IRS regs on Sec. 199A look �taxpayer-favorable�

IRS regs on Sec. 199A look ‘taxpayer-favorable’

Long-awaited and highly anticipated proposed regulations for Code Section 199A, the new 20 percent deduction on “qualified business income” of pass-through entities, were released August 8 by the Treasury Department and the Internal Revenue Service, and experts are saying they're broadly taxpayer-friendly.

“The government did a good job of responding to practitioner concerns during the comment period,” said Jerry August, shareholder and chair of Philadelphia Federal Tax Practice at law firm Chamberlain Hrdlicka. “The regulations cover important definitional, computational and anti-avoidance guidance. There are still open issues, and the government has requested comments and scheduled a public hearing for Oct. 18, 2018.”

“The proposed regs are impressive in scope, but there are still a handful of areas that will prove tricky for taxpayers,” said Dustin Stamper, managing director at Grant Thornton’s Washington National Tax Office. “We were very pleased to see how narrowly construed the interpretations were for disqualified specified services.”

“The rules are broadly very taxpayer-favorable,” said Jeff Bilsky, technical practice leader for BDO’s National Tax Office Partnership Taxation group. “The Treasury really had some significant decisions to make regarding how the rules would impact taxpayers claiming the deduction and following congressional intent as best they could. They could have been much more restrictive.”

“But when you read through the rules, it’s not as simple as saying, ‘You’re entitled to this,’” he said. “Instead, there’s a lot of nuance that companies will have to consider as they calculate qualified business income.”

The new proposed regulations will help clarify an issue that’s been under consideration all year, according to Bilsky: “Now, the choice of entity has become a little more clear. Companies should now be able to finish their analysis as to whether to remain a pass-through or become a C corporation.” Read more on Accounting Today.