The first IRS Priority Guidance Plan (Plan) under the Trump Administration was released October 20, 2017, by the Treasury Department's Office of Tax Policy and the IRS. The Plan identifies and prioritizes tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices and other published administrative guidance. With the new Administration came a new format, which includes four parts. Part I addresses the eight regulations identified as burdensome earlier this year (see Tax Alert 2017-1086). Part II identifies certain projects that may reduce taxpayer burden in the near future. Part III focuses on various projects to implement the new statutory partnership audit regime. Finally, Part IV describes other projects to be considered in this plan year, which ends June 30, 2018.

The Plan

Although no specific accounting method regulations were previously identified as burdensome, Part II does list final regulations under Section 263A on addressing the inclusion of negative amounts in additional Section 263A costs as a burden-reducing item to address in the near term. The Plan also contains several projects related to Section 199, including a new project on qualified films. Additionally, the first item of Part II is quite broad, including removing or revising any regulations necessary to reduce complexity, reduce burdens or increase clarity. The following Plan projects address important accounting method-related issues:

Implications

Several items that appeared on prior guidance plans are not included in this year's Plan. This includes a guidance project related to a new portion of the research credit, Section 41(h), allowing a taxpayer to offset its payroll tax liability with a limited amount of its research credit. Some interim guidance has been provided (see Notice 2017-23; Advice Memorandum 2017-003), along with changes to relevant forms, but more comprehensive guidance on this issue is warranted since the statutory change requires coordination between Section 41 and Section 3111, and the statute instructs the Treasury Department to issue regulations "to minimize compliance and record-keeping burdens."

Another Section 41 guidance item from prior plans, regulations on the treatment of gross receipts from transactions between group members, does not appear in this year's Plan. The proposed regulations were controversial, as they contradicted not only a 2010 court decision and a 2012 government litigation concession, but also an IRS Chief Counsel Advice position from 2002.

Guidance on the finalization of the August 27, 2015 proposed regulations under Section 199 was also removed from this year's Plan. The proposed regulations addressed a variety of issues, including statutory changes and modifications of existing regulations. The proposed regulations contained a controversial change to the current regulations' benefits-and-burdens-of-ownership test for contract manufacturing arrangements. The removal of the guidance project from the Plan may indicate the need for additional review and revisions with respect to that rule.

The Plan includes three items related to Section 199, two of which were on the previous plan: (1) final regulations on allocating W-2 wages in a short tax year and in an acquisition or disposition; and (2) regulations addressing computer software. The third item — guidance on qualified films under Section 199 — is new.

Additional updates to the current Plan appear likely and will reflect an evolving approach as the Administration's tax reform efforts continue. Specifically, Treasury and the IRS have expressed an intent to periodically update the status of Plan projects and, for example, may add projects to respond to developments arising during the Plan Year.

As in the past, the Plan invites public comment regarding the development of the Plan and the guidance items listed on the Plan.

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