The SBA has added a question and answer[1] to the Paycheck Protection Program Loans Frequently Asked Questions to clarify how the extension of the deferral period in the Paycheck Protection Program Flexibility Act affected loans that were already in place when the PPPFA was enacted.

The original loans were written for the original six-month period for deferral of payments of all principal, interest and fees on PPP loans. When the PPPFA extended that period through the date that forgiveness is granted on the PPP loan as long as an application for forgiveness is made during the 10 months following end of the covered period, the key question was whether those PPP notes already signed before passage of the PPPFA had to be modified?

Life can be unfair, and the tax law even more so. In the case of Koopman, et al v. United States[1] the taxpayers found the law left them no recourse when they never received amounts on which they had previously paid Medicare taxes due to the bankruptcy of United Airlines.

In Revenue Ruling 2020-21 the IRS has announced the rates and terminal charges for noncommercial flights for the second half of 2020. These numbers may be used under IRC §1.61-21(g)(5) to determine the value of such flights on employer-provided aircraft for compensation purposes.

The Small Business Administration has issued guidance related to PPP loans when there is a change in ownership of the borrowing business.[1] The notice provides for the required procedures when there is a change in ownership.

The notice defines a change in ownership as when any of the following take place:

• At least 20 percent of the common stock or other ownership interest of a PPP borrower (including a publicly traded entity) is sold or otherwise transferred, whether in one or more transactions, including to an affiliate or an existing owner of the entity,

• The PPP borrower sells or otherwise transfers at least 50 percent of its assets (measured by fair market value), whether in one or more transactions, or

• A PPP borrower is merged with or into another entity.[2]

This came out a few weeks ago, but since I’ve been asked to talk about it in another setting, I’ve posted the write-up of the issue here.

In Notice 2020-69[1] the IRS outlined items that will be contained in to be issued proposed regulations related to S corporations with accumulated earnings and profits impacted by IRC §§951 and 951A. The revisions are meant to address the proposed and then modified final regulations on GILTI and FDII issued by the IRS previously. The IRS’s change of direction from handling the S corporation as an entity for GILTI to treating it under an aggregate approach can lead to problems in getting shareholders the cash to pay the tax if the S corporation has accumulated earnings and profits. The Notice and eventual regulations seeks to address that issue.

Another set of final regulations[1] have been issued by the IRS on bonus depreciation under the Tax Cuts and Jobs Act (TCJA). These regulations make final, with revisions, proposed regulations issued in 2019 (REG-106808-19).

Selected items highlighted by the IRS in the preamble related to areas that received comments from the proposed regulations or were revised from what was in those regulations are discussed below.

The IRS has issued the final regulations dealing with the post-TCJA treatment of excess deductions on termination in TD 9918.[1]

Previously Reg. §1.642(h)-2 had treated excess deductions on the termination of an estate or trust as miscellaneous itemized deductions for the beneficiary. The Tax Cuts and Jobs Act (TCJA) added IRC §67(g), effective for tax years beginning in 2018, that provided individuals would no longer receive a deduction for miscellaneous itemized deductions.

In Notice 2018-61 the IRS indicated that the agency was considering whether the treatment of such items as miscellaneous itemized deductions was appropriate following the effective date of IRC §67(g). In May of 2020 the IRS released proposed regulations (REG-113295-18) that would provide that the nature of such deductions would be determined by their treatment at the trust level. The final regulations adopt the proposed regulations with some modifications.

The IRS has granted relief related to the CCH electronic filing software outage that took place on September 15, 2020.[1]

CCH suffered an outage in their online systems that began in the afternoon of October 15, 2020 and continued throughout the evening. CPAs that used their systems found themselves unable to submit tax returns electronically on the last day to timely file extended partnership income tax returns.

The Tax Court determined that Clinton Deckard did not own shares in Waterfront Fashion Week, Inc., and, as such, the corporation could not make a late S election. Mr Decker was barred from claiming losses from that corporation on his personal return.[1]

In News Release IR-2020-212[1] the IRS reminded taxpayers of the option to request an expedited letter ruling request, and that COVID-19 issues can justify asking for such expedited processing.

The news release notes that normally letter ruling requests are processed in the order received, but there is a procedure in place for requesting expedited processing:

As set forth in Rev. Proc. 2020-1, the IRS ordinarily processes requests for letter rulings in the order that they were received. A taxpayer with a compelling need to have a request processed more quickly may request expedited handling.[2]

The IRS has published a web page that contains tax information for the marijuana industry.[1] The page describes its purpose as follows:

A key component in promoting the highest degree of voluntary compliance on the part of taxpayers is helping them understand and meet their tax responsibilities while also enforcing the law with integrity and fairness to all. This article provides general guidance including frequently asked questions for taxpayers in the marijuana industry.

The IRS has released a draft of the form that will be used by self-employed individuals to claim a credit for family and sick leave that was enacted as part of the Families First Coronavirus Relief Act (FFCRA). Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals[1] is to be used by taxpayers qualifying for this credit.

You are now cleared to start filing revisions to the second quarter Form 941 if you have some to fix. The IRS has released the revised Form 941-X[1] that will allow revising Forms 941 that are impacted by provisions found in the Families First Coronavirus Relief Act and/or the CARES Act that impacted second quarter payroll. The related revised instructions to the form were also issued at the same time.[2]

On August 17 the IRS had asked employers not to use the prior version of Form 941-X to attempt to amend a second quarter 2020 Form 941 and to wait for this form, which existed in draft form on that date, to be finalized sometime in “late September.”[3]

The special per-diem rates for the fiscal year running from October 1, 2020 to September 30, 2021 has been released in Notice 2020-71.[1] The special rates governed by this Notice are:

• The special transportation industry meal and incidental expenses (M&IE) rates,

• The rate for the incidental expenses only deduction, and

• The rates and list of high-cost localities for purposes of the high-low substantiation method.[2]

A state level decision in the case of In the Matter of the Appeal of Mazur, California OTA Case No. 19064883[1] has a discussion of the concept of domicile, a key concept used by many states as either the single or one of the tests available to determine if an individual must file an income tax return as a resident of the state.

In states with an income tax, residents generally are required to pay tax to the state on all income for the year, whether or not it is sourced to the state, while nonresidents generally only pay tax on income that can trace its source to the state. But whether someone is or is not a resident isn’t necessarily a simple item to determine.

The IRS has announced an additional six forms that will qualify for electronic signatures, in addition to the forms originally announced as eligible for this program on August 28.[1]

The new forms added to the list are:

• Form 706, U.S. Estate (and Generation-Skipping Transfer) Tax Return;

• Form 706-NA, U.S. Estate (and Generation-Skipping Transfer) Tax Return;

• Form 709, U.S. Gift (and Generation-Skipping Transfer) Tax Return;

• Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons;

• Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts; and

• Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner.

In Notice 2020-66[1] the IRS provided that Medicaid coverage limited to COVID-19 testing and diagnostic services does not constitute minimum essential coverage. The issue is important in determining if a taxpayer qualifies for a premium tax credit under IRC §36B.

The Tax Court considered the question in the case of Fowler v. Commissioner,[1] 155 TC No. 7 of the impact of a taxpayer electronically filing a tax return without a required IP PIN on the running of the statute of limitations on the time for the IRS to assess tax.

The taxpayer in this case had his identity compromised in 2013 and the IRS claims the agency sent the taxpayer an IP PIN in late December 2013. However, the taxpayer claims that he did not receive the IP PIN by the October 15, 2014 date on which he timely attempted to file his 2013 income tax return.[2]

The Tax Court had to determine what Congress meant with unclear wording of an effective date provided for in the Taxpayer First Act in the case of Sutherland v. Commissioner, 155 TC No. 6.[1] While most readers are not going to be trying cases before the Tax Court that were filed before July 1, 2019, the case reminds those who represent taxpayers in innocent spouse cases in Appeals that Congress has attempted to incentivize taxpayers to cooperate in the Appeals process rather than decide to attempt to go straight to Tax Court in innocent spouse cases.