Insights & News

Tax Insights, December 16, 2015
Tracking Tax News You Need to Know

December 16, 2015

IRS Rules on Qualifying Income of PTP
The IRS ruled in Private Letter Ruling 201250003 that income earned by a publicly traded partnership (PTP) from ground leases of land and rooftops on which cell phone towers, billboards, Internet installations, wind turbines and solar arrays are built qualify as rents from real property under Section 856(d) (section references are to the Internal Revenue Code of 1986, as amended, except as noted otherwise), and thus was qualifying income to the partnership. Under Section 7704(a), a PTP is generally treated as a corporation. A PTP will not be treated as a corporation if at least 90 percent of its gross income for the tax year is qualifying income and if certain other requirements are satisfied.

IRS Releases Notice Providing Guidance on Marriage Equality Decision
The IRS released Notice 2015-86, 2015-52 IRB, providing guidance on the application of the Supreme Court's marriage equality decision, Obergefell v. Hodges, to qualified retirement plans under Section 401(a) and to health and welfare plans, including cafeteria plans under Section 125.

Summary of Extenders Legislation Released — RICs, REITs and Tax-Exempt Organizations Impacted
House Ways and Means Committee Chair Kevin Brady, R-Texas, released a summary, on Dec. 7, of a House amendment to H.R. 34, the Tax Increase Prevention and Real Estate Investment Act of 2015 (the "Act"), which would extend various expiring tax provisions and make other changes to the Internal Revenue Code relating to RICs and tax-exempt organizations. According to the summary:

  • Section 132 of the Act extends through 2016 provisions allowing for the pass-through character of interest-related dividends and short-term capital gains dividends from RICs to foreign investors.
  • Section 133 of the Act extends through 2016 the treatment of RICs as qualified investment entities, and, therefore, not subject to withholding under the Foreign Investment in Real Property Tax Act.
  • Section 106 of the Act extends through 2016 the enhanced deduction for contributions of capital gain real property for conservation purposes.
  • Section 108 of the Act extends through 2016 tax-free distributions from individual retirement plans for charitable purposes.
  • Section 225 of the Act contains a requirement for organizations to notify the Treasury Department of their intent to operate under Section 501(c)(4) within 60 days of being established.
  • Section 228 of the Act treats transfers to organizations exempt from tax under Sections 501(c)(4), (c)(5) and (c)(6) as exempt from the gift tax. The provision would apply to transfers made after the date of enactment.

The Act proposes significant changes to the taxation of REITs, including a restriction on tax-free spinoffs involving REITs and limitations on fixed percentage rent and interest exceptions for REIT income tests. The Act would also, among other things, reduce the percentage limitation on assets of a REIT which may be taxable REIT subsidiaries; repeal the preferential dividend rule for publicly offered REITs; provide the IRS with authority to develop alternative remedies to address certain REIT distribution failures; provide that the aggregate amount of dividends that could be designated by a REIT as qualified dividends or capital gain dividends cannot exceed the dividends actually paid by the REIT; and increase from 5 percent to 10 percent the maximum stock ownership a shareholder may have held in a publicly traded stock to avoid having that stock treated as U.S. real property interest on disposition.

IRS Releases YouTube Videos and Provides Other FATCA Updates
The IRS released six new YouTube videos explaining upgrades to the Foreign Account Tax Compliance Act (FATCA) Online Registration System. The IRS has also upgraded the Foreign Financial Institution (FFI) List Search and Download Tool (it can narrow down results by Global Intermediary Identification Number (GIIN), financial institution name and/or country/jurisdiction of FFI or branch). Finally, the IRS added new frequently asked questions (FAQs) about general FATCA compliance to its website (see FAQs 12 through 17 under General Compliance.)

IRS Issues Email Statement Regarding Donee Reporting
In an emailed statement, the IRS sought to assure charitable organizations that proposed regulations issued in September (see prior coverage here) would not make mandatory changes to the way donees currently acknowledge charitable gifts of $250 or more. The proposed regulations would merely implement an optional donee reporting procedure, authorized by Section 170(f)(8)(D), for substantiating such charitable contributions.

IRS Issues Final 2016 Form 1099-B Providing for FATCA Compliance
The IRS issued the final version of its 2016 Form 1099-B, Proceeds from Broker and Barter Exchange Transactions (instructions can be found here). The changes from the 2015 form include the addition of a new checkbox to indicate the form is being used to meet requirements of FATCA and separate boxes for showing accrued market discount, wash sale loss disallowed and whether the proceeds reported are from collectibles.

Slovenia-U.S. FATCA IGA Competent Authority Arrangement Available 
Slovenia and U.S. competent authorities have signed an arrangement under the two jurisdictions' 2014 intergovernmental agreement to implement the information reporting and withholding tax provisions of FATCA.

IRS Updates Requirements for Substitute Tax Forms
The IRS issued Revenue Procedure 2015-55; 2015-49 IRB 788 updating the guidelines and general requirements for the development, printing and approval of substitute tax forms.

New Jersey's Application of Throwout Rule Is Unconstitutional
In Lorillard Licensing Co. LLC v. Div. of Taxation, N.J. Super. Ct., App. Div., Dkt. No. A-2033-13T1, 12/04/2015, the New Jersey Superior Court, Appellate Division, held that the New Jersey Division of Taxation's application of its throwout rule to receipts that other states could have taxed but opted not to is unconstitutional. An intangible holding company challenged the state's application of the throwout rule in apportioning the taxpayer's royalty income paid by its parent company that sells its product in all 50 states.

PA Treasury Releases Guidance on Abandoned Property
The Pennsylvania Treasury has published a booklet providing guidance and instructions to help holders of abandoned property comply with laws regarding the reporting and disposition of abandoned property.

Information contained in this publication should not be construed as legal advice or opinion or as a substitute for the advice of counsel. The articles by these authors may have first appeared in other publications. The content provided is for educational and informational purposes for the use of clients and others who may be interested in the subject matter. We recommend that readers seek specific advice from counsel about particular matters of interest.

Copyright © 2015 Stradley Ronon Stevens & Young, LLP. All rights reserved.

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