Tax Reform IRS Guidance Tracker
The Tax Cuts and Jobs Act of 2017 (TCJA) was an incredibly sweeping piece of tax reform legislation. Many months later, in fact, CPAs and tax professionals are still unpacking what many aspects of the law mean for their clients. Additional guidance has begun to come forth from the IRS, with more regulations and guidance on additional provisions expected soon. With so much still up in the air, Surgent CPE tax experts created this Tax Reform IRS Guidance Tracker to help CPAs stay on top of the guidance that has already been issued. We've noted where additional content or CPE courses are available on a particular topic. Check this page or our Tax Reform resources page often as we get additional clarification from the IRS and are able to provide analysis for you.
Final Section 199A Regulations and Guidance Issued for the Qualified Business Income Deduction.
Safe Harbor Enables Rental Real Estate Owners to Claim Deduction
IR-2019-04 January 18, 2019
Summary of guidance: Finalizes regulations from August 2018, proposed regulations for QBI, including REIT dividends, revenue procedure for W-2 wages used for the QBI deduction, and a notice on a proposed revenue procedure providing safe harbor for real estate enterprises that can be treated as trade or business for the QBI deduction.
The final regulations:
- Provide an awaited definition of net capital gain for purposes of section 199A
- Outline what a relevant pass through entity is
- Recommend to use section 162 for definitions of trades or businesses
- Decline to adopt the recommendation to define trade or business for purposes of section 199A by reference to section 469
- Detail a proposed safe harbor under which a rental real estate enterprise may be treated as a trade or business solely for purposes of section 199A
- Provide that a taxpayer can use different methods of accounting for separate and distinct trades or businesses
Surgent is offering a new comprehensive 4-credit CPE course: Section 199A NEW Developments: What You Need to Know to Prepare 2018 Tax Returns in Light of the IRS' Final Regulations (S19U). Learn more and register here.
For insights on safe harbor for rental real estate, Read Nick Spoltore's blog post.
Proposed SALT Regs Require Deductions to Charitable Contributions
Proposed Regs 112176-18; August 23, 2018
Summary of Guidance: Rules on the availability of charitable contribution deductions when a taxpayer receives or expects to receive a corresponding state or local tax credit.
Under the proposed regulations, a taxpayer who makes payments or transfers property to an entity eligible to receive tax deductible contributions must reduce their charitable deduction by the amount of any state or local tax credit the taxpayer receives or expects to receive. There is a de minimis exception under which a taxpayer may disregard a state or local tax credit if such credit does not exceed 15% of the taxpayer’s payment or 15% of the fair market value of the property transferred. Another exception is provided for dollar for dollar state tax deductions.
Read Nick Spoltore's blog post for insights on these new rules on SALT deduction workarounds.
Surgent will be covering these new SALT rules and much more at our CPE webinar, "Tax Reform Overview: Post-Tax Season Update (TARU)"
§199A 20% Passthrough Deduction
Proposed Regs 107892-18; August 8, 2018
Summary of Guidance: Comprehensive guidance presented in six sections with each providing rules on the Section 199A 20% passthrough deduction’s calculation.
Six substantive sections comprise the proposed regulations (107892-18) that were issued on August 8, 2018 regarding the passthrough deduction of §199A. The first section consists of operational rules and defined terms. The computation of the deduction is discussed with differing levels of taxable income and reference to the threshold amounts and phase-in ranges. The second section discusses W-2 wages and basis issues. Notice 2018-64 was concurrently released and provides three methods for calculating W-2 wages for purposes of the limitations on the§199A deduction. The third section concerns itself with QBI, qualified real estate investment trust dividends, and qualified publicly traded partnership income. The fourth section tackles the aggregation of separate trades or businesses. Section 5 discusses Specified Service Trade or Businesses. The final section contains the anti-abuse rules.
Read Nick Spoltore's blog post for insights on these new Section 199A regs.
Surgent is offering a new comprehensive 4-hour CPE course on all aspects of Section 199A, including the nearly 200 pages of new proposed regulations released on August 8, 2018. Learn more and register for "Section 199A: What We Know Now In Light of NEW IRS Guidance"
Bonus Depreciation Rules
Proposed Regs 104397-18; August 3, 2018
Summary of Guidance: Application of the new 100% depreciation, including whether the bonus depreciation is available to Qualified Improvement Property (QIP).
Qualified Improvement Property (QIP) has been around for several years. It was created with the PATH Act of 2015 and defined as "any improvement to an interior portion of a building that is nonresidential real property, if such improvement is placed in service after the date such building was first placed in service." Not included as QIP: any enlargement of the building, improvements to elevators or escalators, or improvement to the internal structural framework of the building.
When it was created in 2015, QIP was eligible for bonus depreciation and depreciated over 39 years. However, QIP was left off TCJA's list of 15-year depreciation period property, making it ineligible for TCJA’s 100% bonus depreciation. Many analysts felt that this was a mistake that would be remedied in later guidance. Yet in the bonus depreciation regulations (104397-18) released on August 3, 2018, QIP still only qualifies for bonus depreciation if acquired and placed in service between September 27, 2017 and December 31, 2017. This first set of proposed regulations leaves QIP from 2018 forward ineligible for bonus depreciation. This could be a significant issue for companies with real estate holdings since nonresidential interior renovations generally qualify as QIP.
ABLE Account Contributions
Notice 2018-62; August 3, 2018
Summary of Guidance: Increased contribution limits for accounts under Achieving a Better Life Experience (ABLE) Act.
Accounting Method Changes
Rev. Proc 2018-40; August 3, 2018
Summary of Guidance: Guidance regarding small business taxpayers with average annual gross earnings of $25M or less in the prior three-year period utilizing the cash method of accounting.