- Highlights of This Issue
- Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
- Part III. Administrative, Procedural, and Miscellaneous
- Definition of Terms and Abbreviations
- Numerical Finding List
- Effect of Current Actions on Previously Published Items
- How to get the Internal Revenue Bulletin
Internal Revenue Bulletin: 2019-14
April 1, 2019
These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations.
This Notice provides penalty relief under sections 6722 (failure to furnish correct payee statements); 6698 (failure to file partnership return); section 6038(b) and (c) (failure to furnish information with respect to certain partnerships); and any other section for filing or furnishing Schedules K–1 or other forms or statements, where a penalty is imposed solely as a result of failing to include information about partners’ negative tax basis capital accounts for the 2018 tax year.
Section 30D provides a credit of up to $7,500 for new qualified plug-in electric drive motor vehicles sold after December 31, 2009. This notice announces the credit phase-out schedule for new qualified plug-in electric drive motor vehicles sold by General Motors, LLC. Section 30D of the Internal Revenue Code provides for a credit determined under § 30D(b) for certain new qualified plug-in electric drive motor vehicles. The new qualified plug-in electric drive motor vehicle credit begins to phase out for a manufacturer’s qualified plug-in electric drive motor vehicles in the second calendar quarter after the calendar quarter in which at least 200,000 of the manufacturer’s vehicles that qualify for the credit have been sold for use or lease in the United States (determined on a cumulative basis for sales after December 31, 2009). General Motors, LLC has submitted quarterly reports that indicate that its cumulative sales of qualified plug-in electric drive motor vehicles reached the 200,000-vehicle limit during the calendar quarter ending December 31, 2018. Accordingly, the credit for all new qualified plug-in electric drive motor vehicles sold by General Motors, LLC will begin to phase out on April 1, 2019.
This notice sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for March 2019 used under § 417(e)(3)(D), the 24-month average segment rates applicable for March 2019, and the 30-year Treasury rates, as reflected by the application of § 430(h)(2)(C)(iv).
This revenue ruling provides tables of covered compensation under § 401(l)(5)(E) of the Internal Revenue Code and the Income Tax Regulations thereunder, effective January 1, 2019.
Notice 2019–24 provides for adjustment to the limitation on housing expenses for purposed of section 911 of the Internal Revenue Code. These adjustments are made on the basic geographical differences in housing costs in the United States. Further, if the limitation on housing expenses is higher for taxable year 2019 than the adjusted limitations on housing expenses provided in Notice 2018–44, qualified taxpayers may apply the adjusted limitations for taxable year 2019 to their 2018 taxable year.
Attached is Revenue Procedure 2019–15, which provides a waiver for the time requirements for individuals electing to exclude their foreign earned income who must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. Rev. Proc. 2019–15 adds the Democratic Republic of the Congo, Cuba, Iraq, and Nicaragua to the list of waiver countries for tax year 2018 for which the minimum time requirements are waived. Generally, U.S. citizens or resident aliens living and working abroad are taxed on their worldwide income. However, if their tax home is in a foreign country and they meet either the bona fide residence test or the physical presence test, they can choose to exclude from their income a limited amount of their foreign earned income ($103,900 for 20018). Both the bona fide residence test and the physical presence test contain minimum time requirements.
Federal rates; adjusted federal rates; adjusted federal long-term rate, the long-term exempt rate, and the blended annual rate. For purposes of sections 382, 1274, 1288, 7872 and other sections of the Code, tables set forth the rates for April 2019.
This revenue ruling suspends Rev. Rul. 57–464, 1957–2 C.B. 244, and Rev. Rul. 57–492, 1957–2 C.B. 247, pending the completion of a study by the Department of the Treasury and the Internal Revenue Service regarding the active trade or business requirement under sections 355(a)(1)(C) and (b) of the Internal Revenue Code.
These final regulations provide guidance on the requirements that are used to determine whether a corporation qualifies as a regulated investment company (RIC) for federal income tax purposes. The final regulations clarify that amounts included in gross income under § 951(a)(1)(A) or 1293(a) are treated as dividends only to the extent that there is an actual distribution out of the earnings and profits of the taxable year that are attributable to the amounts so included. The final regulations also provide that inclusions under §§ 951(a)(1) and 1293(a) derived with respect to a RIC’s business of investing in stock, securities, or currencies are other qualifying income for purposes of the RIC income test under § 851(b)(2).
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The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secretary (Enforcement).
Part IV.—Items of General Interest. This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period.
This document provides final regulations relating to the income test used to determine whether a corporation may qualify as a regulated investment company (RIC) for Federal income tax purposes. These final regulations provide guidance to corporations that intend to qualify as RICs.
Effective Date: These regulations are effective on March 19, 2019.
Applicability Date: For the date of applicability, see § 1.851–2(d).
This document contains amendments to the Income Tax Regulations (26 CFR part 1) relating to RICs. Section 851 of the Internal Revenue Code (Code) sets forth requirements for qualifying as a RIC.
On September 28, 2016, a notice of proposed rulemaking (REG–123600–16) was published in the Federal Register (81 FR 66576) under section 851. No public hearing was requested or held. Written or electronic comments responding to the notice of proposed rulemaking were received. After consideration of all the comments, the proposed regulations are adopted as revised by this Treasury decision containing final regulations. The revisions to the proposed regulations are discussed in the Summary of Comments and Explanation of Revisions.
In response to the notice of proposed rulemaking, the IRS received five written comments that are available for public inspection at www.regulations.gov or upon request.
The notice of proposed rulemaking proposed revisions to § 1.851–2(b)(1), which had been published in the Federal Register (25 FR 11910) on November 26, 1960, as part of TD 6500 (1960 final regulations). The proposed revisions would conform § 1.851–2(b)(1) to several changes to the statutory text of section 851(b)(2) enacted after the 1960 final regulations were published. See Pub. L. 95–345, § 2(a)(3), 92 Stat. 481, 481 (1978); Tax Reform Act of 1986, Pub. L. 99–514, § 653(b), 100 Stat. 2085, 2298 (1986); Taxpayer Relief Act of 1997, Pub. L. 105–34, § 1271(a), 111 Stat. 788, 1036 (1997). No comments were received on these proposed revisions. Accordingly, the final regulations adopt the revisions to § 1.851–2(b)(1) as proposed.
In the notice of proposed rulemaking, the Department of the Treasury (Treasury Department) and the IRS determined that the IRS should no longer issue private letter rulings on questions relating to the treatment of a corporation as a RIC that require a determination of whether a financial instrument or position is a security under the Investment Company Act of 1940, Pub. L. No. 76–768, 54 Stat. 789 (codified as amended at 15 U.S.C. §§ 80a–1 – 80a–64 (2016)) (1940 Act). Contemporaneously with the publication of the notice of proposed rulemaking, the Treasury Department and the IRS issued Rev. Proc. 2016–50 (2016–43 I.R.B. 522), which provides that the IRS ordinarily will not issue rulings or determination letters on any issue relating to the treatment of a corporation as a RIC that requires a determination of whether a financial instrument or position is a security under the 1940 Act. One commenter recommended that the IRS not add this issue to the no-rule list and that the IRS continue to consider ruling requests in situations in which the status of an investment as a security under section 2(a)(36) of the 1940 Act is sufficiently clear under the language of the 1940 Act or under relevant guidance from the SEC. In issuing the notice of proposed rulemaking and Rev. Proc. 2016–50, the Treasury Department and the IRS considered the issues, the resource constraints of the IRS, and the jurisdiction of the SEC under the 1940 Act and determined that the IRS ordinarily should not issue rulings that require a determination by the IRS of whether a financial instrument or position is a security under the 1940 Act. If the security status of an instrument is sufficiently clear under the 1940 Act, or if the SEC has issued relevant guidance, any other requested ruling may be considered by the IRS subject to other limitations applicable to all ruling requests. See, for example, section 6 of Rev. Proc. 2019–1 (2019–1 I.R.B. 1, 18). The IRS therefore declines to adopt the suggestion and has continued to include the issue described in Rev. Proc. 2016–50 in the list of areas in which rulings or determinations letters will not ordinarily be issued. See, for example, section 4.01(44) of Rev. Proc. 2019–3 (2019–1 I.R.B. 130, 140).
In the notice of proposed rulemaking, the Treasury Department and the IRS also requested comments as to whether Rev. Rul. 2006–1 (2006–1 C.B. 261), Rev. Rul. 2006–31 (2006–1 C.B. 1133), and other previously issued guidance involving determinations of whether a financial instrument or position held by a RIC is a security under the 1940 Act should be withdrawn. Commenters recommended that Rev. Rul. 2006–1 and Rev. Rul. 2006–31 not be withdrawn because RICs rely on those rulings to invest with confidence in certain derivatives on stocks and securities. The commenters suggested that withdrawal of those rulings would create confusion and uncertainty with respect to investments by a RIC. After consideration of the comments, the Treasury Department and the IRS have decided not to withdraw the revenue rulings at this time.
In certain circumstances, a U.S. person may be required under section 951(a)(1) or 1293(a) to include in taxable income certain earnings of a foreign corporation in which the U.S. person holds an interest, without regard to whether the foreign corporation makes a distribution to the U.S. person. The Tax Reduction Act of 1975, Pub. L. No. 94–12, § 602, 89 Stat. 26, 58 (1975 Act), substantially increased the overall amount of these inclusions. Because these inclusions are not dividends (even if accompanied by a corresponding distribution), they would have been non-qualifying gross income for RICs. However, the same subsection of the 1975 Act that increased the amount of inclusions also amended section 851(b). This amendment provided that an inclusion under section 951 was treated as a dividend (and therefore qualifying income for purposes of section 851(b)(2)) if the inclusion was accompanied by a distribution out of the earnings and profits of the taxable year that are attributable to the amounts so included. The Tax Reform Act of 1986, Pub. L. No. 99–514, § 1235, 100 Stat. 2085, 2575 (1986 Act), provided the same dividend treatment for amounts included in income under section 1293(a). The current version of the language added by the 1975 and 1986 amendments provides:
For purposes of [section 851(b)(2)], there shall be treated as dividends amounts included in gross income under section 951(a)(1)(A) or 1293(a) for the taxable year to the extent that, under section 959(a)(1) or 1293(c) (as the case may be), there is a distribution out of the earnings and profits of the taxable year which are attributable to the amounts so included.
The 1986 Act also added to the description of a RIC’s qualifying income “other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its business of investing in . . . stock, securities, or currencies.”
The amendments to section 851(b) by the 1975 Act and the 1986 Act unambiguously condition dividend treatment of an inclusion under section 951(a)(1)(A) or 1293(a) on a distribution from the foreign corporation’s earnings and profits attributable to the amount included. Absent a distribution, there is no support in the Code for treating an inclusion under section 951(a)(1)(A) or 1293(a) as a dividend under section 851. The proposed regulations would, therefore, clarify that an inclusion under section 951(a)(1)(A) or 1293(a) is treated as a dividend for purposes of section 851(b)(2) only to the extent that the distribution requirement in section 851(b) is met. All five commenters acknowledged that the distribution requirement for dividend treatment in the proposed regulations is consistent with the statutory language in section 851(b). Accordingly, the final regulations adopt the clarification of the distribution requirement as proposed.
The proposed regulations, however, also would provide that dividend treatment is the only manner in which an inclusion under section 951(a)(1) or 1293(a) may be qualifying income. That is, under the proposed regulations, for purposes of section 851(b)(2) neither of these inclusions would be other income derived with respect to a RIC’s business of investing in stock, securities, or currencies (Non-qualifying Income Proposal). Commenters unanimously recommended that the Treasury Department and the IRS exclude the Non-qualifying Income Proposal from the final regulations. Commenters noted that some RICs have no ability to control when, or whether, distributions are made and may have income inclusions in excess of available or allowable distributions.
Commenters also suggested that the Non-qualifying Income Proposal would produce inconsistent results. For example, if a RIC has income inclusions with respect to a passive foreign investment company (PFIC) as a result of making a mark-to-market election under section 1296 with respect to the PFIC, the RIC would have qualifying income under section 851(b). See section 1296(h), which specifically treats that income as a dividend even though there has been no distribution. In contrast, if the RIC had made a qualified electing fund election under section 1293 with respect to a PFIC, then the Non-qualifying Income Proposal would prevent income inclusions with respect to that PFIC from being qualifying income.
The Treasury Department and the IRS have carefully considered the comments and recognize that the Non-qualifying Income Proposal creates an unintended effect on the RIC income test of section 851(b)(2). For example, certain types of income, such as interest and dividends, would be considered qualifying income if earned directly by a RIC. These types of income, however, would not be qualifying income when received by a controlled foreign corporation or PFIC and included in a RIC’s income under section 951(a)(1) or 1293(a), unless there is a corresponding distribution. Accordingly, the Treasury Department and the IRS have decided not to include the Non-qualifying Income Proposal in these final regulations.
One commenter further recommended that the final regulations treat inclusions under sections 951(a)(1)(A) and 1293(a) derived with respect to a RIC’s business of investing in stock, securities, or currencies as other qualifying income for purposes of the RIC income test of section 851(b)(2) (Qualifying Income Proposal). The Treasury Department and the IRS recognize that inclusions under sections 951(a)(1) and 1293(a) with respect to which there are no corresponding distributions may be accelerations of income derived from stock that otherwise would be recognized as a dividend or as gain from the sale or other disposition of stock. The Qualifying Income Proposal recommended by the commenter would treat these inclusions as qualifying income for purposes of section 851(b)(2). That is, it would apply to inclusions with respect to which there are no corresponding contemporaneous distributions and which otherwise would not be treated as dividends even though those inclusions are connected to a RIC’s business of investing in stock, securities, or currencies. After further consideration of the issues raised by the commenter and the provisions in “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” P.L. 115–97, title 1, § 11000, 131 Stat. 2054 (Dec. 22, 2017), affecting the taxation of income earned outside of the United States, the Treasury Department and the IRS adopt the Qualifying Income Proposal in the final regulations.
This regulation is not subject to review under section 6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) between the Treasury Department and the Office of Management and Budget regarding review of tax regulations.
Because these regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking preceding these regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business, and no comments were received.
The IRS revenue procedures and revenue rulings cited in this document are published in the Internal Revenue Bulletin (or Cumulative Bulletin) and are available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS website at www.irs.gov.
The principal author of these final regulations is Matthew Howard, Office of Associate Chief Counsel (Financial Institutions and Products). However, other personnel from the Treasury Department and the IRS participated in their development.
* * * * *
Paragraph 1. The authority citation for part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.851–2 is amended by revising paragraphs (b)(1) and (b)(2)(i), and adding paragraphs (b)(2)(iii) and (d) to read as follows:
§ 1.851–2 Limitations.
* * * * *
(b) * * * (1) General rule. A corporation will not be a regulated investment company for a taxable year unless 90 percent of its gross income for that year is income described in paragraph (b)(1)(i) or (ii) of this section. Any loss from the sale or other disposition of stock or securities is not taken into account in the gross income computation.
(i) Gross income amounts. Income is described in this paragraph (b)(1)(i) if it is gross income derived from:
(C) Payments with respect to securities loans (as defined in section 512(a)(5));
(D) Gains from the sale or other disposition of stocks or securities (as defined in section 2(a)(36) of the Investment Company Act of 1940, as amended);
(E) Gains from the sale or other disposition of foreign currencies; or
(F) Other income (including but not limited to gains from options, futures, or forward contracts) derived with respect to a regulated investment company’s business of investing in such stock, securities, or currencies.
(ii) Income from a publicly traded partnership. Income is described in this paragraph (b)(1)(ii) if it is net income derived from an interest in a qualified publicly traded partnership (as defined in section 851(h)).
(2) * * * (i) For purposes of section 851(b)(2)(A) and paragraph (b)(1)(i)(A) of this section, amounts included in gross income for the taxable year under section 951(a)(1)(A) or 1293(a) are treated as dividends only to the extent that, under section 959(a)(1) or 1293(c) (as the case may be), there is a distribution out of the earnings and profits of the taxable year that are attributable to the amounts included in gross income for the taxable year under section 951(a)(1)(A) or 1293(a). For allocation of distributions to earnings and profits of foreign corporations, see § 1.959–3.
* * * * *
(iii) If an amount is included in gross income under section 951(a)(1) or 1293(a) and is derived with respect to a corporation’s business of investing in stock, securities, or currencies then the amount is other income described in section 851(b)(2)(A) and paragraph (b)(1)(i)(F) of this section. Notwithstanding paragraph (d) of this section, a taxpayer may rely on the rule in this paragraph (b)(2)(iii) for taxable years that begin after September 28, 2016.
* * * * *
(d) Applicability date. The rules in paragraphs (b)(1) and (b)(2)(i) and (iii) apply to taxable years that begin after June 17, 2019.Kirsten Wielobob Deputy Commissioner for Services and Enforcement.
Approved: February 15, 2019David J. Kautter Assistant Secretary of the Treasury (Tax Policy).
This revenue ruling provides tables of covered compensation under § 401(l)(5)(E) of the Internal Revenue Code and the Income Tax Regulations thereunder, for the 2019 plan year.
Section 401(l)(5)(E)(i) defines covered compensation with respect to an employee as the average of the contribution and benefit bases in effect under section 230 of the Social Security Act (the “Act”) for each year in the 35-year period ending with the year in which the employee attains social security retirement age.
Section 401(l)(5)(E)(ii) states that the determination for any year preceding the year in which the employee attains social security retirement age shall be made by assuming that there is no increase in covered compensation after the determination year and before the employee attains social security retirement age.
Section 1.401(l)–1(c)(34) of the Income Tax Regulations defines the taxable wage base as the contribution and benefit base under section 230 of the Act.
Section 1.401(l)–1(c)(7)(i) defines covered compensation for an employee as the average (without indexing) of the taxable wage bases in effect for each calendar year during the 35-year period ending with the last day of the calendar year in which the employee attains (or will attain) social security retirement age. A 35-year period is used for all individuals regardless of the year of birth of the individual. In determining an employee’s covered compensation for a plan year, the taxable wage base for all calendar years beginning after the first day of the plan year is assumed to be the same as the taxable wage base in effect as of the beginning of the plan year. An employee’s covered compensation for a plan year beginning after the 35-year period applicable under § 1.401(l)–1(c)(7)(i) is the employee’s covered compensation for a plan year during which the 35-year period ends. An employee’s covered compensation for a plan year beginning before the 35-year period applicable under § 1.401(l)–1(c)(7)(i) is the taxable wage base in effect as of the beginning of the plan year.
Section 1.401(l)–1(c)(7)(ii) provides that, for purposes of determining the amount of an employee’s covered compensation under § 1.401(l)–1(c)(7)(i), a plan may use tables, provided by the Commissioner, that are developed by rounding the actual amounts of covered compensation for different years of birth.
For purposes of determining covered compensation for the 2019 year, the taxable wage base is $132,900.
The following tables provide covered compensation for 2019.
|2019 COVERED COMPENSATION TABLE|
|CALENDAR CALENDAR YEAR OF 2019 COVERED||YEAR OF SOCIAL SECURITY COMPENSATION||BIRTH RETIREMENT AGE TABLE II|
|1986 and Later||2053 and Later||132,900|
|2019 ROUNDED COVERED COMPENSATION TABLE|
|1938 – 1939||45,000|
|1946 – 1947||66,000|
|1959 – 1960||102,000|
|1962 – 1963||108,000|
|1965 – 1966||114,000|
|1967 – 1968||117,000|
|1969 – 1970||120,000|
|1971 – 1972||123,000|
|1973 – 1975||126,000|
|1976 – 1979||129,000|
|1980 – 1983||132,000|
|1984 and Later||132,900|
The principal author of this notice is Tom Morgan of the Office of the Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). However, other personnel from the IRS participated in the development of this guidance. For further information regarding this notice, contact Mr. Morgan at 202-317-6700 or Gregory K. Davis at 443-853-5590 (not toll-free numbers).
This revenue ruling provides various prescribed rates for federal income tax purposes for April 2019 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. Finally, Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520.
|REV. RUL. 2019–08 TABLE 1|
|Applicable Federal Rates (AFR) for April 2019|
|Period for Compounding|
|REV. RUL. 2019–08 TABLE 2|
|Adjusted AFR for April 2019|
|Period for Compounding|
|REV. RUL. 2019–08 TABLE 3|
|Rates Under Section 382 for April 2019|
|Adjusted federal long-term rate for the current month||2.19%|
|Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months.)||2.20%|
|REV. RUL. 2019–08 TABLE 4|
|Appropriate Percentages Under Section 42(b)(1) for April 2019|
|Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%.|
|Appropriate percentage for the 70% present value low-income housing credit||7.63%|
|Appropriate percentage for the 30% present value low-income housing credit||3.27%|
|REV. RUL. 2019–08 TABLE 5|
|Rate Under Section 7520 for April 2019|
|Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest||3.0%|
This revenue ruling suspends Rev. Rul. 57–464, 1957–2 C.B. 244, and Rev. Rul. 57–492, 1957–2 C.B. 247, pending the completion of a study by the Department of the Treasury (Treasury Department) and the Internal Revenue Service (Service) regarding the active trade or business (ATB) requirement under sections 355(a)(1)(C) and (b) of the Internal Revenue Code.
In Rev. Rul. 57–464, the Service considered the section 355 qualification of a corporation’s separation of a manufacturing business from a group of real estate assets consisting of an old factory building used for storage and four other buildings: a duplex apartment building rented to employees of the corporation, a small office building rented to a single tenant, and two houses, one of which was occupied by a sister-in-law of the president of the corporation. The use of the old factory building for storage “was not in itself the active operation of a business as defined in the regulations.” The rental activities “produced only a nominal rental” and “negligible” net income, and the properties “were acquired either as an investment or as a convenience to employees of the manufacturing business.” The Service held that the separation did not satisfy the ATB requirement.
In Rev. Rul. 57–492, a corporation engaged in refining, transporting, and marketing petroleum products began a separate operation to explore for and produce oil. The exploration and production operation incurred substantial expenditures but “did not include any income producing activity or any source of income” until less than five years preceding its separation from the primary refining, transportation, and marketing operation. The Service held that the exploration and production operation failed to qualify as an ATB because, “[b]efore oil was discovered in commercial quantities . . ., the venture . . . did not include any income producing activity or any source of income.”
Section 355(a)(1) provides that, if certain requirements are met, a corporation may distribute stock and securities of a controlled corporation to its shareholders and security holders without recognition of gain or loss or income to the recipient shareholders or security holders. Among those requirements, both the distributing corporation and the controlled corporation must be engaged in an ATB immediately after the distribution. Sections 355(a)(1)(C) and (b), and § 1.355–3(a)(1)(i). Each trade or business must have been actively conducted throughout the five-year period ending on the date of the distribution. Section 355(b)(2)(B) and § 1.355–3(b)(3).
Section 1.355–3(b)(2)(ii) describes a “trade or business” as “a specific group of activities [that] are being carried on by the corporation for the purpose of earning income or profit, and the activities included in such group include every operation that forms a part of, or a step in, the process of earning income or profit.” In particular, “[s]uch group of activities ordinarily must include the collection of income and the payment of expenses.” Section 1.355–3(b)(2)(ii).
The Treasury Department and the Service are conducting a study to determine, for purposes of section 355, “whether a business can qualify as an ATB if entrepreneurial activities, as opposed to investment or other non-business activities, take place with the purpose of earning income in the future, but no income has yet been collected.” See IRS statement regarding the active trade or business requirement for section 355 distributions, dated September 25, 2018, available at http://www.irs.gov/newsroom/statements-from-office-of-the-chief-counsel. The ATB analysis underlying the holdings in Rev. Rul. 57–464 and Rev. Rul. 57–492 focuses, in significant part, on the lack of income generated by the activities under consideration. Consequently, these rulings could be interpreted as requiring income generation for a business to qualify as an ATB.
Accordingly, Rev. Rul. 57–464 and Rev. Rul. 57–492 are suspended pending completion of the study. See IRM 188.8.131.52.1, para. 9 (Aug. 11, 2004) (providing that a revenue ruling can be suspended “only in rare situations to show that previously published guidance will not be applied pending some future action, such as . . . the outcome of a Service study”).
This Notice provides penalty relief under sections 6722 (failure to furnish correct payee statements), 6698 (failure to file partnership return), section 6038(b) and (c) (failure to furnish information with respect to certain partnerships), and any other section of the Internal Revenue Code (Code) for filing or furnishing Schedules K–1 or other forms or statements, where a penalty is imposed solely as a result of failing to include information about partners’ negative tax basis capital accounts for taxable years that began after December 31, 2017, but before January 1, 2019.
Item L of Schedule K–1 to Form 1065 and Item F of Schedule K–1 to Form 8865 require reporting a partner’s capital account. Generally, a partnership may report partner capital to a partner using tax basis, Generally Accepted Accounting Principles, section 704(b) book, or some other method. Pursuant to updates, the 2018 Instructions for Form 1065 and Partner’s Instructions for Schedule K–1 (Form 1065) to Item L now require a partnership that does not report tax basis capital accounts to its partners to report, on line 20 of Schedule K–1 (Form 1065) using code AH, the amount of such partner’s tax basis capital both at the beginning of the year and at the end of the year if either amount is negative (negative tax basis capital account information). The Instructions for Form 8865, Schedule K–1, incorporate this requirement by reference to the Instructions for Form 1065.
The Treasury Department and Internal Revenue Service (IRS) have become aware that certain persons and partnerships may be unable to comply timely with this new requirement.
The IRS will waive penalties under section 6722 for failure to furnish a partner a Schedule K–1 (Form 1065) and under section 6698 for failure to file a Schedule K–1 (Form 1065) with a partnership return, under section 6038 for failure to furnish a Schedule K–1 (Form 8865), and under any other section of the Code for failure to file or furnish a Schedule K–1 or any other form or statement, for any penalty that arises solely as a result of failing to include negative tax basis capital account information if both the following conditions are met:
1. The Schedule K–1 or other applicable form or statement is timely filed, including extensions, with the IRS; is timely furnished to the appropriate partner, if applicable; and contains all other required information.
2. The person or partnership required to file the Schedule K–1 or other applicable form or statement files with the IRS, no later than one year after the original, unextended due date of the form to which the Schedule K–1 or other applicable form or statement must be attached, a schedule setting forth, for each partner for which negative tax basis capital account information is required:
a. the partnership’s name and Employee Identification Number, if any, and Reference ID Number, if any;
b. the partner’s name, address, and taxpayer identification number; and
c. the amount of the partner’s tax basis capital account at the beginning and end of the tax year at issue.
The schedule should be captioned “Filed Under Notice 2019–20” and accord with instructions and additional guidance posted by the IRS on IRS.gov.
The due date for this supplemental schedule is determined without consideration of any extensions, automatic or otherwise, that may apply to the due date for the form itself. The schedule should be sent to the following address:
1973 North Rulon White Blvd.
Ogden, UT 84404-7843
Attn: Ogden PTE
This penalty relief applies only for a taxable year beginning after December 31, 2017, but before January 1, 2019. To receive a penalty waiver, a person or partnership is not required to file or furnish amended Schedules K-1 or other applicable amended forms or statements to partners or the IRS, or to file an administrative adjustment request under section 6227, if applicable. Partnerships or other persons should not delay filing or furnishing Schedules K–1 or other applicable forms or statements on account of this Notice. The timely filing and furnishing, including extensions, of Schedules K–1 or other applicable forms or statements is a requirement to be eligible for relief under this Notice. The IRS will post instructions and additional information about the relief provided by this Notice in the coming weeks on IRS.gov, where forms, instructions, and other tax assistance are available.
The penalty relief under this Notice will allow additional time for persons and partnerships to provide the negative tax basis capital account information with respect to their taxable years beginning after December 31, 2017, but before January 1, 2019.
This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the Internal Revenue Code. In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I).
Section 430 specifies the minimum funding requirements that apply to single-employer plans (except for CSEC plans under § 414(y)) pursuant to § 412. Section 430(h)(2) specifies the interest rates that must be used to determine a plan’s target normal cost and funding target. Under this provision, present value is generally determined using three 24-month average interest rates (“segment rates”), each of which applies to cash flows during specified periods. To the extent provided under § 430(h)(2)(C)(iv), these segment rates are adjusted by the applicable percentage of the 25-year average segment rates for the period ending September 30 of the year preceding the calendar year in which the plan year begins. However, an election may be made under § 430(h)(2)(D)(ii) to use the monthly yield curve in place of the segment rates.
Notice 2007–81, 2007–44 I.R.B. 899, provides guidelines for determining the monthly corporate bond yield curve, and the 24-month average corporate bond segment rates used to compute the target normal cost and the funding target. Consistent with the methodology specified in Notice 2007–81, the monthly corporate bond yield curve derived from February 2019 data is in Table 2019–2 at the end of this notice. The spot first, second, and third segment rates for the month of February 2019 are, respectively, 3.01, 4.11, and 4.41.
The 24-month average segment rates determined under § 430(h)(2)(C)(i) through (iii) must be adjusted pursuant to § 430(h)(2)(C)(iv) to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates. For plan years beginning before 2021, the applicable minimum percentage is 90% and the applicable maximum percentage is 110%. The 25-year average segment rates for plan years beginning in 2018 and 2019 were published in Notice 2017–50, 2017–41 I.R.B. 280, and Notice 2018–73, 2018–40 I.R.B. 526, respectively.
The three 24-month average corporate bond segment rates applicable for March 2019 without adjustment for the 25-year average segment rate limits are as follows:
|24-Month Average Segment Rates Without 25-Year Average Adjustment|
|Applicable Month||First Segment||Second Segment||Third Segment|
Based on § 430(h)(2)(C)(iv), the 24-month averages applicable for March 2019, adjusted to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates, are as follows:
|Adjusted 24-Month Average Segment Rates|
|For Plan Years Beginning In||Applicable Month||First Segment||Second Segment||Third Segment|
Section 431 specifies the minimum funding requirements that apply to multiemployer plans pursuant to § 412. Section 431(c)(6)(B) specifies a minimum amount for the full-funding limitation described in § 431(c)(6)(A), based on the plan’s current liability. Section 431(c)(6)(E)(ii)(I) provides that the interest rate used to calculate current liability for this purpose must be no more than 5 percent above and no more than 10 percent below the weighted average of the rates of interest on 30-year Treasury securities during the four-year period ending on the last day before the beginning of the plan year. Notice 88–73, 1988–2 C.B. 383, provides guidelines for determining the weighted average interest rate. The rate of interest on 30-year Treasury securities for February 2019 is 3.02 percent. The Service determined this rate as the average of the daily determinations of yield on the 30-year Treasury bond maturing in November 2048 determined each day through February 6, 2019 and the yield on the 30-year Treasury bond maturing in February 2049 determined each day for the balance of the month. For plan years beginning in March 2019, the weighted average of the rates of interest on 30-year Treasury securities and the permissible range of rates used to calculate current liability are as follows:
|Treasury Weighted Average Rates|
|For Plan Years Beginning In||30-Year Treasury Weighted Average||Permissible Range 90% to 105%|
|March 2019||2.93||2.64 to 3.08|
In general, the applicable interest rates under § 417(e)(3)(D) are segment rates computed without regard to a 24-month average. Notice 2007–81 provides guidelines for determining the minimum present value segment rates. Pursuant to that notice, the minimum present value segment rates determined for February 2019 are as follows:
|Minimum Present Value Segment Rates|
|Month||First Segment||Second Segment||Third Segment|
The principal author of this notice is Tom Morgan of the Office of the Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). However, other personnel from the IRS participated in the development of this guidance. For further information regarding this notice, contact Mr. Morgan at 202-317-6700 or Paul Stern at 202-317-8702 (not toll-free numbers).
|Monthly Yield Curve for February 2019|
|Derived from February 2019 Data|
 Pursuant to § 433(h)(3)(A), the 3rd segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount of the full funding limitation under § 433(c)(7)(C)).
This notice announces the credit phase-out schedule for new qualified plug-in electric drive motor vehicles sold by General Motors, LLC.
Section 30D(a) of the Internal Revenue Code provides for a credit for certain new qualified plug-in electric drive motor vehicles. The new qualified plug-in electric drive motor vehicle credit begins to phase out for a manufacturer’s vehicles in the second calendar quarter after the calendar quarter in which at least 200,000 of the manufacturer’s vehicles that qualify for the credit have been sold for use or lease in the United States (determined on a cumulative basis for sales after December 31, 2009). Taxpayers purchasing the manufacturer’s vehicles during the first two calendar quarters of the phase-out period may claim 50 percent of the otherwise allowable credit. Taxpayers purchasing the manufacturer’s vehicles during the third and fourth calendar quarters of the phase-out period may claim 25 percent of the otherwise allowable credit. No credit is available for vehicles purchased after the last day of the fourth calendar quarter of the phase-out period.
Notice 2009–89, 2009–48 I.R.B. 714, provides procedures for a vehicle manufacturer (or in the case of a foreign vehicle manufacturer, its domestic distributor) to certify to the Internal Revenue Service (Service) both (1) that a particular make, model and model year of vehicle qualifies as a plug-in electric drive motor vehicle and (2) the amount of the credit allowable with respect to that vehicle.
Section 5.05 of Notice 2009–89 requires a manufacturer (or, in the case of a foreign vehicle manufacturer, its domestic distributor) that has received from the Service an acknowledgement of its certification for a particular make, model, and model year of vehicle to submit to the Service a report of the number of qualified vehicles sold by the manufacturer (or, in the case of a foreign vehicle manufacturer, its domestic distributor) to consumers or retail dealers during the calendar quarter. A qualified vehicle is defined for this purpose as any vehicle that is a new qualified plug-in electric drive motor vehicle.
In accordance with section 5.05 of Notice 2009–89, General Motors, LLC has submitted reports that indicate that its cumulative sales of qualified vehicles reached the 200,000-vehicle limit during the calendar quarter ending December 31, 2018. Accordingly, the credit for all new qualified plug-in electric drive motor vehicles sold by General Motors, LLC will begin to phase out April 1, 2019.
This notice applies to any make, model, or model year of new qualified plug-in electric drive motor vehicle that is –
(1) sold by General Motors, LLC; and
(2) purchased for use or lease in the United States on or after April 1, 2019.
If a new qualified plug-in electric drive motor vehicle sold by General Motors, LLC is purchased for use or lease on or after April 1, 2019, the allowable credit is as follows:
(1) For vehicles purchased for use or lease on or after April 1, 2019, and on or before September 30, 2019, the credit is 50 percent of the otherwise allowable amount determined under § 30D(b);
(2) For vehicles purchased for use or lease on or after October 1, 2019, and on or before March 31, 2020, the credit is 25 percent of the otherwise allowable amount determined under § 30D(b);
(3) For vehicles purchased for use or lease on or after April 1, 2020, no credit is allowable.
|Qualifying Vehicle||Full Credit When Purchased through 3/31/2019; (first quarter =100% credit allowed)||Reduced Credit When Purchased from 4/1/2019 through 9/30/2019 (2nd & 3rd quarters = 50% credit allowed)||Reduced Credit When Purchased from 10/1/2019 through 3/31/2020 (4th & 5th quarters = 25% credit allowed)||Credit available starting 4/1/2020|
|Chevrolet Volt 2011–2019||$7,500||$3,750||$1,875||$0|
|Chevrolet Spark EV 2014–2016||$7,500||$3,750||$1,875||$0|
|Chevrolet Bolt 2017–2019||$7,500||$3,750||$1,875||$0|
|Cadillac ELR 2014, 2016||$7,500||$3,750||$1,875||$0|
|Cadillac CT6 Plug-In 2017–2018||$7,500||$3,750||$1,875||$0|
This notice provides adjustments to the limitation on housing expenses for purposes of section 911 of the Internal Revenue Code for specific locations for 2019. These adjustments are made on the basis of geographic differences in housing costs relative to housing costs in the United States.
Section 911(a) allows a qualified individual to elect to exclude from gross income the foreign earned income and housing cost amount of such individual. The term “housing cost amount” is generally the total of the housing expenses for the taxable year minus a base housing amount. See section 911(c)(1). For this purpose, the housing expenses taken into account are limited to an amount that is tied to the maximum foreign earned income exclusion. Specifically, the limit on such housing expenses equals 30 percent (adjusted as may be provided under the Secretary’s authority under section 911(c)(2)(B)) of the maximum exclusion amount (computed on a daily basis), multiplied by the number of days in the applicable period that fall within the taxable year. See sections 911(c)(2)(A) and 911(d)(1). Thus, under this general limitation, a qualified individual whose entire taxable year is within the applicable period is limited to maximum housing expenses of $31,770 ($105,900 x .30) for 2019.
Similarly, the computation of the base housing amount is also tied to the maximum foreign earned income exclusion. Specifically, the base housing amount is 16% of the maximum exclusion amount (computed on a daily basis), multiplied by the number of days in the applicable period that fall within the taxable year. See sections 911(c)(1)(B) and 911(d)(1). Assuming that the entire taxable year of a qualified individual is within the applicable period, the base housing amount for 2019 is $16,944 ($105,900 x .16). Section 911(c)(2)(B) authorizes the Secretary to issue regulations or other guidance to adjust the percentage under section 911(c)(2)(A)(i) (which determines the limit on housing expenses) based on geographic differences in housing costs relative to housing costs in the United States. Pursuant to this authority, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) have published annual notices concerning the limitation on the section 911 housing cost amounts since the 2006 taxable year.
For more background on the foreign housing exclusion, https://www.irs.gov/individuals/international-taxpayers/foreign-housing-exclusion-or-deduction.
The following table provides adjusted limitations on housing expenses (in lieu of the otherwise applicable limitation of $31,770) for 2019.
|Country||Location||Limitation on Housing Expenses (full year)||Limitation on Housing Expenses (daily)|
|Brazil||Rio de Janeiro||35,100||96.16|
|Cayman Islands||Grand Cayman||48,000||131.51|
|Colombia||All cities other than Bogota||49,400||135.34|
|Costa Rica||San Jose||32,000||87.67|
|Democratic Republic of the Congo||Kinshasa||42,000||115.07|
|Dominican Republic||Santo Domingo||45,500||124.66|
|El Salvador||San Salvador||32,000||87.67|
|France||All cities other than Garches, Le Havre, Lyon, Marseille, Montpellier, Paris, Sevres, Suresnes, and Versailles||31,900||87.40|
|Germany||Frankfurt am Main||36,800||100.82|
|Germany||All cities other than Augsburg, Babenhausen, Bad Aibling, Bad Kreuznach, Bad Nauheim, Baumholder, Berchtesgaden, Berlin, Birkenfeld, Boeblingen, Bonn, Bremen, Bremerhaven, Butzbach, Cologne, Darmstadt, Delmenhorst, Duesseldorf, Erlangen, Flensburg, Frankfurt am Main, Friedberg, Fuerth, Garlstedt, Garmisch-Partenkirchen, Geilenkirchen, Gelnhausen, Germersheim, Giebelstadt, Grafenwoehr, Grefrath, Greven, Gruenstadt, Hamburg, Hanau, Handorf, Hannover, Heidelberg, Heilbronn, Herongen, Idar-Oberstein, Ingolstadt, Kaiserslautern, Landkreis, Kalkar, Karlsruhe, Kerpen, Kitzingen, Koblenz, Leimen, Leipzig, Ludwigsburg, Mainz, Mannheim, Mayen, Moenchen-Gladbach, Muenster, Munich, Nellingen, Neubruecke, Noervenich, Nuernberg, Ober Ramstadt, Oberammergau, Osterholz-Scharmbeck, Pfullendorf, Pirmasens, Rheinau, Rheinberg, Schwabach, Schwetzingen, Seckenheim, Sembach, Stuttgart, Twisteden, Vilseck, Wahn, Wertheim, Wiesbaden, Worms, Wuerzburg, Zirndorf and Zweibrueken||34,600||94.79|
|Holy See, The||Holy See, The||47,900||131.23|
|Kuwait||All cities other than Kuwait City||57,700||158.08|
|Malaysia||All cities other than Kuala Lumpur||33,700||92.33|
|Mexico||All cities other than Ciudad Juarez, Cuernavaca, Guadalajara, Hermosillo, Matamoros, Mazatlan, Merida, Metapa, Mexico City, Monterrey, Nogales, Nuevo Laredo, Reynosa, Tapachula, Tijuana, Tuxtla Gutierrez, and Veracruz||39,400||107.95|
|Netherlands||All cities other than Amsterdam, Aruba, Brunssum, Coevorden, Eygelshoven, The Hague, Heerlen, Hoensbroek, Hulsberg, Kerkrade, Landgraaf, Maastricht, Margraten, Papendrecht, Rotterdam, Schaesburg, Schinnen, Schiphol, and Ypenburg.||33,900||92.88|
|Qatar||All cities other than Doha||32,400||88.77|
|Switzerland||All cities other than Bern, Geneva, and Zurich||32,900||90.14|
|Tanzania||Dar Es Salaam||44,000||120.55|
|Trinidad and Tobago||Port of Spain||54,500||149.32|
|United Arab Emirates||Abu Dhabi||49,687||136.13|
|United Arab Emirates||Dubai||57,174||156.64|
|United Kingdom||High Wycombe||62,100||170.14|
|United Kingdom||Menwith Hill||37,400||102.47|
|United Kingdom||All cities other than Basingstoke, Bath, Belfast, Birmingham, Bracknell, Bristol, Brookwood, Brough, Cambridge, Caversham, Chelmsford, Cheltenham, Chicksands, Croughton, Dunstable, Edinburgh, Edzell, Fairford, Farnborough, Felixstowe, Ft. Halstead, Gibraltar, Glenrothes, Greenham Common, Harrogate, High Wycombe, Huntingdon, Hythe, Kemble, Lakenheath, Liverpool, London, Loudwater, Menwith Hill, Mildenhall, Nottingham, Oxfordshire, Plymouth, Portsmouth, Reading, Rochester, Samlesbury, Southampton, Surrey, Waterbeach, Welford, West Byfleet, and Wiltshire.||35,500||97.26|
|Vietnam||Ho Chi Minh City||42,000||115.07|
For some locations, the limitation on housing expenses provided in Section 3 of this notice may be higher than the limitation on housing expenses provided in the “Table of Adjusted Limitations for 2018” in Notice 2018–44. A qualified individual incurring housing expenses in such a location during 2018 may apply the adjusted limitation on housing expenses provided in Section 3 of this notice for 2019 in lieu of the amounts provided in the “Table of Adjusted Limitations for 2018” in Notice 2018–44 (and as set forth in the Instructions to Form 2555, Foreign Earned Income, for 2018).
The Treasury Department and the IRS anticipate that future annual notices providing adjustments to housing expense limitations will make a similar option available to qualified individuals that incur housing expenses in the immediately preceding year. For example, when adjusted housing expense limitations for 2020 are issued, it is expected that taxpayers will be permitted to apply those adjusted limitations to the 2019 taxable year.
Notice 2011–8, 2011–8 I.R.B. 503; Notice 2012–19, 2012–10 I.R.B. 440; Notice 2013–31, 2013–21 I.R.B. 1099; Notice 2014–29, 2014–18 I.R.B. 991; Notice 2015–33, 2015–18 I.R.B. 934; Notice 2016–21, 2016–12 I.R.B. 465; Notice 2017–21, 2017–13 I.R.B. 1026; and Notice 2018–44, 2018–21 I.R.B. 611 are relisted to assist those individuals who are filing prior year or amended tax returns.
This notice supersedes Notice 2006–87, 2006–43 I.R.B. 766; Notice 2007–25, 2007–12 I.R.B. 760; Notice 2007–77, 2007–40 I.R.B. 735; Notice 2008–107, 2008–50 I.R.B. 1265; Notice 2010–27, 2010–15 I.R.B. 531; Notice 2011–8, 2011–8 I.R.B. 503; Notice 2012–19, 2012–10 I.R.B. 440; Notice 2013–31, 2013–21 I.R.B. 1099; Notice 2014–29, 2014–18 I.R.B. 991; Notice 2015–33, 2015–18 I.R.B. 934; Notice 2016–21, 2016–12 I.R.B. 465; Notice 2017–21, 2017–13 I.R.B. 1026, and Notice 2018–44, 2018–21 I.R.B. 611.
SECTION 7. EFFECTIVE DATE
This notice is effective for taxable years beginning on or after January 1, 2019. However, as provided in Section 4, a taxpayer may apply the 2019 adjusted housing limitations contained in Section 3 of this notice to his or her taxable year beginning in 2018.
.01 This revenue procedure provides information to any individual who failed to meet the eligibility requirements of section 911(d)(1) of the Internal Revenue Code because adverse conditions in a foreign country precluded the individual from meeting those requirements.
.02 The Internal Revenue Service previously has listed countries for which the eligibility requirements of section 911(d)(1) of the Code are waived under section 911(d)(4) because of adverse conditions in those countries. See Rev. Proc. 2018–23, 2018–17, I.R.B. 516.
.01 Section 911(a) of the Code allows a “qualified individual,” as defined in section 911(d)(1), to exclude from gross income the individual’s foreign earned income and the housing cost amount.
.02 Section 911(d)(1) of the Code defines the term “qualified individual” as an individual whose tax home is in a foreign country and who is (A) a citizen of the United States and establishes to the satisfaction of the Secretary of the Treasury that the individual has been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire taxable year, or (B) a citizen or resident of the United States who, during any period of 12 consecutive months, is present in a foreign country or countries during at least 330 full days.
.03 Section 911(d)(4) of the Code provides an exception to the eligibility requirements of section 911(d)(1). An individual will be treated as a qualified individual with respect to a period in which the individual was a bona fide resident of, or was present in, a foreign country if the individual left the country during a period for which the Secretary of the Treasury, after consultation with the Secretary of State, determines that individuals were required to leave because of war, civil unrest, or similar adverse conditions that precluded the normal conduct of business. An individual must establish that but for those conditions the individual could reasonably have been expected to meet the eligibility requirements.
.01 For 2018, the Secretary of the Treasury, in consultation with the Secretary of State, has determined that war, civil unrest, or similar adverse conditions precluded the normal conduct of business in the following countries beginning on the specified date:
|Country||Date of Departure On or After|
|Congo, Democratic Republic of the||December 14, 2018|
|Cuba||January 4, 2018|
|Iraq||September 28, 2018|
|Nicaragua||July 6, 2018|
For example, for purposes of section 911 of the Code, an individual who left the Democratic Republic of Congo on or after December 14, 2018, will be treated as a qualified individual with respect to the period during which that individual was present in, or was a bona fide resident of, the Democratic Republic of Congo if the individual establishes a reasonable expectation that he or she would have met the requirements of section 911(d) but for those conditions.
.02 To qualify for relief under section 911(d)(4) of the Code, an individual must have established residency, or have been physically present, in the foreign country on or before the date that the Secretary of the Treasury determines that individuals were required to leave the foreign country. For example, individuals who were first physically present or established residency in the Democratic Republic of Congo after December 14, 2018, are not eligible to qualify for the exception provided in section 911(d)(4) of the Code for taxable year 2018.
Previously issued revenue procedures under section 911(d)(4) remain in full force and effect. However, Rev. Proc. 2018–23, 2018–17, I.R.B. 516, is supplemented.
A taxpayer who needs assistance on how to claim this exclusion, or on how to file an amended return, should consult the section under the heading Foreign Earned Income Exclusion at https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad; consult the section under the heading How to Get Tax Help at the same web address; or contact a local IRS office.
Revenue rulings and revenue procedures (hereinafter referred to as “rulings”) that have an effect on previous rulings use the following defined terms to describe the effect:
Amplified describes a situation where no change is being made in a prior published position, but the prior position is being extended to apply to a variation of the fact situation set forth therein. Thus, if an earlier ruling held that a principle applied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare with modified, below).
Clarified is used in those instances where the language in a prior ruling is being made clear because the language has caused, or may cause, some confusion. It is not used where a position in a prior ruling is being changed.
Distinguished describes a situation where a ruling mentions a previously published ruling and points out an essential difference between them.
Modified is used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a published position. (Compare with amplified and clarified, above).
Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions. This term is most commonly used in a ruling that lists previously published rulings that are obsoleted because of changes in laws or regulations. A ruling may also be obsoleted because the substance has been included in regulations subsequently adopted.
Revoked describes situations where the position in the previously published ruling is not correct and the correct position is being stated in a new ruling.
Superseded describes a situation where the new ruling does nothing more than restate the substance and situation of a previously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same position published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single ruling a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new ruling does more than restate the substance of a prior ruling, a combination of terms is used. For example, modified and superseded describes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously published ruling is first modified and then, as modified, is superseded.
Supplemented is used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original ruling has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the additions, and supersedes all prior rulings in the series.
Suspended is used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study.
The following abbreviations in current use and formerly used will appear in material published in the Bulletin.
B.T.A.—Board of Tax Appeals.
CFR—Code of Federal Regulations.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
ERISA—Employee Retirement Income Security Act.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
FUTA—Federal Unemployment Tax Act.
G.C.M.—Chief Counsel’s Memorandum.
I.R.B.—Internal Revenue Bulletin.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T.I.R.—Technical Information Release.
U.S.C.—United States Code.
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–27 through 2018–52 is in Internal Revenue Bulletin 2018–52, dated December 27, 2018.
Action on Decision:
The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue Bulletins are available at www.irs.gov/irb/.
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