While Congress was on a week-long recess, the IRS released guidance during the week of April 30 addressing prepaid mortgage insurance premiums, low-income housing purchase price and basis procedures and the delayed effective date of proposed debt instrument regulations. The IRS is also accepting applications for matching grants for low-income taxpayer clinics and 2013 Community Volunteer Income Tax Assistance (VITA).
Tax-Exempt Status Revocations. The Treasury Inspector General for Tax Administration (TIGTA) issued a report finding that the IRS had identified 279,500 tax-exempt organizations that had not filed a return or notice for three consecutive years and had appropriately notified these organizations of the automatic revocation of their tax-exempt status (TAXDAY, 2012/05/04, T.1). However, the IRS did not identify more than 15,000 organizations that should have been informed about their revocations and did not clearly inform certain organizations on how to regain their tax-exempt status if they were still operating.
Prepaid Mortgage Insurance Premiums. Final regulations were issued that explain how to allocate prepaid qualified mortgage insurance premiums to determine the amount of the prepaid premium that is treated as qualified residence interest each tax year under Code Sec. 163(h)(4)(F) (T.D. 9588; TAXDAY, 2012/05/07, I.1). The final regulations apply to prepaid qualified mortgage insurance premiums paid or accrued on or after January 1, 2011.
Low-Income Housing Purchase Price. The IRS finalized regulations defining the qualified contract formula used to compute the purchase price amount of a low-income housing building as the fair market value of the non-low-income portion of the building, plus the low-income portion of the building (T.D. 9587; TAXDAY, 2012/05/03, I.1). The regulations are applicable to owner requests to housing credit agencies on or after May 2, 2012, to obtain a qualified contract for the acquisition of a low-income housing credit building.
Low-Income Housing Basis Procedure. The IRS released the procedure for taxpayers to notify the Service of an increase in tax resulting from a reduction in the qualified basis of a low-income housing credit building in order to begin the three-year statutory period for assessing a deficiency with respect to that taxpayer (Rev. Proc. 2012-27; TAXDAY, 2012/05/03, I.2).
Debt Instrument Regulations/Delayed Effective Date. The effective dates for proposed regulations under Code Secs. 6045(g), 6045(h), 6045A and 6045B for reporting debt instruments and options by brokers and others (TAXDAY, 2011/11/23, I.5) have been delayed one year, from January 1, 2013, to January 1, 2014 (Notice 2012-34; TAXDAY, 2012/05/03, I.3).
Low-Income Taxpayer Clinic. The IRS is now accepting applications for low-income taxpayer clinic (LITC) matching grants for the 2013 grant cycle, which runs from January 1, 2013, through December 31, 2013 (IR-2012-50; TAXDAY, 2012/05/04, I.4; TAXDAY, 2012/05/01, I.1). The application period runs from May 1, 2012, through June 15, 2012.
Community Volunteer Clinic. The IRS announced that application packages for the 2013 Community Volunteer Income Tax Assistance (VITA) Matching Grant Program are now available (IR-2012-49; TAXDAY, 2012/05/01, I.3). The VITA matching grant program is intended to help VITA programs by providing direct funds to assist volunteer organizations in reaching areas with under-served taxpayers.
Passive Activity Loss Regulations. At an IRS hearing, two witnesses expressed opposite opinions on proposed regulations on passive activity loss (NPRM REG-109369-10, I.R.B. 2012-9, 434): Michael Grace, Milbank, Tweed, Hadley & McCloy LLP, Washington, D.C., generally agreed with the proposal to change the standard from limited liability to management rights (TAXDAY, 2012/05/01, I.5). However, John Hoover, Dow Lohnes PLLC, Washington, D.C., objected to the proposed regulations, stating that the regulations should only draw bright lines, provide some examples on management rights, and leave the nuances to the letter ruling process.
By Jennifer J. Rodibaugh, CCH News Staff