Category Archives: News / Updates

Proposed Regulations under Sections 168(k) Bonus Depreciation

 

The IRS issued proposed regulations regarding the first-year bonus depreciation under Section 168(k). Section 168(k) extends and modifies bonus depreciation, allowing businesses to immediately deduct 100% of the cost of qualified property in the year it is acquired and placed in services through 2022, generally.  The regulations address definition of qualified property, eligibility of used property for bonus deprecation, placed in service definition, and time and manner of making elections.

 

Qualified Property:   Property may be qualified property for bonus depreciation if it is of a specified type.  Property is of a specified type if it is a Modified Accelerated Cost Recovery System (MACRS) asset which had a recovery period of 20 years or less, generally.

 

Used Property:  Property may be qualified property if the original use of the property begins with the taxpayer or the taxpayer acquires used property that meets certain requirements.  An acquisition of property meets the requirements of the provision if the property was not used by the taxpayer at any time before the acquisition, and the acquisition is not between the related parties, among controlled group members, or where the nonrecognition provisions apply.

 

Acquired and Please-In-Service Date:  With an exception to long term contract, to be eligible for 100% bonus depreciation, the property must be acquired and placed in service after September 27, 2017 and before 2022.

 

Elections:  Consistent with prior law, taxpayers may make an annual election to elect out of bonus depreciation on a class-by-class basis, and it is irrevocable.  Additionally, taxpayers can elect to claim 50% bonus depreciation in lieu of 100% bonus deprecation

 

Additionally, the regulations provide that Section 754 optional basis adjustment related to 743(b) transactions allocated to qualified property of a partnership may qualify for the bonus depreciation.

Proposed Regulations under Sections 199A Qualified Business Income Deduction

The IRS issued proposed regulations regarding the qualified business income deduction under Section 199A.  Below is a quick summary of the provision and certain items contained in the proposed regulations that stand out.

 

Section 199A allows owners of partnerships, S-Corporations, trust, and sole proprietorships to deduct 20% of their qualified business income (QBI) starting in 2018.  The deduction is equal to the lesser of 20% of taxpayer’s QBI or 20% of taxable income minus capital gains.  Deductions for taxpayers with taxable income above $315,000 for joint returns and $157,500 for other taxpayers (the Threshold Amount) may be subject to the two limitations (Wage & Capital Limitation and Specified Services Limitation).

 

Limitation Based on Wages & Capital:  The deduction attributable to 20% of QBI is limited to the greater of (1) 50% of the taxpayer’s share of W-2 Wages paid with respect to the QBI or (2) the sum of 25% of the taxpayer’s share of W-2 Wages plus 2.5% of the unadjusted basis of qualified property.  The Wage & Capital limitation does not apply to taxpayers with taxable income not exceeding the Threshold Amount.

 

Specified Services Limitation:  The deduction attributable to 20% of QBI may be subject to the Specified Services Limitation if the taxpayer’s taxable income exceeds the Threshold Amount and derives income from specified service trade or business, as defined below.  In computing the QBI with respect to a specified service trade or business, the taxpayer takes into account only the applicable percentage of qualified items of income, gain, deduction, or loss, and of allocable W-2 Wages and qualified property. The applicable percentage with respect to any taxable year is 100 percent reduced by the percentage equal to the ratio of the taxable income of the taxpayer in excess of the threshold amount, bears to $50,000 ($100,000 in the case of a joint return).  A specified service trade or business means any trade or business involving the performance of services in the fields of health, law, accounting, actuarial, sciences, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners.

 

Additionally, regulations contain aggregation rules allowing separate trades or businesses to be grouped when applying the Sec. 199A rules. The regulations impose a duty of consistency that requires that once multiple trades or businesses are aggregated into a single aggregated trade or business under Sec. 199A, taxpayers must consistently report the aggregated group in subsequent tax years.

해외유보이익 강제송환 법안 관련 집중 세무조사 (campaign) 항목 공시

해외유보이익 강제송환 법안 관련 집중 세무조사 (campaign) 항목 공시

 2018년 7월 2일IRS의 대기업 및 국제기업을 담당하는 LB&I(Large Business & International)에서 세법 965에 대한 내용을 포함하는 5개의 집중 세무조사 (campaign) 항목을 추가 공시하였다.  IRS는 한정된 인적/물적 자원을 보다 효과적으로 사용하기 위하여 납세자들의 철저한 검토가 필요한 부분 및 규정불이행의 리스크가 있는 부분을 집중 세무조사 항목으로 지정한 바가 있다. 이를 기반으로, LB&I는 세무쟁점 중심의 감사 (issue-based examination)을 진행하게 되며, 이에 맞추어서 IRS 직원들을 훈련하고 감사 대상 선정 및 납세불순응을 선별하는 절차를 발전시켜, 납세자들의 보다 향상된 세법준수를 유도하는 것이다.

미국세법 965항에 따라, 미국투자자들은 2017년도 세금보고를 할 시에 특정조건을 충족하는 해외법인들의 유보이익에 대해서 미국으로 배당을 받은것으로 간주하여 세금을 납부하여야 한다. 이 항목에 대한 세수입이 상당할 것으로 예상되며, 이에 맞추어서 IRS에서는 이 내용을 IRS 집중 세무조사 항목에 추가하는 한편, 관련 세법조항에 대해서 여러가지 가이드를 제공하였다 (https://www.irs.gov/businesses/section-965-transition-tax 참조). IRS에서 발표한 내용에 따르면 납세자들은 세법 조항 965에 맞게 세금이 계산되었음을 증명할 적절한 자료를 보관하여야 하며, IRS는 이 자료를 기반으로 하여 초기 감사를 진행하며, 추후에 추가 자료를 요청하여 세법준수의 여부를 확인할 예정이다.

IRS에서 추가로 965에 대한 내용을 발표하는 등 이 이슈에 대해서 집중적인 관심이 쏠릴것으로 보임에 따라 이에 맞추어 납세자들의 세법준수 및 이를 증명할수 있는 자료를 준비해 두어야 할 것으로 보인다.

 

IRS 링크 참조:  https://www.irs.gov/businesses/irs-announces-the-identification-and-selection-of-five-large-business-and-international-compliance-campaigns

IRS Audit Campaigns – Section 965 Transition Tax

IRS Audit Campaigns - Section 965 Transition Tax

The IRS Large Business and International division (LB&I) updated list of audit “campaigns” on July 2, 2018, which now includes the Section 965 Transition Tax.  These campaigns are part of the IRS’s strategy to focus limited resources on areas in which the IRS believes scrutiny is needed or present risk of noncompliance.  LB&I ’s compliance campaigns have been implemented in an effort to move toward issue-based examination, train its agents and implement process to improve return selection, identify issues representing a risk of non-compliance and drive taxpayers’ behavior.

Section 965 requires United States shareholders to pay a transition tax by due date of 2017 tax return on the untaxed foreign earnings of certain specified foreign corporations as if those earnings had been repatriated to the United States.  As this provision is considered to be the single most largest revenue generator for the government, IRS has issued many guidance related to the provision, including External Communication https://www.irs.gov/businesses/section-965-transition-tax, and added the provision to its audit campaigns.   In its external communication, it stated that “taxpayers must keep adequate records to support the calculation of tax pursuant to section 956.  The IRS plans to monitor compliance with the provision of section 965.  Follow-up inquires may occur if the IRS determines that the required filings and/or payments are not made.”

As we expect increased scrutiny related to section 965 compliance, as evidenced by launched audit campaigns and many guidance and communications issued, we advise that you retain adequate records to support the section 965 tax computation.

 

Link to July 2 IRS announcement:  https://www.irs.gov/businesses/irs-announces-the-identification-and-selection-of-five-large-business-and-international-compliance-campaigns