Living With And Applying The Tax Cuts And Jobs Act Of 2017 In Real Life
This new tax law needs both extensive Treasury regulations and a technical corrections act passed by the Congress.
In the waning days of 2017, the U.S. Congress passed the Tax Cuts and Jobs Act of 2017 (TCJA), which the president signed into law on Dec. 22, 2017. In its rush to pass the legislation before the holiday recess, House and Senate Republicans — the bill did not receive a single vote from Democratic members in either chamber — passed some poorly written, often-unclear provisions, leaving many tax practitioners with a lot of questions and heartburn. This new law desperately needs both extensive Treasury regulations explaining how to apply its provisions and a technical corrections act passed by the Congress that will repair actual errors included in the December act.
Regs, Anyone?
Responding to news reports that some state legislatures had already enacted or were considering enacting legislation to skirt the new $10,000 limit on deductible property taxes by allowing homeowners to make charitable contributions to tax-exempt municipal entitles (say, a public library foundation) in an amount equal to any otherwise non-deductible property taxes, the IRS responded on May 23rd with Notice 2018-54. With a threatening tone, it reminds taxpayers that the IRS — not state legislatures — has the ultimate power to “recharacterize” a claimed deduction if it finds that said deduction (here, the charitable contribution) is intended to circumvent the new limit on the real property deduction. The Notice also said that proposed regulations are currently being written, but offers no indication when they’ll be released. Moreover, the notice does not address whether proposed regulations pertaining to other issues raised by TCJA are currently being drafted.
Technical Corrections Bill in the Offing?
As of the writing of this article (Jul. 13), no technical corrections bills have been introduced in the House, even though many leading tax practitioners around the nation have expressed their desire for changes to the TCJA. Far from an all-exhaustive list, the following are just some of the IRC sections that have raised questions from practitioners since passage of the TCJA:
- IRC § 59A – Tax on base erosion payments of taxpayers with substantial gross receipts
- IRC § 163 – Interest
- IRC § 168 – Accelerated Cost Recovery System
- IRC § 172 – Net operating loss deduction
- IRC §199A – Qualified business income
- IRC § 231 – Medical, dental, etc., expenses
- IRC § 385 – Treatment of certain interests in corporations as stock or indebtedness
- IRC § 451 – General rule for taxable year of inclusion
- IRC § 469 – Passive activity losses and credits limited
- IRC § 512 – Unrelated business taxable income
- IRC § 951A – Current year inclusion of GILTI by U.S. shareholders
- IRC § 965 – Treatment of deferred foreign income upon transition to participation exemption system of taxation
- IRC § 1031 – Like-kind exchanges
- IRC § 4960 – Tax on excess tax-exempt organization executive compensation
- IRC § 4968 – Excise tax based on investment income of private colleges & universities
- IRC § 4982 – Excise tax on undistributed income of regulated investment companies.
New from LexisNexis: Guidance on the TCJA
As practitioners await the issuance of guidance from Congress, Treasury, and the IRS, expert tax lawyers recruited by LexisNexis have drafted a series of 25 “Model Client Memoranda,” each focusing on a different change made by the TCJA. Authors were asked to explain how taxpayers might legally minimize the impact of some onerous change made by the statute, or conversely, how they might maximize the benefits wrought by a provision of the TCJA. These 25 memoranda are just one part of a “TCJA Resource Kit” that also includes: a 130-page summary of the Act; lengthy analytical articles explaining the law, written by top Matthew Bender tax authors; and a live feed of articles on the TCJA drawn from Law360® Tax Authority, an online daily newspaper of federal, state and international tax developments.
The kit is included in a new LexisNexis product that launched on July 9: Lexis Practice Advisor® Tax. The new product is essentially a “tax law tool kit” intended for tax attorneys and accountants. Containing over 320 original documents — sample forms, Q&A documents, checklists, practice notes, etc. — the tools cover federal, state and local, and foreign taxes. The author team is composed of over 40 tax attorneys from some of the most prestigious law firms in America: Baker & McKenzie; Cahill Gordon & Reindel; Dentons; Ivins Phillips & Barker; Nutter, McClennen & Fish; Munger Tolles & Olson; Sullivan & Worcester; Withers Worldwide, and many more.
To give you a flavor for the product, we are including one of the model client memoranda here. Entitled Unadjusted Basis of IRC section 1031 Exchange Property: IRC Sec. 199A, it was written by tax Professor Bradley T. Borden of the Brooklyn Law School, in NYC, where he also serves as Special Counsel to Federman Steifman. In addition, we have also reproduced our 130-page LexisNexis Analysis of the Tax Cuts and Jobs Act of 2017, published Dec. 22, 2017. It’s our hope that these two resources will be of help to you in your practice as we all “work our way through” the TCJA.
Lexis Practice Advisor® provides attorney developed practical guidance including practice notes, checklists, sample documents, and related legal content to help you work more efficiently. Learn more about Lexis Practice Advisor® Tax and request a free trial.
