IRS Will Issue Regulations Limiting Refunds of FATCA Tax and Amounts Withheld From Foreign Persons

IRS Notice 2015-10, 2015-20 IRB announced that regulations will be issued stating that a claim for refund or credit made by a person from whom tax was withheld under Chapter 3 (withholding of tax on nonresident aliens and foreign corporations) or Chapter 4 (FATCA) of the Internal Revenue Code of 1986, as amended, will be available only to the extent that the withholding agent deposited the amount withheld. The regulations will be effective for refund claims or claims for credit for amounts withheld with respect to the 2015 calendar year and thereafter.

IRS Rules on Tax Consequences Where Taxpayer Sells REMIC Regular Interests and Retains Residual Interest

In Technical Advice Memorandum 201517007, the IRS found that a sponsoring subsidiary could claim a capital loss on the sale of a real estate mortgage investment conduit (REMIC) regular interest and an ordinary loss on the retained residual interest of the REMIC. In the TAM, a subsidiary of a life-nonlife consolidated group formed a statutory trust that elected to be treated as a REMIC. Under the trust agreement, the subsidiary sold its right in residential mortgage-backed securities to the trust in exchange for REMIC regular and residual interests. The mortgage-backed securities had a built-in loss because they decreased in value.

IRS Rules on Partnership Restructuring

The IRS, in Chief Counsel Advice 201517006, found that a publicly traded partnership’s restructuring of certain incentive distribution rights (IDRs) that were owned by its general partner and were converted to common units, and new, but less valuable IDRs that supplied the partner with a distribution similar to that which would have occurred under the original IDRs, was not a taxable exchange. Additionally, the IRS found that a same-day contribution made by the partner’s corporate parent was a revaluation event, so the increase in the partner’s capital account to reflect unbooked built-in gain in the partnership’s assets did not constitute a capital shift.

529 Plan Expansion

The Joint Committee on Taxation (JCT) described the mark by Senate Finance Committee Chair Orrin G. Hatch, R-Utah, of S. 335, which would expand section 529 education savings accounts. On April 29, the Senate Finance Committee favorably reported out of Committee S. 335. In general, the bill would allow purchases of computers or Internet access and related services to be classified as higher education expenses as long as the beneficiary is enrolled at an eligible institution. The JCT estimated the proposal would cost $51 million from 2015 to 2025.

Tennessee Legislature Passes Act Changing Nexus Standard and Modifying Sourcing Rules

The Tennessee Legislature passed HB644 – the Revenue Modernization Act (the Act). Tennessee’s governor is expected to sign the Act into law. Among other things, the Act expands the definition of nexus for Tennessee franchise and excise tax purposes (including adopting an economic nexus standard) and modifies the sourcing rules for franchise and excise tax purposes (including looking at where the taxpayer’s market for the sale is located or, in the case of intangible property, looking at whether the intangible property is used in Tennessee). 

Missouri Authorizes Tax Amnesty Program

Missouri Governor Jay Nixon signed legislation on April 27 authorizing a tax amnesty program. The amnesty applies to the assessment or payment of penalties, additions to tax, and interest with respect to unpaid taxes and taxes due, provided that they are reported and paid in full between Sept. 1, 2015, and Nov. 30, 2015. The amnesty program applies only to tax liabilities due, or due but unpaid, on or before Dec. 31, 2014.