This Week's Internal Revenue Bulletin

HIGHLIGHTS OF THIS ISSUE

These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations.

Employee Plans

Notice 2018-68, page 418. The notice provides initial guidance on the application of § 162(m) of the Code, as amended by “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” (Act), Public Law 115–97 (2017). Section 162(m)(1) generally limits the allowable deduction for a taxable year for remuneration by any publicly held corporation paid with respect to a covered employee. The Act made significant amendments to § 162(m), and also provided a transition rule applicable to certain outstanding arrangements (commonly referred to as the grandfather rule). The notice provides guidance on the amended rules for identifying covered employees and the operation of the grandfather rule.

REV. PROC. 2018-42, page 424. This revenue procedure modifies Rev. Proc. 2017-41, 2017–29 I.R.B. 92, to extend the deadline for submitting on-cycle applications for opinion letters for preapproved defined contribution plans for the third six-year remedial amendment cycle from October 1, 2018, to December 31, 2018.

Exempt Organizations

Notice 2018-67, page 409. This notice solicits comments regarding the application of new § 512(a)(6) of the Internal Revenue Code (“Code”), which was added to the Code by section 13702 of “An Act to provide for reconciliation pursuant to titles II and IV of the concurrent resolution on the budget for fiscal year 2018,” Public Law 115–97 (131 Stat. 2054 (2017)). Section 512(a)(6) requires an organization subject to the unrelated business income tax under § 511 with more than one unrelated trade or business to calculate unrelated business taxable income (“UBTI”) separately with respect to each trade or business. The notice requests comments on various topics, including possible methods for separating trades or businesses and the treatment of activities in the nature of investments and income from fringe benefits required to be included in UBTI under § 512(a)(7) for purposes of § 512(a)(6). The notice also sets forth interim and transition rules under § 512(a)(6) with respect to aggregating gross income and directly connected deductions of certain activities in the nature of investments. Finally, the notice concludes that global intangible low-taxed income (“GILTI”) under new § 951A will be treated in the same manner as subpart F inclusions under § 951(a)(1)(A) for purposes of the unrelated business income tax.

Income Tax

Notice 2018-68, page 418. The notice provides initial guidance on the application of § 162(m) of the Code, as amended by “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” (Act), Public Law 115–97 (2017). Section 162(m)(1) generally limits the allowable deduction for a taxable year for remuneration by any publicly held corporation paid with respect to a covered employee. The Act made significant amendments to § 162(m), and also provided a transition rule applicable to certain outstanding arrangements (commonly referred to as the grandfather rule). The notice provides guidance on the amended rules for identifying covered employees and the operation of the grandfather rule.

REV. PROC. 2018-43, page 425. This revenue procedure provides the monthly national average premium for qualified health plans that have a bronze level of coverage and are offered through Exchanges for taxpayers to use in determining their maximum individual shared responsibility payment under § 5000A(c)(1)(B) of the Internal Revenue Code and § 1.5000A-4 of the Income Tax Regulations.

REV. RUL. 2018-23, page 405. Federal rates; adjusted federal rates; adjusted federal long-term rate, the long-term exempt rate, and the blended annual rate. For purposes of sections 382, 1274, 1288, 7872 and other sections of the Code, tables set forth the rates for September 2018.

REV. RUL. 2018-24, page 407. This revenue ruling provides that the exchange of mortgage-backed securities pursuant to the Single Security Initiative does not constitute a taxable exchange for purposes of section 1001 of the Internal Revenue Code.