November 15, 2022
2022-1715 IRS and Treasury issue 2022 - 2023 Priority Guidance Plan, addressing various accounting method issues - 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.
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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. ——————————————— Contact Information
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Published by NTD’s Tax Technical Knowledge Services group; Jennifer Brittenham, legal editor |
