Tax policy watchers are waiting eagerly for the Department of the Treasury and the Internal Revenue Service to issue guidance and rules to clarify some of the key provisions in the new tax law (P.L. 115-97). In the near-term, the Treasury and the IRS are expected to prioritize guidance and rulemaking on provisions that are effective immediately, including:
- Repatriation (see Notice 2018-07). The initial guidance on the deemed repatriation provision is broad. Expect forthcoming guidance/rules addressing the application of the 15.5 percent rate for cash and cash equivalents, and the 8 percent rate for non-cash. Terms such as “cash,” “cash equivalents,” and “intercompany transactions” will also need to be defined.
- Bonus Depreciation. Clarification needed on eligibility criteria.
- Pass-through Deduction. Regulators will need to clarify who can claim the 20 percent deduction.
- BEAT, GILTI, FDII. Questions abound regarding the calculation of these taxes and the reporting requirements.
- Interest Deductibility. Clarification needed on the election rules applicable to certain businesses (e.g. real estate companies).
- Withholding Rules for employers and payroll service providers.
- State and Local Tax Deduction. There are prepayment questions for which the IRS issued an advisory on Dec. 27.
Issuing timely guidance and rules will be a challenge given the staffing shortages at the IRS. The tax-collection agency is already feeling the crunch given that staff has to write these guidance and implement the new tax law while simultaneously process millions of 2017 tax returns. It should be no surprise that the regulatory process to implement the new law will likely spill into 2019.
Congress will also need to put out a technical corrections bill to clean up any errors made during the drafting of the GOP tax bill. However, without Democratic support, a technical corrections bill isn’t going to get far; and it’s tough to see Democrats lending a hand to fix a law that was enacted in a hyper-partisan fashion.