October 10, 2023
IRS and Treasury issue 2023 - 2024 Priority Guidance Plan, addressing various accounting method issues
The IRS and Treasury have issued the 2023 — 2024 Priority Guidance Plan, addressing various accounting method issues as well as other provisions. The plan includes 237 guidance projects, which the Treasury and IRS are seeking to complete by June 30, 2024.
IRC Section 174
IRC Section 174 remains on the Priority Guidance Plan despite the IRS and the Treasury releasing Notice 2023-63 on 8 September 2023, which described rules that the IRS is considering for inclusion in proposed regulations under IRC Section 174, as amended by the TCJA. The Notice also covers the treatment of specified research and experimental (SRE) expenditures under IRC Section 460, as well as the application of IRC Section 482 to cost-sharing arrangements that involve SRE expenditures (a new regulation project related to capitalizable intangible development costs under IRC Section 482 is included in the Priority Guidance Plan). Notice 2023-63 provides (1) insight into the direction Treasury and the IRS intend to go in the proposed regulations, (2) the technical issues that they believe are the most pressing to resolve, and (3) their view of Congress' intent in amending IRC Section 174. Because the potential rules described in Notice 2023-63 are not required to be applied retroactively, and the forthcoming proposed regulations will not apply to tax years ending on or before September 8, 2023, taxpayers can continue relying on prior law for tax years ending on or before September 8, 2023. Section 11 of Notice 2023-63, however, contains a request for comments on the guidance in Notice 2023-63 and on topics that are not covered under Notice 2023-63. Although it is uncertain when proposed regulations may be released, comments should be submitted by November 24, 2023. Accordingly, as IRC Section 174 remains on the priority guidance plan, it may be helpful for taxpayers to submit comments.
Corporate alternative minimum tax
The CAMT, enacted under the Inflation Reduction Act of 2022, also remains on the Priority Guidance Plan, even though the IRS published interim guidance that clarifies certain provisions of the CAMT. The IRS also announced that it plans to issue proposed regulations that are consistent with the guidance in Notice 2023-64 and previously issued interim guidance in Notice 2023-7 and Notice 2023-20. While Notice 2023-64 provides interim guidance and additional clarifications on several issues that will help taxpayers in applying the CAMT, the Notice leaves several other pressing issues unaddressed (such as certain international issues). The Notice indicates that proposed regulations are anticipated to be effective for 2024 tax years and that taxpayers may rely on the interim guidance issued in Notice 2023-64 (and prior interim guidance issued in Notices 2023-7 and 2023-30) for 2023 tax years. The IRS has requested comments by October 12, 2023. The IRS, however, indicates that it will consider comments submitted after that date, if the consideration of those comments will not delay the issuance of the proposed regulations.
IRC Section 163(j)
Many taxpayers have been making IRC Section 266 elections to capitalize interest into the basis of certain real and personal property, converting those interest amounts into basis in property. Because of the recent prevalence of these elections, the IRS appears motivated to clarify the relationship between IRC Section 266 and IRC Section 163(j). It is not yet clear what guidance the IRS is contemplating or how in depth it will be, but there has not been any mention of regulations at this time.
IRC Section 179D
In including a guidance package item on IRC Section 179D, the IRS appears to be acknowledging that taxpayers need additional guidance as they look to implement modifications to IRC Section 179D as a result of the Inflation Reduction Act of 2022.
IRC Section 468B
The IRS National Office informally has expressed interest related to the establishment or structuring of qualified settlement funds. The addition of this topic to the Priority Guidance Plan may be reflective of an increased focus in this technical area.
As these items are important to taxpayers, guidance would be welcome.
Published by NTD’s Tax Technical Knowledge Services group; Jennifer A Brittenham, legal editor