Newsletters

The IRS has announced the launch of two new online tools to help families verify, manage and monitor monthly payments of child tax credits under the American Rescue Plan Act (ARP) ( P.L. 117-2). These are in addition to the Non-filer Sign-up tool announced last week, which helps families register for child tax credits. The tools are both available through the Update Portal at https://www.irs.gov/credits-deductions/child-tax-credit-update-portal.

The IRS has announced the launch of two new online tools to help families verify, manage and monitor monthly payments of child tax credits under the American Rescue Plan Act (ARP) (P.L. 117-2). These are in addition to the Non-filer Sign-up tool announced last week, which helps families register for child tax credits. The tools are both available through the Update Portal at https://www.irs.gov/credits-deductions/child-tax-credit-update-portal.

The Treasury and IRS have urged taxpayers to use a special online tool to determine eligibility for the Child Tax Credit (CTC) and the special monthly advance payments beginning on July 15. The new CTC Eligibility Assistant is interactive and easy to use. It is particularly useful to those who do not normally file a federal tax return and have not yet filed either a 2019 or 2020 return.

"This new tool provides an important first step to help people understand if they qualify for the CTC, which is especially important for those who don’t normally file a tax return," said IRS Commissioner Chuck Rettig. "The eligibility assistant works in concert with other features on IRS.gov to help people receive this important credit. The IRS is working hard to deliver the expanded Child Tax Credit, and we will be rolling out additional help for taxpayers in the near future. Where possible, please help us help others by distributing CTC information in your communities," he added.

The CTC Eligibility Assistant does not request any personally-identifiable information for any family member. The tool can be found at https://www.irs.gov/credits-deductions/advance-child-tax-credit-eligibility-assistant.

In addition to verification of their eligibility, the Update Portal allows a taxpayer to unenroll from receiving monthly payments, in order to receive a lump sum. The tool can be found at https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021. The unenroll feature is helpful to families that no longer qualify for the child tax credit or believe they will not qualify when they file their 2021 return. This could happen if:

• their income in 2021 is too high to qualify for the credit;
• someone else (an ex-spouse or another family member, for example) qualifies to claim their child or children as dependents in 2021; or
• their main home was outside of the United States for more than half of 2021.

Further, future versions and new features of the tool are planned for the summer and fall. These updates will allow taxpayers to view their payment history, adjust bank account information or mailing addresses. In general, these payments will go to families who:

• filed either a 2019 or 2020 federal income tax return;
• used the Non-Filers tool register for an Economic Impact Payment; or
• registered for the advance child tax credit using the new Non-filer Sign-up tool.

Next, eligible families will receive advance payments, either by direct deposit or check. Each payment will be up to $300 per month for each child under age six and up to $250 per month for each child ages six through 17. Filing soon will ensure that the IRS has taxpayers’ most current bank account information and key details about qualifying family members. This includes individuals who do not normally file tax returns, including families experiencing homelessness and individuals in undeserved groups.

The IRS also announced pertinent child tax credit changes. The ARP raised the maximum child tax credit to $3,600 for children under the age of six and to $3,000 per child for children ages six through 17. Finally, the IRS urged community groups, non-profits, associations, education organizations and taxpayers with connections to individuals with children to share this critical information about the child tax credit as well as other important benefits.

Partnerships, S corporations, and U.S. persons with interests in foreign partnerships may rely on transition relief from penalties for tax years beginning in 2021 with respect to new Schedules K-2 and K-3.

Partnerships, S corporations, and U.S. persons with interests in foreign partnerships may rely on transition relief from penalties for tax years beginning in 2021 with respect to new Schedules K-2 and K-3. These schedules may be required for:

• Form 1065, U.S. Return of Partnership Income,
• Form 1120-S, U.S. Income Tax Return for an S Corporation, and
• Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships.

The IRS also released new draft instructions for Schedules K-2 and K-3. Comments are requested.

Reporting Requirement for Interests in Foreign Partnerships
For tax years beginning in 2021, two new forms may be required when a partnership files Form 1065 or Form 8865, or an S corporation files Form 1120-S (1) Schedule K-2, Partners’ Distributive Share Items—International, and (2) Schedule K-3, Partner’s Share of Income, Deductions, Credits, etc.

The IRS released final versions of these schedules on June 3 and 4, 2021, after receiving comments on draft versions it released in July of 2020.

Waived Penalties for Failing to File or Furnish Schedules K-2 and K-3
The IRS recognizes that a filer may not have systems or procedures in place to obtain information about its partners, shareholders, or the controlled foreign partnership (CFP) to determine whether and how it must file a part of Schedules K-2 and K-3.

Accordingly, for tax years beginning in 2021, penalties will not be imposed for incorrect or incomplete reporting on Schedules K-2 and K-3 if the partnership or S corporation establishes to the satisfaction of the IRS that it made a good faith effort to comply with the requirements to file or furnish the schedules. A Schedule K-2 or K-3 filer that does not establish that it made a good faith effort to comply with the new requirements is not eligible for this penalty relief.

Good Faith Effort to Complete Schedules K-2 and K-3
In determining whether a filer makes a good faith effort to complete Schedules K-2 and K-3, the IRS will take into account:

• the extent to which the filer has changed its systems, processes, and procedures for collecting and processing relevant information;
• the extent to which the filer has obtained information from partners, shareholders, or the CFP, or applied reasonable assumptions when information is not obtained; and
• the steps the filer has taken to modify the partnership or S corporation agreement or governing instrument to facilitate the sharing of information with partners and shareholders that is relevant to determining whether and how to file Schedules K-2 and K-3.

With respect to relevant information about partners, shareholders, or the CFP, the IRS will assess the effort the Schedule K-2/K-3 filer made to obtain this information and the reasonableness of any assumptions, taking into account the relationship between the Schedule K-2/K-3 filer and its partners, shareholders or the CFP. For example, the appropriate level of diligence and/or the reasonableness of an assumption may differ with respect to a partner that manages or controls the partnership, or a partner with a significant interest in the partnership, as compared to partners holding small interests for which there may not be the same ease of access to information. A Schedule K-2/K-3 filer may have made a good faith effort despite being unsuccessful in obtaining information from its partners, shareholders, or the CFP.

Comments Requested
The IRS requests comments on the new draft instructions to Schedules K-2 and K-3 for tax years beginning in 2021. The IRS is especially in comments regarding:

• instances where the instructions do not provide sufficient guidance on how to complete the returns or where additional clarity is needed;
• suggestions for addressing structures and situations that make it difficult to determine certain information (for example, tiered partnership structures or publicly-traded partnerships; and
• reasonable assumptions Schedule K-2/K-3 filers could make in determining whether and how to complete Schedules K-2 and K-3 for tax years beginning after 2021, and whether these assumptions may differ between various parts of the Schedules K-2 and K-3.

Comments must be submitted in writing and should include a reference to Notice 2021-39. The IRS strongly encourages electronic comments submitted via the Federal eRulemaking Portal at https://www.regulations.gov (type IRS-2021-0006 in the search field on the regulations.gov homepage to find this notice and submit comments). However, to the extent practicable, the IRS will also consider paper comments it receives by mail.

The Departments of the Treasury, Labor, and Health and Human Services (the Departments), have issued interim final rules and identical proposed regulations to implement provisions of the No Surprises Act.

The Departments of the Treasury, Labor, and Health and Human Services (the Departments), have issued interim final rules and identical proposed regulations to implement provisions of the No Surprises Act. On December 27, 2020, the Consolidated Appropriations Act, 2021 (CAA), which included the No Surprises Act, was signed into law. The No Surprises Act provides federal protections against surprise billing and limits out-of-network cost sharing under many of the circumstances in which surprise bills arise most frequently. The regulations are generally applicable for plan years (in the individual market, policy years) beginning on or after January 1, 2022.

Application of No Surprises Rules
The interim and proposed Treasury regulations implement the rules under the new Code Sec. 9816 regarding the prevention of surprise medical bills, Code Sec. 9817 regarding surprise ambulance bills, and Code Sec. 9822 regarding the choice of health care professional. The regulations apply to group health plans, including grandfathered plans. They do not apply to excepted benefits, short-term, limited-duration insurance, or health reimbursement arrangements or other account-based group health plans.

The interim regulations also include largely overlapping HHS and DOL regulations that apply to health insurance issuers offering group or individual health insurance coverage, and carriers in the Federal Employees Health Benefits Act (FEHB) Program to provide protections against balance billing and out-of-network cost sharing with respect to emergency services, non-emergency services furnished by nonparticipating providers at certain participating health care facilities, and air ambulance services furnished by nonparticipating providers of air ambulance services.

The new regulations prohibit nonparticipating providers, health care facilities, and providers of air ambulance services from balance billing participants, beneficiaries, and enrollees in certain situations, and permit these providers and facilities to balance bill individuals if certain notice and consent requirements in the No Surprises Act are satisfied. They also require certain health care facilities and providers to provide disclosures of federal and state patient protections against balance billing.

The regulations recodify certain patient protections that initially appeared in the Affordable Care Act and provide that the No Surprises Act applies to grandfathered plans. They also set forth complaints processes with respect to violations of the protections against balance billing and out-of-network cost sharing under the No Surprises Act.

These new rules protect individuals from surprise medical bills for emergency services, air ambulance services furnished by nonparticipating providers, and non-emergency services furnished by nonparticipating providers at participating facilities in certain circumstances. Among other requirements, they require emergency services to be covered without any prior authorization, without regard to whether the health care provider furnishing the emergency services is a participating provider or a participating emergency facility with respect to the services, and without regard to any other term or condition of the plan or coverage other than the exclusion or coordination of benefits or a permitted affiliation or waiting period.

Additionally, emergency services include certain services in an emergency department of a hospital or an independent freestanding emergency department, as well as post-stabilization services in certain instances.

Effective Dates and Comments
The regulations are generally applicable for plan years (in the individual market, policy years) beginning on or after January 1, 2022. However, the HHS-only regulations that apply to health care providers, facilities, and providers of air ambulance services are applicable beginning on January 1, 2022. The OPM-only regulations that apply to health benefits plans are applicable to contract years beginning on or after January 1, 2022.

Comments must be received no later than 5 p.m. on September 7, 2021. Comments, including mass comment submissions, must be submitted in one of the following three ways: electronically at https://www.regulations.gov by entering the file code in the search window and then clicking on “Comment”; by regular mail to the Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9909-IFC, P.O. Box 8016, Baltimore, MD 21244-8016; or by express or overnight mail to the Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9909-IFC, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

The IRS has proposed regulations that would amend the rules for filing electronically and affects persons required to file partnership returns, corporate income tax returns, unrelated business income tax returns, withholding tax returns, certain information returns, registration statements, disclosure statements, notifications, actuarial reports, and certain excise tax returns.

The IRS has proposed regulations that would amend the rules for filing electronically and affects persons required to file partnership returns, corporate income tax returns, unrelated business income tax returns, withholding tax returns, certain information returns, registration statements, disclosure statements, notifications, actuarial reports, and certain excise tax returns.

The proposed amendments reflect changes made by the Taxpayer First Act of 2019 (TFA), P.L. 116-25, and are consistent with the TFA’s emphasis on increasing electronic filing.

The IRS is also withdrawing proposed regulations ( REG-102951-16) published in the Federal Register on May 31, 2018, that would amend the rules for determining whether information returns must be filed electronically.

Electronic Filing
Amendments are proposed to:

• income tax regulations under Code Secs. 1461 and 1474, which provide that persons required to deduct and withhold tax are liable for such tax; and Code Sec. 6050I, which requires persons to report information about financial transactions to the IRS;
• pension excise tax regulations under Code Sec. 6011, which require persons to report information for certain excise taxes related to employee benefit plans;
• regulations under Code Secs. 1474, 6011, 6012, 6033, 6057, 6058, and 6059, for determining whether returns must be filed using magnetic media; and
• regulations under Code Sec. 6011 to remove the option available to a person required to report certain excise taxes on Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code, to designate a Form 4720 filed by a private foundation or trust as that person’s return if the foundation is reporting the same transaction.

Under Code Sec. 6011(e) and related regulations, filers are already required to file returns and statements electronically if, during a calendar year, they are required to file 250 or more returns. Eight related proposed rules would lower the 250-return threshold as authorized by Code Sec. 6011(e), as amended by section 2301 of the TFA. A filer can request that the IRS waive the electronic-filing requirement if the filer’s cost to comply with the rule would cause a financial hardship, and the IRS routinely grants meritorious hardship waiver requests.

Under Code Sec. 6050I and related regulations, filers are required to file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if, in the course of their trade or business, they receive more than $10,000 in cash in one transaction or in two or more related transactions. The related proposed rule would require filers of Forms 8300 to file those forms electronically if such filers are also required to file returns electronically under Reg. §§301.6011-2(b)(1) and (2). The Treasury Department and the IRS expect filers of Form 8300 to use FinCEN’s BSA E-Filing System, which is free, requiring only an internet connection.

Under Code Sec. 6011(e)(4) and related regulations, financial institutions defined in Code Sec. 1471(d)(5) already are required to electronically file Forms 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. The related proposed rule would extend this filing requirement to Forms 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, filed by the same financial institutions.

Under Code Sec. 6011(h), as amended by section 3101 of the TFA, organizations required to file annual returns relating to any tax imposed by Code Sec. 511 must file those returns in electronic form. A proposed regulation implements this statutory requirement.

Under Code Sec. 6033(n), as amended by section 3101 of the TFA, organizations required to file returns under Code Sec. 6033 must file those returns in electronic form. Proposed regulations implement this statutory requirement.

Seven proposed regulations would require electronic filing for certain returns not currently required to be filed electronically. Because electronic filing has become more common, accessible, and economical, the economic impact of these proposed rules on small entities is expected be insignificant. If the cost to comply with these electronic-filing requirements would cause a financial hardship, an entity may request a waiver, and the IRS routinely grants meritorious hardship waiver requests.

Comments Requested
The proposed rules are scheduled to be published in the Federal Register on July 23, 2021, and available online at federalregister.gov/d/2021-15615, and on govinfo.gov. Written or electronic comments must be received by September 21, 2021, the date that is 60 days after the date the proposed rules are published in the Federal Register. Comments may be submitted electronically at www.regulations.gov (indicate IRS and REG-102951-16), or by mail.

The public hearing is being held by teleconference on September 22, 2021, at 10 a.m. EST. Requests to speak and outlines of topics to be discussed at the public hearing must be received by September 21, 2021. If no outlines are received by that date, the public hearing will be cancelled. Requests to attend the public hearing must be received by 5:00 p.m. EST on September 20, 2021.

Secretary of the Treasury Janet L.Yellen addressed the support for a global minimum tax for corporations at a press conference at the close of the G20 Finance Ministers and Central Bank Governors Meetings, on July 11, 2021.

Secretary of the Treasury Janet L.Yellen addressed the support for a global minimum tax for corporations at a press conference at the close of the G20 Finance Ministers and Central Bank Governors Meetings, on July 11, 2021, see https://home.treasury.gov/news/press-releases/jy0270. Secretary Yellen stated that now 132 countries, representing more than 90 percent of global GDP have agreed to the outline of a global tax deal. Secretary Yellen praised what she sees as a "revival of multilateralism" on taxation and other issues. She stated, "we continue to see consensus around – and enthusiasm for – a global corporate minimum tax rate of at least 15%, as well as a partial reallocation of taxing rights to reflect the realities of the modern business world. … This deal will end the race to the bottom. Instead of asking the question: ‘Who can offer the lowest tax rate?,’ it will allow all of our countries to compete on the basis of economic fundamentals – on the skill of our workforces, our capacity to innovate, and the strength of our legal and economic institutions. And this deal will give our nations the ability to raise the necessary funding for important public goods like infrastructure, R & D, and education."

Implementation in the United States
In response to a question on OECD Pillar One (nexus and source rules), Secretary Yellen said the details of Pillar One remain to be negotiated, and she would say that OECD Pillar Two is further along. Secretary Yellen stated, "Pillar Two [the minimum tax rate], we're hoping to have incorporated in the coming budget resolution and reconciliation bill the changes that are necessary to put it into effect, but Pillar One will be on a slightly slower track. We will work with Congress. Maybe it will be ready in the Spring of 2022 and we will try to determine at that point what's necessary for implementation."

The IRS has provided a procedure for making elections and revocations under Act Sec. 2303(e) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) ( P.L. 116-136) for taxpayers with a net operating loss (NOL) for any tax year beginning in 2018, 2019, or 2020, all or a portion of which consists of a farming loss (farming loss NOLs). The procedure is effective on the date of its release, June 30, 2021.

The IRS has provided a procedure for making elections and revocations under Act Sec. 2303(e) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) ( P.L. 116-136) for taxpayers with a net operating loss (NOL) for any tax year beginning in 2018, 2019, or 2020, all or a portion of which consists of a farming loss (farming loss NOLs). The procedure is effective on the date of its release, June 30, 2021.

Specifically, the procedure:

• prescribes when and how to make an election with regard to all NOLs of the taxpayer, regardless of whether the NOL is a farming loss NOL;
• provides that a taxpayer is treated as having made a deemed election under Act Sec. 2303(e)(1) of the CARES Act if the taxpayer, before December 27, 2020, filed one or more original or amended tax returns, or applications for tentative refund, that disregard the CARES Act amendments with regard to a farming loss NOL; and
• prescribes when and how to revoke an election made under Code Sec. 172(b)(1)(B)(iv) or (b)(3) to waive the two-year carryback period for the farming loss portion of a farming loss NOL incurred in a tax year beginning in 2018 or 2019.

TCJA Amendments to NOL Rules
The Tax Cuts and Jobs Act (TCJA) ( P.L. 115-97) amended the NOL rules to provide that, with regard to NOLs arising in a tax year beginning after 2017, the amount allowed as an NOL deduction cannot exceed 80 percent of the taxable income computed without regard to any NOL deduction (the 80-percent limitation). The 80-percent limitation does not apply in the case of a non-life insurance company. The TCJA also eliminated NOL carrybacks, except that a two-year carryback period is allowed for the portion of an NOL that is a farming loss. Taxpayers entitled to this two-year carryback period may make an irrevocable election to waive it. A separate rule provides that any taxpayer entitled to an NOL carryback period may irrevocably elect to relinquish the entire carryback period with respect to that NOL for any tax year. The TCJA changes relating to loss carrybacks apply to NOLs arising in tax years beginning after 2017.

CARES Act Amendments to NOL Rules
The CARES Act temporarily suspended the 80-percent limitation so that it applies only to NOLs arising in tax years beginning after 2017 that are deducted in tax years beginning after 2020. In addition, it provided a five-year carryback period for any NOL arising in a tax year beginning after 2017 and before 2021. The two-year carryback period for farming losses does not apply to any such NOL.

CTRA 2020 Amendments to CARES Act
The COVID-related Tax Relief Act of 2020 (CTRA 2020), which was enacted as part of the Consolidated Appropriations Act, 2021 (CAA 2021) ( P.L. 116-260) amended Act Sec. 2303 of the CARES Act by adding a new subsection (e), which took effect as if originally included in that CARES Act, to provide that a taxpayer with a farming loss NOL for any tax year beginning in 2018, 2019, or 2020, may make an election to disregard the CARES Act amendments.

If a taxpayer makes the election: (i) the 80-percent limitation applies to determine the NOL deduction for each tax year beginning in 2018, 2019, or 2020 to the extent the deduction is attributable to NOLs arising in tax years beginning after 2017, but the 80-percent limitation does not apply to determine the NOL deduction for any tax year beginning before 2018, (ii) the modified taxable income rule applies with regard to each tax year beginning in 2018, 2019, or 2020, and (iii) the NOL carryback period is determined under Code Sec. 172(b), as amended by the TCJA and effective prior to enactment of the CARES Act, for any NOL arising in any tax year beginning in 2018, 2019, or 2020.

An election to disregard the CARES Act amendments (an affirmative election) must be made in the manner prescribed by the IRS. Once made, an election is irrevocable. An affirmative election must be made by the due date, including extensions of time, for filing the taxpayer’s tax return for the first tax year ending after December 27, 2020.

In the case of any taxpayer with a farming loss NOL that files a tax return before December 27, 2020, that disregards the CARES Act amendments, the taxpayer is treated as having made a deemed election (a deemed election) unless the taxpayer amends the return to reflect such amendments by the due date (including extensions of time) for filing the taxpayer’s tax return for the first tax year ending after December 27, 2020.

A taxpayer can revoke an election made under Code Sec. 172(b)(1)(B)(iv) or (b)(3) to waive the two-year carryback period if the election (i) was made before December 27, 2020; and (ii) relates to the two-year carryback period for the portion of any farming loss NOL that is a farming loss arising in tax years beginning in 2018 or 2019.

Procedure for Making Elections to Disregard CARES Act Amendments
Affirmative election. A taxpayer with a farming loss NOL, other than a taxpayer making a deemed election described below, may make an affirmative election under Act Sec. 2303(e)(1) of the CARES Act if: (i) the farming loss NOL arose in any tax year beginning in 2018, 2019, or 2020; and (ii) the taxpayer:

• makes the affirmative election on a statement described below by the due date, including extensions of time, for filing the taxpayer’s tax return for the first tax year ending after December 27, 2020; and
• attaches a statement to its tax return for the first tax year ending after December 27, 2020, that provides at the top: "The taxpayer elects under § 2303(e)(1) of the CARES Act and Revenue Procedure 2021-14 to disregard the amendments made by § 2303(a) of the CARES Act for taxable years beginning in 2018, 2019, and 2020, and the amendments made by § 2303(b) of the CARES Act that would otherwise apply to any net operating loss arising in any taxable year beginning in 2018, 2019, or 2020. The taxpayer incurred a Farming Loss NOL, as defined in section 1.01 of Revenue Procedure 2021-14, in [list each applicable taxable year beginning in 2018, 2019, or 2020]." The taxpayer should also attach a copy of the statement to any original or amended tax return or application for tentative refund on which the taxpayer claims a deduction attributable to a two-year NOL carryback pursuant to the affirmative election.

Deemed election. A taxpayer is treated as having made a deemed election under Act Sec. 2303(e)(1) of the CARES Act if the taxpayer, before December 27, 2020, filed one or more original or amended tax returns, or applications for tentative refund, that disregard the CARES Act amendments with regard to a farming loss NOL. Special procedure is provided for certain taxpayers whose two-year carryback claims filed before December 27, 2020, were rejected. Generally, if such a taxpayer wants to continue to pursue those claims, the taxpayer should submit complete copies of their rejected applications or claims, including the original or amended tax returns for the tax years in which the NOLs arose, in the manner set forth in the procedure.

A taxpayer will not be treated as having made a deemed election if, for each tax year for which the taxpayer filed an original or amended tax return or an application for tentative refund that treated a farming loss NOL in a manner that disregards the CARES Act amendments, the taxpayer subsequently files either (i) an amended return by the due date, including extensions of time, for filing the taxpayer’s tax return for the first tax year ending after December 27, 2020, or (ii) an application for tentative refund within the required time for filing such an application and also by the due date, including extensions of time, for filing the taxpayer’s tax return for the first tax year ending after December 27, 2020. The amended return or application must properly reflect the treatment of each farming loss NOL under the CARES Act amendments.

Procedure for Revocation of Election Not to Apply the Two-year Carryback Period for Farming Losses
A taxpayer that elected under Code Sec. 172(b)(1)(B)(iv) or (b)(3) not to have the two-year carryback period apply to the farming loss portion of a farming loss NOL incurred in a tax year beginning in 2018 or 2019 may revoke that election, if the taxpayer:

• made that election before December 27, 2020;
• makes the revocation by the date that is three years after the due date, including extensions of time, for filing the return for the tax year the farming loss NOL was incurred; and
• attaches a statement to an amended return for the loss year that provides at the top: "Pursuant to section 4.01 of Rev. Proc. 2021-14 the taxpayer is revoking a prior §172(b)(1)(B)(iv) or § 172(b)(3) election not to have the two-year carryback period provided by § 172(b)(1)(B)(i) apply to the Farming Loss NOL, as defined in section 1.01 of Rev. Proc. 2021-14, incurred in the taxable year."

Consolidated Groups
The procedure provides special rules for consolidated groups for making an affirmative election, consequences of affirmative and deemed elections, and reliance on rules in Reg. §1.1502-21 regarding the application of the 80-percent limitation.

The IRS has provided answers to questions that certain transportation companies may have regarding Treasury grants and related taxes.

The IRS has provided answers to questions that certain transportation companies may have regarding Treasury grants and related taxes, https://www.irs.gov/newsroom/coronavirus-economic-relief-for-transportation-services-certs-frequently-asked-questions. These companies must largely prioritize the use of the grants for payroll costs, though grants may be used for operating expenses, including the acquisition of services and any equipment needed to protect workers and customers from COVID-19. In addition, the funds may also be used for the repayment of debt accrued to maintain payroll. The IRS reminded the companies that funds not used for eligible activities within one year of receipt of the grant, must be returned to the Treasury.

The Service reminded the companies that the Coronavirus Economic Relief for Transportation Services (CERTS) Act ( P.L. 117-24) authorizes the Treasury to provide grants to transportation service providers that experienced annual revenue losses of 25 percent or more as a result of COVID-19. Under which, the IRS posted answers to two questions:

• are the grants taxable? Yes, the receipt of a CERTS Act grant is not excluded from the recipient’s gross income under the Code and therefore is taxable; and
• are costs for which the grants are used deductible? Yes, the costs are deductible to the extent that they are otherwise deductible under the law. The tax law generally permits the payment of wages, salaries, and benefits to employees and other amounts paid to carry on a trade or business to be deducted as ordinary and necessary business expenses.

The IRS reminded taxpayers that their website (www.irs.gov) provides millions of visitors with the answers they need to fit their busy summer schedules.

The IRS reminded taxpayers that their website ( www.irs.gov) provides millions of visitors with the answers they need to fit their busy summer schedules. Taxpayers who requested an extension to October 15 or missed the May 17 deadline can still prepare and e-file tax returns for free with the IRS Free File tool. Further, taxpayers can view, download or print tax products, and do the following:

Use the "File" tab on the home page for most federal income tax needs. Access the Interactive Tax Assistant tool that can answer many tax law questions.
See their tax account with the View Your Account tool. With this, they can find information such as a payoff amount, the balance for each tax year owed, up to 24 months of their payment history and key information from their current tax year return as originally filed.
Use the Get Transcript tool to view, print or download their tax transcripts after the IRS has processed the return.
Find the most up-to-date information about tax refunds using the Where's My Refund? tool on the IRS website and on the official IRS mobile app, IRS2Go. Taxpayers can start checking on the status of their refund 24 hours after the IRS acknowledges receipt of an e-filed return.
Additionally, many pages on the IRS website are now available in Spanish, Vietnamese, Russian, Korean, Haitian, Creole, and Chinese—simplified and traditional. Earlier this year, the agency posted a Spanish language version of Form 1040 PDF and the related instructions.

Assistive Technology
Moreover, at the online Alternative Media Center (AMC), taxpayers can find a variety of accessible products like screen reading software, refreshable Braille displays, and screen magnifying software. These products include tax forms, instructions, and publications that can be downloaded or viewed online as Section 508 compliant PDF, HTML, eBraille, text, and large print. However, every product is not available in all formats. For example, tax forms are not available as HTML. To request paper copies of tax forms, instructions or publications in Braille or large print, taxpayers must call the tax form telephone number at 800-829-3676.

Coronavirus Tax Relief Information
Further, the IRS has published ready-to-use articles, e-posters, videos, and much more on the website about Economic Impact Payments, the Recovery Rebate Credit, and the Advance Child Tax Credit. The IRS placed a special emphasis on partnering with organizations that work with groups focusing on veterans, homeless and low-income taxpayers as well as non-English speaking audiences to share information. In all, the IRS worked with thousands of partners across the country reaching organizations representing hundreds of millions of taxpayers.

IRS Tax Withholding Estimator
Finally, the IRS Tax Withholding Estimator helps employees assess their income tax, credits, adjustments and deductions and determine whether they need to change their withholding by submitting a new Form W-4, Employee's Withholding Allowance Certificate. However, taxpayers should remember that, if needed, they should submit their new W-4 to their employer, not the IRS.

The Supreme Court has reversed and remanded California v. Texas, holding that the Plaintiffs do not have standing to challenge the Patient Protection and Affordable Care Act’s (ACA) minimum essential coverage provision.

The Supreme Court has reversed and remanded California v. Texas, holding that the Plaintiffs do not have standing to challenge the Patient Protection and Affordable Care Act’s (ACA) minimum essential coverage provision.

In 2010, ACA, under the newly added Code Sec. 5000A, required most Americans to obtain minimum essential health insurance coverage, or pay a penalty. In 2017, under the Tax Cuts and Jobs Act, Congress effectively nullified the penalty by setting its amount at $0. The IRS issued guidance that the statute no longer required taxpayers to report whether they did or did not maintain coverage.

In 2018, Texas and 17 other states brought a lawsuit against the United States and federal officials. They were later joined by two individuals (Neill Hurley and John Nantz). The United States took the side of the plaintiffs. The plaintiffs claimed that without the penalty, the minimum essential coverage requirement was unconstitutional and that the minimum essential coverage requirement was not severable from the rest of ACA. Hence, they believed ACA as a whole was invalid. California, along with fifteen other states and the District of Columbia, intervened to defend ACA.

The District Court found that the individual plaintiffs had standing to challenge the constitutionality of the minimum essential coverage provision, Code Sec. 5000A(a). The court further held that the minimum essential coverage provision was unconstitutional and not severable from the rest of ACA. It granted relief in the form of a declaration stating just that. On appeal, a panel majority agreed with the District Court that the plaintiffs had standing and that the minimum essential coverage provision was unconstitutional. It found that the District Court’s severability analysis, however, was "incomplete," and it remanded the case for further analysis.

The Supreme Court did not analyze whether the provision or ACA is unconstitutional, because it held that Texas and the other plaintiffs in the suit lack standing to bring the case. The plaintiffs do not have standing because they were not able to show a past or future injury, pocketbook or otherwise, fairly traceable to the government enforcing the minimum essential coverage requirement. The Court vacated the lower court’s judgment and remanded the case with instructions to dismiss.

The IRS issued two new, separate sets of frequently-asked-questions (FAQs) to assist families and small and mid-sized employers) in claiming credits under the American Rescue Plan (ARP). These FAQs provide information on eligibility, computing the credit amounts and how to claim these important tax benefits. Enacted in March to assist families and small businesses with the fallout of the COVID-19 pandemic and recovery underway, the ARP enhanced the child and dependent care credit and the paid sick and family leave credit.

The IRS issued two new, separate sets of frequently-asked-questions (FAQs) to assist families and small and mid-sized employers) in claiming credits under the American Rescue Plan (ARP). These FAQs provide information on eligibility, computing the credit amounts and how to claim these important tax benefits. Enacted in March to assist families and small businesses with the fallout of the COVID-19 pandemic and recovery underway, the ARP enhanced the child and dependent care credit and the paid sick and family leave credit.

Child and Dependent Care Credit
For 2021, the ARP increased the maximum amount of work-related expenses for qualifying care that may be taken into account in calculating the credit, increased the maximum percentage of those expenses for which the credit may be taken, modified how the credit is reduced for higher earners, and made it refundable. Additionally, eligible taxpayers can claim qualifying work-related expenses up to:

• $8,000 for one qualifying person, up from $3,000 in prior years; or
• $16,000 for two or more qualifying persons, up from $6,000 in prior years.

Further, the taxpayers are required to have earnings, and the amount of qualifying work-related expenses claimed cannot exceed the taxpayer’s earnings. Combined with the increase to 50-percent in the maximum credit rate, taxpayers with the maximum amount of qualifying work-related expenses would receive a credit of $4,000 for one qualifying person, or $8,000 for two or more qualifying persons.

A dependent under the age of 13 or a dependent of any age or spouse who is incapable of self-care and who lives with the taxpayer for more than half of the year is considered a qualifying person for this credit. Under the new ARP, more taxpayers will qualify for the new maximum 50-percent credit rate. However, the 50-percent credit rate goes down as income rises above $125,000. Taxpayers with adjusted gross income over $438,000 are not eligible for the credit.

The credit is fully refundable for the first time in 2021. This means eligible taxpayers can receive the credit even if they owe no federal income tax. To be eligible for the refundable credit, a taxpayer must reside in the U.S. for more than half of the year. However, special rules apply to military personnel stationed outside the U.S. To claim the credit for 2021, taxpayers need to complete Form 2441, Child and Dependent Care Expenses, and include the form when filing their tax returns in 2022.

Paid Sick and Family Leave Credit
The paid sick and family leave credits reimburse eligible employers for the cost of providing paid sick and family leave to their employees for reasons related to COVID-19, including leave taken by employees to receive or recover from COVID-19 vaccinations. Self-employed individuals are eligible for similar tax credits. Additionally, under the ARP, eligible employers may now claim the credit for paid family leave wages for the same reasons that they can claim the credit for paid sick leave wages.

Under the ARP, eligible employers, including businesses and tax-exempt organizations with fewer than 500 employees and certain governmental employers, may claim tax credits for qualified leave wages and certain other wage-related expenses (such as health plan expenses and certain collectively bargained benefits) paid with respect to leave taken by employees beginning on April 1, 2021, through September 30, 2021. The ARP kept the daily wage thresholds that previously existed for these credits under the Families First Coronavirus Response Act (FFCRA) ( P.L. 116-127). The aggregate cap on qualified sick leave wages remains at two weeks (up to a maximum of 80 hours), and this aggregate cap reset with respect to leave taken by employees beginning on April 1, 2021. The aggregate cap on qualified family leave wages increases to $12,000 from $10,000, and this aggregate cap reset with respect to leave taken by employees beginning on April 1, 2021.

The paid leave credits under the ARP are tax credits against the employer’s share of Medicare tax. This credit is refundable, which means that the employer is entitled to payment of the full amount of he credit to the extent it exceeds the employer’s share of Medicare tax. Self-employed individuals may claim comparable credits on the Form 1040, U.S. Individual Income Tax Return.

The IRS has started sending letters to over 36 million families who, based on tax returns filed, may be eligible to receive monthly child tax credit payments starting July. Eligibility of these families are being evaluated based on information provided by taxpayers in their 2019 or 2020 tax returns, or through the Non-Filers tool while registering for an Economic Impact Payment. In addition, taxpayers who are eligible for advance child tax credit payments will receive a second, personalized letter listing an estimate of their monthly payment, starting July 15.

The IRS has started sending letters to over 36 million families who, based on tax returns filed, may be eligible to receive monthly child tax credit payments starting July. Eligibility of these families are being evaluated based on information provided by taxpayers in their 2019 or 2020 tax returns, or through the Non-Filers tool while registering for an Economic Impact Payment. In addition, taxpayers who are eligible for advance child tax credit payments will receive a second, personalized letter listing an estimate of their monthly payment, starting July 15.

The IRS further announced that eligible families will begin receiving advance payments, either by direct deposit or check. Importantly, this payment will be up to $300 per month for each qualifying child under six years of age, and up to $250 per month, for each qualifying child from ages six to 17. Moreover, advance child tax credit payments will be issued on July 15, August 13, September 15, October 15, November 15 and December 15, 2021.

To avail themselves of these credits, taxpayers who have not yet filed their 2020 or 2019 return should do so as soon as possible, to receive advance payments. The IRS reminded taxpayers who do not normally file returns, such as families experiencing homelessness, that filing soon will ensure that their most current banking information would be applicable. Similarly, community groups, non-profits, associations, education organizations and others with connections to people with children to share this critical information about the child tax credit and other important benefits.

Finally, the IRS reminded taxpayers of the changes to child tax credit by the American Rescue Plan Act (ARP) ( P.L. 117-2). The entire credit is fully refundable for 2021; meaning eligible families can avail themselves of the credit, even if they owe no federal income tax. The IRS also recommends that taxpayers visit the Advance Child Tax Credit Payments in 2021 page to learn more about these changes.

The IRS has finalized regulations relating to the mandatory 60-day postponement of certain time-sensitive tax-related deadlines by reason of a federally declared disaster. Further, the regulations clarify the definition of "federally declared disaster." The regulations affect individuals who reside in or were killed or injured in a disaster area, businesses that have a principal place of business in a disaster area, relief workers who provide assistance in a disaster area, or any taxpayer whose tax records necessary to meet a tax deadline are located in a disaster area.

The IRS has finalized regulations relating to the mandatory 60-day postponement of certain time-sensitive tax-related deadlines by reason of a federally declared disaster. Further, the regulations clarify the definition of "federally declared disaster." The regulations affect individuals who reside in or were killed or injured in a disaster area, businesses that have a principal place of business in a disaster area, relief workers who provide assistance in a disaster area, or any taxpayer whose tax records necessary to meet a tax deadline are located in a disaster area.

Background
Section 205 of the Taxpayer Certainty and Disaster Tax Relief Act of 2019, enacted as Division Q of the Further Consolidated Appropriations Act, 2020 ( P.L. 116-94), amended Code Sec. 7508A relating to the discretionary authority of the Secretary of the Treasury or her delegate to postpone certain time-sensitive tax deadlines by reason of a federally declared disaster, by adding Code Sec. 7508A(d). This provision provides qualified taxpayers a mandatory 60-day period that is disregarded "in the same manner as a period specified" under Code Sec. 7508A(a).

On January 13, 2021, the IRS published in the Federal Register a notice of proposed rulemaking ( NPRM REG-115057-20) to interpret and implement Code Secs. 165(i)(5) and 7508A(d). As described in the proposed regulations, Code Sec. 7508A(d) was ambiguous in at least two important respects—the time-sensitive acts to be postponed (beyond the pension-related actions described in Code Sec. 7508A(d)(4)) were not specified and it was unclear how the mandatory 60-day postponement period was to be calculated when the disaster declaration specified in Code Sec. 7508A(d) did not contain an incident date. The legislative history was also insufficient to explain these areas of ambiguity

Final Regulations
The final regulations adopt the proposed rules including providing that the definition of a federally declared disaster includes both a major disaster and emergencies declared under sections 401 or 501 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) ( P.L. 100-707). Also, one minor modification has been made to an example in the proposed rules to better illustrate the calculation of the mandatory 60-day postponement period in the event of multiple declarations and shifting "latest" incident dates.

Applicable Date
The final regulations under Code Sec. 7508A for a mandatory 60-day postponement period apply to disasters declared on or after December 21, 2019. The final regulations under Code Sec. 165 for the definition of a federally declared disaster apply June 11, 2021.

The IRS has released a revenue procedure explaining how a taxpayer changes its method of computing depreciation for certain residential rental property. Automatic consent procedures for changing accounting method are available for taxpayers adopting the depreciation method changes.

The IRS has released a revenue procedure explaining how a taxpayer changes its method of computing depreciation for certain residential rental property. Automatic consent procedures for changing accounting method are available for taxpayers adopting the depreciation method changes.

Residential Rental Property Allowed 30-Year ADS Depreciation
Tax Cuts and Jobs Act ( P.L. 115-97) added residential rental property held by an electing real property trade or business to the list of property to which a 30 year recovery periods applies under the alternative depreciation system (ADS), thus changing the recovery period from 40 years to 30 years. The change applied to property placed in service after December 31, 2017, and therefore only to property newly placed in service.

The Taxpayer Certainty and Disaster Tax Relief Act (Taxpayer Certainly Act) ( P.L. 116-260), enacted December 27, 2020, extended 30-year depreciation to apply to residential rental property placed in service before January 1, 2018 held by certain electing real property trade or businesses. To apply the 30-year recovery period to property already placed in service, taxpayers have to change their computation of depreciation for the property.

Procedures Provided for Changing Depreciation Method
This revenue procedure permits taxpayers who are affected by the Taxpayer Certainly Act's retroactive effective date to file an amended federal income tax return or information return, administrative adjustment request (AAR), or a Form 3115, Application for Change in Accounting Method, to change their method of computing depreciation of certain residential rental property held by an electing real property trade or business to use a 30-year ADS recovery period. If the property is included in a general asset account, it permits taxpayers to change their general asset account treatment for the property to comply with Reg. §1.168(i)-1(h)(2).

The revenue procedure also provides automatic consent procedures for changing accounting method, and in certain cases simplified procedures, for taxpayers adopting the depreciation method changes.

An eligible partnership may file amended partnership returns for tax years beginning in 2018, 2019, and 2020 by filing a Form 1065, U.S. Return of Partnership Income (Form 1065), with the "Amended Return" box checked. The partnership may also issue an amended Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc. (Schedule K-1), to each of its partners.

An eligible partnership may file amended partnership returns for tax years beginning in 2018, 2019, and 2020 by filing a Form 1065, U.S. Return of Partnership Income (Form 1065), with the "Amended Return" box checked. The partnership may also issue an amended Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc. (Schedule K-1), to each of its partners.

Partnerships Eligible for Amended-Return Procedures
The amended-return procedures apply to "BBA partnerships," which include most partnerships that are subject to the centralized audit regime provided by the Bipartisan Budget Act of 2015 (BBA) ( P.L. 114-74). The centralized audit regime replaced the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) ( P.L. 97–248) partnership procedures.

An eligible BBA partnership may use amended returns to:

• change its method of depreciation and/or general asset account treatment for its residential rental property, or
• make a late election to be an electing real property trade or business under Code Sec. 163(j)(7) by filing an amended Form 1065 in accordance with Rev. Proc. 2020-22, 2020-18 IRB 745.

Amended Partnership Returns in Special Situations
If the partnership is currently under examination for a tax year beginning in 2018, 2019, or 2020, it must send written notice to the revenue agent coordinating the before or at the same time it files its amended Form 1065.

If the partnership previously filed an administrative adjustment request (AAR) for a tax year covered by the amended return, it should use the items as adjusted in the AAR on the amended return.

If, under Notice 2019-46, 2019-37 I.R.B. 695, a partnership has applied the Global Intangible Low-Taxed Income (GILTI) rules of Proposed Reg. §1.951A-5 for tax years ending before June 22, 2019, the partnership may continue to apply those rules to those tax years. However, the partnership must also furnish amended Schedules K-1 and appropriate notifications to its partners.

An estate was allowed a marital deduction because the decedent’s marriage was valid in the country of celebration. The decedent, who was Jewish, obtained a religious divorce under rabbinical law in New York from his first wife after a New York court had declared his Mexican divorce invalid, which resulted in the declaration that his marriage to a second wife was null and void. The decedent traveled to Israel and married his third wife in an Orthodox Jewish ceremony. The Israeli marriage certificate noted that the decedent was free to marry because he was divorced. The government claimed that because the divorce was not valid under state law, no marital deduction was allowed because the property did not pass to the decedent’s surviving spouse.

An estate was allowed a marital deduction because the decedent’s marriage was valid in the country of celebration. The decedent, who was Jewish, obtained a religious divorce under rabbinical law in New York from his first wife after a New York court had declared his Mexican divorce invalid, which resulted in the declaration that his marriage to a second wife was null and void. The decedent traveled to Israel and married his third wife in an Orthodox Jewish ceremony. The Israeli marriage certificate noted that the decedent was free to marry because he was divorced. The government claimed that because the divorce was not valid under state law, no marital deduction was allowed because the property did not pass to the decedent’s surviving spouse.

Marriage Was Valid in New York
Under New York law, the marriage was valid since it was recognized in Israel unless it was contrary to public policy or violated "positive law." Because Code Sec. 2056(a) focuses on the identity of the surviving spouse, the initial question was whether the decedent and the surviving spouse were validly married, and not whether the religious divorce was valid. Under Israeli law, the decedent was validly divorced and could remarry. Thus, for purposes of New York law, the marriage was not bigamous and not contrary to public policy. New York divorce law was not violated by the finding because that law was not broken by a New York resident marrying outside of the state and recognizing a non-New York marriage was not equivalent to ruling on the divorce’s validity. However, the ruling was narrowly focused on whether the New York Court of Appeals would recognize the Israeli marriage, which was not contested by the prior spouse and left undisturbed by the lower courts.

The Treasury Department and the IRS have announced that they intend to amend the base erosion and anti-abuse tax (BEAT) regulations under Code Sec. 59A and Code Sec. 6038A to defer the information reporting requirements for qualified derivative payments (QDPs) until tax years beginning on or after January 1, 2023. The current regulations provide that the QDP reporting requirements apply to tax years beginning on or after June 7, 2021.

The Treasury Department and the IRS have announced that they intend to amend the base erosion and anti-abuse tax (BEAT) regulations under Code Sec. 59A and Code Sec. 6038A to defer the information reporting requirements for qualified derivative payments (QDPs) until tax years beginning on or after January 1, 2023. The current regulations provide that the QDP reporting requirements apply to tax years beginning on or after June 7, 2021.

Background
Under the BEAT rules, a base erosion minimum tax is imposed on certain corporations with annual average annual gross receipts of at least $500 million over the previous three tax years. The tax applies to base erosion payments paid or accrued in tax years beginning after December 31, 2017. Generally speaking, base erosion payments are certain types of payments made by a taxpayer to foreign related parties or foreign persons.

QDPs are not base erosion payments. A QDP is any payment made by a taxpayer to a foreign related party pursuant to a derivative for which:

• the taxpayer recognizes gain or loss on the derivative on a mark-to-market basis (treats the derivative as sold on the last business day of the tax year);
• the gain or loss is ordinary; and
• any gain, loss, income or deduction on a payment made pursuant to the derivative is also treated as ordinary.

This QDP exception applies only if the taxpayer satisfies certain reporting requirements. Reg. §1.6038A-2(b)(7)(ix) requires a taxpayer subject to the BEAT to report on Form 8991, Tax on Base Erosion Payments of Taxpayers With Substantial Gross Receipts, the aggregate amount of QDPs for the tax year, and make a representation that all payments satisfy the reporting requirements of Reg. §1.59A-6(b)(2).

Reg. §1.6038A-2(b)(7)(ix) applies to tax years beginning on or after June 7, 2021. During the “transition period” before that date, a taxpayer is treated as satisfying the reporting requirements to the extent that it reports the aggregate amount of QDPs on Schedule A of Form 8991, provided the taxpayer reports this amount in good faith ( Reg. §§1.59A-6(b)(2)(iv); 1.6038A-2(g)).

QDP Reporting Deferred
The preamble to 2020 final regulations relating to Code Sec. 59A included a comment which recommended that Treasury and the IRS address the interaction of the QDP exception, the BEAT netting rule in Reg. §1.59A-2(e)(3)(vi), and the QDP reporting requirements in Reg. §1.59A-6 and Reg. §1.6038A-2(b)(7)(ix). While studying this matter, Treasury and the IRS have determined that it is appropriate to extend the transition period.

Accordingly, Treasury and the IRS intend to amend Reg. §1.6038A-2(g) to provide that Reg. §1.6038A-2(b)(7)(ix) will apply to tax years beginning on or after January 1, 2023. Until that reporting requirement applies, the transition period rules described above continue to apply.

Taxpayer Reliance
Taxpayers may rely on this Notice before the amendments to the final regulations are issued.