IRS Publishes Final Regulations on Alternative Simplified Credit Election
The IRS has published final regulations (T.D. 9712) allowing taxpayers to elect the alternative simplified credit under Section 41(c)(5) (section references listed in this edition of Tax Insights are to the Internal Revenue Code unless otherwise noted) on an amended return only if the taxpayer has not previously claimed a Section 41 credit on its original return or an amended return for that tax year. Section 41(a) provides an incremental tax credit for increasing research activities (research credit) based on a percentage of a taxpayer's qualified research expenses above a base amount. The regulations are available here.
Fifth Circuit Court of Appeals Says Abandoned Securities Loss Is Ordinary
The U.S. Court of Appeals for the Fifth Circuit reversed the Tax Court's holding that a corporation's $98.6 million ordinary loss from the abandonment of securities was subject to capital loss treatment as a deemed sale or exchange of capital assets under Section 1234A, finding that Section 1234A does not apply to the abandonment of capital assets. In Pilgrim's Pride Corp. v. Commissioner, the taxpayer rejected a redemption offer by the corporate issuer of securities held by the taxpayer and, instead, surrendered the securities for no consideration, reasoning that the tax savings it would realize by claiming an ordinary loss on abandonment was greater than the redemption offer. The circuit court found that Section 1234A applies only to the termination of contractual or derivative rights based on the plain language of Section 1234A(1). The court rejected the IRS' position that the statute indirectly applies to abandoned securities. The Fifth Circuit's opinion is available here.
IRS and Treasury May Shrink Priority Guidance Plan
Treasury Tax Legislative Counsel Thomas West said on Feb. 23 that resource constraints on the IRS may force the agency to contemplate scaling back its priority guidance plan.
CRS Lists Tax Provisions That Expired in 2014
In a Feb. 20 report, the Congressional Research Service discussed tax extenders, including individual, business, charitable and energy tax provisions that expired in 2014; costs of extending expired provisions; and proposals for extenders from Congress and President Obama. The CRS report is available here.
IRS Releases FAQ on FATCA Report Notifications
The IRS has also released a list of frequently asked questions on FATCA report notifications that may be sent from the IRS after files have been processed through the international compliance management model system. The FAQ is available here.
State Law, Not Federal Common Law, Applied to Determine Successor-In-Interest Status
The Tax Court in TFT Galveston Portfolio Ltd. et al. v. Commissioner, 144 T.C. No. 7, held that state law, not federal common law, applied to determine whether the taxpayer, a partnership that transferred four apartment complexes from related taxpayers, was a successor in interest for employment tax purposes. The Tax Court found no significant conflict between federal policy and state law to justify the adoption of the federal common law standard in this context. The Tax Court's opinion is available here.
FASB Will Not Require Nonprofit Disclosure of Taxes on Investment
The Financial Accounting Standards Board decided on Feb. 25 not to include in its proposed guidance on nonprofit financial reporting a requirement that nonprofit organizations disclose the taxes assessed on income from their investment activity.
Guidance Updated for Preapproved Plan Submissions
The IRS has issued guidance (Rev. Proc. 2015-22) that changes the addresses to which applications for opinion and advisory letters for Section 403(b) preapproved plans should be submitted and inserts a user fee that was omitted from Rev. Proc. 2015-8. Effective Feb. 26, 2015, Rev. Proc. 2013-22 and Rev. Proc. 2015-8 are modified. Rev. Proc. 2015-22 is available here.
Pennsylvania Governor Calls for Tax Cuts and Combined Reporting
Pennsylvania Gov. Tom Wolf (D) on Feb. 25 said his fiscal 2016 budget proposal will include a reduction of corporate taxes coupled with a move to combined reporting. More information on Wolf's budget proposal can be found here.