Daily Tax Update - July 30, 2014: Treasury Issues Final Regulations on Material Advisor Penalty

TREASURY ISSUES FINAL REGULATIONS ON MATERIAL ADVISOR PENALTY:    Treasury has issued final regulations under section 6707 relating to the penalty imposed on material advisors for failure to furnish information regarding reportable transactions.  Proposed regulations had been issued in 2008.  The regulations make some substantive changes to the proposed regulations including clarification that only one penalty will apply if a transaction is both a listed transaction and a reportable transaction other than a listed transaction, that an advisor is subject to a separate penalty for each transaction, and that gross income for purposes of determining the penalty only includes fees from a listed transaction.  The regulations also provide guidance on rescission of the penalty under section 6707.

The regulations can be accessed via:TD 9686.pdf

OUTSOURCING BILL FAILS TO ADVANCE IN SENATE:  The Senate failed to secure enough votes to advance S. 2569, the “Bring Jobs Home Act.” The bill would “(1) grant business taxpayers a tax credit for up to 20% of insourcing expenses incurred for eliminating a business located outside the United States and  relocating it within the United States, and (2) deny a tax deduction for outsourcing expenses incurred in relocating a U.S. business outside the United States. Requires an increase in the taxpayer's employment of full-time employees in the United States in order to claim the tax credit for insourcing expenses.” 

Announcement 2014-28 provides guidance to U.S. citizens or resident aliens living and working abroad whose tax home is in a foreign country and meet either the bona fide residence test or the physical presence test, choosing to exclude from their income a limited amount of their foreign earned income ($99,200 for 2014).  Both the bona fide residence test and the physical presence test contain minimum time requirements.  The minimum time requirements can be waived, however, for those who must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country.  Rev. Proc. 2014-25 contains the list of countries for tax year 2013 for which the minimum time requirements are waived.  However, that list is incomplete.  South Sudan and its departure date have been added.