Source: https://www.disantopriest.com/safe-harbor-regulations-irc-section-199a/
Timestamp: 2019-04-22 08:55:29+00:00

Document:
On January 18, 2019, the IRS issued long-awaited final IRC §199A regulations. In conjunction with these regulations, a proposed revenue procedure, Notice 2019-07, was also released to provide a safe harbor under which a rental real estate enterprise will be treated as a trade or business solely for purposes of IRC § 199A.
The new IRC § 199A 20 percent deduction is available for “qualified business income” arising from a “qualified trade or business”. Since the issuance of the initial guidance on the deduction, taxpayers and practitioners alike were looking for guidance on when a taxpayer’s rental real estate activity is enough to meet the “qualified trade or business” standard.
In response to the requests for more certainty, Notice 2019-07 was released and includes a proposed safe harbor under which a rental real estate enterprise may be treated as a trade or business solely for the purposes of IRC § 199A.
Under the guidance, taxpayers must either treat each property held for the production of rents as a separate enterprise or treat all similar properties held for the production of rents as a single enterprise. Commercial and residential real estate may not be part of the same enterprise. Taxpayers may not vary this treatment from year-to-year unless there has been a significant change in facts and circumstances.
These records are to be made available for inspection at the request of the IRS. The contemporaneous records requirement will not apply to taxable years beginning prior to January 1, 2019.
These activities may be performed by owners, employees, agents, or independent contractors of the owners.
What activities do not count?
A taxpayer using the safe harbor must include a statement attached to their income tax return specifying that the requirements of the revenue procedure have been satisfied. The statement must be signed by the taxpayer or an authorized representative of an eligible taxpayer, and it must say, “Under penalties of perjury, I (we) declare that I (we) have examined the statement, and, to the best of my (our) knowledge and belief, the statement contains all the relevant facts relating to the revenue procedure, and such facts are true, correct, and complete”. The individual or individuals who sign must have personal knowledge of the facts and circumstances related to the statement.
The proposed revenue procedure may be applied generally to taxpayers with taxable years ending after December 31, 2017. Taxpayers may rely on it until final guidance is issued.
It should also be noted that the final regulations continue to provide that rental activity that does not rise to the level of an IRC § 162 trade or business is nevertheless treated as a trade or business for purposes of IRC § 199A if the property is rented to a commonly controlled trade or business. In other words, self-rental activities do not have to rise to the level of a trade or business for the rental income to qualify as QBI. Common control under the final regulations means that the same person or group of persons, directly or by attribution under IRC §§ 267(b) or 707(b), owns 50 percent or more of each trade or business. Notably, the final rule was written to exclude self-rental income received by a C corporation from this special treatment.

References: §199
 § 199
 § 199
 § 199
 § 162
 § 199