Highlights of This Issue Income Tax Preface The IRS Mission Introduction Part III. Administrative, Procedural, and Miscellaneous Notice 201842 Notice 201854 Part IV. Items of General Interest Announcement 201809 Definition of Terms and Abbreviations Definition of Terms Abbreviations Numerical Finding List Numerical Finding List Effect of Current Actions on Previously Published Items Finding List of Current Actions on Previously Published Items INTERNAL REVENUE BULLETIN We Welcome Comments About the Internal Revenue Bulletin Internal Revenue Bulletin: 2018-24 June 11, 2018 Highlights of This Issue 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. Income Tax Announcement 2018–09 Announcement 2018–09 This announcement corrects a typographical error in Notice 2018–40, which published the inflation adjustment factor for the carbon oxide sequestration credit under § 45Q for calendar year 2018. Notice 2018–42 Notice 2018–42 This notice modifies Notice 2018–03, 2018–2 I.R.B. 285 (released to the Public Dec. 14, 2017), in light of Public Law 115–97 (Dec. 22, 2017), which made amendments to §§ 67 and 217 of the Internal Revenue Code. Notice 2018–03 provided the optional 2018 standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes. Notice 2018–54 Notice 2018–54 Notice 2018–54 informs taxpayers that the Treasury Department and the IRS intend to propose regulations addressing the federal income tax treatment of certain payments made by taxpayers for which taxpayers receive a credit against their state and local taxes. Preface The IRS Mission Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all. Introduction 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. Part III. Administrative, Procedural, and Miscellaneous Notice 2018–42 Update of 2018 Standard Mileage Rates Notice This notice modifies Notice 2018–03, 2018–2 I.R.B. 285 (released to the Public Dec. 14, 2017), in light of Public Law 115–97 (Dec. 22, 2017), which made amendments to §§ 67 and 217 of the Internal Revenue Code. Notice 2018–03 provided the optional 2018 standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes. Section 3 of Notice 2018–03 identified a standard mileage rate of 54.5 cents per mile for all miles of business use (business standard mileage rate) that taxpayers were to use, including to deduct unreimbursed employee travel expenses as a miscellaneous itemized deduction under § 67. Public Law 115–97 (section 11045) suspends all miscellaneous itemized deductions that are subject to the two-percent of adjusted gross income floor under § 67, including unreimbursed employee travel expenses. This suspension applies to taxable years beginning after December 31, 2017, and before January 1, 2026. Thus, the business standard mileage rate listed in Notice 2018–03 cannot be used to claim an itemized deduction for unreimbursed employee travel expenses during the suspension. Notwithstanding the foregoing suspension of miscellaneous itemized deductions, deductions for expenses that are deductible in determining adjusted gross income are not suspended. For example, members of a reserve component of the Armed Forces of the United States, state or local government officials paid on a fee basis, and certain performing artists are entitled to deduct unreimbursed employee travel expenses as an adjustment to total income on line 24 of Form 1040 (2017), not as an itemized deduction on line 21 of Schedule A of Form 1040 (2017), and therefore may continue to use the business standard mileage rate. For the use of an automobile as a part of a move for which the expenses are deductible under § 217, section 3 of Notice 2018–03 provided a standard mileage rate of 18 cents per mile. For taxable years beginning after December 31, 2017, and before January 1, 2026, Public Law 115–97 (section 11049) suspends the deduction for moving expenses. This suspension does not apply to members of the Armed Forces of the United States on active duty who move pursuant to a military order and incident to a permanent change of station to whom § 217(g) applies. Thus, other than those to whom § 217(g) applies, the standard mileage rate is not applicable for the use of an automobile as part of a move occurring during the suspension. Section 5 of Notice 2018–03 identified a maximum standard automobile cost of $27,300 for passenger automobiles (excluding trucks and vans) and $31,000 for trucks and vans for purposes of computing the allowance under a fixed and variable rate (FAVR) plan. Public Law 115–97 (section 13202), however, increases the depreciation limitations for passenger automobiles placed in service after December 31, 2017. As a result, the maximum standard automobile cost may not exceed $50,000 for passenger automobiles (including trucks and vans) placed in service after December 31, 2017. EFFECT ON OTHER DOCUMENTS Notice 2018–03 is modified. DRAFTING INFORMATION The principal author of this notice is Bernard P. Harvey of the Office of Associate Chief Counsel (Income Tax and Accounting). For further information on this notice contact Bernard P. Harvey on (202) 317-7005 (not a toll-free phone call). Notice 2018–54 Guidance on Certain Payments Made in Exchange for State and Local Tax Credits SECTION 1. PURPOSE This notice informs taxpayers that the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) intend to propose regulations addressing the federal income tax treatment of certain payments made by taxpayers for which taxpayers receive a credit against their state and local taxes. SECTION 2. BACKGROUND Section 11042 of “The Tax Cuts and Jobs Act,” Pub. L. No. 115–97, limits an individual’s deduction under § 164 for the aggregate amount of state and local taxes paid during the calendar year to $10,000 ($5,000 in the case of a married individual filing a separate return). State and local tax payments in excess of those amounts are not deductible. This new limitation applies to taxable years beginning after December 31, 2017, and before January 1, 2026. In response to this new limitation, some state legislatures are considering or have adopted legislative proposals that would allow taxpayers to make transfers to funds controlled by state or local governments, or other transferees specified by the state, in exchange for credits against the state or local taxes that the taxpayer is required to pay. The aim of these proposals is to allow taxpayers to characterize such transfers as fully deductible charitable contributions for federal income tax purposes, while using the same transfers to satisfy state or local tax liabilities. Despite these state efforts to circumvent the new statutory limitation on state and local tax deductions, taxpayers should be mindful that federal law controls the proper characterization of payments for federal income tax purposes. SECTION 3. GUIDANCE TO BE ISSUED The Treasury Department and the IRS intend to propose regulations addressing the federal income tax treatment of transfers to funds controlled by state and local governments (or other state-specified transferees) that the transferor can treat in whole or in part as satisfying state and local tax obligations. The proposed regulations will make clear that the requirements of the Internal Revenue Code, informed by substance-over-form principles, govern the federal income tax treatment of such transfers. The proposed regulations will assist taxpayers in understanding the relationship between the federal charitable contribution deduction and the new statutory limitation on the deduction for state and local tax payments. SECTION 4. DRAFTING INFORMATION The principal authors of this notice are Mon Lam and Merrill Feldstein of the Office of Associate Chief Counsel (Income Tax & Accounting). Other personnel from the Treasury Department and the IRS participated in its development. For further information regarding this notice, contact Ms. Lam or Ms. Feldstein at (202) 317-5100 (not a toll-free number). Part IV. Items of General Interest Announcement 2018–09 Notice 2018–40, 2018–20 I.R.B. 583 (May 14, 2018), contains a typographical error in the first sentence of section 3 on page 584. The sentence states that the inflation adjustment factor for calendar year 2017 is 1.1437. The correct year is 2018. The sentence is amended to delete “2017” and replace it with “2018.” Definition of Terms and Abbreviations Definition of Terms 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. Abbreviations The following abbreviations in current use and formerly used will appear in material published in the Bulletin. A—Individual. Acq.—Acquiescence. B—Individual. BE—Beneficiary. BK—Bank. B.T.A.—Board of Tax Appeals. C—Individual. C.B.—Cumulative Bulletin. CFR—Code of Federal Regulations. CI—City. COOP—Cooperative. Ct.D.—Court Decision. CY—County. D—Decedent. DC—Dummy Corporation. DE—Donee. Del. Order—Delegation Order. DISC—Domestic International Sales Corporation. DR—Donor. E—Estate. EE—Employee. E.O.—Executive Order. ER—Employer. ERISA—Employee Retirement Income Security Act. EX—Executor. F—Fiduciary. FC—Foreign Country. FICA—Federal Insurance Contributions Act. FISC—Foreign International Sales Company. FPH—Foreign Personal Holding Company. F.R.—Federal Register. FUTA—Federal Unemployment Tax Act. FX—Foreign corporation. G.C.M.—Chief Counsel’s Memorandum. GE—Grantee. GP—General Partner. GR—Grantor. IC—Insurance Company. I.R.B.—Internal Revenue Bulletin. LE—Lessee. LP—Limited Partner. LR—Lessor. M—Minor. Nonacq.—Nonacquiescence. O—Organization. P—Parent Corporation. PHC—Personal Holding Company. PO—Possession of the U.S. PR—Partner. PRS—Partnership. PTE—Prohibited Transaction Exemption. Pub. L.—Public Law. REIT—Real Estate Investment Trust. Rev. Proc.—Revenue Procedure. Rev. Rul.—Revenue Ruling. S—Subsidiary. S.P.R.—Statement of Procedural Rules. Stat.—Statutes at Large. T—Target Corporation. T.C.—Tax Court. T.D.—Treasury Decision. TFE—Transferee. TFR—Transferor. T.I.R.—Technical Information Release. TP—Taxpayer. TR—Trust. TT—Trustee. U.S.C.—United States Code. X—Corporation. Y—Corporation. Z—Corporation. Numerical Finding List Numerical Finding List A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2017–27 through 2017–52 is in Internal Revenue Bulletin 2017–52, dated December 27, 2017. Bulletin 2018–1 through 2018–24 Announcements: Article Issue Link Page 2018-01 2018-09 I.R.B. 2018-09 387 2018-02 2018-09 I.R.B. 2018-09 387 2018-03 2018-09 I.R.B. 2018-09 387 2018-04 2018-10 I.R.B. 2018-10 401 2018-05 2018-13 I.R.B. 2018-13 461 2018-07 2018-16 I.R.B. 2018-16 503 2018-08 2018-19 I.R.B. 2018-19 552 2018-09 2018-24 I.R.B. 2018-24 752 Notices: Article Issue Link Page 2018-01 2018-03 I.R.B. 2018-03 285 2018-02 2018-02 I.R.B. 2018-02 281 2018-03 2018-02 I.R.B. 2018-02 285 2018-05 2018-06 I.R.B. 2018-06 341 2018-06 2018-03 I.R.B. 2018-03 300 2018-07 2018-04 I.R.B. 2018-04 317 2018-08 2018-07 I.R.B. 2018-07 352 2018-10 2018-08 I.R.B. 2018-08 359 2018-11 2018-11 I.R.B. 2018-11 425 2018-12 2018-12 I.R.B. 2018-12 441 2018-13 2018-06 I.R.B. 2018-06 341 2018-14 2018-07 I.R.B. 2018-07 353 2018-15 2018-09 I.R.B. 2018-09 376 2018-16 2018-10 I.R.B. 2018-10 390 2018-17 2018-09 I.R.B. 2018-09 376 2018-18 2018-12 I.R.B. 2018-12 443 2018-19 2018-12 I.R.B. 2018-12 443 2018-20 2018-12 I.R.B. 2018-12 444 2018-21 2018-15 I.R.B. 2018-15 472 2018-22 2018-14 I.R.B. 2018-14 464 2018-23 2018-15 I.R.B. 2018-15 474 2018-24 2018-17 I.R.B. 2018-17 507 2018-25 2018-15 I.R.B. 2018-15 476 2018-26 2018-16 I.R.B. 2018-16 480 2018-27 2018-20 I.R.B. 2018-20 580 2018-28 2018-16 I.R.B. 2018-16 492 2018-29 2018-16 I.R.B. 2018-16 495 2018-30 2018-21 I.R.B. 2018-21 610 2018-31 2018-16 I.R.B. 2018-16 501 2018-32 2018-17 I.R.B. 2018-17 507 2018-33 2018-17 I.R.B. 2018-17 508 2018-34 2018-19 I.R.B. 2018-19 549 2018-35 2018-18 I.R.B. 2018-18 520 2018-36 2018-20 I.R.B. 2018-20 582 2018-37 2018-18 I.R.B. 2018-18 521 2018-38 2018-18 I.R.B. 2018-18 522 2018-39 2018-20 I.R.B. 2018-20 582 2018-40 2018-20 I.R.B. 2018-20 583 2018-41 2018-20 I.R.B. 2018-20 584 2018-42 2018-24 I.R.B. 2018-24 750 2018-43 2018-20 I.R.B. 2018-20 590 2018-44 2018-21 I.R.B. 2018-21 611 2018-45 2018-21 I.R.B. 2018-21 620 2018-46 2018-21 I.R.B. 2018-21 621 2018-47 2018-21 I.R.B. 2018-21 621 2018-49 2018-22 I.R.B. 2018-22 624 2018-50 2018-22 I.R.B. 2018-22 626 2018-51 2018-22 I.R.B. 2018-22 628 2018-52 2018-22 I.R.B. 2018-22 629 2018-53 2018-22 I.R.B. 2018-22 631 2018-54 2018-24 I.R.B. 2018-24 750 Proposed Regulations: Article Issue Link Page REG-119514-15 2018-04 I.R.B. 2018-04 325 REG-129260-16 2018-14 I.R.B. 2018-14 470 REG-118067-17 2018-08 I.R.B. 2018-08 360 REG-132197-17 2018-10 I.R.B. 2018-10 404 REG-132197-17 2018-10 I.R.B. 2018-10 404 REG-132434-17 2018-16 I.R.B. 2018-16 503 Revenue Procedures: Article Issue Link Page 2018-1 2018-01 I.R.B. 2018-01 1 2018-2 2018-01 I.R.B. 2018-01 106 2018-3 2018-01 I.R.B. 2018-01 130 2018-4 2018-01 I.R.B. 2018-01 146 2018-5 2018-01 I.R.B. 2018-01 244 2018-7 2018-01 I.R.B. 2018-01 282 2018-8 2018-02 I.R.B. 2018-02 286 2018-9 2018-02 I.R.B. 2018-02 290 2018-10 2018-07 I.R.B. 2018-07 355 2018-11 2018-05 I.R.B. 2018-05 334 2018-12 2018-06 I.R.B. 2018-06 349 2018-13 2018-07 I.R.B. 2018-07 356 2018-14 2018-09 I.R.B. 2018-09 378 2018-15 2018-09 I.R.B. 2018-09 379 2018-16 2018-09 I.R.B. 2018-09 383 2018-17 2018-09 I.R.B. 2018-09 384 2018-18 2018-10 I.R.B. 2018-10 392 2018-19 2018-14 I.R.B. 2018-14 466 2018-20 2018-11 I.R.B. 2018-11 427 2018-21 2018-14 I.R.B. 2018-14 467 2018-22 2018-18 I.R.B. 2018-18 524 2018-23 2018-17 I.R.B. 2018-17 516 2018-24 2018-18 I.R.B. 2018-18 525 2018-25 2018-18 I.R.B. 2018-18 543 2018-26 2018-18 I.R.B. 2018-18 546 2018-27 2018-20 I.R.B. 2018-20 591 2018-28 2018-20 I.R.B. 2018-20 592 2018-29 2018-22 I.R.B. 2018-22 634 2018-30 2018-21 I.R.B. 2018-21 622 2018-31 2018-22 I.R.B. 2018-22 637 2018-32 2018-23 I.R.B. 2018-23 739 2018-33 2018-22 I.R.B. 2018-22 734 2018-34 2018-23 I.R.B. 2018-23 748 Revenue Rulings: Article Issue Link Page 2018-01 2018-02 I.R.B. 2018-02 275 2018-02 2018-02 I.R.B. 2018-02 277 2018-03 2018-02 I.R.B. 2018-02 278 2018-04 2018-04 I.R.B. 2018-04 304 2018-05 2018-06 I.R.B. 2018-06 339 2018-06 2018-10 I.R.B. 2018-10 388 2018-07 2018-13 I.R.B. 2018-13 445 2018-09 2018-14 I.R.B. 2018-14 462 2018-10 2018-16 I.R.B. 2018-16 477 2018-11 2018-18 I.R.B. 2018-18 518 2018-12 2018-20 I.R.B. 2018-20 575 2018-13 2018-20 I.R.B. 2018-20 576 2018-14 2018-23 I.R.B. 2018-23 736 2018-15 2018-23 I.R.B. 2018-23 736 2018-16 2018-23 I.R.B. 2018-23 737 Treasury Decisions: Article Issue Link Page 9829 2018-04 I.R.B. 2018-04 308 9830 2018-11 I.R.B. 2018-11 423 9831 2018-13 I.R.B. 2018-13 459 9832 2018-16 I.R.B. 2018-16 477 Effect of Current Actions on Previously Published Items Finding List of Current Actions on Previously Published Items A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2017–27 through 2017–52 is in Internal Revenue Bulletin 2017–52, dated December 27, 2017. Bulletin 2018–1 through 2018–24 Notices: Old Article Action New Article Issue Link Page 2003-65 Modified by Notice 2018-30 2018-21 I.R.B. 2018-21 610 INTERNAL REVENUE BULLETIN 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/. We Welcome Comments About the Internal Revenue Bulletin If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page (www.irs.gov) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave. NW, IR-6230 Washington, DC 20224.