Daily Tax Update - September 27, 2016: IRS Provides Guidance on Qualifications for RICs

IRS Provides Guidance on Qualifications for RICs:  Today, the IRS issued proposed regulations to provide guidance relating to the income test and asset diversification requirements that are used to determine whether a corporation may qualify as a regulated investment company (RIC) for federal income tax purposes.  The preamble to the proposed regulations and Rev. Proc. 2016-50, also released today, state that IRS will no longer ordinarily issue letter rulings on questions relating to the treatment of a corporation as a RIC that require a determination of whether a financial instrument or position is a security under the Investment Company Act of 1940.  

IRS Releases Guidance on QTIP Elections:  In Revenue Procedure 2016-49, the IRS has provided the procedures to disregard and treat as null and void for transfer tax purposes a qualified terminable interest property (QTIP) election in situations where the QTIP election was not necessary to reduce the estate tax liability to zero.  The guidance states that the new procedures will not apply to those estates in which the executor made the portability election in accordance with the regulations under section 2010(c)(5)(A). 

House Passes Exemption From the Individual Shared Responsibility Requirement:  Today, the House passed the CO-OP Consumer Protection Act of 2016 (H.R. 954) to amend the Internal Revenue Code to exempt from the Affordable Care Act individual shared responsibility requirement certain individuals who had coverage under a terminated health plan funded through the Consumer Operated and Oriented Plan (CO-OP) program.  

OECD Releases Report on Effective Carbon Rates:  The OECD released Effective Carbon Rates: Pricing CO2 through taxes and emissions trading systems, a report that presents new data on effective carbon rates, the price of carbon emissions resulting from taxes and emissions trading systems, in 41 OECD and G20 countries.  The report finds that there is a major gap between current carbon pricing policies and what is needed to reduce greenhouse gas emissions driving climate change.  Across all sectors and countries, the average effective carbon rate is EUR 14.4 per ton of CO2, of which 93.1% are excise taxes, 5.6% are emissions trading systems, and 1.3% are carbon taxes. 

Miscellaneous Guidance:
Notice 2016-58 announces the special per diem rates effective October 1, which taxpayers may use to substantiate the amount of expenses for lodging, meals, and incidental expenses when traveling away from home. 

Notice 2016-59 advises readers of revisions to the requirements for the reduced user fee for substantially identical letter rulings set forth in section 15.07(s) of Rev. Proc. 2016-1. 

DTU in Depth – Election Update

How the 2016 Election Will Impact Public Policy Developments:  Last night’s presidential debate marked the beginning of the final phase leading to November’s presidential and congressional elections.  To be sure, the next six weeks will be filled with speeches, policy proclamations, a wave of positive and negative advertisements, and plenty of politics.

But, at the same time, the 2016 election will have serious implications for the future.  A change in elected and appointed policymakers resulting from a new president, administration, and Congress, will significantly impact the trajectory of a wide range of issues, including tax, financial services, immigration, trade, education, energy, and health care.  Taxes were hotly debated last night by the two presidential candidates.  Because so many small businesses are organized as passthrough entities, the treatment of passthrough entities will be central to any movement next year on tax reform.  Click here to read more.