Final and Additional Proposed Regulations Under §199A Sent to OIRA for Review

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.

The IRS had indicated that they were planning to release the final regulations by the end of the year after issuing proposed regulations in August.  Given that OIRA has not indicated that the regulations are economically significant, it is very possible that advisers will not get the final regulations until after the beginning of the year.

Advisers are waiting to see what changes the IRS makes to the proposed regulations in reaction to the comments received on the final regulations.  Items of particular interest would be any clarification on the treatment of rental properties as a trade or business that creates qualified business income and the factors used to determine how may trade or businesses a taxpayer is carring on.

The proposed regulations are to contain proposed rules that apparently will allow, at least in some cases, REIT income qualified for the §199A deduction to flow through mutual funds, allowing the mutual fund investors the 20% deduction.