Daily Tax Update - August 1, 2013: President to Nominate Koskinen to be IRS Commissioner

President to Nominate Koskinen to be IRS Commissioner:  President Obama is nominating John Koskinen as the next commissioner of the IRS.  Koskinen would replace acting commissioner Danny Werfel, who was appointed in May.

In a statement today, President Obama said, “John is an expert at turning around institutions in need of reform.  With decades of experience, in both the private and public sectors, John knows how to lead in difficult times, whether that means ensuring new management or implementing new checks and balances."  The President added, “Every part of our government must operate with absolute integrity and that is especially true for the IRS.  I am confident that John will do whatever it takes to restore the public’s trust in the agency.”

Camp Planning Fall Mark Up of Tax Reform Bill:  House Ways and Means Committee Chairman Dave Camp is planning to hold a committee markup of a tax reform bill in late October.  House staff members said he wants to have the markup completed before the debt ceiling becomes an issue for Congress in November.

At a Committee meeting yesterday, a Ways and Means spokesperson said, “Throughout this process, the chairman has actively engaged committee members on both sides of the aisle and plans to continue to do so going forward. Today's meeting underscored his willingness to work with all members interested in advancing tax reform and also provided an opportunity to remind members to get ready for a busy fall."

Rep. Charles W. Boustany Jr. (R-LA) said, "I think we want to move along as quickly as possible, and so I'm excited about that possibility.  I know a lot of work is being done by staff, and so I would expect when we get back in the fall things will escalate in terms of introduction of a bill."

Treasury and the IRS Issue Final Regulations Regarding Certain Transfers of Property to Regulated Investment Companies and Real Estate Investment Trusts:  Treasury and the IRS have issued final regulations (T.D. 9626) that provide guidance on certain transfers of property from a C corporation to a regulated investment company (RIC) or a real estate investment trust (REIT).  The final regulations, effective August 2, 2013, adopt, with some modifications, the proposed regulations (REG-139991-08) issued in April 2012.  Treas. Reg. § 1.337(d)-7 generally provides that if property of a C corporation becomes the property of a RIC or REIT—by the qualification of that C corporation as a RIC or REIT or by the transfer of assets of that C corporation to a RIC or REIT (conversion transaction)—then the RIC or REIT will be subject to tax on the net built-in gain in the converted property under the rules of section 1374 and the underlying regulations (the general rule).  However, the general rule does not apply if the C corporation transferor makes a “deemed sale election” under Treas. Reg. § 1.337(d)-7(c) to recognize gain and loss as if it sold the converted property to an unrelated person at fair market value.  The final regulations clarify that the general rule does not apply to a conversion transaction in which the C corporation that owned the converted property is a tax-exempt entity to the extent that gain would not be subject to tax under the Code if a deemed sale election were made.

Treasury and the IRS Issue Temporary and Proposed Regulations Providing Guidance on the Use of Straddle-by-Straddle Identification:  Treasury and the IRS have issued temporary regulations (T.D. 9627), effective August 2, 2013, that provide guidance for taxpayers electing to establish a mixed straddle using straddle-by-straddle identification.  The text of the temporary rules also serves as the text of the concurrently issued proposed regulations (REG-112815-12).  The temporary regulations explain how to account for unrealized gain or loss on a position held by a taxpayer prior to the time the taxpayer establishes a mixed straddle using straddle-by-straddle identification.  In particular, the temporary regulations are intended to prevent transactions where taxpayers use the section 1092(b)(2) identified mixed straddle rules to serve as an alternative to selling or otherwise disposing of a position.  According to the IRS, such transactions undermine the general rules governing when gain and loss are recognized and represent a use of section 1092 that was not intended.  The proposed regulations provide notice that a public hearing is scheduled for December 4, 2013.

Treasury and the IRS Issue Proposed Regulations That Revise Examples Illustrating the "Controlled Group" Rules Under Section 851(c):  Treasury and the IRS have issued proposed regulations (REG-114122-12) that contain proposed revisions to examples that illustrate the “controlled group” rules under section 851(c).  The proposed regulations resolve an issue involving how the controlled group rules should be applied in connection with the regulated investment company (RIC) “asset diversification” test.  More specifically, the proposed revisions clarify that two corporations constitute a controlled group if the ownership requirements of section 851(c)(3) are met.  According to the IRS, these revisions are consistent with the purpose of section 851(c)(3), which is to aggregate the investments of related corporations for purposes of the asset diversification test.  A public hearing has been scheduled for December 9, 2013 and comments and discussion topic outlines for the public hearing are due by October 31, 2013.

Tax Bills Introduced July 31:

1.[113rd] H.R.2870 : To amend the Internal Revenue Code of 1986 to exempt certain stock of real estate investment trusts from the tax on foreign investments in United States real property interests, and for other purposes.
Sponsor: Rep Brady, Kevin [TX-8] (introduced 7/31/2013)      Cosponsors (13) 
Committees: House Ways and Means 
Latest Major Action: 7/31/2013 Referred to House committee. Status: Referred to the House Committee on Ways and Means.


2. [113rd] H.R.2876 : To amend the Internal Revenue Code of 1986 to provide veterans with a 1-year exemption from the requirement to maintain minimum essential coverage under the Patient Protection and Affordable Care Act.
Sponsor: Rep Flores, Bill [TX-17] (introduced 7/31/2013)      Cosponsors (6) 
Committees: House Ways and Means 
Latest Major Action: 7/31/2013 Referred to House committee. Status: Referred to the House Committee on Ways and Means.


3. [113rd] H.R.2885 : To amend the Internal Revenue Code of 1986 to temporarily exclude capital gain from gross income.
Sponsor: Rep Fleischmann, Charles J. "Chuck" [TN-3] (introduced 7/31/2013)      Cosponsors (None) 
Committees: House Ways and Means 
Latest Major Action: 7/31/2013 Referred to House committee. Status: Referred to the House Committee on Ways and Means.


4. [113rd] H.R.2890 : To amend the Internal Revenue Code of 1986 to extend certain tax incentives for investment in the District of Columbia.
Sponsor: Rep Norton, Eleanor Holmes [DC] (introduced 7/31/2013)      Cosponsors (None) 
Committees: House Ways and Means 
Latest Major Action: 7/31/2013 Referred to House committee. Status: Referred to the House Committee on Ways and Means.


5. [113rd] H.R.2899 : To amend the Internal Revenue Code of 1986 to increase the quarterly wages paid threshold for classification as an agricultural labor employer for purposes of unemployment taxes.
Sponsor: Rep Welch, Peter [VT] (introduced 7/31/2013)      Cosponsors (1) 
Committees: House Ways and Means 
Latest Major Action: 7/31/2013 Referred to House committee. Status: Referred to the House Committee on Ways and Means.


6. [113rd] S.1409 : A bill to amend the Internal Revenue Code of 1986 to provide a credit for employer-provided job training, and for other purposes.
Sponsor: Sen Menendez, Robert [NJ] (introduced 7/31/2013)      Cosponsors (None) 
Committees: Senate Finance 
Latest Major Action: 7/31/2013 Referred to Senate committee. Status: Read twice and referred to the Committee on Finance.