Insights & News

Tax Insights, March 18, 2015
Tracking Tax News You Need to Know

March 18, 2015
Proposed, Temporary and Final Regulations Issued on Broker Reporting Requirements
The IRS has issued final regulations on information reporting by brokers for bond premium and acquisition premium, along with final and temporary regulations (which serve as the text of the proposed regulations) on information reporting by brokers for transactions involving debt instruments and options (T.D. 9713 available here). Generally, the regulations make changes to reporting requirements under Sections 6045, 6045A and 6049 (Section references are to the Internal Revenue Code), but the regulations did not extend the deadline for implementation of the regulations (which were originally issued in 2013). Under the new regulations, brokers must now presume that the taxpayer will make the Section 1276(b)(2) constant yield election for market discount unless the taxpayer informs the broker to the contrary. This rule applies to debt acquired on or after Jan. 1, 2015. The new regulations also require a broker to use the ratable method for a debt instrument acquired on or after Jan. 1, 2015, to determine the amount of acquisition premium allocable to a taxable year for purposes of basis reporting under Section 6045, regardless of any election under Regulation Section 1.1272-3. Additionally, brokers will have to begin transfer reporting for Section 1256 options after Jan. 1, 2016, and will be required to identify the option’s original cost and the price at which it was last marked.

Pennsylvania Governor Releases Draft Bills to Overhaul State’s Tax Regime
Pennsylvania Gov. Tom Wolf on March 11 released draft legislation reflecting an overhaul of the state’s tax code, as laid out in his recent budget proposal.

IRS Stops Providing Exemption Letters to Press
The IRS National Office in Washington will no longer release exemption letters to members of the press. The spokesperson said the decision was connected to recent changes in the structure of the IRS Office of Chief Counsel and the relocation of the IRS’s tax-exempt organizations headquarters from Washington to Cincinnati. The IRS began making favorable exemption letters available in 1992. They have been released under the procedures announced in Notice 92-28, 1992-1 C.B. 515.

Tax Foundation Releases Facts and Figures Comparing State Taxes
The Tax Foundation has released a booklet comparing all 50 states on various measures of tax policy, including individual and corporate income tax rates, the foundation’s Business Tax Climate Index and Tax Freedom Day calculations, excise taxes, overall tax burdens, federal aid, and state debt and spending. The booklet is available here.

Guidance Issued on Qualified ABLE Accounts
In Notice 2015-18, 2015-12 IRB (available here), the IRS has informed states and taxpayers of provisions that it anticipates including in proposed regulations under Section 529A, which allows a state to establish a tax-advantaged ABLE program to assist persons with disabilities in paying qualified disability expenses. The IRS advises that although the new provisions are modeled on Section 529, which provides tax-exempt status to qualified tuition programs, there are significant differences between the two provisions which will be reflected in the proposed regulations. The IRS intends to provide transition relief to comply with the regulations when issued.

IRS Provides Correction and Disclosure Procedures so Hospitals Can Avoid Losing 501(c)(3) Status
In Revenue Procedure 2015-21 (available here), the IRS has provided correction and disclosure procedures for hospital organizations to follow so that certain failures to meet the requirements of Section 501(r) would be excused for purposes of Section 501(r)(1) and Section 501(r)(2)(b), and the organizations would not lose their Section 501(c)(3) tax-exempt status. Revenue Procedure 2015-21 also contains examples of minor and inadvertent omissions and errors and provides that hospital organizations that do not have a Form 990 filing requirement may disclose their failures and corrections on a website. Another change was made to provide that the correction principle requiring restoration of affected individuals applies only to failures to meet the requirements of Section 501(r)(4)(A), (r)(5) or (r)(6).

IRS Corrects Final Regulations on Charitable Hospital Regulations and the Exemption for Health Insurance Issuers
The IRS has corrected errors in final regulations that authorize it to prescribe the procedures by which a qualified nonprofit health insurance issuer participating in the Consumer Operated and Oriented Plan program may apply for recognition as a tax-exempt organization under Section 501(c)(29). T.D. 9709 is available here. The IRS has also issued correcting amendments for final regulations on the requirements for charitable hospital organizations that were added by the Affordable Care Act. T.D. 9708 is available here.

Marketplace Fairness Act of 2015 Introduced
The Marketplace Fairness Act of 2015, introduced March 10 by Sen. Mike Enzi, R-Wyo., would permit states to require vendors with more than $1 million in gross receipts from remote sales annually to collect sales tax on purchases made by state residents if the state adopts and implements specified simplification requirements.

IRS Updates Instructions for Reporting Foreign Financial Assets
The IRS has updated the 2014 instructions for Form 8938, “Statement of Specified Foreign Financial Assets,” to provide additional information and to reflect changes that were made to the Form 8938 reporting requirements by final regulations under Section 6038D. The instructions are available here.

IRS Releases FAQ on Final Tangible Property Regulations
The IRS has issued new FAQs on the final tangible property capitalization regulations. The FAQs include new details on the de minimis safe harbor election, which allows many businesses to dispense with capitalizing and depreciating (or expensing under Section 179) purchases of many lower-cost assets (e.g., furniture, equipment, computers) needed to run a business. Click here for the IRS’s FAQs on the Tangible Property Final Regulations.

IRS Announces Resumption of PTP Letter Rulings
The IRS has announced that it expects to publish proposed regulations on Section 7704(d)(1)(E) publicly traded partnerships soon and that it is ending the pause in issuing private letter rulings related to exploration, development, production, processing, refining, transportation and marketing of natural resources, which are relevant to the upcoming regulations.

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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