Monday - Friday
Sunday October 21, 2018
Small Business TCJA Tax Changes
In IR-2018-2003, the IRS reminded small business owners that the Tax Cuts and Jobs Act (TCJA) includes many changes that may reduce or change their taxes. While there are approximately two months left in the calendar year, many small businesses may still benefit from making changes before December 31.
Foundations Seek SALT Relief
On October 11, 2018, community foundations from five states sent a letter to the IRS requesting relief from the state and local tax (SALT) proposed regulations. Under the proposed SALT regulations, a state tax credit that is equal to more than 15% of the charitable gift value is considered a "quid pro quo" that reduces the federal charitable deduction. All five states offer endowment credits that are above the 15% limit and potentially will be impacted by the SALT proposed regulations.
There are specific provisions in these state laws designed to encourage endowment gifts.
The community foundations concluded by urging "the Treasury Department and the Internal Revenue Service to withdraw the proposed regulations and instead draft regulations that will more effectively target recently enacted laws and not jeopardize our state's endowment credits."
Georgia Representatives Request SALT Exemption
On October 18, 2018, five Georgia representatives asked the IRS to exclude state credit programs that pre-date the Tax Cuts and Jobs Act from the proposed SALT regulations.
Representatives Rob Woodall (R-GA), Jody Hice (R-GA), Tom Graves (R-GA), Karen Handel (R-GA) and Earl L. Carter (R-GA) signed the letter.
The five Republican Members of Congress recognized the purpose of the $10,000 limit on the SALT deductions as passed under TCJA. They agree that some states are passing workarounds to defeat the $10,000 limit and recognize that "those schemes should rightly be thwarted."
Georgia previously created several educational and relief programs through state tax credits. In 2008, Georgia created the Qualified Education Expense Tax Credit Program and the Qualified Rural Hospital Organization Expense Credit Program. Under the Qualified Education Expense Tax Credit Program, over 13,200 students benefited from scholarships in 2017.
Because these state credit programs were not established with the intent of "aiding taxpayers in eluding or reducing tax liabilities owed to the federal government," the Georgia representatives argue that these credits should be excluded from the final SALT regulations.
The five Members of Congress ask the IRS to "carefully review and consider all comments on the proposed rule, and we recommend that any final rule include a method that clearly differentiates pre-TCJA state tax credit programs from those newly created tax credit programs that have been adopted or being considered for the sole purpose of aiding taxpayers in sidestepping the newly imposed SALT limitations."
Applicable Federal Rate of 3.6% for November -- Rev. Rul. 2018-28; 2018-45 IRB 1 (18 October 2018)
The IRS has announced the Applicable Federal Rate (AFR) for November of 2018. The AFR under Section 7520 for the month of November is 3.6%. The rates for October of 3.4% or September of 3.4% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2018, pooled income funds in existence less than three tax years must use a 1.4% deemed rate of return.
Published October 19, 2018