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Tax reform implementation issues are going to be with us for a long time, especially related to Sec. 199A. And many CPAs may be wondering when will the IRS issue guidance on the new Sec. 199A.
The answer is soon, according to Acting IRS Commissioner David Kautter. On June 8, when speaking at a tax conference in Virginia, Kautter said that the proposed Sec. 199A regulations could be released “within a couple of weeks.” Kautter also said the IRS is trying to hit the key points with the proposed regulations (implying they will not address many of the less-urgent points in the initial guidance). He noted that the proposed regulations will likely include general rules, aggregation rules, anti-abuse rules and the definition of specified services.
Kautter had first predicted at a May tax meeting in Washington, D.C. that the proposed regulations would be released in July. At that time, he said that the proposed regulations probably would not answer all practitioners’ questions and that public comments would help shape the final regulations.
Under the Tax Cuts and Jobs Act passed by Congress in December, qualified business income (QBI) from many pass-through entities is eligible for a 20 percent deduction, although many basic questions about the provision will remain unanswered until the Treasury Department and the IRS issue guidance.
The AICPA began its push for immediate guidance in February. In a letter to Treasury and IRS officials, the AICPA stated: “Taxpayers and practitioners need clarity regarding QBI to comply with their 2018 tax obligations and to make informed decisions regarding cash-flow, entity structure, and other tax planning issues.”
The AICPA has since reinforced the urgency for guidance in meetings with the IRS and Treasury, and also provided real-life examples of challenges about how the rules may impact our members and their clients. The AICPA also has identified six top priorities for QBI guidance and suggested how guidance in those areas should be written. The six issues are:
“We offered our suggestions on guidance early in the process because we believed it would be helpful to IRS and Treasury as they thought through how to draft the proposed regulations,” Edward Karl, CPA, CGMA, AICPA vice president of taxation, said. “We also know how important this area of the law is to our members and their clients.”