes the method of accounting on the basis of which he regularly computes his income in keeping his books shall, before computing his taxable income under the new method, secure the consent of the Secretary.” Sec. 446(e); see Silver Queen Motel v. Commissioner, 55 T.C. 1101, 1105 (1971) (“[T]he notion of changes in accounting method necessarily implies that a new accounting method is being substituted for a previously regularly used accounting method.”).

After deciding in September 2018 to give up on the revisions to Form W-4 found in the draft 2018 Forms W-4 released in June, the IRS in Notice 2018-92 has decided to continue for the most part with interim rules that were found in Notice 2018-14 for the 2018 tax year and, in the case of one such rule, until April 30, 2019.

The IRS, facing criticism regarding the more complex draft Form W-4 initially proposed, had indicated on September 20, 2018, that implementation of the revised Form W-4 fully incorporating changes made in the Tax Cuts and Jobs Act (TCJA) would be delayed until 2020.  The IRS will be releasing a 2019 Form W-4 before the end of this year that will make “minimal changes to the 2018 Form W-4.”

After having faced criticism for not addressing the clawback issue in previous tax laws, Congress granted the IRS explicit authority[1] to issue regulations to prevent “clawback” of prior gifts if the increased basic exclusion amount (BEA) provided for in the Tax Cuts and Jobs Act (TCJA) reverts to a lower amount after 2025 as also provided for in TCJA.  The IRS has issued proposed regulations (REG-106706-18) to provide information on the anti-clawback protect to be provided for the estates of those “unlucky” enough to live to see 2026.