New IRS regulations: be careful what you wish for!

Your Guide to State, Local, Federal, Estate + International Taxation

regulations, IRS, tax reformAugust turned out to be quite a month for us in the IRS issued proposed regulations department. Quite the month.

We started out with regulations clarifying 100% bonus depreciation from the Tax Cuts and Jobs Act (TCJA). As far as regulations go, these were not too game changing. You know, if you ignore the fact that they were 121 pages.

Next came something we had been eagerly awaiting in the tax area – proposed regulations on the 199A rules, also passed as part of TCJA.

Now, these were eagerly anticipated – there was all sorts of excitement and buzz in the tax community (I am not kidding!) – as we made our way through not only the 184 pages of regulations, but also attending webinars, reading up on analyses and then trying to figure out what we were going to do with our clients.

We know now what we are going to do with some of our clients, regarding 199A, but not all. Not all by a long shot. But it is a start, that is for sure. We still have questions. But we also have answers.

Read more about the proposed regulations on Section 199A

And then, out of the blue – yet another set of IRS proposed regulations. And this was just cruel. They came out on a Thursday, with an effective date of midnight the following Monday. That just doesn’t leave much time.

These were a direct correlation to TCJA, as well. However, it was aimed at some of the higher income states that were trying to get some tax credits into place that would help their constituents get around the $10,000 state and local tax cap established under the TCJA.

The problem? Arizona got caught in the cross-fire. We have had these credits in place for many years – some for decades. What these proposed regulations mean is that cash paid to Arizona charities for which you are receiving a credit can no longer also qualify for a federal charitable deduction.

We had three days to get the word out to our clients that the proposed regulations may affect them. And, yes, I have seen statistics that nationwide this only affects 1% of taxpayers. However, in a CPA practice such as ours, the number is closer to 50% of our individual clients that could be affected.

On the bright side – these regulations were only 34 pages. And we had the opportunity to speak to many of our clients mid-year.

I have a request, though. We are trying to work through extension deadlines of September 15 for business returns and individual estimated tax payments, September 30 for trust returns and October 15 for individual returns – could we maybe hold off on any more regulations, until, say October 16? And if the tax gods are out there, maybe the next set of regulations could be shorter – under 10 pages, would be nice.

Donna H. Laubscher, CPA