IRS EASES FATCA ENFORCEMENT

Washington, D.C. -- The Internal Revenue Service said it would regard 2014 and 2015 as a transition period for purposes of IRS enforcement and administration of the Foreign Account Tax Compliance Act, or FATCA, for banks that have made a good-faith effort to comply.

FATCA was included as part of the HIRE Act of 2010 and requires foreign financial institutions to report on the holdings of U.S. citizens or else face stiff penalties. The notice that the IRS issued in early May is not a postponement, but it indicates that if foreign banks and other entities have been making "good faith efforts" to comply, then they won't be subject to onerous penalties.

In Notice 2014-33, the IRS announced that calendar years 2014 and 2015 would be regarded as a transition period for purposes of IRS enforcement and administration with respect to the implementation of FATCA by withholding agents, foreign financial institutions, and other entities, and with respect to certain related due diligence and withholding provisions.

During the transition period, the IRS said that it would take into account whether a withholding agent has made "reasonable efforts" during the transition period to modify its account-opening practices and procedures to document the status of payees, apply the appropriate standards of knowledge, and, in the absence of reliable documentation, apply the relevant presumption rules.

 

IRS DRAFTS EASIER-TO-USE FORM 1023-EZ FOR CHARITIES

Washington, D.C. -- The Internal Revenue Service has released a draft of an easier-to-use Form 1023-EZ for charities that are seeking tax-exempt status. The draft Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, announced in the Federal Register March 31, is a less burdensome version of the Form 1023.Most small exempt organizations will be eligible to use the Form 1023-EZ. The IRS expects the Form 1023 EZ to be in use by eligible organizations this summer.

 

IRS MODIFIES 'KILLER B' REGS

Washington, D.C. -- The Internal Revenue Service is modifying and clarifying the regulations under Section 367(b) of the Tax Code relating to the treatment of property used to acquire parent stock or securities in certain triangular re-organizations involving foreign corporations, colloquially referred to as the "Killer B" regulations, to close loopholes in the anti-abuse rules.

Notice 2014-32 eliminates the deemed contribution model under the existing regulations. In addition, the notice modifies the amount of income and gain taken into account for purposes of applying the priority rules of Section 367(a) and (b).

In addition, the notice clarifies the application of the anti-abuse rules. The final regulations provide that appropriate adjustments shall be made if, in connection with a triangular re-organization, a transaction is engaged in with a view to avoid the purpose of the anti-abuse rules. The IRS said it and the Treasury Department are aware that taxpayers are engaging in transactions designed to avoid U.S. tax by exploiting the deemed contribution provided under the final regulations.

The IRS and the Treasury believe that the deemed contribution is inconsistent with the purpose of Section 1.367(b)-10, regardless of whether a subsidiary acquires the stock or securities of a parent corporation from the parent or from someone other than the parent.

 

NEW LIVING EXPENSE STANDARDS RELEASED

Washington, D.C. -- The IRS has released the 2014 update to its Allowable Living Expense Standards that apply to taxpayers who need to delay full payment of delinquent taxes. The ALE Standards are used to objectively determine what a taxpayer can claim as basic living expenses to avoid undue hardship when they have to delay full payment of taxes. National standards for one to four persons in a household include between $315 and $794 for food and between $88 and $244 for apparel and services. Allowable out-of-pocket health-care costs are $60 for those younger than 65 and $144 for those 65 and older.

The IRS provides national standards for food, clothing and out-of-pocket health-care expenses. Local standards are provided for housing and utilities for different states.

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