Tax-Related Portion of the Substance Use–Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act, Enrolled, as Signed by the President on October 24, 2018, P.L. 115-271

Tax-Related Portion of the Substance Use–Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act, Enrolled, as Signed by the President on October 24, 2018, P.L. 115-271

President Donald Trump has signed bipartisan legislation, which expands a religious exemption for the Patient Protection and Affordable Care Act’s (ACA) ( P.L. 111-148) individual mandate. The exemption is effective for taxable years beginning after December 31, 2018.

Religious Exemption

SUPPORT for Patients and Communities Act ( HR 6) amends Code Sec. 5000A(d)(2)(a) to expand the religious conscience exemption for the ACA individual mandate. Individual taxpayers who rely solely on a religious method of healing for whom the acceptance of medical health services would be inconsistent with their religious beliefs are exempt from the ACA mandate to maintain health insurance or pay a penalty.

Tax Reform

Additionally, last year’s tax reform legislation essentially repeals the ACA’s individual mandate. The Tax Cuts and Jobs Act (TCJA) ( P.L. 115-97) repeals the ACA’s shared responsibility payment for individuals failing to maintain minimum essential coverage effective January 1, 2019.

Congressional Republicans are looking to move forward with certain legislative tax efforts during Congress’s lame-duck session. The House’s top tax writer, who will hand the reins to Democrats next year, has reportedly outlined several tax measures that will be a priority when lawmakers return to Washington, D.C., during the week of November 12. However, President Donald Trump’s recently touted 10-percent middle-income tax cut does not appear to be one of them.

Congressional Republicans are looking to move forward with certain legislative tax efforts during Congress’s lame-duck session. The House’s top tax writer, who will hand the reins to Democrats next year, has reportedly outlined several tax measures that will be a priority when lawmakers return to Washington, D.C., during the week of November 12. However, President Donald Trump’s recently touted 10-percent middle-income tax cut does not appear to be one of them.

Democrats Take the House

Republicans will lose their one-party rule in Washington, D.C. in the 116th Congress beginning in January 2019. As a result of the November 6 midterm elections, Democrats will control the House during the next Congress, and Republicans will retain control of the Senate.

Currently, Rep. Kevin Brady, R-Tex., serves as chairman of the House’s tax-writing Ways and Means Committee. Republicans’ majority in both chambers of Congress enabled the GOP, in coordination with the Trump administration, to enact tax reform legislation last year. However, the Tax Cuts and Jobs Act (TCJA) ( P.L. 115-97) reportedly did not turn out to be as popular as they had hoped. The TCJA’s unpopularity is at least in part why Republicans lost vital seats in the House, according to several reports.

Lame-Duck

Before the turnover of power, however, Brady is reportedly gearing up to introduce a tax extenders measure during the lame-duck session, which would extend certain temporary or expired tax breaks. Generally, Democrats have been supportive of year-end tax extender legislation. At this time, the details of the tax-extender proposal remain unclear.

Additionally, Brady reportedly said on November 7 that a TCJA technical corrections bill with "minor changes" will move in the lame-duck session. Further, the Senate is expected to take up a House-approved retirement savings measure that is part of House Republicans’ "Tax Reform 2.0" efforts.

Looking Forward

House Ways and Means Committee ranking member Richard Neal, D-Mass., is expected to chair the committee in the 116th Congress. Neal has a fairly moderate tax-legislative record, and is considered on Capitol Hill to be "business-friendly." To that end, Neal has recently sponsored several retirement savings measures, which would enhance employer workplace savings accounts. Additionally, infrastructure and tax-related health care initiatives are expected to be a priority among House Democrats.

GOP Retains Senate

Republicans will continue to lead the Senate in the 116th Congress. While the GOP Senate majority may not be enough to approve additional GOP tax legislation, it is likely to prevent Democrats from repealing parts of the TCJA. However, it is expected on Capitol Hill that hearings will be held in both chambers’ tax writing committees to examine various provisions of the new tax law. Although a divided Congress can result in fewer tax bills being approved, successful legislation will likely be bipartisan.

The Senate Finance Committee’s (SFC) top ranking Democrat has introduced a bill to restore a retirement savings program known as myRA that was terminated by Treasury last year. The myRA program was created by former President Obama through an Executive Order.

The Senate Finance Committee’s (SFC) top ranking Democrat has introduced a bill to restore a retirement savings program known as myRA that was terminated by Treasury last year. The myRA program was created by former President Obama through an Executive Order.

Retirement Savings

"Cost-of-living is soaring with working families having less and less to save for their futures," SFC ranking member Ron Wyden, D-Ore., said in a November 15 tweet. "Today, I’m introducing a bill to address this retirement crisis."

The Encouraging Americans to Save Bill is co-sponsored by Sens. Ben Cardin, D-Md., Bob Casey, D-Pa., Amy Klobuchar, D-Minn., and Michael Bennet, D-Colo. An earlier version of the bill, Sen. 2492, was introduced by Wyden in the 114th Congress that also aimed to expand the myRA program.

"The Encouraging Americans to Save [Bill] enhances retirement savings incentives by restructuring the existing, nonrefundable saver’s credit into a refundable, government matching contribution of up to $500 a year for middle-class workers who save through 401(k) type plans or IRAs, "Wyden’s November 15 press release noted. Additionally, the bill would restore the myRA program, which Treasury determined last year was too costly to continue.

myRA Program

The Obama-era myRA program was designed as a government-sponsored retirement savings program available to individuals without access to employer-sponsored retirement plans. Although the program was determined to have very little demand to warrant its high operating costs, Democrats attributed the low sign-up to the program still being in its infancy. However, Republicans criticized the program as an "executive overreach" that could not become successful based on its investments in little interest yielding Treasury bonds and posed certain risks to taxpayers and employees.

House

House Ways and Means Committee ranking member Richard Neal, D-Mass., along with Wyden, sent a letter last year to Treasury Secretary Steven Mnuchin urging Treasury to continue the myRA program. Neal is expected to become chairman of the House’s tax writing committee this coming January in the 116th Congress.

However, considering the Trump administration ended the program, it is seen as unlikely on Capitol Hill that Trump would support legislation to restore it. Moreover, Republicans will retain their majority-hold of the Senate in the next Congress, thus further limiting its chances of success.

A new, 10 percent middle-income tax cut is conditionally expected to be advanced in 2019, according to the House’s top tax writer. This timeline, although largely already expected on Capitol Hill, departs sharply from President Donald Trump’s original prediction that the measure would surface by November.

A new, 10 percent middle-income tax cut is conditionally expected to be advanced in 2019, according to the House’s top tax writer. This timeline, although largely already expected on Capitol Hill, departs sharply from President Donald Trump’s original prediction that the measure would surface by November.

Middle-Income Tax Cut

President Donald Trump announced on October 22 that a new 10 percent tax cut would soon be unveiled that will focus specifically on middle-income taxpayers. "President Trump is determined to provide further tax relief for middle-class families," House Ways and Means Committee Chairman Kevin Brady, R-Tex., said in an October 23 statement. "We will continue to work with the White House and Treasury over the coming weeks to develop an additional 10 percent tax cut focused specifically on middle-class families and workers, to be advanced as Republicans retain the House and Senate," Brady added.

Comment. Notably, Brady is essentially highlighting in his statement that any such additional tax cut measure would require a Republican majority for congressional approval. As November midterm elections near, there is "talk" on Capitol Hill that Republicans may lose control of the House.

The additional 10 percent tax cut for middle-income taxpayers would aim to build upon the individual tax cuts enacted last December under the Tax Cuts and Jobs Act (TCJA) ( P.L. 115-97). To that end, the House passed a "Tax Reform 2.0"package last month, which would make permanent the TCJA’s individual and small business tax credits. The TCJA’s individual tax cut provisions were enacted temporarily through 2025 in accordance with certain Senate budget rules. Although the TCJA did not receive one Democratic vote, the Tax Reform 2.0 package did clear the House with some bipartisan support.

New Congress, New Tax Cut

"We expect to advance this in the new session of Congress if Republicans maintain control of the House and Senate," Brady, said of the tax cut in an October 26 televised interview. However, President Trump said a couple of days before that a " resolution" would be introduced for the tax cut by the week of October 29.

Democratic lawmakers have been criticizing Trump’s announcement as nothing more than politically-driven rhetoric ahead of the November 6 midterm elections. Several top congressional Democrats have voiced intent to repeal, at least in part, the TCJA enacted last December. While Republicans, on the other hand, want to continue building upon the TCJA’s tax cuts.

"What President Trump is looking at is a 10 percent cut focused on middle-class workers and families…he still believes middle-class families are the ones always in the squeeze," Brady said on October 26. "We’ve been working with the White House and the Treasury on some ideas about how best to do it," he added.

Net Neutral

Trump has predicted that the tax cut will be net neutral. A chief complaint of last year’s tax reform among Democrats is the TCJA estimated $1.4 trillion price tag over a 10-year budget window.

"If you speak to Brady and a group of people, we're putting in a tax reduction of 10 percent, which I think will be a net neutral because we're doing other things, which I don't have to explain now," Trump said. A spokesperson for Brady has reportedly said that cost measures for the tax cut will be addressed once the proposal has been scored.

Looking Ahead

At this time, it is considered likely on Capitol Hill that Republicans will retain control of the Senate, but several predictions continue to float that the GOP will lose its House majority. Republicans would likely need to retain control of both chambers for any chance of approving further individual tax cuts or making permanent those enacted under the TCJA.

Although, the House approved its "Tax Reform 2.0" package last month, which includes measures to make permanent the TCJA’s individual tax cuts and enhance various savings accounts and business innovation, the Senate has showed little interest in taking up the package as a whole before the end of the year. However, consideration of the retirement and savings measure in the lame-duck session remains a possibility.

IRS Commissioner Charles Rettig gave his first speech since being confirmed as the 49th chief of the Service at the American Institute of CPAs (AICPA) November 13 National Tax Conference in Washington, D.C. "You’re going to see things [I do] and go, ‘I can’t believe he did that,’" Rettig said.

IRS Commissioner Charles Rettig gave his first speech since being confirmed as the 49th chief of the Service at the American Institute of CPAs (AICPA) November 13 National Tax Conference in Washington, D.C. "You’re going to see things [I do] and go, ‘I can’t believe he did that,’" Rettig said.

Rettig, nominated by President Donald Trump last February and sworn in as IRS Commissioner on October 1, was a practicing tax attorney for over 30 years. "I’m not going to lose my tax edge," he told CPAs and other tax professionals.

Modernizing the IRS

Rettig, since being confirmed, has maintained that a top priority of the IRS is updating the Service’s technology. "We must work on our IT modernization efforts," Rettig said in a previous statement.

Additionally, Rettig discussed the IRS’s antiquated information technology (IT) systems and software at the AICPA event. "I can call Google…or All State and a recording…says, 'you are 14th in line, we can call you back, you won't lose your place in line," Rettig said. "We don't have those tools, we need those tools."

However, Rettig emphasized that the IRS’s employees should have pride in their roles, and that many IRS challenges are a result of constrained financial resources. IRS employees are "people who care,"Rettig said. Further, Rettig said he wants the IRS to gain taxpayers’ respect.

Additionally, in line with the IRS’s increased efforts toward transparency, Rettig said that employee training materials for last year’s tax reform will soon be posted to the IRS’s website. The Tax Cuts and Jobs Act (TCJA) (P.L. 115-97) was enacted last December. Rettig is tasked with overseeing the new tax law’s implementation.

Tax Reform

A copy of Rettig’s prepared remarks for the AICPA event was provided to Wolters Kluwer by the IRS on November 14. Notably, an IRS spokesperson told Wolters Kluwer that Rettig "did not stick to the script." In an informal outline of areas on which Rettig intends to focus, "the top of the list is continuing to implement the Tax Cuts and Jobs Act, which contains the most sweeping tax changes in 30 years,"Rettig stated in the prepared remarks. "The IRS has already made great progress in this area, but more remains to be done."

IRS Guidance

The IRS is committed to helping taxpayers and tax professionals understand the new tax law changes, as well as file returns next year timely and accurately, Rettig noted. To that end, the IRS will continue to issue guidance this year related to tax reform, according to Rettig. "You can expect additional guidance in the next several weeks in a number of areas," he added, which include TCJA provisions related to the following:

• Opportunity Zones;
• the limitation on the business interest expense deduction; and
• the Base Erosion and Anti-Abuse Tax (BEAT).

Additionally, the IRS will continue to update taxpayer forms and instructions related to new tax law provisions, Rettig noted. "We’re well on our way to having those completed in time for [the 2019] filing season."

The American Institute of Certified Public Accountants (AICPA) and the American Bar Association (ABA) Section of Taxation are urging the IRS to make extensive changes to proposed "transition tax" rules.

The American Institute of Certified Public Accountants (AICPA) and the American Bar Association (ABA) Section of Taxation are urging the IRS to make extensive changes to proposed "transition tax" rules.

Transition Tax

The Tax Cuts and Jobs Act (TCJA) ( P.L. 115-97), enacted last December, revived and amended Code Sec. 965. The new Code Sec. 965 generally requires U.S. shareholders pay a mandatory one-time repatriation "transition" tax on untaxed foreign earnings of certain foreign corporations.

"The Tax Cuts and Jobs Act treats these foreign earnings as repatriated and places a 15.5 percent tax on cash or cash equivalents, and an 8 percent tax on the remaining earnings. Generally, the transition tax can be paid in installments over an eight-year period when a taxpayer files a timely election under section 965(h),"Treasury Secretary Steven Mnuchin said in a statement.

The IRS held an October 22 public hearing on NPRM REG-104226-18, which provides rules for implementing the transition tax created under last year’s tax reform. IRS officials did not provide any feedback at the hearing.

AICPA Recommendations

In an October 31 comment letter to the IRS, the AICPA offered 15 recommendations to provide taxpayers further clarity and guidance on tax reform’s transition tax requirements. The AICPA’s recommendations include the following:

• Clarify that previously taxed earnings (PTI) under Code Sec. 965(b)(4)(A) are deemed included in Code Sec. 951 for purposes of applying Code Sec. 1248(d).
• Clarify that the portion of a Code Sec. 965 inclusion liability attributable to Code Sec. 956 is eligible for the appropriate reduced rate of tax as a consequence of the deduction provided for in Code Sec. 965(c).
• Provide taxpayers with additional flexibility when making the basis adjustment election under Proposed Reg. §1.965-2(f) by including the ability to make partial basis adjustments, elect adjustments on an entity-by-entity basis, and modify the proposed consistency provision on related persons.
• Provide guidance as to the ordering of distributions of PTI between Code Sec. 965(a) PTI and Code Sec. 965(b) PTI for purposes of applying Code Sec. 959(c) and Code Sec. 986(c).
• Provide relief to taxpayers that make or have made late elections under the proposed regulations and clarify the procedure for obtaining such relief.
• Provide that U.S. shareholders that are members of the same consolidated group are treated as a single U.S. shareholder for all purposes with respect to Code Sec. 965.
• Clarify that the PTI amount created under Code Sec. 965(b)(4)(A) is not taken into account under Code Sec. 864(e)(4)(D) for purposes of allocating and apportioning interest expense.
• Exercise the authority under Code Sec. 965(o) to provide relief from the income inclusion to certain affected taxpayers. Specifically, provide guidance excluding a foreign corporation that is considered a controlled foreign corporation (CFC) solely as a result of the "downward attribution" rules of Code Sec. 318(a)(3) from the definition of an specified foreign corporation (SFC) for any U.S. shareholder not considered a related party (within the meaning of Code Sec. 954(d)(3)) with respect to the domestic corporation to which ownership was attributed.
• Provide a carve-out for certain "triggering events" of an S corporation Code Sec. 965(i), such as where the S corporation and relevant shareholders maintain direct or indirect ownership of the transferred assets (e.g., tax-free transfers).
• Provide guidance on the interaction between a Code Sec. 962 election and a Code Sec. 965(i) election, including clarifying that an eligible taxpayer may make a Code Sec. 962 election for a Code Sec. 965 tax liability for which they intend to defer inclusion under Code Sec. 965(i).

ABA Recommendations

Likewise, the ABA made similar recommendations on the proposed regulations and related guidance in an October 29 letter sent to IRS Commissioner Charles Rettig. The ABA’s 80-page letter grouped its principal recommendations into the three categories:

• the application of Code Sec. 965 to passthrough entities (other than S corporations) and individuals;
• the application of the netting of accumulated post-1986 deferred foreign income with deficits in other related entities; and
• issues in applying the foreign tax credit.

Last year’s tax reform created a new Opportunity Zone program, which offers qualifying investors certain tax incentives aimed to spur investment in economically distressed areas. Treasury Secretary Steven Mnuchin has predicted that the Opportunity Zone program will create $100 billion in private capital that will be invested in designated opportunity zones.

Last year’s tax reform created a new Opportunity Zone program, which offers qualifying investors certain tax incentives aimed to spur investment in economically distressed areas. Treasury Secretary Steven Mnuchin has predicted that the Opportunity Zone program will create $100 billion in private capital that will be invested in designated opportunity zones.

The IRS released the much anticipated proposed regulations for the Opportunity Zone program in October ( REG-115420-18). The proposed rules provide "clarity and some good news for taxpayers," Micheal Bernier, partner at Ernst & Young’s National Tax practice, told Wolters Kluwer in an emailed statement.

Opportunity Zones

The Opportunity Zone program was created under the Tax Cuts and Jobs Act ( P.L. 115-97) enacted in December 2017. The TCJA added Code Secs. 1400Z-1 and 1400Z-2, which include procedural rules for designating opportunity zones and provisions allowing qualifying taxpayers to elect certain income tax benefits. Although not a single Democrat voted for the TCJA, the Opportunity Zone program was based on a bipartisan bill sponsored by Sens. Tim Scott, R-S.C., and Cory Booker, D-N.J. The program "creates tax incentives to help stimulate the flow of capital into communities that need opportunity the most," Cory Booker said in an October 29 tweet.

Generally, the proposed rules have been considered on Capitol Hill as leaning favorably toward taxpayers. However, stakeholders and practitioners are reporting that many questions remain. To that end, the Office of Information and Regulatory Affairs (OIRA), housed under the Office of Management and Budget (OMB), has announced that a second package of regulations is expected to be completed by the end of this year.

Qualified Opportunity Funds

The TCJA’s Opportunity Zone program generally established the following investor tax benefits:

• a temporary tax deferral for capital gains realized on the sale of appreciated assets and reinvested within 180 days in a qualified opportunity fund (QOF);
• the elimination of up to 10 or 15 percent of the tax on the capital gain that is invested in the QOF and held between five and seven years; and
• the permanent exclusion of tax when exiting a qualified opportunity fund investment held for at least 10 years.

"Most importantly, taxpayers can use the fund as collateral. This was a surprise and is important," Bernier told Wolters Kluwer. "The type of investments made by Opportunity Funds do have some strings attached, which are designed to make sure the investments are creating economic activity in the Opportunity Zones, not just buying and holding existing assets," he added. "Under an Opportunity Zone structure, if you refinance the property and take cash out of the Opportunity Zone fund, that would be a disposition and would trigger the gain, thus reducing the amount of investment that is eligible for the 10-year deferral."

Real Estate Investors

Additionally, real estate investors stand to receive significant tax advantages through the Opportunity Zone program, according to Bernier. "As collateral, it is possible to borrow against the Opportunity Zone fund, a very important option for real estate investors," he said. "There are a few extra hurdles to using that strategy, but it’s valuable in the real estate world and would be the rough equivalent of a cash-out refinancing."

Additionally, Bernier noted the generous latitude that Treasury and the IRS used in defining certain statutory terms. For example, "‘substantially all’ of owned or leased assets was defined as 70 percent [in the proposed regulations]; this could have been as high as 90 percent or more," Bernier said. Further, "the time allowance for working capital is set at 30 months to deal with cash. This helps in getting the development done," he added.

Too Flexible?

The proposed regulations for the Opportunity Zone program may be too flexible, according to an October article released by the liberal-leaning Urban-Brookings Tax Policy Center (TPC). "Neither the statute nor the guidance ensure that the investments will benefit low- and moderate-income residents of these communities,"the TPC article noted. "The investment flexibility makes it very difficult to evaluate the success of Opportunity Zones."

Additionally, TPC researchers noted the need for proper reporting under the Opportunity Zone program. "The next round of IRS regulations and tax forms is expected to detail those reporting requirements,"the TPC article said. "It will be vital that this disclosure provide the public with the answers to a series of basic questions: Who is investing in Opportunity Zones? How much is being invested? How is the money being used?"

Likewise, the conservative-leaning Tax Foundation noted in an October 23 article that the proposed regulations do nothing to ensure the program’s success. "The benefits given to investors through opportunity funds are remarkably generous, and many of these regulations only increase and widen those benefits without regard to the results," the article said.

Further, stakeholders testifying before the Senate Small Business Committee in early October also emphasized the importance of establishing proper reporting metrics for the program.

Questions Remain

Although stakeholder feedback has been largely positive, stakeholders and practitioners have noted several areas where additional IRS guidance is needed. Particularly, uncertainties surrounding the application of the QOF penalty, tax treatment of the sale of a QOF asset, and clarity on the definition of qualified opportunity zone business property are reportedly among items circulating the tax community as needing further guidance.

After the IRS released the proposed regulations, Sen. Scott praised the guidance while also noting that it is incomplete. "The first set of rules released by the Treasury Department today reinforce that this will not be another bureaucratic process burdened by red tape, but rather a streamlined, efficient process that allows for investments to truly help communities in need," Scott said.

Additionally, Bernier told Wolters Kluwer that future regulations are needed to "fill in gaps." The next package of proposed regulations are "anticipated in November and December, "he added.

To that end, the House’s top tax writer has urged stakeholders in a recent statement to provide feedback on the proposed regulations. Moreover, those comments should include "identifying any areas where additional technical guidance would be valuable in providing certainty to potential investors and project managers," House Ways and Means Committee Chairman Kevin Brady, R-Tex., said.

The IRS is expected to soon release proposed regulations for tax reform’s new business interest limitation. "They are so broad that nearly every domestic taxpayer will be impacted," Daniel G. Strickland, an associate at Eversheds Sutherland, told Wolters Kluwer.

The IRS is expected to soon release proposed regulations for tax reform’s new business interest limitation. "They are so broad that nearly every domestic taxpayer will be impacted," Daniel G. Strickland, an associate at Eversheds Sutherland, told Wolters Kluwer.

The first set of proposed regulations for the Code Sec. 163(j) business interest limitation is expected to focus primarily on corporations. A second package of proposed regulations, expected sometime in December, will reportedly address the business interest limitation’s treatment of partnerships and S corporations.

The Tax Cuts and Jobs Act (TCJA) ( P.L. 115-97), enacted last December, amended Code Sec. 163(j) to include a broader limitation on the business interest expense deduction. Before last year’s tax reform, the former Code Sec. 163(j) "earnings stripping" rules were applied much more narrowly to a specific type of debt-to-equity ratio held by corporations. Now, the amended Code Sec. 163(j)limitation encompasses all debt, regardless of entity or individual. The new business interest limitation was intended by Republicans, at least in part, to serve as a revenue raiser to help offset tax reform’s significant corporate tax rate reduction from 35 to 21 percent.

OMB Review

Currently, the proposed regulations for the Code Sec. 163(j) business interest limitation are under review at the Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs (OIRA). OIRA received the proposed regulations from Treasury and the IRS on October 25, according to OIRA’s website.

It is expected on Capitol Hill that a 10-day expedited review process that is available for tax reform-related regulations was requested.

Business Interest Limitation

Under the amended Code Sec. 163(j), a taxpayer’s annual business interest expense for the tax year, effective for tax years after December 31, 2017, is limited to the following three factors:

• business interest income;
• 30 percent of adjustable taxable income (ATI); and
• floor plan financing interest.

Under the TCJA, business interest excludes "investment interest" as defined in Code Sec. 163(d). Additionally, the calculation requirements for "adjusted taxable income" are set to change in 2022.

Practitioner Insight

"In terms of statutory language, phrases like ‘properly allocable’ jump off the page,"Strickland told Wolters Kluwer. Under the TCJA, "business interest" is defined as any interest paid or accrued on indebtedness that is properly allocable to a trade or business. It remains to be seen how the IRS will identify what is "properly allocable,"according to Strickland.

"Since propriety differs between taxpayers and the government, it will be interesting to see how the regulations handle it," Strickland said. "Will we get a two-pronged objective and subjective test or will there be a bright line rule?" he posited.

Additionally, Strickland said that tax practitioners expect allocation rules will be included, but noted that it remains unclear what form the rules will take. Whether there will be separate rules for different types of entities and how the IRS will treat allocation between exempt and non-exempt entities and within consolidated groups are all interesting yet unsettled components, according to Strickland.

Further, Strickland predicted that the forthcoming regulations will clarify how Code Sec. 951A’s global intangible low-taxed income (GILTI) provision will interact with Code Sec. 163(j). "In the same vein, I expect that we will see how 163(j) plays with 168(k) and 267A, among other sections," he added. "As we get each new piece of the puzzle, the whole picture comes into focus."

The Electronic Federal Tax Payment System (EFTPS) allows individuals and businesses to make tax payments by telephone, personal computer or through the Internet.

The Electronic Federal Tax Payment System (EFTPS) allows individuals and businesses to make tax payments by telephone, personal computer or through the Internet.

Paperless

EFTPS is one of the most user-friendly programs developed by the IRS. EFTPS is totally paperless. Everything is done by telephone or computer. Because it's electronic, it's available 24 hours a day, seven days a week.

You make your tax payments electronically by:

· Calling EFTPS; or

· Using special computer software or the Internet.

Who can use EFTPS

EFTPS is available to businesses and individuals but businesses have more options.

Businesses: If your total deposits of federal taxes are more than $200,000 each year, you must use EFTPS. If not, you can still use EFTPS but you're not required to.

To calculate the $200,000 threshold, you have to include every federal tax your business pays, such as payroll, income, excise, social security, railroad retirement, and any other federal taxes.

The IRS wants businesses to use EFTPS and makes it difficult to stop using it. Once you meet the $200,000 threshold, you have to continue using EFTPS even if your annual tax deposits fall below $200,000 in the future.

Individuals: Individuals can also use EFTPS. Many of the individuals using EFTPS are making quarterly estimated tax payments but it's also available to people paying federal estate and gift taxes and installment payments.

How EFTPS works

There are two versions of EFTPS: direct and through a financial institution.

Direct: EFTPS-Direct is just what the name suggests. You access EFTPS directly - by telephone or computer - and make your tax payments. You tell EFTPS when you want to deposit your taxes and on that date EFTPS tells your bank to transfer the funds from your account to the IRS. At the same time, the IRS updates your payroll tax records to reflect the deposit.

Example. Your payroll taxes are due on the 15th. You have to contact EFTPS by 8PM at least one day before your tax due date. You either call EFTPS or log-on using special software or through the Internet. You enter your payment and EFTPS automatically debits your bank account and transfers the funds to the IRS on the date you indicate.

If you're a business, you can schedule your tax deposits up to 120 days before the due date. Individuals can schedule tax deposits up to 365 days before the due date.

Through a financial institution: You can also access EFTPS through a bank or credit union. Instead of contacting EFTPS directly and making your tax payments, your bank does it for you. Not all banks and credit unions participate in EFTPS so you have to check with your financial institution.

Only businesses can use EFTPS through a financial institution. If you're an individual and you want to use EFTPS, you have to use it directly. Also, while EFTPS-Direct is free, some financial institutions charge a fee for accessing EFTPS.

Getting started

To access EFTPS, you have to enroll. Your tax advisor can help you navigate the enrollment process and, once you're part of EFTPS, he or she can make the payments for you.

The responsibility for remitting federal tax payments to the IRS in a timely manner can be overwhelming for the small business owner -- the deadlines seem never ending and the penalties for late payments can be stiff. However, many small business owners may find that participating in the IRS's EFTPS program is a convenient, timesaving way to pay their federal taxes.

The responsibility for remitting federal tax payments to the IRS in a timely manner can be overwhelming for the small business owner -- the deadlines seem never ending and the penalties for late payments can be stiff. However, many small business owners may find that participating in the IRS's EFTPS program is a convenient, timesaving way to pay their federal taxes.

The Electronic Federal Tax Payment System (EFTPS) is a simple way for businesses to make their federal tax payments. It is easy to use, fast, convenient, secure and accurate. It also saves business owners time and money in making federal tax payments because there are no last minute trips to the bank, no waiting lines, no envelopes, stamps, couriers, etc. And best of all, tax payments are initiated right from your office!

What is the EFTPS?

EFTPS is an electronic tax payment system through which businesses can make all of their federal tax deposits or payments. The system is available 24 hours a day, seven days a week for businesses to make their tax payments either through the use of their own PC, by telephone, or through a program offered by a financial institution.

What federal tax payments are covered by EFTPS?

Some taxpayers mistakenly assume that EFTPS applies only to the deposit of employment taxes. EFTPS has much broader reach. It can be used to make tax payments electronically for a long list of payment obligations:

• Form 720, Quarterly Federal Excise Tax Return;
• Form 940, Employer's Annual Federal Unemployment Tax (FUTA) Return;
• Form 941, Employer's Quarterly Federal Tax Return;
• Form 943, Employer's Annual Tax Return For Agricultural Employees;
• Form 945, Annual Return of Withheld Federal Income Tax;
• Form 990-C, Farmer's Cooperative Association Income Tax Return;
• Form 990-PF, Return of Private Foundation;
• Form 990-T, Exempt Organization Business Income Tax Return Section 4947(a)(1) Charitable Trust Treated as Private Foundation;
• Form 1041, Fiduciary Income Tax Return;
• Form 1042, Annual Withholding Tax Return for U.S. Sources of Income for Foreign Persons;
• Form 1120, U.S. Corporation Income Tax Return; and
• Form CT-1, Employer's Annual Railroad Retirement Tax Return.

How can I get started using EFTPS?

To enroll in EFTPS, the taxpayer must complete IRS Form 9779, Business Enrollment Form, and mailing it to the EFTPS Enrollment Center. To obtain a copy of IRS Form 9779 a taxpayer or practitioner can call EFTPS Customer Service at 1-800-945-8400 or 1-800-555-4477. The enrollment form may also be requested from the IRS Forms Distribution Center at1-800-829-3676.

After you complete and mail the enrollment form, EFTPS processes the enrollment and sends you a Confirmation Packet, which includes a step-by-step Payment Instruction Booklet. You will also receive a PIN under separate cover. Once the Confirmation Packet and the PIN are received, you can begin to make tax payments electronically.

What flexibility is available within the EFTPS for payment options?

There are two primary ways to make payment under EFTPS - directly to EFTPS or through a financial institution. If you wish to make payments directly to EFTPS, the "ACH debit method" should be selected on the enrollment form. Deposits and payments are made using this method by instructing EFTPS to move funds from the business bank account to the Treasury's account on a date you designate. You can instruct EFTPS by either calling a toll-free number, and using the automated telephone system, or by using a PC to initiate the payment.

If you instead elect to make payments through a financial institution, the "ACH credit method" should be chosen on the enrollment form. This method works by using a payment system offered by the financial institution through which you instruct the institution to electronically move funds from your account to a Treasury account.

Although the ACH debit and the ACH credit methods are the primary payment methods for EFTPS, a taxpayer may also choose the Same Day Payment Method. You should contact your financial institution to determine if it can make a same day payment.

If I provide the IRS with access to my bank account, can it access my account for any other purposes?

It is important to note you retain total control of when a payment is made under EFTPS because you initiate the process in all instances. In addition, at no time does the government or any other party have access to your account from which the deposits are made. The only way to authorize deposits or payments from your account is through use of the PIN that is given to you upon enrollment.

Many businesses have recognized the convenience of voluntary participation in the IRS's EFTPS program. If you are interested in discussing whether your business would also benefit from this program, please contact the office for a consultation.