The annual IRS priority guidance plan (PGP) lists subjects on which the IRS plans to focus to provide guidance to taxpayers, primarily through regs. Comparing the 2018-2019 PGP with the 2019-2020 PGP yields clues about what guidance to expect in 2020.
The former PGP, released on November 8, 2018, listed 231 projects over the 12-month period between July 1, 2018, and June 30, 2019.
The 2019-2020 PGP, released on October 8, lists 203 projects that will receive focus between July 1, 2019, and June 30, 2020. As of September 30, 31 guidance items have been released. Both PGPs are divided into several parts, three of which contain items relevant to international tax.
Project Status Categories
The international tax projects are in varying stages of completion. Most are provisions related to the Tax Cuts and Jobs Act that await final regs after the IRS issued proposed regs in 2018 and 2019.
Some are TCJA-related projects that await revisions and updates to regs that were published before the TCJA amended the underlying code sections. Some are non-TCJA provisions that await final regs after the issuance of proposed regs, notices, or revenue procedures in prior years.
Some projects included in both PGPs have no previous guidance. These may reflect priorities that are worthy of PGP inclusion but that have been given less focus than PGP projects on which proposed regs or other guidance has been published.
Finally, some projects are new to the PGP.
Part 1: Implementing the TCJA
Part 1 of both PGPs covers guidance interpreting the TCJA. Most of these projects await final regs, following the 2018 or 2019 release of other guidance, mostly proposed regs.
Among TJCA-related international provisions awaiting further guidance, most have had guidance previously issued in 2018 and 2019. These provisions include the following:
Both PGPs call for final regs under sections 864(c)(8) and 1446(f) on gain or loss to foreign persons from the sale or exchange of an interest in a partnership engaged in a U.S. trade or business. Both sections have outstanding proposed regs. The first was published in late 2018 (REG 113604-18), and the second on May 13 (REG 105476-18).
Both PGPs call for final regs and other guidance under section 267A addressing hybrid transactions and hybrid entities, with proposed regs published in late 2018 (REG 104352-18).
Both call for final regs and other guidance on foreign tax credit issues under sections 901 and 960 and related provisions, including sections 78, 861, 904, and 905. Proposed regs were published in late 2018 (REG 105600-18). On December 17, the IRS published T.D. 9882 adopting these proposed regs. The same day, the IRS published proposed regs (REG 105495-19) that provide additional guidance on FTC issues.
Both PGPs call for regs under sections 959 and 961 addressing previously taxed earnings and profits under subpart F, with Notice 2019-01, 2019-3 IRB 275, outstanding since January 7.
Both PGPs call for final regs and other guidance under section 250 for the foreign-derived intangible income and global intangible low-taxed income deductions. Proposed regs were published on March 6 (REG 104464-18).
Both PGPs call for final regs and other guidance on section 951A’s GILTI provisions. Previous guidance includes proposed regs published on June 21 (REG 101828-19) and Notice 2019-46, 2019-37 IRB 695, published on August 22. These proposed regs and notice also contain modifications to subpart F, including coordination with section 951A, the repeal of the section 958(b)(4) attribution rule, and the modification of section 951(b).
Both PGPs call for final regs and other guidance on the participation exemption in section 245A. The IRS published temporary (T.D. 9865) and proposed regs (REG 106282-18) on June 18.
Both PGPs call for regs under several sections governing passive foreign investment companies, including regs addressing insurance income. Proposed regs were published on July 11 (REG 105474-18).
Both PGPs call for regs under sections 367 and 482 addressing the TCJA’s changes to those sections that require the Secretary to value intangible property. In contrast to subjects having post-TCJA outstanding guidance, pre-TCJA temporary (T.D. 9738) and proposed regs (REG 139483-13) have been outstanding since late 2015.
TCJA-related revisions to source rules for inventory sales in section 863(b) and additional rules in 865(e)(2) addressing source rules for sales of personal property have no previous guidance, even though both PGPs call for this.
Parts 2 and 3: Burden Reduction
Parts 2 and 3 of both PGPs address burden reduction. Part 2 specifically calls for identifying and reducing regulatory burdens under Executive Order 13789, while Part 3 lists more general burden reduction projects.
International burden reduction provisions include the delay, proposed removal, and review of various final, temporary, and proposed regs under the section 385 inversion rules published in 2016. Proposed regs to that effect were published in late 2018 (REG 130244-17).
Additionally, both PGPs propose modification of 2016 final regs under section 987 on income and currency gains or losses of qualified business units (T.D. 9794). Notice 2017-57, 2017-42 IRB 324, Notice 2018-57, 2018-26 IRB 774, and Notice 2019-65, 2019-52 IRB 1, all extend the applicability date of the regs to years beginning after December 7, 2020.
Both PGPs call for regs under section 871(m) to include guidance on withholding on dividend equivalent amounts in non-delta-one transactions (in which the ratio of the value of a contract to the value of the referenced asset is not one). Final and temporary regs (T.D. 9815) have been outstanding since early 2017, and Notice 2018-72, 2018-40 IRB 522, in late 2018 delayed the applicability date of some of the final regs. That delay was extended in Notice 2020-2, 2020-3 IRB 1. On December 17, the IRS issued final regs (T.D. 9887) on dividend equivalent amounts that also withdrew temporary regulations.
Both PGPs also call for final withholding regs under chapter 3 (sections 1441-1446) and chapter 4 (sections 1471-1474), addressing withholding on gross proceeds, foreign passthrough payments, insurance premiums, and withholding agents’ due diligence requirements, including issues related to refunds and credits. Proposed regs have been outstanding since late 2018 (REG 132881-17).
Parts 5 and 6: General International Guidance
Part 5 of the former PGP and Part 6 of the current PGP contain general guidance not directly related to the TCJA. As with the TCJA-related guidance, international provisions requiring further guidance are in various stages of completion.
Both PGPs anticipate revising final regulations under reg. section 1.337(d)-7 (T.D. 9626) regarding the treatment of certain foreign corporations.
Both PGPs await final regs for covered asset acquisitions in section 901(m), with temporary (T.D. 9800) and proposed regs published in late 2016 (REG 129128-14).
Both PGPs call for final regs on transfers of property to partnerships with related foreign partners and controlled transactions involving partnerships. Temporary (T.D. 9814) and proposed regs (REG 127203-15) were published in 2017.
In addition to burden reduction on these provisions, both PGPs also call for final regs and other guidance under chapters 3 and 4, including regs on due diligence, taxpayer identification numbers, and qualified intermediaries. Previous guidance was issued throughout 2017 in the form of temporary (T.D. 9809) and proposed regs (REG 103477-14), Notice 2017-46, 2017-41 IRB 275, and Rev. Proc. 2017-15, 2017-3 IRB 437.
Both PGPs call for final regs under sections 897 and 1445 related to changes in the Protecting Americans From Tax Hikes Act of 2015. Proposed regs were published on June 7 (REG 109826-17).
Both PGPs call for regs on sourcing and expense allocations under section 861, including character and source of income from transactions involving intellectual property and digital goods and services, with proposed regs published on August 14 (REG 130700-14).
Two non-TCJA international provisions have no previous guidance but are included in both PGPs. They call for regs under section 1256(g)(2) regarding the definition of a foreign currency contract after the decision in Wright v. Commissioner, 809 F.3rd 877 (6th Cir. 2016). That decision held that over-the-counter currency options are section 1256 foreign currency contracts in contrast to legislative history, Tax Court decisions, and IRS guidance.
Similarly, both PGPs call for guidance under sections 6039F, 6048, and 6677 on foreign trust reporting and reporting on foreign gifts and regs under sections 643(i) and 679 relating to specific transactions between U.S. persons and foreign trusts. There is no previous guidance on this topic.
Finally, there is one subject that is new to the PGP: guidance under chapter 61, including rules to require payors that are financial institutions and that maintain financial accounts at U.S. offices or branches to report information concerning specific account holders.
Guidance published after the September 30 closing date for the 2019-2020 PGP includes the following:
Proposed regs under section 958 for purposes of determining controlled foreign corporation or U.S. shareholder status (REG-104223-18) were released on October 2.
As noted, Notice 2019-65 was released on December 6. It defers the applicability date of the 2016 section 987 regs.
November 19 saw the release of final regs under sections 954 and 958 on related-person ownership attribution and active rent exception to foreign personal holding company income (T.D. 9883) subsequent to the publication of proposed regs published on May 20 (REG 125135-15).
On December 6, 2019, final base erosion and antiabuse tax regulations (T.D. 9885) finalized proposed regs published in late 2018 (REG 104259-18). Proposed regs containing additional BEAT rules were published on the same day (REG-112607-19).
As noted, on December 16 and 17, the IRS issued Notice 2020-2 and T.D. 9887 addressing section 871(m) dividend equivalent amounts.
As noted, on December 17, the IRS published final regulations (T.D. 9882) and proposed regulations (REG 105495-19) providing FTC guidance.
Projects that appear in both PGPs but have no previous guidance indicate a lower priority than projects with new or substantial previous guidance. Projects unrelated to the TCJA having previous guidance that is several years old could indicate a lower priority or a view that outstanding guidance is sufficient compared to other items.
TCJA-related projects in both PGPs seem more likely to be completed in 2020, especially if proposed regs were published in 2018 or 2019. These projects include guidance on PFICs and sections 267A, 250, and 245A.