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More ‘One-Off’ Relief Like Repatriation Proposal May Be Possible

Posted on Jan. 22, 2020

The IRS is trying to find ways to offer “one-off, taxpayer-specific” relief that don’t necessarily involve making regulatory changes.

A recent announcement about possible relief from double taxation under the transition tax — which was “intentionally cryptic” — is one example, IRS Chief Counsel Michael J. Desmond said January 21 during a webinar hosted by the Practising Law Institute.

“That press release we put out Friday was just one illustration where we’re trying to make clear to folks — although the context is intentionally a little bit ambiguous — that we are willing to take one-off, taxpayer-specific issues, and we absolutely want to hear from people on those,” Desmond said. “If you’ve got something that you think is an unintended consequence of the application of our rules resulting in a potential double taxation, we’d like to hear about it.”

The January 17 announcement said that relief from double taxation might be provided in “unique circumstances,” and practitioners noted the release’s lack of specifics.

Desmond said the IRS has seen taxpayers over the past year come in with unique, sympathetic situations that weren’t foreseen when guidance was issued on the Tax Cuts and Jobs Act. The January release was meant to publicly signal that the IRS is receptive to those complaints about the section 965 regulations, he said.

Section 965 imposes a one-time tax — 15.5 percent for cash positions and 8 percent for other amounts — on U.S. shareholders’ share of a specified 10-percent-owned foreign corporation’s deferred earnings and profits. Final regulations on the tax (T.D. 9846) were released in January 2019.

Desmond said the complaints raised by taxpayers might not require a wholesale reworking of regulations, but more limited relief is possible. “We do try whenever possible to do things through notice and comment, but there are often instances where we know we’re not addressing all issues and we know there are going to be gaps and holes,” he said.

New Projects on Guidance Plan

The first quarterly update to the 2019-2020 priority guidance plan should be released soon, Desmond said. He noted that Treasury and the IRS have been more focused on including only projects that can be completed during the plan year.

However, the government’s priorities might shift in light of recent legislation.

According to Desmond, the quarterly update will include additional items involving the Taxpayer First Act (P.L. 116-25), which was enacted in July, as well as projects concerning tax legislation (P.L. 116-94) signed into law at the end of 2019 that included the Setting Every Community Up for Retirement Enhancement Act and tax extenders.

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