{"id":1610,"date":"2018-11-13T03:15:00","date_gmt":"2018-11-13T08:15:00","guid":{"rendered":"https:\/\/actec.matrixdev.net\/?post_type=capital-letter&p=1610"},"modified":"2024-04-29T16:29:07","modified_gmt":"2024-04-29T20:29:07","slug":"the-2018-2019-priority-guidance-plan","status":"publish","type":"capital-letter","link":"https:\/\/actec.matrixdev.net\/capital-letter\/the-2018-2019-priority-guidance-plan\/","title":{"rendered":"The 2018-2019 Priority Guidance Plan"},"content":{"rendered":"\n

The Treasury-IRS Priority Guidance Plan for the 12 months ending June 30, 2019, confirms and clarifies the preview offered by the OMB\u2019s government-wide agenda.<\/strong><\/em>
<\/p>\n\n\n\n

Dear Readers Who Follow Washington Developments:<\/p>\n\n\n\n

The\u00a0Treasury-IRS Priority Guidance Plan\u00a0for the 12 months from July 2018 to June 2019 was published on November 8, 2018.\u00a0 That is later than usual, especially for Plans published in years after an Administration\u2019s first year.\u00a0 While we were waiting, Capital Letter Number 44 of October 22, 2018, attempted to fill the gap by drawing inferences from the Office of Management and Budget\u2019s\u00a0Fall 2018 Unified Agenda of Federal Regulatory and Deregulatory Actions<\/a>, which had been released on October 17, 2018.\u00a0 This Capital Letter will point out the items in the Priority Guidance Plan of most interest to ACTEC Fellows and will replicate just the highlights of the analysis of those items.\u00a0\u00a0Capital Letter Number 44<\/a>\u00a0itself may be consulted for more detail.<\/p>\n\n\n\n

IMPLEMENTATION OF THE 2017 TAX ACT<\/strong><\/h2>\n\n\n\n

Part 1 of the 2018-2019 Plan, titled \u201cImplementation of Tax Cuts and Jobs Act (TCJA),\u201d contains 62 items, compared to 25 in the Fourth Quarter Update<\/a> of the 2017-2018 Plan.  This 148-percent proliferation of projects demonstrates the overwhelming impact of the 2017 Tax Act on tax administration and the agenda for published guidance.<\/p>\n\n\n\n

Item 3 of Part 1, which was not in the 2017-2018 Priority Guidance Plan, is described as \u201cGuidance clarifying the deductibility of certain expenses described in \u00a767(b) and (e) that are incurred by estates and non-grantor trusts.\u201d  As previewed in Notice 2018-61<\/a> , 2018-31 I.R.B. 278, regulations anticipated from this project should clarify that trust and estate administration expenses continue to be deductible because of section 67(e), despite the eight-year \u201csuspension\u201d of section 67(a) by new section 67(g).  It is still likely, however, that deductibility will continue to be limited by the harsh treatment in Reg. \u00a71.67-4(b)(4) and (c)(2) of fiduciary investment advisory fees, including the portion of a \u201cbundled\u201d fiduciary fee attributable to investment advice (which now will mean total disallowance, not just the application of a 2-percent floor).  Notice 2018-16 states flatly that \u201cnothing in section 67(g) impacts the determination of what expenses are described in section 67(e)(1).\u201d<\/p>\n\n\n\n

Notice 2018-16 indicates that regulations will also address the availability of \u201cexcess deductions\u201d to individual beneficiaries under section 642(h) on termination of a trust or estate, and the Notice asks for comments on that issue.  But it is harder to predict the outcome in that context.<\/p>\n\n\n\n

\u201cComputational, definitional, and anti-avoidance guidance under new \u00a7199A\u201d (item 7 in the 2017-2018 Plan) has now ballooned into the following four items, confirming the complexity of the new qualified business income deduction:<\/p>\n\n\n\n

13. Final regulations on computational, definitional, and anti-avoidance rules under new \u00a7199A and \u00a7643(f). Proposed regulations on computational, definitional, and anti-avoidance guidance under new \u00a7199A and \u00a7643(f) published on August 16, 2018 in FR as REG-107892-18 (NPRM) (Released on August 8, 2018).<\/p>\n\n\n\n

14. Revenue Procedure on methods for calculating W-2 wages for purposes of new \u00a7199A. Notice of proposed revenue procedure published on August 27, 2018 (Released on August 8, 2018).<\/p>\n\n\n\n

15. Regulations under \u00a7199A and other guidance for cooperatives and their patrons.<\/p>\n\n\n\n

16. Guidance on methods for calculating W-2 wages for purposes of new \u00a7199A for cooperatives and their patrons.<\/p>\n\n\n\n

And \u201cGuidance on computation of estate and gift taxes to reflect changes in the basic exclusion amount\u201d (item 16 in the 2017-2018 Plan) is now expanded to \u201cRegulations under \u00a72010 addressing the computation of the estate tax in the event of a difference between the basic exclusion amount applicable to gifts and that applicable at the donor\u2019s date of death\u201d (item 37 in the current Plan).  That makes it clear that the target of the regulations will be the phenomenon known as \u201cclawback\u201d with regard to the estate tax on the estate of a donor who makes a gift before the 2026 sunset but dies after the sunset.<\/p>\n\n\n\n

REDUCING REGULATORY BURDENS<\/strong><\/h2>\n\n\n\n

Part 2 of the Plan, titled \u201cIdentifying and Reducing Regulatory Burdens,\u201d was Treasury\u2019s response to Executive Order 13789<\/a> of April 21, 2017.  Last year it included the withdrawal of the proposed regulations under section 2704 that had been published in August 2016.  Nothing has been added this year.<\/p>\n\n\n\n

BURDEN REDUCTION<\/strong><\/h2>\n\n\n\n

Part 3 of the 2017-2018 Plan was titled \u201cNear-Term Burden Reduction.\u201d  In the 2018-2019 Plan it is simply \u201cBurden Reduction,\u201d a fitting revision, as it has now been over a year.  It is reduced from 20 to 14 projects, reflecting the elimination of projects that have been completed.  No new projects have been added.  Two projects, with the same numbers as in last year\u2019s Plan, are of special interest to ACTEC Fellows:<\/p>\n\n\n\n

4. Final regulations under \u00a7\u00a71014(f) and 6035 regarding basis consistency between estate and person acquiring property from decedent. Proposed and temporary regulations were published on March 4, 2016.<\/p>\n\n\n\n

8. Final regulations under \u00a72642(g) describing the circumstances and procedures under which an extension of time will be granted to allocate GST exemption.<\/p>\n\n\n\n

To fulfill the \u201cburden reduction\u201d promise, these final regulations should provide some relief \u2013 for example, relief from harsh rules like the 30-day due date in the consistent basis regulations and some relief from the burdensome requirements for affidavits and maybe even from the user fee in the 2642(g) regulations.<\/p>\n\n\n\n

GENERAL GUIDANCE<\/strong><\/h2>\n\n\n\n

As in the 2017-2018 Plan, Part 5 is titled \u201cGeneral Guidance\u201d and is divided into traditional subject areas.  Four items appear under the heading of \u201cGifts and Estates and Trusts\u201d:<\/p>\n\n\n\n

1. Guidance on basis of grantor trust assets at death under \u00a71014.<\/p>\n\n\n\n

2. Final regulations under \u00a72032(a) regarding imposition of restrictions on estate assets during the six month alternate valuation period. Proposed regulations were published on November 18, 2011.<\/p>\n\n\n\n

3. Regulations under \u00a72053 regarding personal guarantees and the application of present value concepts in determining the deductible amount of expenses and claims against the estate.<\/p>\n\n\n\n

4. Regulations under \u00a77520 regarding the use of actuarial tables in valuing annuities, interests for life or terms of years, and remainder or reversionary interests.<\/p>\n\n\n\n

Although Item 1 is intriguing, any good news it may offer is likely to be limited to trusts created by non-U.S. persons.  It is described only as \u201cguidance,\u201d not \u201cregulations,\u201d and it was missing from last month\u2019s regulatory<\/em> agenda discussed in Capital Letter Number 44.  Both those observations suggest that this project may produce only, for example, a revenue ruling.  That in turn implies that the guidance will not radically extend the step-up in the basis of appreciated assets as we know it.<\/p>\n\n\n\n

Items 2 and 3 both reflect Treasury\u2019s responses to public criticism of previously proposed regulations.  Regulations under section 2032(a) were proposed in 2008 and then reproposed in 2011 to take a new approach to distributions and other transactions within six months after death that might affect estate tax value.  Regulations under section 2053 were proposed in 2007 and then finalized in 2009 with \u00a720.2053-1(d)(6) reserved to eventually address present value concepts differently from the 2007 proposed regulations.  Both new approaches were prompted by criticism of the original proposed regulations in the public comments.<\/p>\n\n\n\n

Item 4 is new in the 2018-2019 Plan.  The current mortality tables, based on 2000 census data, became effective May 1, 2009, and section 7520(c)(2) mandates revision of the tables at least once every ten years.  Thus, this project appears to be that routine revision, to take effect by May 1, 2019.<\/p>\n\n\n\n

TIMING<\/strong><\/h2>\n\n\n\n

As explained in Capital Letter Number 44, according to the OMB Unified Agenda three of the trust and estate regulation projects discussed above have a target completion date of the end of 2018 \u2013 clawback, extensions of time under section 2642(g), and alternate valuation under section 2032(a).  The clawback guidance, in the form of proposed and possibly temporary regulations, is the likely frontrunner.<\/p>\n\n\n\n

The OMB Unified Agenda assigned a target completion date of June 30, 2019, to the other trust and estate regulation projects discussed above \u2013 deduction of administration expenses under section 67(e), consistent basis under sections 1014(f) and 6035, present value concepts under section 2053, and actuarial tables under section 7520.<\/p>\n\n\n\n

Ronald D. Aucutt<\/p>\n\n\n\n

\u00a9 Copyright 2018 by Ronald D. Aucutt.  All rights reserved.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Treasury-IRS Priority Guidance Plan for the 12 months ending June 30, 2019, confirms and clarifies the preview offered by the OMB\u2019s government-wide 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