IRS officials affirmed stances taken in informal guidance on new coronavirus relief-related credits even though some positions may conflict with the Joint Committee on Taxation’s interpretation.
Asked about potential discrepancies on how the credits operate, Sydney L. Gernstein, branch 1 chief (employment tax), IRS Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes), repeatedly pointed to the IRS’s position in sets of FAQs that have been issued following coronavirus relief legislation.
For example, the IRS FAQs on the employee retention credit include only full-time employees in determining if an employer has 100 workers for purposes of the “qualified wages” definition. But the JCT’s description (JCX-12R-20) discusses “full-time and full-time-equivalent employees.”
“What we said in the FAQ, that would be our position,” Gernstein said April 30 during a webinar hosted by the American Bar Association Section of Taxation.
“There seem to be differing views between some of the staff on the Hill and how the provisions are being interpreted by the IRS,” said Kurt L.P. Lawson of Hogan Lovells US LLP, adding that this raises questions about reasonable reliance on the FAQs. Lawson noted that neither the FAQs nor the JCT descriptions are binding guidance and asked how taxpayers might construct a reasonable position given the conflicts.
But Janine Cook, IRS deputy associate chief counsel (Employee Benefits, Exempt Organizations, and Employment Taxes), wouldn’t comment specifically on that issue.
“Obviously the FAQs are sometimes used to provide helpful information as soon as we can,” Cook said, adding that the IRS and Treasury are trying to implement things quickly while recognizing that there could still be differing opinions on some issues. Cook wouldn’t say whether any of the FAQs would eventually be included in regulations.
Additional FAQs Coming
The IRS has issued dozens of FAQs since enactment of the Families First Coronavirus Response Act (P.L. 116-127) March 18 and the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136) March 27. The former provides payroll tax credits for employers providing paid sick, family, and medical leave, and the latter offers an employee retention credit equal to 50 percent of qualified wages paid to workers.
Both Gernstein and Cook said that additional FAQs on the credits would likely be forthcoming and urged practitioners to look for updates.
Lawson noted that the substantiation requirements for the paid leave credits were rigid, but that the employee retention credit didn’t seem to have similar rules.
Gernstein acknowledged that the FAQs for the retention credit don’t address substantiation specifically, but he said that using reasonable methods — including using the paid leave credit rules as a guide — is a good idea.