IRS and Treasury issue 2023 - 2024 Priority Guidance Plan, addressing various accounting method issues

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October 10, 2023
2023-1681

IRC Section 174 guidance and the corporate alternative minimum tax (CAMT) remain on the Priority Guidance Plan, even though the IRS has previously published guidance on those items.
With an increase in IRC Section 266 elections to capitalize interest into the basis of certain real and personal property, the IRS appears motivated to clarify the relationship between IRC Section 266 and IRC Section 163(j).

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.

Code section	Type of guidance	Abstract	Notes
41	Regulations	Addressing research credit substantiation	Carryover project from prior year
48D	Final regulations	Addressing the advanced manufacturing investment credit established by Section 107 of the CHIPS Act of 2022	Carryover project from prior year; proposed regulations were published March 21, 2023
48D	Final regulations	Addressing the elective payment of the advanced manufacturing investment credit	New; proposed and temporary regulations were published June 21, 2023
55, 56A and 59	Unspecified	Addressing the corporate alternative minimum tax	New
163(j)	Unspecified	Addressing the limitation on business interest, including the application of IRC Section 163(j) to interest capitalized under IRC Section 266	New
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.
174	Unspecified	Addressing amortization of research and experimental expenditures	Carryover project from prior year; Notice 2023-63 was published on September 8, 2023.
179D	Unspecified	Addressing the energy efficient commercial buildings deduction	New
199A	Regulations	Determining unadjusted basis immediately after acquiring qualified property, defining qualified business income and other issues	Carryover project from prior year
263A	Regulations	Addressing interest capitalization requirements for improvements to designated property	Carryover project from prior year
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	Revenue Procedure	Updating Revenue Procedure 2015-13 on automatic and non-automatic changes in accounting method	New
453	Unspecified	Addressing monetized installment sales	Carryover project from prior year; proposed regulations published August 3, 2023
453B	Final Regulations	Addressing non-recognition of gain or loss on the disposition of certain installment sales	Carryover project from prior year
468B	Unspecified	Addressing qualified settlement funds	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.
301.9100	Unspecified	Addressing relief for late regulatory elections	Carryover project from prior year

Implications

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.

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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)
• Alexa Claybon (alexa.claybon@ey.com)
• Sam Weiler (sam.weiler@ey.com)
• Rayth Myers (rayth.myers@ey.com)
• Dan Penrith (dan.penrith@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 A Brittenham, legal editor