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.

Administrative

NOTICE 2018-96, page 1061. Section 30D provides a credit of up to $7,500 for new qualified plug-in electric drive motor vehicles sold after December 31, 2009. This notice announces the credit phase-out schedule for new qualified plug-in electric drive motor vehicles sold by Tesla, Inc. Section 30D of the Internal Revenue Code provides for a credit determined under § 30D(b) for certain new qualified plug-in electric drive motor vehicles. The new qualified plug-in electric drive motor vehicle credit begins to phase out for a manufacturer's qualified plug-in electric drive motor vehicles in the second calendar quarter after the calendar quarter in which at least 200,000 of the manufacturer's vehicles that qualify for the credit have been sold for use or lease in the United States (determined on a cumulative basis for sales after December 31, 2009). Tesla, Inc. has submitted quarterly reports that indicate that its cumulative sales of qualified plug-in electric drive motor vehicles reached the 200,000-vehicle limit during the calendar quarter ending September 30, 2018. Accordingly, the credit for all new qualified plug-in electric drive motor vehicles sold by Tesla, Inc. will begin to phase out on January 1, 2019.

NOTICE 2018-100, page 1074. This notice provides certain tax-exempt organizations a waiver of the addition to tax under section 6655 of the Internal Revenue Code (Code) for underpayment of estimated income tax payments required to be made on or before December 17, 2018, to the extent the underpayment of estimated income tax results from the changes to the tax treatment of qualified transportation fringes under sections 13304(c) and 13703 of “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” (the Act). Pub. L. No. 115-97, 131 Stat. 2054.

Employee Plans

NOTICE 2018-95, page 1058. This notice provides transition relief from the “once-in-always-in” (OIAI) exclusion condition for excluding part-time employees under § 1.403(b)-5(b)(4)(iii)(B) of the Treasury Regulations. Under the OIAI exclusion condition, for a § 403(b) plan that excludes part-time employees from making elective deferrals, once an employee is eligible to make elective deferrals, the employee may not be excluded from making elective deferrals in any later exclusion year on the basis that the employee is a part-time employee. In addition, in applying the OIAI exclusion condition for exclusion years after the transition relief ends, this notice provides a fresh-start opportunity for plans.

Employment Taxes

NOTICE 2018-97, page 1062. Section 83 generally provides for the federal tax treatment of property transferred in connection with the performance of services. Section 83(i) allows certain employees to elect to defer income that would otherwise be included under § 83(a) upon the exercise of a stock option or settlement of a stock-settled restricted stock unit. Income subject to such an election may be deferred for up to 5 years, subject to certain limitations. The notice provides guidance to taxpayers on (1) application of the requirement in § 83(i)(2)(C)(i)(II) that grants be made to 80% of the employer's employees, (2) application of income tax withholding to the deferred income related to qualified stock, and (3) the manner in which an employer may opt out of permitting employees to elect the deferred tax treatment even if the requirements under § 83(i) are otherwise met.

Income Tax

NOTICE 2018-97, page 1062. Section 83 generally provides for the federal tax treatment of property transferred in connection with the performance of services. Section 83(i) allows certain employees to elect to defer income that would otherwise be included under § 83(a) upon the exercise of a stock option or settlement of a stock-settled restricted stock unit. Income subject to such an election may be deferred for up to 5 years, subject to certain limitations. The notice provides guidance to taxpayers on (1) application of the requirement in § 83(i)(2)(C)(i)(II) that grants be made to 80% of the employer's employees, (2) application of income tax withholding to the deferred income related to qualified stock, and (3) the manner in which an employer may opt out of permitting employees to elect the deferred tax treatment even if the requirements under § 83(i) are otherwise met.

NOTICE 2018-99, page 1067. This notice provides interim guidance for taxpayers to determine the amount of parking expenses for qualified transportation fringes (QTFs) that is nondeductible under § 274(a)(4) of the Internal Revenue Code (Code) and for tax-exempt organizations to determine the corresponding increase in the amount of unrelated business taxable income (UBTI) under § 512(a)(7) attributable to the nondeductible parking expenses. Sections 274 and 512 were amended by the Tax Cuts and Jobs Act, Pub. L. No. 115-97, §§ 13304 and 13703, 131 Stat. 2054, 2123, 2169 (2017) (the Act), effective for amounts paid or incurred after December 31, 2017. As amended by the Act, §274(a)(4) generally disallows a deduction for expenses with respect to QTFs provided by taxpayers to their employees, and §512(a)(7) generally provides that a tax-exempt organization's UBTI is increased by the amount of the QTF expense that is nondeductible under § 274. However, the Act does not address how to determine the amount of the QTF expense that is nondeductible or treated as an increase in UBTI.

NOTICE 2018-100, page 1074. This notice provides certain tax-exempt organizations a waiver of the addition to tax under section 6655 of the Internal Revenue Code (Code) for underpayment of estimated income tax payments required to be made on or before December 17, 2018, to the extent the underpayment of estimated income tax results from the changes to the tax treatment of qualified transportation fringes under sections 13304(c) and 13703 of “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” (the Act). Pub. L. No. 115-97, 131 Stat. 2054.