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New IRS guidance fills in several more pieces of the Code Sec. 199A passthrough deduction puzzle. Taxpayers can generally rely on all of these new final and proposed rules.


The IRS has issued interim guidance on the excise tax payable by exempt organizations on remuneration in excess of $1 million and any excess parachute payments made to certain highly compensated current and former employees in the tax year. The excise tax imposed by Code Sec. 4960 is equal to the maximum corporate tax rate on income (currently 21 percent).


The IRS has provided safe harbors for business entities to deduct certain payments made to a charitable organization in exchange for a state or local tax (SALT) credit. A business entity may deduct the payments as an ordinary and necessary business expenses under Code Sec. 162 if made for a business purpose. Proposed regulations that limit the charitable contribution deduction do not affect the deduction as a business expense.


The Treasury and IRS have issued final regulations for determining the inclusion under Code Sec. 965 of a U.S. shareholder of a foreign corporation with post-1986 accumulated deferred foreign income. Code Sec. 965 imposes a "transition tax" on the inclusion. The final regulations retain the basic approach and structure of the proposed regulations, with certain changes.


The IRS has issued its annual revisions to the general procedures for ruling requests, technical memoranda, determination letters, and user fees, as well as areas on which the Associate Chief Counsel offices will not rule. The revised procedures are generally effective January 2, 2019.


An LLC (limited liability company) is not a federal tax entity. LLCs are organized under state law. LLCs are not specifically mentioned in the Tax Code, and there are no special IRS regulations governing the taxation of LLCs comparable to the regulations for C corporations, S corporations, and partnerships. Instead, LLCs make an election to be taxed as a particular entity (or to be disregarded for tax purposes) by following the check-the-box business entity classification regulations. The election is filed on Form 8832, Entity Classification Election. The IRS will assign an entity classification by default if no election is made. A taxpayer who doesn't mind the IRS default entity classification does not necessarily need to file Form 8832.


The IRS has issued proposed reliance regulations on the 3.8 percent surtax on net investment income (NII), enacted in the 2010 Health Care and Education Reconciliation Act. The regulations are proposed to be effective January 1, 2014. However, since the tax applies beginning January 1, 2013, the IRS stated that taxpayers may rely on the proposed regulations for 2013. The IRS expects to issue final regulations sometime later this year.


Effective January 1, 2013, a new Medicare tax takes effect. The Additional Medicare Tax imposes a 0.9 percent tax on compensation and self-employment income above a threshold amount.  Unlike regular Medicare tax, the Additional Medicare Tax has no employer match but employers have withholding obligations. The IRS issued proposed reliance regulations about the Additional Medicare Tax in December 2012.


Beginning with 2012 Forms W-2, large employers must report the aggregate cost of employer-sponsored health insurance provided to employees. 2012 Form W-2s must be furnished to employees by January 31, 2013.