- Topic: Tax Reform
One of the most innovative features of the energy tax credit provisions of the Inflation Reduction Act (the “IRA”), which became law on August 16, 2022, is a pair of provisions that allow taxpayers to sell energy tax credits to a third party for cash (Section 6418) or to elect to receive a cash payment of the tax credit directly from the federal government (Section 6417).1 Since the IRA was enacted, taxpayers, tax-exempt organizations, governmental entities, and their advisors have been counting the days for the IRS to provide guidance on how to apply these monetization provisions, which are expected to be a game-changer in the U.S. market for investment into green energy technologies.
The IRS released a major package of temporary and proposed regulations on these provisions on June 14, 2023.
On February 13, 2023, the IRS released Notices 2023-17 and 2023-18, which provide guidance on energy incentive tax credit provisions that were amended by the Inflation Reduction Act of 2022 (the "IRA"). Taxpayers and their advisors have been eagerly awaiting guidance on many aspects of the IRA's changes. The guidance in Notices 2023-17 and 2023-18, however, does not cover many of the most pressing issues regarding the new tax credit rules, such as the details of how to obtain a refund of tax credits under the new “direct pay” provision and how to comply with the prevailing wage and apprenticeship requirements. The IRS has stated that it will issue additional guidance on the IRA's changes to existing tax credit provisions in the future.
The Inflation Reduction Act (the “IRA”), which became law in August 2022, provides one of the most significant packages of renewable energy incentives in recent history. Most of the renewable energy provisions take the form of extended and expanded tax credits, which apply to investments in solar, wind, geothermal and other nontraditional energy resources. One tax credit provision of the IRA that will be of interest to ordinary consumers are the changes to the tax credit for taxpayers who purchase an electric vehicle (the “EV tax credit”).
The Inflation Reduction Act (the "IRA") is being hailed as one of the most significant legislative actions in recent history intended to incentivize investment in renewable energy technologies. The IRA generally achieves this through the extension and broadening of existing tax credit provisions that apply to investments in clean energy technologies such as solar, wind and geothermal. Since the IRA became law in August 2022, taxpayers have been eagerly awaiting regulations and other guidance on how to apply the new provisions and how to claim the tax credits. On November 30, 2022, the IRS issued the first item of guidance on these provisions in the form of IRS Notice 2022-61 (the "Notice").
The Inflation Reduction Act (the “IRA”), which became law on August 16, 2022, includes only a handful of tax provisions. Though few in number, the new provisions are expected to have a major impact on taxpayers. The corporate minimum income tax and excise tax on stock buybacks are both entirely new tax regimes implemented under the IRA. In addition, the IRA has introduced major changes to the investment tax credit (the “ITC”) and the production tax credit (“PTC”), which are intended to encourage investment in renewable energy projects, such as solar and wind projects.
In December 2017, Congress added a provision to the tax code that allows some taxpayers to defer some capital gain and eliminate other gain if the taxpayer invests in an Opportunity Zone and certain conditions are met.
The beginning of each year provides an opportunity for investment advisers to review compliance and regulatory matters, including issues related to private investment funds and commodity pools.
- New Proposed Regulations Take the Bite out of Section 956 Deemed Dividends for Corporate Shareholders
New treasury regulations proposed by the Internal Revenue Service on October 31 significantly diminish the sting of Section 956 for many US corporations that own stock in non-US corporations that have investments in US property.
The Internal Revenue Service recently provided excise tax relief for funds taxed as regulated investment companies that were required to increase their gross income because of the new Section 965 transition tax.
Under 1991 US guidance, if a non-US partner sold its interest in a US partnership, the selling partner would look through to the business of the partnership and would be required to file a US tax return and pay US tax if the partnership would have had income effectively connected to a US trade or business on a deemed sale of its assets. But that guidance was reversed in a tax court case. Then the US position was reversed again in the Tax Cuts and Jobs Act.
- Journal of Taxation
For non-US individuals and corporations that invest in real estate within the US, the rules that subject their gains to US federal income tax generally are found under Section 897. The Foreign Investment in Real Property Tax Act rules have often been attacked as a disincentive for overseas investors to enter the US real estate market.
- March 2018Journal of Taxation of Financial Products
This article describes the impact of the Tax Cuts and Jobs Act on securitization transactions. The article addresses in detail the new limitation on the deduction for business interest expense as well as the requirement that the transferee of an equity interest in a partnership engaged in a US trade or business withhold 10% of the amount realized unless the transferor certifies that it is a US person.
Although recent legislation commonly referred to as the Tax Cuts and Jobs Act retained Section 956 of the Internal Revenue Code (and its notorious deemed dividend issue), the enactment of other changes may reduce the impact of Section 956 on taxpayers.
On December 22, 2017, President Trump signed into law the most sweeping tax law changes in the last thirty years. Highlights of the new tax reform legislation as they impact individuals are summarized in this Client Alert.
Overlooked in the many discussions about the new tax laws are the consequences on trusts and estates and the high likelihood trusts and their beneficiaries will see larger income tax bills for the next seven years. This Client Alert focuses on how the tax changes will impact trusts and estates, identify some of the significant uncertainties and provide recommendations for fiduciaries.
On December 20, Congress passed the act commonly referred to as the Tax Cuts and Jobs Act of 2017. Although no provision of the Act was designed specifically to address securitization transactions, two new sets of rules are likely to have significant effects on at least some securitization transactions
- Tax Cuts and Jobs Act Would Eliminate Advance Refunding Bonds, Tax Credit and Direct Pay Bonds, Would Retain Private Activity Bonds and Stadium Bonds
On December 15, House and Senate conferees reached an agreement on the Tax Cut and Jobs Act and released the final version of the Bill, which is expected to be voted on this week in the House and Senate.
Both the House and Senate versions of the Tax Cuts and Jobs Act include a new provision that would impose an excise tax on the compensation paid by certain tax-exempt organizations if the compensation to a covered employee is more than $1 million.
Both the House and Senate versions of the Tax Cuts and Jobs Act include a new provision that would impose an excise tax on the compensation paid by certain exempt organizations, including certain state and local governmental entities, if the compensation to a covered employee is more than $1 million.
On November 2, Representative Brady released the “Tax Cuts and Jobs Act.” On November 9, the Senate Finance Committee released a “Description of the Chairman’s Mark of the ‘Tax Cuts and Jobs Act.’” This summary highlights four provisions in the proposed legislation that will be of particular interest to financial institutions.
On November 2, Representative Brady released the proposed text of the long-awaited federal income tax reform bill. The bill also includes a provision that appears aimed at subjecting public pension plans to unrelated business taxable income.
On November 2, Representative Kevin Brady released the proposed text of the long-awaited federal income tax reform bill. The bill also includes a provision that creates a limit on the deductibility of interest. If enacted, this provision could have potentially wide-reaching impacts on securitization transactions.
- Proposed House Tax Bill Would Eliminate All Private Activity Bonds (Including Qualified 501(c)(3) Bonds), Tax Credit Bonds (Including Direct Pay Bonds), and Advance Refundings
On November 2, Representative Brady released the proposed text of the long-awaited federal income tax reform bill. If enacted into law, the bill would eliminate all tax-exempt private activity bonds, tax credit bonds and all tax-exempt advance refunding bonds.
The recently released “Unified Framework for Fixing Our Broken Tax Code” includes a proposed limitation on the deductibility of interest expense by corporations. Although this framework does not provide details as to the nature or scope of the proposed limitations, any such limitations will potentially affect the balance in preferences between debt and equity funding.
- Changes to REIT Related Provisions Proposed in the Tax Reform Act of 2014 and in the 2015 Budget ProposalClient Alert
The following is a summary of certain proposed changes to the Real Estate Investment Trust provisions of the Internal Revenue Code included in recent legislative proposals.
- Client Alert
Legislative proposals by House Ways and Means Committee Chair Dave Camp would expand the scope of the unrelated business taxable income rules so that state and local pension funds would be subject to tax on certain investment income, including, in some instances, income from investment funds.
- Client Alert
Recently proposed legislation would generally (i) require sale treatment when a C corporation elects to become a regulated investment company or transfers assets to a RIC, (ii) treat certain RIC shares as United States real property interests subject to tax by non-U.S. persons on disposition, and (iii) provide that RIC dividends received through foreign corporations would not be eligible for a dividends received deduction.
- Client Alert
The Tax Reform Act of 2014 intends to simplify and consolidate the individual taxation scheme by consolidating, changing, or eliminating a variety of current tax benefits and the tax rates.
- Client Alert
In March 2014, the U.S. Department of the Treasury released its general explanation of the tax proposals in the Obama administration’s proposed fiscal year 2015 budget.
- Client Alert
Federal income tax reform has been the subject of numerous congressional discussions and committee hearings over the last year.
- Client Alert
Legislative proposals by House Ways and Means Committee Chair Dave Camp would repeal the 4% LIHTC and change the way LIHTCs are allocated by the States.
- Tax Reform Act of 2014--Derivatives, Hedges and Other Financial Product and Securitization Relevant ProvisionsClient Alert
On February 26, 2014, Representative David Camp, chair of the House Ways and Means Committee, released draft legislation referred to as the Tax Reform Act of 2014 that proposes to amend major portions of the Internal Revenue Code to provide for comprehensive tax reform.
- Client Alert
Recent legislative tax reforms proposed by Senate Finance Committee Chairman Max Baucus could have far reaching tax and other economic consequences to many holders of interests in real estate and tangible personal property, whether as investors, lessors, or other business users.