On December 4, 2018, FinCEN issued Notice 2018-1, extending the filing deadline for the Report of Foreign Bank and Financial Accounts, FinCEN Form 114 (FBAR), for certain individuals with signature or other authority over (but no financial interest in) employer-owned foreign financial accounts to April 15, 2020. FinCEN has provided similar extensions over the previous six years.[1] This new extension applies to reporters with signatory authority during the 2018 calendar year and to those individuals whose reporting deadline was extended under prior notices (such as certain employees or officers of investment advisers registered with the U.S. Securities and Exchange Commission (SEC) who have signature authority over, but no financial interest in, certain foreign financial accounts).[2] All other filers must still file by April 15, 2019, although FinCEN will grant an automatic extension until October 15, 2019.
Proposed Rental Business Safe Harbor under Section 199A
On January 18, the Internal Revenue Service (“IRS”) and the U.S. Department of the Treasury issued final regulations (the “Final Regulations”) on the “pass through” deduction under section 199A[1] of the Internal Revenue Code (the “Code”). Very generally, section 199A provides individuals with a deduction of up to 20% of income from a domestic “trade or business” operated as a sole proprietorship or through a partnership, S corporation, trust, or estate. The Final Regulations define trade or business as “a trade or business under section 162, other than the trade or business of performing services as an employee.”[2]
Prior to the issuance of the Final Regulations, taxpayer commenters expressed uncertainty as to whether a rental business qualified as a trade or business under section 199A—based on a long-standing uncertainty as to whether, and to what extent, a rental real estate business was a trade or business for purposes of section 162.
To provide some certainty for taxpayers potentially entitled to the pass-through deduction, the IRS released Notice 2019-07 (the “Notice”) in conjunction with the Final Regulations. The Notice proposes a safe harbor under which taxpayers (including partnerships and S corporations owned by at least one individual, estate, or trust) may treat a “rental real estate enterprise” as a trade or business solely for the purposes of the section 199A deduction. Because the Notice would provide a safe harbor—and not a substantive rule—failure to meet the tests set forth in the Notice does not necessarily mean a rental real estate business is ineligible for the section 199A deduction. If the Notice standards are not met, then the general test under section 162 would need to be met for such a business.[3] However, in certain other contexts, tax professionals and the IRS have viewed safe harbors as establishing the bounds of the substantive law; it remains to be seen whether taxpayers will claim the pass-through deduction for real estate leasing activities that fail to satisfy the safe harbor.
UK Tax Round Up: January 2019
Welcome to the January 2019 edition of the UK Tax Round Up. With the political focus continuing to be dominated by Brexit, this month has been reasonably quiet on the UK tax front. There have nevertheless been some noteworthy developments.
Proposed Anti-Hybrid Regulations under Sections 267A, 245A, and 1503(d)
On December 20, 2018, the Internal Revenue Service (the “IRS”) and the Department of the Treasury (the “Treasury”) released proposed “anti-hybrid” regulations (the “Proposed Regulations”) under sections 267A, 245A(e), and 1503(d) of the Internal Revenue Code.[1] Sections 267A and 245A(e) were enacted in 2017 as part of the tax reform act.[2] Very generally, these sections deny U.S. tax deductions associated with a financial instrument, transaction, or entity that is treated differently under the tax laws of the United States and the tax laws of another country. Such an instrument, transaction, or entity is referred to as a “hybrid”; and sections 267A and 245A(e) are referred to as “anti-hybrid” provisions. Hybrids, by exploiting the differences between tax laws, can be used to claim tax benefits in multiple countries or achieve “double nontaxation”.
The Proposed Regulations will generally be retroactively effective from January 1, 2018 if they are finalized by June 22, 2019.[3] If they are not finalized by that date, then they will be effective as of December 20, 2018. The deadline for comments on the Proposed Regulations is February 26, 2019.[4]
This post provides both a summary and detailed explanation of some of the most important aspects of the Proposed Regulations. For more information, please contact any of the Proskauer tax lawyers listed on this post or your regular Proskauer contact. Continue Reading
The Proposed BEAT Regulations
On December 13, 2018, the Internal Revenue Service (the “IRS”) and the Department of the Treasury (the “Treasury”) released proposed regulations (the “Proposed Regulations”) with respect to the “base erosion and anti-abuse tax” (the “BEAT”) under section 59A of the Internal Revenue Code.[1]
The BEAT was enacted in 2017 as part of the tax reform act.[2] The BEAT is an additional tax that has the effect of a minimum tax on certain large U.S. corporations that make deductible payments to foreign related parties. The BEAT is designed to prevent these U.S. corporations from using deductible payments to reduce (or “base erode”) their corporate tax liability.
The Proposed Regulations clarify which taxpayers are subject to the BEAT and how the BEAT rules apply. The Proposed Regulations are generally effective for taxable years after December 31, 2017, and a taxpayer may rely on them before they are finalized so long as the taxpayer applies them consistently for all taxable years before they are finalized.
This post provides background and summarizes some of the most important aspects of the Proposed Regulations. For more information, please contact any of the Proskauer tax lawyers listed on this post or your regular Proskauer contact.
UK Tax Round Up: December 2018
Season’s greetings from Proskauer’s UK tax team and welcome to the December edition of the Tax Round Up. Following the Autumn Budget and draft Finance Bill last month, this month has been comparatively quiet with very few significant announcements.
Tax Reform: UBTI Guidance on Qualified Transportation Fringe Benefits
From Proskauer’s Not For Profit / Exempt Organization Blog, a discussion of recent IRS guidance and New York State legislative relief on Internal Revenue Code 512(a)(7), added by the Tax Cuts and Jobs Act (“TCJA”)…
