The Ninth Circuit Court of Appeals, in a split decision, upheld[^1] the Tax Court’s holding in the case of The Morning Star Packing Co. LP et al. v. Commissioner, TC Memo 2020-142 that the all events test had not been met by a taxpayer with respect to costs to restore, rebuild, recondition, and retest their manufacturing facilities recorded at the end of the taxpayers’ tomato products packaging season.

The IRS has issued proposed regulations[1] that would revise Circular 230, removing provisions found at sections 10.3 through 10.6 of the current Circular 230 that related to the regulation of registered return preparers, clarify that practice before the IRS includes “preparation and submission of tax returns in connection with representing a client in a matter before the IRS,” eliminate Section 10.27 of the current Circular 230 that bars the acceptance of contingent fees (but now making accepting such fees disreputable conduct in certain situations), expand the definition of competency to include requiring that a federally authorized tax practitioner (FATP) must maintain certain minimum qualifications of technological competency related to tax practice as well as make additional changes.

Unless otherwise provided for in the proposed regulations, these regulations would become effective 30 days after being published in final form in the Federal Register.[2]

In the matter of Surk LLC v. Commissioner,[1] the Tax Court was presented with the question of basis computations related to an interest in a partnership. In a tax year that is now closed for assessment, the taxpayer mistakenly deducted losses that exceeded the limitation set forth in Internal Revenue Code Section 704(d). The central issue is whether the taxpayer should reduce its basis in subsequent years by the amount of those disallowed losses or should compute the basis by treating those losses as if they were never deducted.

On August 21, 2024, the National Taxpayer Advocate issued a statement on the Employee Retention Credit in the form of a blog post.[1] This statement aimed to provide taxpayers with comprehensive information regarding the subsequent procedures for those who have recently received a Notice of Disallowance for their Employee Retention Credit (ERC) claim. Additionally, the statement addressed perceived issues within the process currently and prospectively employed by the Internal Revenue Service (IRS) for these claims.

There has been extensive discussion about the risk CPAs face when assisting clients with filing Beneficial Ownership Interest (BOI) Reports under the Corporate Transparency Act (CTA), particularly concerning unauthorized practice of law provisions in various states. However, there has been little guidance from enforcement entities on what actions are permissible for CPAs and EAs in this area. This week, the New Jersey Supreme Court’s Committee on the Unauthorized Practice of Law issued a letter to the New Jersey Society of CPAs, providing some much-needed guidance.

The IRS has released IR-2024-2024-177[1] reminding taxpayers that marijuana remains a Schedule I substance for now, and that IRC §280E continues to apply until such time as the drug is removed from that schedule when and if the Justice Department finalizes the proposed rule. The news release states that:

Until a final federal rule is published, the Internal Revenue Service today reminded taxpayers that marijuana remains a Schedule I controlled substance and is subject to the limitations of Internal Revenue Code.[2]

In the case of Connelly v. United States, US Supreme Court, Docket 23-146, June 6, 2024[1], the U.S. Supreme Court resolved inconsistent holdings in lower courts.  In a unanimous opinion, the Court, authored by Justice Thomas, found that although life insurance proceeds received by the corporation that were intended to be used to redeem a deceased majority shareholder had to be included in valuing the corporation as of the date the shareholder died, the estate could not use the obligation to redeem those shares to reduce the value of the corporation when valuing the interest.

Consistent with its stance from 2021 to 2023, the Internal Revenue Service (IRS) has announced, via Notice 2024-35[1], that penalties will not be imposed on taxpayers who fail to take the required minimum distributions (RMDs) from most individual retirement accounts (IRAs) and defined contribution plans inherited from decedents who passed away post-2019.

The Proposed Regulations released in 2022, addressing the amended RMD regulations for IRAs and defined contribution plans as instituted by the SECURE Act, stipulated that taxpayers inheriting an IRA or defined contribution account from an individual who passed away after 2019, and who had reached their required beginning date for distributions, were mandated to receive distributions based on the life expectancy of the designated beneficiary. This was to occur each year for the nine years following the decedent's death, with the total remaining balance to be distributed by the end of the tenth year.

On January 19, 2024, the House of Representatives’ Ways and Means Committee advanced HR 7024, titled “Tax Relief for American Families and Workers Act of 2024,” with a decisive vote of 40-3. This bill represents a consensus reached earlier in the week between Chairman Smith of the Ways and Means Committee and Chairman Wyden of the Senate Finance Committee.

In an article by Cady Stanton and Doug Sword, published on the Tax Notes Today website on January 19, 2024, under the title “W&M Advances Tax Deal; May Vote in Late January or Early February (subscription required),” the authors suggest that the bill could potentially be presented on the House floor as early as the week of January 29.

The SECURE 2.0 Act of 2022 introduced the option for sponsors of §401(k), §403(b), or government §457(b) defined contribution plans to incorporate a Pension-Linked Emergency Savings Account (PLESA) feature. Notice 2024-22 from the IRS delivers preliminary guidance concerning the anti-abuse rules applicable to these plans.

In IRS News Release IR-2024-11, released at the same time as the Notice, the IRS provides a brief summary of the reasons for the notice:

Guidance on reasonable measures employers who offer PLESAs can take to discourage potential manipulation of the PLESA matching contribution rules can be found in Notice 2024-22, posted today on IRS.gov. The notice also requests public comment and explains how to submit comments.

In 2019, the Taxpayer First Act (TFA) amended IRC §6011(e), granting the IRS authority to mandate electronic filing requirements for non-individual taxpayers filing a lower number of information returns than previously triggered mandatory electronic filing. Notice 2024-18 offers guidance on the specific circumstances under which taxpayers may secure a waiver from these electronic filing requirements, simultaneously rendering Notice 2010-13 obsolete and modifying guidance provided in Notice 2023-60.

In Notice 2024-19, the IRS has offered relief to partnerships mandated to disclose extra information on Form 8308. This pertains to the sales or exchanges of partnership interests under the “hot asset” provisions of IRC §751(a).

The Notice begins:

This notice provides relief from penalties under § 6722 of the Internal Revenue Code1 for failures to furnish correct payee statements solely for failure of a partnership with unrealized receivables or inventory items described in § 751(a) (§ 751 property) to furnish Part IV of Form 8308, Report of a Sale or Exchange of Certain Partnership Interests, to the transferor and transferee in a § 751(a) exchange (described in section II of this notice) that occurred in calendar year 2023 by the due date specified in § 1.6050K-1(c)(1). This relief applies only if the partnership furnishes to the transferor and transferee by the due dates specified in section III of this notice (1) a correct copy of Parts I, II, and III of Form 8308, or a statement that includes the same information, and (2) a correct copy of the complete Form 8308, including Part IV, or a statement that includes the same information and any additional information required under § 1.6050K-1(c).

In News Release IR-2024-02, dated January 5, 2024, the IRS declared a temporary extension for clean vehicle dealers to submit time-of-sale reports, as stipulated in Revenue Procedure 2023-38. These reports must be submitted through the IRS Energy Credits Online (IRS ECO) website.

In Chief Counsel Advice 202352018, dated December 29, 2023, the IRS issued guidance explicitly stating that it no longer upholds the stance outlined in Private Letter Ruling (PLR) 201647001. The focal issue is the determination of gift (and possible subsequent estate) tax consequences arising from the modification of an intentionally defective grantor trust. This modification entails adding a provision that permits the trust to reimburse the grantor for taxes paid on the trust’s income.

What are the implications when the Internal Revenue Service (IRS) erroneously states the filing deadline for a petition in the Tax Court to contest a notice of deficiency? In a situation where this error significantly favored the taxpayer, the Tax Court determined that the taxpayer was entitled to rely on the date specified in the initial notice, despite the IRS issuing a corrected notice the following day. (Dodson v. Commissioner, 162 TC No. 1)

The Financial Crimes Enforcement Network (FinCEN) on January 1, 2024 launched its electronic filing platform, [ https://boiefiling.fincen.gov/ ] designed specifically for submitting Beneficial Ownership Reports as mandated by the Corporate Transparency Act.  A news release was provided at the same time describing the filing requirements. [“U.S. Beneficial Ownership Information Registry Now Accepting Reports,” FinCEN website, January 1, 2024, https://www.fincen.gov/news/news-releases/us-beneficial-ownership-information-registry-now-accepting-reports ]

The IRS has announced in  Notice 2024-7 the waiver of specific failure-to-pay penalties, pertaining to the suspension period of certain notices initiated during the COVID-19 pandemic.

In the case of Nguyen v. Commissioner, TC Memo 2023-151, the taxpayer’s choice of an incorrect delivery service resulted in the filing of their Tax Court petition beyond the designated final filing date.

In Announcement 2024-3 the IRS has released its Employee Retention Credit Voluntary Disclosure Program (VDP) to be used by those who have received a refund of taxes under the program and who now wish to return those funds.  The IRS released News Release IR-2023-247 at the same time to describe the program, along with Form 15434 (December 2023) that must be used to apply to enter the program.

The program will be open for three months, ending on March 22, 2024.

Before going on holiday break, the United States House of Representatives passed HR 5119, the Protect Small Business and Prevent Illicit Financial Activity Act, by a vote of 420-1.

The bill can be found at https://www.congress.gov/bill/118th-congress/house-bill/5119/text.