Of course, we all know that nothing says Merry Christmas and Happy Holidays like regulations from the IRS. And that is just what the executive compensation professionals community received today!
Based on my quick review, I have spotted only one item of good news so far. The final regulations provide that a corporation that was not a publicly held corporation and then becomes a publicly held corporation on or before December 20, 2019, may rely on the transition relief provided in §1.162-27(f)(1) until the earliest of the events provided in §1.162-27(f)(2).
Other things to check out:
Treasury Releases Final Carried Interest Regulations - Lexology
As noted below under "Employee Co-Investments," certain factors (including the fact that API Holders do not bear "cost of services" or benefit from tax distributions) are disregarded in determining whether the rights with respect to an API Holder's capital contribution and that of unrelated investors are reasonably consistent; however, preferential withdrawal terms (which may be relevant for hedge funds) are not specifically addressed.
While the focus on contributed capital, as opposed to capital accounts, will be a welcome change for many private investment funds, it may raise questions for certain private equity-style funds that make initial allocations between partners based on their relative capital commitments (although in many instances the two allocation methods will produce equivalent results).
IRS Prop. Reg.: AICPA Comments on Fines, Penalties After Tax Reform (IRC §162)
AICPA comments released January 12 on REG-104591-18 that would provide operational and definitional guidance concerning the application of tax code Section 162(f) . Reporting under Section 6050X would apply to the appropriate official of a government or governmental entity or nongovernmental entity treated as a governmental entity that is a party to a suit, agreement, or otherwise to which Section 162(f) applies.
Texas oil and gas group says new taxes, regulations will crimp rebound
With the storied Texas oil and gas sector still recovering from the devastating economic fallout of the coronavirus pandemic, the industry's main lobbying group is urging state lawmakers not to put any new obstacles in its path.
Todd Staples, president of the Texas Oil & Gas Association, said calls for increased taxes on production, known as severance taxes, should be resisted during the 2021 legislative session that begins this week, as should environmental regulations that aren't "rational" and based on what he called firm science.
In case you are keeping track:
US Treasury Code Section 45Q Carbon Capture Tax Credit
Amid the headline-grabbing events of 6 January 2021, the U.S. Department of Treasury released final regulations under Code 1 Section 45Q. Code Section 45Q provides for a U.S. federal income tax credit at varying rates to taxpayers that participate in various aspects of the process of sequestering carbon oxide and disposing of it in secure geologic storage, use it as a tertiary injectant in a qualified enhanced oil or natural gas recovery project, or utilize it in certain processes.
45Q Carbon Capture Tax Credit regulations finalized by Administration | AM 1100 The Flag WZFG
U.S. Senator Kevin Cramer (R-ND), a Senate Environment and Public Works (EPW) Committee member, issued the following statement today on the Treasury Department and Internal Revenue Service (IRS) finalizing the section 45Q carbon capture utilization and storage (CCUS) tax credit:
"Carbon capture is the future of reliable, low emissions energy, and North Dakota is a national leader in the development and use of this technology. With the administration's long-awaited guidance finalized, investors can now take advantage of the carbon capture tax credit with confidence and clarity."
IRS Issues Final Regulations Providing Guidance on Taxation of Carried Interest from Investment
In 2017, as part of the Tax Cuts and Jobs Act (“TCJA”), Congress enacted Section 1061, which increases the holding period required to receive long-term capital gain treatment from one year to three years for the gain related to partnership interests (referred to as “Applicable Partnership Interests” or “APIs”) held in connection with the performance of certain services, including services that fund managers provide.
Section 1061(c)(1) defines an API as any interest in a partnership transferred to or held by a taxpayer, directly or indirectly, in connection with the taxpayer (or any related person) performing substantial services in an “applicable trade or business” (“ATB”) for the partnership.
Silver Lining on Tax Treatment of Partnership Interests for Private Equity Managers…At Least for
Although we now have clarity and a reprieve, the question is, for how long. Strategic planning with partnership services-related interests is only meaningful when ordinary and capital gain tax rates materially differ. If ordinary income tax rates for high-income individual taxpayers revert to the pre-2017 Tax Act level of 39.6%, as has been proposed, the planning becomes more relevant.
Happening on Twitter
To my point and hot off the presses: Echo chamber propaganda. An entire industry centered around the organize… https://t.co/z7ZOSfuAzm JohnFetterman (from Braddock, PA) Wed Jan 06 11:40:46 +0000 2021
Here you have it hot off the presses: an ALL NEW @talkingfedspod NOW! , "Burning Down the House," chronicling and a… https://t.co/Zj2K6d9D0T harrylitman (from La Jolla, San Diego) Thu Jan 07 14:22:10 +0000 2021
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