Looking at the coverage we have from the American Bar Association Section of Taxation’s meeting in Washington on May 11 nothing earthshattering about the upcoming guidance on the Tax Cuts and Jobs Act seems to have emerged from that meeting. However, Tax Analyst’s coverage did highlight some items.
The proposed regulations on new §199A are scheduled to be released by June 30 per the IRS Priority Guidance plan, most recently updated on May 9. But in a Real Estate session at the ABA’s Conference, Bryan Rimmke, attorney-adviser, Treasury Office of Tax Legislative Counsel did not commit to indicating that taxpayers will be able to rely on that initial guidance. In the Tax Analysts coverage, Mr. Rimmke noted “the agency is grappling with the same complex issues under section 199A as practitioners.” Advisers will need to pay attention when the proposed regulations are issued whether or not they are accompanied by “taxpayers can rely” language.
Similarly, speaking on a later panel, Kathleen Reed, branch 7 chief, IRS Office of Associate Chief Counsel (Income Tax and Accounting), also declined to commit to allowing taxpayers to rely on proposed regulations to be issued this summer on the IRC §168(k) 100% bonus depreciation provisions added by TCJA.
Audrey Ellis, attorney-adviser, Treasury Office of Tax Legislative Counsel, repeated assurances given back in February at the ABA’s San Diego meeting that the IRS was not looking to expand the “reasonable compensation” provision in IRC §199(c)(4) to apply to entities other than S corporations. Some were worried that that language of TCJA implied that such “reasonable compensation” rules could be applied to all entities. Ms. Ellis also noted that the IRS is looking other IRC provisions, with IRC §469 being specifically cited, when looking at issues of how to define a trade or business. But she did not commit regarding how these rules are likely to applied to §199A, indicating advisers will need to wait until the proposed regulations are released this summer.
Unlike the San Diego meeting, where a lot of information came out related to how the IRS was likely to deal with certain provisions, this meeting pretty much just repeated what had been said in San Diego and did not generally provide updates on exactly how the IRS was likely to address specific matters. Hopefully this means that Treasury and the IRS are getting close to releasing the first batch of proposed regulations.
For now, we appear to be at the point of awaiting the “early summer” promised guidance, likely first on IRC §199A and the bonus depreciation rules, followed by guidance on various other TCJA matters going forward.
Note that even if we get “taxpayers may rely” guidance on the §199A regulations, such guidance generally will only apply through the year in which final regulations are issued. If the final regulations come to a different conclusion about a matter, that final decision will almost certainly apply to all future years. Thus, even if the IRS does issue IRC §199A proposed regulations with “taxpayers may rely” language, advisers will still need to await final regulations before advising actions that have a permanent effect and could be expensive to undo—such as deciding to incorporate vs. being an unincorporated entity.