Source: https://www.irs.gov/irb/2020-24_IRB
Timestamp: 2020-07-02 12:28:08
Document Index: 190159046

Matched Legal Cases: ['art 1', '§ 1', '§ 223', '§ 223', 'art 1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1', '§1']

Internal Revenue Bulletin: 2020-24 | Internal Revenue Service
Internal Revenue Bulletin: 2020-24
Rev. Rul. 2020-12
Rev. Proc. 2020-32
REG-1243327-19, page 931.
These proposed regulations provide guidance regarding allocation of the rehabilitation credit over a 5-year period, as the rehabilitation credit is no longer fully allowed in the taxable year that a qualified rehabilitated building is placed in service. These proposed regulations include rules to coordinate with the other special rules for investment credit property. These proposed regulations affect taxpayers that claim the rehabilitation credit.
Rev. Proc. 2020-32, page 930.
This revenue procedure provides the 2021 inflation adjusted amounts for Health Savings Accounts as determined under section 223 of the Internal Revenue Code.
(Also Part 1, §§ 1, 223.)
Rev. Rul. 2020-12, page 928.
Federal rates; adjusted federal rates; adjusted federal long-term rate, the long-term exempt rate, and the blended annual rate. For purposes of sections 382, 1274, 1288, 7872 and other sections of the Code, tables set forth the rates for June 2020.
This revenue ruling provides various prescribed rates for federal income tax purposes for June 2020 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. Finally, Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520.
REV. RUL. 2020-12 TABLE 1 Applicable Federal Rates (AFR) for June 2020 Period for Compounding
AFR 0.18% 0.18% 0.18% 0.18%
110% AFR 0.20% 0.20% 0.20% 0.20%
120% AFR 0.22% 0.22% 0.22% 0.22%
130% AFR 0.23% 0.23% 0.23% 0.23%
AFR 0.43% 0.43% 0.43% 0.43%
110% AFR 0.47% 0.47% 0.47% 0.47%
120% AFR 0.52% 0.52% 0.52% 0.52%
130% AFR 0.56% 0.56% 0.56% 0.56%
150% AFR 0.65% 0.65% 0.65% 0.65%
175% AFR 0.75% 0.75% 0.75% 0.75%
REV. RUL. 2020-12 TABLE 2 Adjusted AFR for June 2020 Period for Compounding
Short-term adjusted AFR 0.14% 0.14% 0.14% 0.14%
Mid-term adjusted AFR 0.33% 0.33% 0.33% 0.33%
Long-term adjusted AFR 0.77% 0.77% 0.77% 0.77%
REV. RUL. 2020-12 TABLE 3 Rates Under Section 382 for June 2020
Adjusted federal long-term rate for the current month .77%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months.) 1.09%
REV. RUL. 2020-12 TABLE 4 Appropriate Percentages Under Section 42(b)(1) for June 2020
Appropriate percentage for the 70% present value low-income housing credit 7.16%
Appropriate percentage for the 30% present value low-income housing credit 3.07%
REV. RUL. 2020-12 TABLE 5 Rate Under Section 7520 for June 2020
Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest .6%
The applicable federal short-term, mid-term, and long-term rates are set forth for the month of June 2020. See Rev. Rul. 2020-12, page 928.
The adjusted applicable federal long-term rate is set forth for the month of June 2020. See Rev. Rul. 2020-12, page 928.
The applicable federal short-term rates are set forth for the month of June 2020. See Rev. Rul. 2020-12, page 928.
The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month of June 2020. See Rev. Rul. 2020-12, page 928.
The applicable federal mid-term rates are set forth for the month of June 2020. See Rev. Rul. 2020-12, page 928.
This revenue procedure provides the 2021 inflation adjusted amounts for Health Savings Accounts (HSAs) as determined under § 223 of the Internal Revenue Code.
This revenue procedure is effective for calendar year 2021.
The principal author of this revenue procedure is Bill Ruane of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding § 223 of the Code and HSAs, contact William Fischer at (202) 317-5500 (not a toll-free number). For further information regarding the calculation of the inflation adjustments in this revenue procedure, contact Mr. Ruane at (202) 317-4718 (not a toll-free number).
SUMMARY: This document contains proposed regulations concerning the rehabilitation credit, including rules to coordinate the new 5-year period over which the credit may be claimed with other special rules for investment credit property. These proposed regulations affect taxpayers that claim the rehabilitation credit.
DATES: Written or electronic comments and requests for a public hearing must be received by July 21, 2020. Requests for a public hearing must be submitted as prescribed in the “Comments and Requests for a Public Hearing” section.
ADDRESSES: Commenters are strongly encouraged to submit public comments electronically. Submit electronic submissions via the Federal eRulemaking Portal at www.regulations.gov (indicate IRS and REG-124327-19) by following the online instructions for submitting comments. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The IRS expects to have limited personnel available to process public comments that are submitted on paper through mail. Until further notice, any comments submitted on paper will be considered to the extent practicable. The Department of the Treasury (Treasury Department) and the IRS will publish for public availability any comment submitted electronically, and to the extent practicable on paper, to its public docket. Send paper submissions to: CC:PA:LPD:PR (REG-124327-19), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, D.C. 20044.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, call Barbara J. Campbell, (202) 317-4137; concerning submissions of comments and requests for a public hearing, call Regina Johnson, (202) 317-5177 (not toll-free numbers).
This document contains proposed amendments to Title 26 part 1 under section 47 of the Internal Revenue Code (Code). The rehabilitation credit under section 47 is listed as an investment credit under section 46, and the investment credit under section 46 is a current year general business credit under section 38. On December 22, 2017, section 47 was amended by section 13402 of Public Law No. 115-97, 131 Stat. 2054 (2017), commonly referred to as the Tax Cuts and Jobs Act (TCJA).
Section 13402(a) of the TCJA repealed the 10-percent credit for pre-1936 buildings and modified the rules for claiming the 20-percent credit for certified historic structures. Section 13402(c)(1) of the TCJA provides that these amendments are generally applicable to QRE amounts paid or incurred after December 31, 2017, subject to a transition rule provided in section 13402(c)(2) of the TCJA. This statutory transition rule provides that in the case of QREs (for either a certified historic structure eligible for a 20-percent credit or a pre-1936 building eligible for a 10-percent credit prior to December 31, 2017), with respect to any building owned or leased (as provided under present law) by the taxpayer at all times on and after January 1, 2018, the 24-month period selected by the taxpayer (section 47(c)(1)(B)(i), as amended by section 13402(b)), or the 60-month period selected by the taxpayer under the rule for phased rehabilitation (section 47(c)(1)(B)(ii), as amended by section 13402(b)), is to begin not later than the end of the 180-day period beginning on December 22, 2017, and the amendments made by section 13402 of the TCJA apply to such QREs paid or incurred after the end of the taxable year in which such 24-month or 60-month period ends.
The proposed regulations add §1.47-7(a) through (e) and include: a general rule for calculating the rehabilitation credit; definitions of ratable share and rehabilitation credit determined; and a rule coordinating the changes to section 47 with the special rules in section 50. The proposed regulations also contain examples, including examples illustrating the interaction of section 47 with rules in section 50(a) (recapture in case of dispositions, etc.), section 50(c) (basis adjustment to investment credit property), and section 50(d)(5) (relating to certain leased property when the lessee is treated as owner and subject to an income inclusion requirement).
II. Proposed §1.47-7(a), (b), and (c): Rehabilitation credit allocated over a 5-year period
Consistent with section 47(a)(1), proposed §1.47-7(a) provides a general rule that, for purposes of the investment credit under section 46, for any taxable year during the 5-year period the rehabilitation credit for the year is the ratable share.
Proposed §1.47-7(b) generally follows the definition of ratable share in section 47(a)(2) but, for clarification, replaces “QREs” with the term “rehabilitation credit determined” as defined in proposed §1.47-7(c). Specifically, proposed §1.47-7(b) defines the term ratable share as the amount equal to 20 percent of the rehabilitation credit determined with respect to the QRB, as allocated ratably to each taxable year during the 5-year credit period. Proposed §1.47-7(c) defines the term rehabilitation credit determined as the amount equal to 20 percent of the QREs, as defined in section 47(c)(2) and §1.48-12(c) of the Income Tax Regulations, taken into account under section 47(b)(1) for the taxable year in which the QRB is placed in service. However, if the taxpayer claims the additional first year depreciation for the QREs pursuant to §1.168(k)-2(g)(9), proposed §1.47-7(c) defines the rehabilitation credit determined as the amount equal to 20 percent of the remaining rehabilitated basis, as defined in §1.168(k)-2(g)(9)(i)(B), of the QRB for the taxable year in which such building is placed in service. Proposed §1.47-7(c) is included to clarify that the rehabilitation credit is determined in the year the QRB is placed in service and allocated ratably over the 5-year period under proposed §1.47-7(b).
Further, this reading of the statutory text is consistent with the conference report accompanying the TCJA (H.R. Rept. No. 466, 115th Cong.435-436 (2017)) (Conference Report) and the Joint Committee on Taxation’s General Explanation of Public Law 115-97, 210 (Staff of the Joint Committee on Taxation, 115th Cong., General Explanation of Public Law 115-97 (Comm. Print 2018) (Bluebook)). The Conference Report states that Congress “intended that the sum of the ratable shares for the taxable years during the five-year period does not exceed 100 percent of the credit for qualified rehabilitation expenditures for the qualified rehabilitated building.” See Conference Report, at 435-436; Bluebook, at 210. By determining the rehabilitation credit based on 100 percent of the QREs in the year QREs are taken into account under section 47(b)(1), that is, the year in which the QRB is placed in service, and ratably allocating the amount determined over the 5-year period, the proposed regulations ensure that the sum of the ratable shares will never violate Congressional intent. Comments are requested with respect to any specific concerns taxpayers may have with this plain reading of the operative statutory text.
III. Proposed §1.47-7(d) and (e): Coordination with section 50 and examples
Proposed §1.47-7(d) describes the coordination with the special rules of section 50 and makes clear that, for purposes of applying the rules in section 50, the full rehabilitation credit amount is determined in the first year of the 5-year period, and then allocated ratably over that 5-year period. Determining the credit in the same manner for purposes of sections 47 and 50 provides certainty and reduces the complexity under section 50 that would result if taxpayers were required to determine five separate rehabilitation credits. For example, if five separate rehabilitation credits were determined, then there would be five separate recapture periods under section 50(a) with respect to a single QRB. This would increase the length of the recapture period and increase the recapture amount as compared to results under section 50(a) prior to the TCJA changes to section 47. The proposed regulations ensure that this is not the result under section 50.
Moreover, in coordinating the rules between sections 47 and 50, the Treasury Department and the IRS considered the fact that that there is no indication that, in changing section 47, Congress intended to modify the application of section 50. The Conference Report and the Bluebook explain that the TCJA’s amendments to section 47 retain the 20-percent credit for QREs with respect to a certified historic structure while extending the credit period from one year to five years, but nowhere in the Conference Report or the Bluebook is there any suggestion that the results for taxpayers claiming the rehabilitation credit under the rules of section 50 were intended to be different. See Conference Report, at 435-436; Bluebook, at 210. Further, the TCJA made no changes to section 50. Accordingly, the proposed regulations generally place taxpayers claiming the rehabilitation credit after the TCJA in the same position with respect to the rules of section 50 as taxpayers prior to the TCJA. Comments are requested with respect to any specific concerns taxpayers may have with this plain reading of the operative statutory text.
Proposed §1.47-7(e) provides examples that illustrate these rules with respect to the most relevant fact patterns. In addition to examples that show the general calculation for claiming the rehabilitation credit, proposed §1.47-7(e) demonstrates the interaction with section 50(a) (recapture in case of dispositions, etc.), section 50(c) (basis adjustment to investment credit property), and two examples to illustrate interaction with section 50(d)(5) (relating to certain leased property when the lessee is treated as owner and subject to an income inclusion requirement). The first example illustrating the interaction with section 50(d)(5) describes a transaction in which the lessee is a corporation, and in the second example the lessee is a partnership that is subject to special rules under §1.50-1(b)(3)(i).
In accordance with the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that these proposed regulations will not have a significant economic impact on a substantial number of small entities. Although the rules may affect small entities, data are not readily available about the number of taxpayers affected. The economic impact of these regulations is not likely to be significant, however, because these proposed regulations substantially incorporate statutory changes made to section 47 by the TCJA that have been effective for QREs paid or incurred after December 31, 2017. The proposed regulations will assist taxpayers in understanding the changes to section 47 and make it easier for taxpayers to comply with those changes and section 50, which was not changed by the TCJA. Notwithstanding this certification, the Treasury Department and the IRS welcome comments on the impact of these regulations on small entities.
Before these proposed amendments to the regulations are adopted as final regulations, consideration will be given to comments that are submitted timely to the IRS as prescribed in the preamble under the “ADDRESSES” section. The Treasury Department and the IRS request comments on all aspects of the proposed regulations. Any electronic comments submitted, and to the extent practicable any paper comments submitted, will be made available at www.regulations.gov or upon request.
§1.47-7 Rehabilitation credit allocated over a 5-year period.
(a) In general. For purposes of section 46, for any taxable year during the 5-year period beginning in the taxable year in which a qualified rehabilitated building, as defined in section 47(c)(1) and §1.48-12(b), is placed in service, the rehabilitation credit for the taxable year is an amount equal to the ratable share for the taxable year, provided the requirements of section 47 are satisfied. Except as provided by section 13402(c)(2) of Public Law No. 115-97, 131 Stat. 2054 (2017), this section applies with respect to qualified rehabilitation expenditures, as defined in section 47(c)(2) and §1.48-12(c), paid or incurred after December 31, 2017.
(c) Rehabilitation credit determined. The term rehabilitation credit determined means the amount equal to 20 percent of the qualified rehabilitation expenditures, as defined in section 47(c)(2) and §1.48-12(c), taken into account under section 47(b)(1) for the taxable year in which the qualified rehabilitated building is placed in service. However, if the taxpayer claims the additional first year depreciation for the qualified rehabilitation expenditures pursuant to §1.168(k)-2(g)(9), the term rehabilitation credit determined means the amount equal to 20 percent of the remaining rehabilitated basis, as defined in §1.168(k)-2(g)(9)(i)(B), of the qualified rehabilitated building for the taxable year in which such building is placed in service.
(d) Coordination with section 50. For purposes of section 50 and §1.50-1, the amount of the rehabilitation credit determined is the amount defined in paragraph (c) of this section.
(1) Example 1: Rehabilitation Credit Determined and Ratable Share. Between February 1, 2021 and October 1, 2021, X, a calendar year C corporation, incurred qualified rehabilitation expenditures of $200,000 with respect to a qualified rehabilitated building. X placed the building in service on October 15, 2021. X’s rehabilitation credit determined in 2021 under paragraph (c) of this section is $40,000 ($200,000 x 0.20). For purposes of section 46, for each taxable year during the 5-year period beginning in 2021, the ratable share allocated under paragraph (b) of this section for the year is $8,000 ($40,000 x 0.20).
(2) Example 2: Coordination with section 50(c). The facts are the same as in paragraph (e)(1) of this section (Example 1). For purposes of determining the amount of X’s basis adjustment in 2021 under section 50(c), the amount of the rehabilitation credit determined under paragraph (c) of this section is $40,000.
(3) Example 3: Coordination with section 50(a). The facts are the same as in paragraph (e)(1) of this section (Example 1). In 2021 and 2022, X claimed the full amount of the ratable share allowed under section 46, or $8,000 per taxable year. X’s total allowable ratable share for 2023 through 2025 is $24,000 ($8,000 allowable per taxable year). On November 1, 2023, X disposes of the qualified rehabilitated building. Under section 50(a)(1)(B)(iii), because the period of time between when the qualified rehabilitated building was placed in service is more than two, but less than 3 full years, the applicable recapture percentage is 60%. Based on these facts, X has an increase in tax of $9,600 under section 50(a) ($16,000 of credit claimed in 2021 and 2022 x 0.60) and has $3,200 of credits remaining in each of 2023 through 2025, after forgoing $4,800 in credits in each of the years 2023 through 2025 ($8,000 x 0.60).
(4) Example 4: Coordination with section 50(d)(5) and §1.50-1; C corporation lessee. X, a calendar year C corporation, leases nonresidential real property from Y. The property is a qualified rehabilitated building that is placed in service on October 15, 2021. Under paragraph (c) of this section, the amount of the rehabilitation credit determined is $100,000. Y elects under §1.48-4 to treat X as having acquired the property. The shortest recovery period that could be available to the property under section 168 is 39 years. Because Y has elected to treat X as having acquired the property, Y does not reduce its basis in the property under section 50(c). Instead, pursuant to section 50(d)(5) and §1.50-1, X, the lessee of the property, must include ratably in gross income over 39 years an amount equal to the rehabilitation credit determined with respect to such property.
(5) Example 5: Coordination with section 50(d)(5) and §1.50-1; partnership lessee. A and B, calendar year taxpayers, form a partnership, the AB partnership, that leases nonresidential real property from Y. The property is a qualified rehabilitated building that is placed in service on October 15, 2021. Under paragraph (c) of this section, the amount of the rehabilitation credit determined is $200,000. Y elects under §1.48-4 to treat the AB partnership as having acquired the property. The shortest recovery period that could be available to the property under section 168 is 39 years. Because Y has elected to treat the AB partnership as having acquired the property, Y does not reduce its basis in the building under section 50(c). Instead, A and B, the ultimate credit claimants, as defined in §1.50-1(b)(3)(ii), must include the amount of the rehabilitation credit determined under paragraph (c) of this section with respect to A and B ratably in gross income over 39 years, the shortest recovery period available with respect to such property.
(Filed by the Office of the Federal Register on May 21, 2020, 8:45 a.m., and published in the issue of the Federal Register for May 22, 2020, 85 F.R. 31096)
Bulletin 2020–24
2020-5 2020-19 I.R.B. 2020-19 796
2020-6 2020-23 I.R.B. 2020-23 911
2020-23 2020-18 I.R.B. 2020-18 742
2020-26 2020-18 I.R.B. 2020-18 744
2020-27 2020-19 I.R.B. 2020-19 778
2020-28 2020-19 I.R.B. 2020-19 781
2020-30 2020-19 I.R.B. 2020-19 781
2020-31 2020-19 I.R.B. 2020-19 783
2020-32 2020-21 I.R.B. 2020-21 837
2020-34 2020-21 I.R.B. 2020-21 838
2020-36 2020-21 I.R.B. 2020-21 840
2020-25 2020-22 I.R.B. 2020-22 863
2020-29 2020-22 I.R.B. 2020-22 864
2020-33 2020-22 I.R.B. 2020-22 868
2020-37 2020-23 I.R.B. 2020-23 900
2020-38 2020-23 I.R.B. 2020-23 903
REG-106013-19 2020-18 I.R.B. 2020-18 757
REG-117138-17 2020-19 I.R.B. 2020-19 796
REG-106864-18 2020-20 I.R.B. 2020-20 805
REG-113295-18 2020-22 I.R.B. 2020-22 875
REG-104591-18 2020-23 I.R.B. 2020-23 911
2020-22 2020-18 I.R.B. 2020-18 745
2020-23 2020-18 I.R.B. 2020-18 749
2020-24 2020-18 I.R.B. 2020-18 750
2020-26 2020-18 I.R.B. 2020-18 753
2020-25 2020-19 I.R.B. 2020-19 785
2020-28 2020-19 I.R.B. 2020-19 792
2020-20 2020-20 I.R.B. 2020-20 801
2020-27 2020-20 I.R.B. 2020-20 803
2020-29 2020-21 I.R.B. 2020-21 859
2020-19 2020-22 I.R.B. 2020-22 871
2020-21 2020-22 I.R.B. 2020-22 872
2020-30 2020-22 I.R.B. 2020-22 873
2020-15 2020-23 I.R.B. 2020-23 905
2020-8 2020-19 I.R.B. 2020-19 775
2020-11 2020-19 I.R.B. 2020-19 776
9896 2020-18 I.R.B. 2020-18 681
9897 2020-23 I.R.B. 2020-23 882