IRS and Treasury issue 2022 - 2023 Priority Guidance Plan, addressing various accounting method issues

15 November 2022

The 2022–2023 Priority Guidance Plan includes new projects on various clean energy provisions in the Inflation Reduction Act (IRA), as well as the advanced manufacturing investment credit in the CHIPS Act of 2022.
Other new projects address recent modifications to IRC Section 118, which were made by the Tax Cuts and Jobs Act, and updates to Revenue Procedure 92-29, which would benefit real estate developers.
The plan also includes several carryover projects from prior years, but no longer lists certain inventory-related projects that were previously outstanding.

The IRS and Treasury have issued the 2022 — 2023 Priority Guidance Plan, addressing various accounting method issues as well as other provisions. The plan includes 205 guidance projects, which the Treasury and IRS are seeking to complete by June 30, 2023.

Code section	Type of guidance	Abstract	Notes
48	Unspecified and regulations	Addressing the provisions of Part 1 of Subtitled D of the Inflations Act (IRA) on clean electricity and reducing carbon emissions, and the definition of qualifying energy property	New
48D	Unspecified	Addressing the advanced manufacturing investment credit established by Section 107 of the CHIPS Act of 2022	New
118	Regulations	Addressing statutory changes and the definition of master development plan	Carryover project from prior year
118	Unspecified	Clarifying the safe harbor under Revenue Procedure 2016-36 for distribution lines	New
163(j)	Unspecified	No details provided	New
163(j)	Final regulations	Addressing the application of IRC Section 163(j) to partnerships, S corporations and their owners	Carryover project from prior year; proposed regulations were published September 14, 2020. Although not noted in the business plan, additional final regulations were issued in January 2021.
166	Unspecified	Guidance on the conclusive presumption of worthlessness for bad debts	Carryover project from prior year; Notice 2013-25, which requested comments on the existing rules, was published on June 10, 2013.
168(i)(10)	Unspecified	Addressing public utility property for purposes of normalization	New
174	Unspecified	Addressing amortization of research and experimental expenditures	Carryover project from prior year
179D	Unspecified and regulations	Addressing the provisions of Part 3 of Subtitle D of the IRA on clean energy and energy efficiency incentives for individuals, including the definition of designer and other issues	New
199A	Regulations	Determining unadjusted basis immediately after acquiring qualified property, defining qualified business income and other issues	Carryover project from prior year
263(a)	Revenue Procedure	Addressing the capitalization of natural gas transmission and distribution property	Carryover project from prior year
263A	Regulations	Addressing interest capitalization requirements for improvements to designated property	New
267	Regulations	Addressing related party transactions and partnerships	Carryover project from prior year
280F	Unspecified	Clarifying the business use of an aircraft by parties related to a lessee	Carryover project from prior year
355	Unspecified	Addressing the treatment of capitalized costs for IRC Section 355 distributions and certain other costs under Treas. Reg. Section 1.263(a)-5(a)	Carryover project from prior year
446, 1275 and 6050H	Unspecified	Addressing the treatment and reporting of capitalized interest on modified home mortgages	Carryover project from prior year
453	Unspecified	Addressing monetized installment sales	Carryover project from prior year
453B	Final Regulations	Addressing non-recognition of gain or loss on the disposition of certain installment sales	Carryover project from prior year
460	Unspecified; possibly revenue procedure	Updating Revenue Procedure 92-29 to reflect statutory changes and address other issues	New
472	Regulations	Addressing dollar-value last-in, first-out inventories	Carryover project from prior year
472	Final regulations	Amending Treas. Reg. Section 1.472-8 concerning the inventory price index computation method	Carryover project from prior year
475	Unspecified	Addressing mark-to-market accounting	Carryover project from prior year; proposed regulations were published on January 4, 1995, and January 28, 1999.
861	Regulations	Addressing the character of income, including income arising in transactions involving intellectual property and the provision of digital goods and services	Carryover project from prior year; proposed regulations were published August 14, 2019.
301.9100	Unspecified	Addressing relief for late regulatory elections	Carryover project from prior year

Implications

IRC Section 118

IRC Section 118 was substantively modified by the Tax Cuts and Jobs Act to eliminate the exception to gross income for money or property contributed by a governmental entity or civic group to a corporation (previously referred to as a "contribution to capital"). However, the effective date provisions of IRC Section 118 post-TCJA indicated that "[t]he amendments made by this section shall not apply to any contribution, made after the date of enactment of this Act by a governmental entity, which is made pursuant to a master development plan that has been approved prior to such date by a governmental entity." "Master development plan" was not defined within IRC Section 118, so taxpayers and practitioners alike are hopeful that the guidance will provide further clarity.

IRC Section 48D

The Advanced Manufacturing Investment Credit (AMIC) under IRC Section 48D allows taxpayers to claim a credit against federal income tax equal to 25% of qualified investment in an advanced manufacturing facility (AMF), provided certain requirements are met. As the requirements are numerous, it is likely that the guidance project listed on the Priority Guidance Plan will be released in the form of Treasury regulations. Issues that are likely to be addressed within this guidance project include:

General eligibility to utilize the AMIC
When construction begins for an investment for purposes of determining if an investment qualifies for the AMIC, in whole or in part
What it means for property to be "integral to the operation" of an AMF

IRC Section 472

The two LIFO inventory items under IRC Section 472 have been on the Priority Guidance Plan for a few years. Several inventory-related items that have been included in previous Priority Guidance Plans, however, are not in the 2022–2023 Priority Guidance Plan. Those items include:

Relief under IRC Section 473 for LIFO taxpayers
Regulatory or procedural guidance under IRC Section 263A(f) on the capitalization of interest to designated property (although a new item was added for regulations under IRC Section 263A on interest capitalization requirements for improvements to designated property)
Additional guidance on negative additional 263A costs and the related final regulations
Guidance on the tax treatment and characterization of software and e-content transactions
Guidance under IRC Section 170(e)(3) on qualified contributions of inventory

As these items are important to taxpayers, guidance would be welcome.

Revenue Procedure 92-29

Revenue Procedure 92-29 provides procedures for a real estate developer to use an alternative to the general method under IRC Section 461(h) for determining when common improvement costs may be included in the basis of properties sold, for purposes of determining the gain or loss resulting from the sales. Under the alternative cost method, a developer may include in the basis of properties sold their allocable share of the estimated cost of common improvements, without regard to whether the costs are incurred under IRC Section 461(h), subject to certain limitations. The new publication project is a welcome development and possibly may increase administrability of the procedure for taxpayers.

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Contact Information
For additional information concerning this Alert, please contact:

National Tax – Accounting Periods, Methods, and Credits
• Scott Mackay (scott.mackay@ey.com)
• Kristine Mora (kristine.mora@ey.com)
• Sam Weiler (sam.weiler@ey.com)
• Alison Jones (alison.jones@ey.com)
• Susan Grais (susan.grais@ey.com)
• Any other member of the NTD QS Team

Published by NTD’s Tax Technical Knowledge Services group; Jennifer Brittenham, legal editor

Document ID: 2022-1715