Daily Tax Update - July 14, 2016: IRS Holds Hearing on Proposed Debt-Equity Regulations

IRS Holds Hearing on Proposed Debt-Equity Regulations:  Today, the IRS held a public hearing on the proposed debt-equity regulations issued under section 385.  The majority of speakers advocated for the complete withdrawal or delay of the proposed regulations, or in the alternative, making numerous modifications.  Many commenters argued that the proposed rules would impact unintended targets and create uncertainty.  For prior in-depth coverage of the proposed section 385 regulations, click here.

IRS Issues Proposed Regulations on Device and Active Trade or Business Under Section 355:  Today, the IRS issued proposed regulations modifying the current regulations under section 355 to provide more objective guidance on certain device and non-device factors and adding a new minimum standard for the active trade or business requirement.  The proposed regulations provide objective thresholds comparing the ratio of business and non-business assets to determine whether a distribution by a corporation is a device.  In addition, the proposed rules add a new requirement that the active trade or business must be five percent of the total fair market value of the corporation’s assets.

Senator Wyden Introduces First-Time Homebuyer Tax Credit:  Yesterday, Senate Finance Committee ranking member Ron Wyden (D-OR) introduced a bill to create a permanent tax credit for first-time homebuyers.  Under the bill, homebuyers who earn less than $80,000 annually as individuals or $160,000 per year as a couple would get a refundable tax credit of up to $10,000.  The credit would equal 2.5% of the home purchase price, with the maximum credit reached at homes sold for $400,000.

Senators Introduce Extension for Biodiesel Tax Credit:  Yesterday, Senators Charles Grassley (R-IA) and Maria Cantwell (D-WA) introduced legislation to extend the biodiesel tax credit for three years and change it to apply only to domestic producers of biodiesel, rather than blenders of the fuel.

Newly Proposed Regulations Under Section 457(f) Impact Deferred Compensation Arrangements of Tax-Exempt and Governmental Entities:  The Internal Revenue Service (IRS) has issued the long-awaited proposed regulations governing deferred compensation for tax-exempt and governmental entities under section 457(f) of the Internal Revenue Code (Code).  While the proposed regulations, issued on June 22, provide few surprises for practitioners, they provide new planning opportunities for tax-exempt and governmental entities to include greater flexibility in their nonqualified deferred compensation arrangements.  Click here to read more.