WHY IT’S GOOD TO BE GRATEFUL

On February 23, 2018, The Wall Street Journal published an article, “How to Raise More Grateful Children.” The subtitle for the article stated: “A sense of entitlement is a big problem among young people today, but it’s possible to teach gratitude.” This last idea is what I hope to do with my clients.

WHY IT’S GOOD TO BE GRATEFUL

On February 23, 2018, The Wall Street Journal published an article, “How to Raise More Grateful Children.” The subtitle for the article stated: “A sense of entitlement is a big problem among young people today, but it’s possible to teach gratitude.” This last idea is what I hope to do with my clients.

Much of what I’ve learned about Gratitude has come from personal experience. When I look back, every personal crisis I’ve had has ultimately led me to Gratitude. Whether it’s a serious, life threatening illness for me, my wife, or loved ones; a major setback in business; or a natural disaster like Hurricane Sandy, I now see the positives in those events and feel more grateful for what I‘ve learned from them. I’ve learned that adversity can be a great teacher, if you pay attention to the lessons, but, it wasn’t always that way.

Like most people, I grew up complaining about the way things were and resenting those who I viewed as “lucky” because they were born into families with monetary wealth. Now, I view it as a blessing that I had to work hard for everything I now have. I’ve learned to be grateful that I chose the career that I have and that I can help so many people with the knowledge and experience I’ve gained. I’ve learned to appreciate the material wealth that I have, modest as it is, and to be content making an honest living and serving others.

I’ve also learned a lot about Gratitude from my coach, Lee Brower, at Strategic Coach. Like myself, he and members of his family have had health issues, but we have all learned to appreciate and not take good health for granted. Through Lee’s teachings on Gratitude, I have learned the value of having family members who get along and care about each other; as well as, the value of friendship and being part of a community where I feel like I belong. Most of all, Lee and members of his firm, Empowered Wealth, have emphasized that Gratitude is a lifestyle. A practice that starts with self-respect and respect for others, grows into appreciation for the many blessings we all have, and inspires the spirit of generosity that gives fulfillment and meaning to the way we live our lives.

Charles Sarowitz, CPA/PFS

Acknowledging the good that you already have in your life is the foundation for all abundance.

                                                                               Eckhart Tolle

TAXES AND GRATITUDE?

You probably never thought you would see these two words paired together.  Let me share my perspective on how this unique combination arises.

TAXES AND GRATITUDE?

You probably never thought you would see these two words paired together.  Let me share my perspective on how this unique combination arises.

During this time of year, many clients come into my office upset about taxes and expressing concerns about how the upcoming changes in the tax code will impact them, their interests, their finances, and their legacies.  Many people are willing to go to extraordinary lengths to avoid taxes and let their fear of the unchartered waters of the new tax polices keep them from leaving port.  And while my professional career largely incorporates minimizing the amount of taxes my clients owe, in an effort to maximize the amount of money they can have, now and in the future, I have learned to recognize that there are more important things to focus on than simply tax minimization.

I advise them to consider “What's more important to you than money?”  I wonder, would they:

• Sacrifice their health for more money?  Health is vital to one’s happiness and well-being, yet too many of us are allowing stress and overworking to ruin our health.
• Compromise their closest relationships for more money?  Too many people put their quest for more money above their connection to their family and friends.
• In order of importance, value having money higher than their moral, ethical, or spiritual beliefs? I've seen people of great wealth live empty lives and suffer at the end of life.

Wouldn't you rather have the satisfaction of living a good, honest life – a life of simple joys and pleasures, a life of health and well-being, a life of close relationships – than only having more money?

In the course of my career, I have come to realize and believe that there is much more to “true wealth” than just accumulating money and minimizing taxes.  In my experience, the key to “true wealth” is the practice of gratitude.  Gratitude leads us all to a happier, fulfilled, and more meaningful life.

Charles Sarowitz, CPA/PFS

Gratitude is a currency that we can mint for ourselves, and spend without fear of bankruptcy.

                                                                  Fred De Witt Van Amb

THE STORY OF THE GRATITUDE ROCK

How I started practicing Gratitude

My coach and mentor, Lee Brower, is well-known as a thought leader on Gratitude.  He’s been featured on television, in articles, and in the movie, “The Secret,” on the topic of Gratitude. But Lee, by his own admission, wasn’t always a grateful person.  In fact, one of the defining moments of his life started out as one of his most ungrateful moments.

THE STORY OF THE GRATITUDE ROCK

How I started practicing Gratitude

My coach and mentor, Lee Brower, is well-known as a thought leader on Gratitude.  He’s been featured on television, in articles, and in the movie, “The Secret,” on the topic of Gratitude. But Lee, by his own admission, wasn’t always a grateful person.  In fact, one of the defining moments of his life started out as one of his most ungrateful moments.

It happened more than two decades ago.  Lee was at the apex of his rise as a successful estate planner in Salt Lake City, Utah.  He was both a leader in his church and a respected member of his local business community. Yet, he had a personal challenge within his family: His teenage daughter developed a substance abuse problem.  Lee initially saw her problem as a personal and family embarrassment.  He wondered how something like this could happen to him and thought that other people must be judging him negatively.

But one day, while walking on the beach, he picked up a rock that, to his eye, had the image of a butterfly embedded in it.  Suddenly he felt differently because, coincidentally, his daughter’s nickname was “Mariposa,” meaning “butterfly” in Spanish.  He saw it as the hand of God speaking to him, reminding him of how precious his daughter is to him.  Ever since then, he carries that rock in his pocket as a daily reminder that he should be grateful for the blessings in his life.

Inspired by Lee’s story, I’ve done my best to do the same, to be grateful for the good fortune I have and to help others realize that we’re all so much better off than we perceive from moment to moment.  My wish for you is that it doesn’t take a personal crisis for you to experience the difference that Gratitude can make in your life.

ABOUT THIS LETTER

This is no ordinary letter to clients or newsletter briefing.  When I had a recent health scare, it was Gratitude for the many blessings in my life (and, really, all of our lives) that got me through the tough time I went through.  Now, I want to help you, and all of our clients, to live happier, more-fulfilled, and more meaningful lives. To me, there’s no better way to start than through practicing and living Gratitude daily.  Please enjoy and share this message if it inspires you as well.

Charles Sarowitz, CPA/PFS

New IRS guidance fills in several more pieces of the Code Sec. 199A passthrough deduction puzzle. Taxpayers can generally rely on all of these new final and proposed rules.

New IRS guidance fills in several more pieces of the Code Sec. 199A passthrough deduction puzzle. Taxpayers can generally rely on all of these new final and proposed rules.

Final Regulations

The final regulations in T.D. 98xx_1 largely adopt the proposed regulations in NPRM REG-107892-18 (August 16, 2018), but with substantial modifications.

Taxpayers are likely to be disappointed in one thing that did not change: all items treated as capital gain or loss, including Section 1231 gains and losses, are still excluded from qualified business income (QBI). Taxpayers should continue to apply the Section 1231 netting and recapture rules when calculating the Code Sec. 199A deduction.

However, the final regulations drop the rule that treated an incidental non-specified services trade or business (SSTB) as part of an SSTB if the businesses were commonly owned and shared expenses, and the non-SSTB’s gross receipts were no more than five percent of the business’s combined gross receipts.

The final regulations make several adjustments to the proposed regulations for estates and trusts. Most significantly, the final regulations remove the definition of "principal purpose" under the anti-abuse rule that allows the IRS to aggregate multiple trusts. The IRS is taking this issue under advisement. Also, in determining if a trust or estate has taxable income that exceeds the threshold amount, distributions are no longer excluded. Instead, the entity’s taxable income is determined after taking into account any distribution deduction under Code Sec. 651 or Code Sec. 661.

The final regulations retain the presumption that an employee continues to be an employee while doing the same work for the same employer. However, the regulations provide a new three-year look back rule, and allow the worker to rebut the presumption by showing records (such as contracts or partnership agreements) that corroborate the individual’s status as a non-employee.

Other changes of note include:

• Disallowed, limited or suspended losses must be used in order from the oldest to the newest, on a FIFO (first in, first out) basis.
• A relevant passthrough entity (RPE) can aggregate businesses.
• If an RPE fails to report an item, only that item is presumed to be zero; the missing information may be reported on an amended return.
• The S portion and non-S portion of an electing small business trust (ESBT) are treated as a single trust for purposes of determining the threshold amounts.

Proposed Regs for QBI, RICs, Trusts, Estates

Taxpayers may rely on the proposed regulations in NPRM REG-134652-18, which cover three broad topics.

First, in calculating QBI, previously disallowed losses are treated as losses from a separate trade or business. If the losses relate to a publicly traded partnership (PTP), they must be treated as losses from a separate PTP. Attributes of the disallowed loss are determined in the year the loss is incurred.

Second, a RIC that receives qualified REIT dividends may pay Section 199A dividends. The IRS continues to consider permitting conduit treatment for qualified PTP income received by a RIC, and seeks public comment on this issue.

Finally, the proposed regulations also provide rules for charitable remainder unitrusts (and their beneficiaries), split-interest trusts, and separate shares.

Rental Real Estate Enterprise

The proposed revenue procedure set forth in Notice 2019-7 provides a safe harbor for a rental real estate enterprise to be treated as a trade or business for purposes of Section 199A. RPEs can also use the safe harbor.

A rental real estate enterprise must satisfy three conditions to qualify for the safe harbor:

• Separate books and records must be maintained to reflect income and expenses for each rental real estate enterprise.
• At least 250 or more hours of rental services must be performed per year with respect to the rental enterprise. For tax years beginning after December 31, 2022, this test can be satisfied in any three of the five consecutive tax years that end with the tax year.
• The taxpayer must maintain contemporaneous records of relevant items, including time reports, logs, or similar documents. (This requirement does not apply to tax years beginning in 2018.)

Relevant items include hours of all services performed, description of all services performed, dates on which such services were performed, and who performed the services.

W-2 Wages

Rev. Proc. 2019-11 allows taxpayers to use one of three methods to calculate W-2 wages for the passthrough deduction:

• the unmodified Box method;
• the modified Box 1 method; or
• the tracking wages method.

These methods were proposed in Notice 2018-64, I.R.B. 2018-35, 347. The unmodified Box method is simplest, but the other two methods are more accurate.

Comments Requested

The IRS requests comments on the proposed regulations and the proposed safe harbor. The IRS must receive the comments and any requests for public hearing within 60 days after the proposed regulations are published in the Federal Register.

The IRS has issued interim guidance on the excise tax payable by exempt organizations on remuneration in excess of $1 million and any excess parachute payments made to certain highly compensated current and former employees in the tax year. The excise tax imposed by Code Sec. 4960 is equal to the maximum corporate tax rate on income (currently 21 percent).

The IRS has issued interim guidance on the excise tax payable by exempt organizations on remuneration in excess of $1 million and any excess parachute payments made to certain highly compensated current and former employees in the tax year. The excise tax imposed by Code Sec. 4960 is equal to the maximum corporate tax rate on income (currently 21 percent).

Q&A on Section 4960

The current guidance is contained in a Question-and-Answer format. The interim guidance addresses:

• general application of Code Sec. 4960;
• applicable tax-exempt organizations and related organizations;
• covered employees;
• excess remuneration;
• medical and veterinary services;
• excess parachute payments;
• three-times-base-amount test for parachute payments;
• computation of excess parachute payments;
• reporting liability under Section 4960;
• miscellaneous issues; and
• the effective date.

Reliance

The IRS intends to issue proposed regulations under Code Sec. 4960 which will incorporate the interim guidance. Until future guidance is issued, taxpayers may rely on the rules in the interim guidance from December 22, 2017. Any future guidance will be prospective and will not apply to tax years beginning before the guidance is issued. Until additional guidance is issued, taxpayers may base their positions upon a good faith, reasonable interpretation of the statute and legislative history, where appropriate. Specifically, the positions reflected in the guidance constitute a good faith and reasonable interpretation.

Comments Requested

The IRS and Treasury Department request comments on the topics addressed in the interim guidance and any other issues arising under Code Sec. 4960. Comments should be submitted no later than April 2, 2019.

The IRS has provided safe harbors for business entities to deduct certain payments made to a charitable organization in exchange for a state or local tax (SALT) credit. A business entity may deduct the payments as an ordinary and necessary business expenses under Code Sec. 162 if made for a business purpose. Proposed regulations that limit the charitable contribution deduction do not affect the deduction as a business expense.

The IRS has provided safe harbors for business entities to deduct certain payments made to a charitable organization in exchange for a state or local tax (SALT) credit. A business entity may deduct the payments as an ordinary and necessary business expenses under Code Sec. 162 if made for a business purpose. Proposed regulations that limit the charitable contribution deduction do not affect the deduction as a business expense.

Charitable Contributions and SALT Limit

An individual’s itemized deduction of SALT is limited to $10,000 ($5,000 if married filing separately). Some states and local governments have adopted or considered adopting laws that allowed individuals to receive a tax credit for contributions to funds controlled by the state and local government.

Under proposed regulations, however, an individual, estate, and trust generally must reduce the amount of any charitable contribution deduction by the amount of any SALT credit he or she receives or expects to receive for the transfer. A de minimis exception allows a taxpayer to disregard up to 15 percent of the payment or transfer to the charitable organization.

C Corporations

If a C corporation makes the charitable payment in exchange for a state and local tax credit, it may deduct the payment as an ordinary and necessary business expense to the extent of any SALT credit received or expected to receive.

Specified Pass-Through Entity

A specified pass-through entity may also deduct the payment as an ordinary and necessary business expense, but only if the SALT credit applies or is expected to apply to offset a SALT other than an income tax. A specified pass-through entity for this purpose is any business entity other than a C corporation that is regarded as separate from its owner for all federal income tax purposes (i.e., disregarded entity). The entity also must operate a trade or business within the meaning of Code Sec. 162 and be subject to SALT incurred in carrying on that trade or business that is imposed directly on the entity.

Effective Date

The safe harbors apply to any payments made to a charitable organization in exchange for a SALT credit paid on or after January 1, 2018.

The Treasury and IRS have issued final regulations for determining the inclusion under Code Sec. 965 of a U.S. shareholder of a foreign corporation with post-1986 accumulated deferred foreign income. Code Sec. 965 imposes a "transition tax" on the inclusion. The final regulations retain the basic approach and structure of the proposed regulations, with certain changes.

The Treasury and IRS have issued final regulations for determining the inclusion under Code Sec. 965 of a U.S. shareholder of a foreign corporation with post-1986 accumulated deferred foreign income. Code Sec. 965 imposes a "transition tax" on the inclusion. The final regulations retain the basic approach and structure of the proposed regulations, with certain changes.

The final regulations generally apply beginning the last tax year of the foreign corporation that begins before January 1, 2018, and with respect to a U.S. person, beginning the tax year in or with which such tax year of the foreign corporation ends.

Note: The final regulations were published without a T.D. number. According to the IRS, a T.D. number will be assigned after the IRS resumes normal operations.

Controlled Domestic Partnerships

Certain controlled domestic partnerships may be treated as foreign partnerships for determining the section 958(a) U.S. shareholders of a specified foreign corporation owned by the controlled domestic partnership and the section 958(a) stock owned by the shareholders. The definition of controlled domestic partnership is revised to not be defined only with respect to a U.S. shareholder, so that the controlled foreign partnership is clearly treated as a foreign partnership for all partners if the rule applies.

Pro Rata Share

The definitions of pro rata share and section 958(a) U.S. shareholder inclusion year are modified. The final regulations will require a section 965(a)inclusion by a section 958(a) U.S. shareholder if the specified foreign corporation, whether or not it is a CFC, ceases to be a specified foreign corporation during its inclusion year.

Downward Attribution Rule

A special rule applies when determining downward attribution from a partner to a partnership where the partner has a de minimis interest in the partnership. The threshold for applying the special attribution rule for partnerships is increased from five to 10 percent, and is extended to trusts.

Basis Election Rules

The final regulations allow a taxpayer elect to increase its basis in the stock of its deferred foreign income corporations (DFICs) by the lesser of its section 965(b) previously taxed earnings and profits or the amount it can reduce the stock basis of its E&P deficit foreign corporations without recognizing gain. Within limits, a taxpayer may designate which stock of a DFIC is increased and by how much.

Exception from Anti-Abuse Rules

The final regulations provide an exception from the anti-abuse rules for certain incorporation transactions. The rules will not apply to disregard a transfer of stock of a specified foreign corporation by U.S. shareholder of a domestic corporation, if certain requirements are met. The section 965(a) inclusion amount with respect to the transferred stock of the specified foreign corporation must not be reduced, and the aggregate foreign cash position of both the transferor and the transferee is determined as if each had held the transferred stock of the specified foreign corporation owned by the other on each of the cash measurement dates.

Cash Position

Code Sec. 965 taxes foreign earnings of a domestic corporate U.S. shareholder at a 15.5-percent rate if held in cash, but only an 8-percent rate if held otherwise. Cash includes cash and cash equivalents. The final regulations provide a narrow exception from the definition of cash position for certain commodities held by a specified foreign corporation in the ordinary course of its trade or business, as well as for certain privately negotiated contracts to buy and sell these assets.

Election and Payment Rules

Under the final regulations, the signature requirement on an election statement is satisfied if the unsigned copy is attached to a timely-filed return of the person making the election, provided that the person retains the signed original in the manner specified.

Transition rules for filing transfer agreements have also been updated. If a triggering event or acceleration event occurs on or before December 31, 2018, the transfer agreement must be filed by January 31, 2019. Rules are added to address the death of an S corporation shareholder transferor. The final regulations also include modifications to certain requirements for the terms of a transfer agreement.

The final regulations provide that in the case of an additional liability reported on a return or amended return, any amount that is prorated to an installment, the due date of which has already passed, will be due with the return reporting the additional amount. The rule on deficiencies remains the same, and payment for a deficiency prorated to an installment, the due date of which has already passed, is due on notice and demand.

Total Net Tax Liability

A taxpayer may elect to defer the payment of its total net tax liability under Code Sec. 965(h) and (i). Total net tax liability under Code Sec. 965, which defines the portion of a taxpayer’s income tax eligible for deferral, is equal to the difference between a taxpayer’s net income tax with and without the application of Code Sec. 965. The final regulations will disregard effective repatriations taxed similarly to dividends under Code Sec. 951(a)(1)(B) resulting from investments in U.S. property under Code Sec. 956 when determining net income tax liability without the application of Code Sec. 965.

Consolidated Groups

The consolidated group aggregate foreign cash position is determined under the final regulations as if all members of the consolidated group that are section 958(a) U.S. shareholders of a specified foreign corporation are a single section 958(a) U.S. shareholder.

Obsolete Guidance

The following previous guidance is obsolete:

• Notice 2018-7, I.R.B. 2018-4, 317;
• Notice 2018-13, I.R.B. 2018-6 341, Secs. 1-4, 6;
• Notice 2018-26, I.R.B. 2018-16, 480, Secs. 1-5, 7; and
• Notice 2018-78, I.R.B. 2018-42, 604, Secs. 1-3, 5.

The IRS has issued its annual revisions to the general procedures for ruling requests, technical memoranda, determination letters, and user fees, as well as areas on which the Associate Chief Counsel offices will not rule. The revised procedures are generally effective January 2, 2019.

The IRS has issued its annual revisions to the general procedures for ruling requests, technical memoranda, determination letters, and user fees, as well as areas on which the Associate Chief Counsel offices will not rule. The revised procedures are generally effective January 2, 2019.

Rev. Proc. 2019-1

This procedure explains how the IRS provides advice to taxpayers in the form of letter rulings, closing agreements, determination letters and information letters, and orally on issues under the jurisdiction of the various Associate Chief Counsel offices. It supersedes Rev. Proc. 2018-1, I.R.B. 2018-1, 1. In addition to changes made throughout the guidance, significant changes in the new procedure include:

• Sections 1, 1.01, 3.07, 5.12, 5.14, 5.15, 6.08, 9.23, 10.07, 15.11, Appendix A, Appendix B, Appendix C, Appendix D, and Appendix E have been amended to reflect the name change from "Associate Chief Counsel (Tax Exempt and Government Entities)" to "Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes)."
• Section 5.15(3) has been removed to reflect the transfer of authority to waive excise tax under Code Sec. 4980F to the Commissioner, Tax Exempt and Government Entities Division, Employee Plans Rulings and Agreements.
• Section 8.02 has been amended to remove the exception for changes in accounting methods or accounting periods from the 21-day notification rule.
  Appendix A (Schedule of User Fees) has been amended with increased user fees to match the increase in costs incurred by the IRS. The new user fee schedule is effective February 2, 2019.
• Appendix E (Church Plan Checklist) has been amended to add a new item 11 to reflect the requirement that an applicant include a representation as to whether an election under Reg. §1.410(d)-1 to apply certain provisions of the Code and the Employee Retirement Income Security Act of 1974 (ERISA) to the plan has ever been made.

Rev. Proc. 2019-2

This procedure explains when and how an Associate Office provides technical advice conveyed in a technical advice memorandum (TAM), as well as a taxpayer’s rights when a field office requests a TAM regarding a tax matter. It supersedes Rev. Proc. 2018-2, I.R.B. 2018-1, 106. Significant changes in the new procedure include:

• All references to Associate Chief Counsel (Tax Exempt and Government Entities) have been revised to read “Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes).” All references to “Appeals Policy” have been revised to read “Appeals Policy Planning Quality & Analysis.”
• Section 3.04 has been amended to delete the mandatory TAM requirement in qualified retirement plan matters in cases concerning proposed adverse letters or proposed revocation letters on collectively bargained plans.
• Section 14.02 has been amended to clarify that requests for relief under Code Sec. 7805(b) on the revocation or modification of determination letters and letter rulings issued by TE/GE are handled under the procedures in sections 23 and 29 of Rev. Proc. 2019-4, and section 12 of Rev. Proc. 2019-5.

Rev. Proc. 2019-3

This procedure provides a revised list of areas under the jurisdiction of certain Associate Chief Counsel offices for which letter rulings or determination letters will not be issued. (Lists of areas of nonissuance under the jurisdiction of the Associate Chief Counsel (International) and the Commissioner, Tax Exempt and Government Entities Division (relating to plans or plan amendments) are presented in separate revenue procedures.) It supersedes Rev. Proc. 2018-3, I.R.B. 2019-1, 130.

The following have been added to the list of issues for which advance rulings will not be issued:

• Gross Income. Whether an amount is not included in a taxpayer’s gross income under Code Sec. 61 because the taxpayer receives the amount subject to an unconditional obligation to repay the amount.
• Trade or Business Expenses. Whether a taxpayer is engaged in a trade or business. This area does not include a request for a ruling that relies on a representation from a taxpayer that the taxpayer is or is not engaged in a trade or business, or a request for a ruling that relies on factual information provided by the taxpayer evidencing the active conduct of a trade or business.
• Losses; Carryovers in Certain Corporate Acquisitions; Regulations. In determining whether a loss for worthless securities is subject to Code Sec. 165(g)(3), (i) whether the source of any gross receipts may be determined by reference to the source of gross receipts of a counter party to an intercompany transaction, as defined in Reg. §1.1502-13(b)(1) (e.g., an intercompany distribution to which Reg. §1.1502-13(f)(2) applies), other than an intercompany transaction to which Code Sec. 381(a) applies, and (ii) in an intercompany transaction to which Code Sec. 381(a) applies, whether the acquiring corporation takes into account historic gross receipts of the distributor or transferor corporation, if the intercompany transaction is part of a plan to claim a deduction for worthless securities under Code Sec. 165(g)(3).
• Treatment of multiple trusts. Whether two or more trusts shall be treated as one trust for purposes of subchapter J of chapter 1.
• Returns Relating to the Cancellation of Indebtedness by Certain Entities. Requests for a ruling that the creditor is not required to report a discharge that include as grounds for the request a dispute regarding the underlying liability.

The following issues have been modified:

• Special Rules for Exchanges Between Related Persons. Except in the case of (i) a transaction involving an exchange of undivided interests in different properties that results in each taxpayer holding either the entire interest in a single property or a larger undivided interest in any of the properties or (ii) a disposition of property in a nonrecognition transaction in which the taxpayer or the related party receives no cash or other property that results in gain recognition, whether a Code Sec. 1031(f) exchange involving related parties, or a subsequent disposition of property involved in the exchange, has as one of its principal purposes the avoidance of federal income tax, or is part of a transaction (or series of transactions) structured to avoid the purposes of Code Sec. 1031(f).

Rev. Proc. 2019-4

This procedure explains how the IRS provides advice to taxpayers on issues under the jurisdiction of the Commissioner, Tax Exempt and Government Entities Division (TE/GE) Employee Plans Rulings and Agreements Office, and details the types of advice available to taxpayers, and the manner in which the advice is requested and provided. The new procedure supersedes Rev. Proc. 2018-4, I.R.B. 2018-1, 146. In addition to minor non-substantive changes, the following changes are made:

• Modifications to reflect Employee Plans Rulings and Agreement’s current practice of considering voluntary requests for closing agreements to resolve certain income or excise tax issues that are ineligible for resolution under the Employee Plans Compliance Resolution System (EPCRS).
• Letter ruling requests may not be submitted via facsimile transmission.
• A new category called "Other Circumstances" for which determination letters can be requested has been added.
• Code Secs. 414(b), (c) and (m) have been added to the list of sections for which a determination is not made when a determination letter is issued in accordance with the revenue procedure.
• For a plan to be reviewed for, and a determination letter relied upon with respect to, whether the terms of the plan satisfy one of the design-based safe harbors, the plan document must provide a definition of compensation that satisfies Reg. §1.414(s)-1(c).
• Employee Plans Rulings and Agreements will consider a request for an extension of time for making an election under Reg. §301.9100-3 to recharacterize annual contributions made to a Roth IRA. Employee Plans Rulings and Agreements will also consider recharacterization requests that relate to a conversion or rollover contribution to a Roth IRA but only if the rollover or conversion was made prior to January 1, 2018.
• SB/SE Exam will be notified if a request for an extension of time for making an election or other application for relief under Reg. §301.9100-3 is submitted when the return is under examination.
• Beginning April 1, 2019, VCP submissions and the applicable user fees must be made using www.pay.gov. Further, the payment of user fees for pre-approved plan submissions and letter ruling requests may not be made using www.pay.gov and such requests must still be accompanied by a check in the amount of the applicable user fee.
• Clarification has been provided regarding which forms must be submitted for VCP submissions made prior to April 1, 2019.
• User fee for Form 5310 will increase from $2,300 to $3,000 for submissions postmarked on or after July 1, 2019.

Rev. Proc. 2019-5

This procedure updates the procedures for organizations applying for, and the issuing of determination letters on, exempt status under Code Secs. 501and 521. These apply to exempt organizations other than those relating to pension, profit-sharing, stock bonus, annuity, and employee stock ownership plans. The procedures also apply to revocation or modification of determination letters. In addition, the procedure provides guidance on the exhaustion of administrative remedies for declaratory judgment under Code Sec. 7428. Finally, new procedure provides guidance on applicable user fees for requesting determination letters. The new procedure supersedes Rev. Proc. 2018-5, I.R.B. 2018-1, 233. Notable changes include:

• "Tax Exempt and Government Entities" was changed to "Employee Benefits, Exempt Organizations, and Employment Taxes" throughout the document to reflect the office’s name change.
• Section 2.02 was amended to add (6), which discusses Rev. Proc. 2018-15, I.R.B. 2018-9, 379.
• Section 2.03(1) was amended to clarify that a Code Sec. 501(c)(4) organization must submit a user fee along with its completed Form 8976.
• Section 3.02(4) was amended to clarify that the section only applies to an organization seeking to qualify under Code Sec. 501(c)(6).
• Sections 4, 15, and 18 were amended to reflect the new Form 1024-A.
• Section 4.09 was amended to clarify that a request for expedited handling of a determination letter will not be forwarded to the appropriate group for action unless the application is complete.
• Section 13 was amended throughout because Rev. Proc. 2018-32, I.R.B. 2018-23, 739, superseded Rev. Proc. 81-7, 1981-1 CB 621.
• Appendix A was amended to reflect the single user fee for non-1023-EZ exemption applications, and to reflect a change in the user fee for submissions postmarked on or after July 1, 2019, for advance approval of Code Sec. 4942(g)(2) set asides, Code Sec. 4945 advance approval of an organization’s grant making procedures, and Code Sec. 4945(f) advance approval of voter registration activities.

Rev. Proc. 2019-7

This procedure provides an updated list of subject areas under the jurisdiction of the Associate Chief Counsel (International) for which it will not issue advance letter rulings or determination letters, or will issue letters only if justified by unique and compelling circumstances. Section 4.01(01) related to Code Sec. 367(a) has been removed as obsolete. There are no other changes except renumbering to reflect the foregoing and updates to cross references and citations. The new procedure supersedes Rev. Proc. 2018-7, I.R.B. 2018-1, 271