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Congressional FAQ Seen as Unorthodox, of Limited Help

Posted on Apr. 1, 2020

New guidance on the employee retention credit from the Senate Finance Committee is no substitute for guidance from the IRS, according to a practitioner.

“These are useful, but do we need additional guidance? Almost certainly,” John Gimigliano of KPMG said March 31 during a webinar hosted by his firm.

The Finance Committee on March 31 provided the series of frequently asked questions about the retention credit created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136).

Gimigliano noted the disclaimer at the bottom of the FAQs, which says that the guidance is “for informational purposes and should not be relied on for legal advice,” and that employers should “consult the IRS or a tax advisor to address questions related to their specific circumstances.”

The use of FAQs in this way is unorthodox, Gimigliano said. “I think that Congress is getting some feedback that there are lots of areas of the law that taxpayers need clarification on,” he said.

Gimigliano also noted that the FAQ was created by the committee’s Republican staff. “Typically, we would see these things be produced on a bipartisan basis,” he said. “It doesn’t mean that Democratic staff doesn’t agree, but they were clearly produced by Republican staff.”

Manal Corwin, also of KPMG, said that practitioners are figuring things out as they go in terms of digesting the various sources of guidance in response to the coronavirus pandemic.

“Legislation — particularly legislation that’s adopted quickly — tends to leave a lot of unanswered questions that, in the normal course, are answered through Treasury regulatory guidance and IRS guidance,” Corwin said. “In a circumstance like this where the relief is intended to be immediate, in the past we’ve seen a lot of that guidance provided through FAQs that the IRS puts out.”

Another source of guidance could be forms, Corwin said. The IRS issued a draft version of Form 7200, “Advance Payment of Employer Credits Due to COVID-19,” along with draft instructions on March 30.

Guidance Delays?

Besides necessitating additional guidance, the CARES Act could push other projects off track. For example, the bill made significant changes to the section 163(j) interest deduction limitation.

The Office of Management and Budget’s review of a second round of proposed regulations on section 163(j) was completed March 20, almost two months after the agency finished its review of the finalized version of the first batch of section 163(j) regs. Treasury and the IRS said they expected to issue the final regs and second batch of proposed regs in March.

However, Tom West of KPMG said it’s possible the timeline has been changed following the CARES Act. “We’re all waiting to see whether or not Treasury is still going to put out those regulations or whether they’re going to hold back and tweak those regulations,” he said.

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