Overview
Bill Would Repeal Tax Increase on Exempt Organizations’ Transportation Fringe Benefits: A manager’s amendment to H.R. 88 (the vehicle for certain technical corrections, extenders, and other provisions) would strike section 512(a)(7), which requires certain exempt organizations to pay a 21% unrelated business income tax on various transportation and fringe benefits, including parking facilities and transit passes. In addition, the bill would clarify certain provisions on deemed repatriation net tax liability under section 965(h), change rules related to business holdings of private foundations under section 4943(c)(4)(A), and provide disaster tax relief.
Tax Court Releases Opinion in Patients Mutual Assistance Collective Corp. v. Comm’r: Today the Tax Court released its opinion in Patients Mutual Assistance Collective Corporation v. Commissioner, which involved a plaintiff California medical-marijuana dispensary that deducted section 162 business expenses and adjusted for indirect cost of goods sold pursuant to the section 263A UNICAP rules for producers. The Commissioner determined that the plaintiff’s sole trade or business was trafficking in a controlled substance and that section 280E prevented it from deducting business expenses. The Commissioner also determined that the plaintiff had to calculate cost of goods sold using the section 471 regulations for resellers and was liable for accuracy-related penalties.
The Tax Court held that (1) the government’s dismissal with prejudice of a civil-forfeiture action against the plaintiff does not bar deficiency determinations; (2) section 280E prevents plaintiff from deducting ordinary and necessary business expenses; (3) during the years at issue the plaintiff’s sole trade or business was trafficking in a controlled substance, and (4) plaintiff must adjust for cost of goods sold under the section 471 regulations for resellers. The Tax Court indicated that it would address whether plaintiff owes accuracy-related penalties in a separate opinion.
OECD Report Finds Tax-to-GDP Ratios in Most Asian and Pacific Economies Fell Between 2015 and 2016: Today the Organization for Economic Development and Co-operation (OECD) released a report on revenue statistics in Asian and Pacific Economies. While tax revenues have increased in a majority of Asian and Pacific economies over the last decade, the report finds that only three out of the 16 economies covered by the report increased their tax-to-GDP ratios between 2015 and 2016 compared to nine in the previous year.
Miscellaneous Guidance:
Revenue Procedure 2018-60 provides the procedures by which a taxpayer may obtain the automatic consent of the Commissioner under section 446 and Treas. Reg. § 1.446-1(e) to change a method of accounting to comply with section 451(b), as amended by the Tax Cuts and Jobs Act. The revenue procedure also provides procedures for certain qualifying taxpayers to make a method change to comply with section 451(b) without filing a Form 3115, Application for Change in Accounting Method.
Notice 2018-94 extends the due dates for certain 2018 information reporting requirements for insurers, self-insuring employers, and certain other providers of minimum essential coverage under section 6055 and for applicable large employers under section 6056. Specifically, the notice extends the due date for furnishing to individuals the 2018 Form 1095-B, Health Coverage, and the 2017 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, from January 31, 2019, to March 4, 2019. The notice also extends transitional good-faith relief from section 6721 and 6722 penalties to the 2018 information reporting requirements under sections 6055 and 6056.