WASHINGTON — The Internal Revenue Service today issued proposed regulations that provide guidance regarding the implementation of the elective payment provisions of the Advanced Manufacturing Investment Credit, established by the Creating Helpful Incentives to Produce Semiconductors Act of 2022, commonly known as the CHIPS Act.

This credit will incentivize the manufacture of semiconductors and semiconductor manufacturing equipment within the United States. The credit is available to taxpayers that meet certain eligibility requirements, and taxpayers can choose to receive the credit as an elective payment. Today’s proposed regulations describe how an entity can choose to make an elective payment election, which will be treated as a payment against the tax liability that is equal to the amount of the credit. A partnership or S corporation can make an elective payment election to receive a payment instead of claiming the credit.

The advanced manufacturing investment credit for any taxable year is generally equal to 25% of an eligible taxpayer's qualified investment in an advanced manufacturing facility. An eligible taxpayer's qualified investment equals its basis in any qualified property placed in service during the taxable year. The qualified property must be integral to the operation of the advanced manufacturing facility. The credit is generally available for qualified property placed in service after Dec. 31, 2022.

The proposed regulations include special rules applicable to partnerships and S corporations, repayment of excessive payments, and basis reduction and recapture. In addition, the proposed regulations provide rules related to an IRS pre-filing registration process that would be required.

The Department of the Treasury and the IRS welcome public comments on these proposed regulations. For details on submitting comments, see the proposed regulations.

Remind your clients about the upcoming 2023 second quarter estimated tax payment deadline. Taxpayers who pay estimated taxes should consider the June 15 deadline to stay current with their taxes. Visit IRS.gov for more information about who must pay estimated tax, how to avoid an underpayment penalty, understanding Form 1099-K and more. 

IRS grants penalty relief for corporations that did not pay estimated tax related to the new corporate alternative minimum tax

WASHINGTON — The Department of Treasury and the Internal Revenue Service today issued Notice 2023-42, which will grant penalty relief for corporations that did not pay estimated tax in connection with the new corporate alternative minimum tax (CAMT).

The Inflation Reduction Act created the CAMT, which imposes a 15% minimum tax on the adjusted financial statement income of large corporations for taxable years beginning after Dec. 31, 2022. CAMT generally applies to large corporations with average annual adjusted financial statement income exceeding $1 billion.

Considering the challenges associated with determining the amount of a corporation’s CAMT liability and whether a corporation is an applicable corporation subject to the CAMT, the IRS will waive the penalty for a corporation’s failure to pay estimated income tax with respect to its CAMT for a taxable year that begins after Dec. 31, 2022, and before Jan. 1, 2024.

Procedural updates affecting Form 4506-C have been implemented. Form 4506-C is used to request return transcripts, account transcripts, record of account transcripts, and wage & income transcripts for the primary taxpayer listed on line 1a. The taxpayer listed on line 2a will only receive wage and income transcripts (W-2, 1098-E, 1099-G, etc.).

IVES participants will need to ensure their customers fill out Form 4506-C as they intend it to be processed. Only list a spouse on line 2a if the spouse is requesting a wage and income transcript and will be signing the request. Taxpayers listed are required to complete their assigned signature section. Forms with missing signature(s), unchecked signatory attestation box, or missing date(s) will be rejected.

For further guidance, please see attached links for Form 4506-C criteria and requirements which can be found on www.IRS.gov.

Internal Revenue Manual 3.5.20.4.2.4 Processing IVES Requests in TDS (irs.gov).

Internal Revenue Manual 3.5.20 Processing Requests for Tax Return/Return Information | Internal Revenue Service (irs.gov).

Form 4506-C instructions. Form 4506-C Published Version (govdelivery.com)

 

Any questions about Form 4506-C updates should be directed to the IVES Participant Assistance email at wi.ives.participant.assistance@irs.gov.

From IRS e-News for Tax Professionals 2023-22

Tax pros, if you have American clients living and working outside of the U.S., remind them that they must file their 2022 federal income tax return by June 15. This deadline applies to both U.S. citizens and resident aliens abroad, including those with dual citizenship. Taxpayers who can't meet the June 15 due date can request an automatic six-month extension by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. This news release is also available in Spanish and Simplified Chinese.

IRS provides additional guidance for advanced energy projects

WASHINGTON — The Department of the Treasury and the Internal Revenue Service today issued Notice 2023-44 to provide more details for applicants seeking section 48C credit allocations in the qualifying advanced energy project credit allocation program under the Inflation Reduction Act.

On Feb. 13, 2023, the Treasury Department and the IRS issued Notice 2023-18 to establish the section 48C(e) program to allocate $10 billion in credits not less than $4 billion of which will be allocated to projects located in certain energy communities census tracts. The notice also provided initial program guidance and announced that the Treasury Department and the IRS would issue additional program guidance by May 31, 2023. The guidance is primarily of interest to owners of clean energy manufacturing and recycling projects, greenhouse gas emission reduction projects, and critical material projects.

Notice 2023-44 updates the earlier version of Appendix A, defining qualifying advance energy projects, with clearer definitions and examples, and updates the earlier version of Appendix B, providing the Department of Energy application process, by adding technical review criteria and application content requirements. This notice also provides the process for submitting concept papers and joint applications for DOE recommendations and for IRS § 48C(e) certifications and clarifies the selection criteria used to evaluate whether a project merits a DOE recommendation.

Additionally, Notice 2023-44 defines the term “facility” for purposes of sections 45X and 48C, provides the procedure for informing DOE and IRS of a significant change to the project plan, includes information regarding the disclosure of certain information, and clarifies that eligible property that is placed in service before being awarded an allocation of section § 48C credits is ineligible for the § 48C(e) program. Finally, the guidance provides information regarding section 48C(e) energy communities census tracts, including new Appendix C, which contains a list of those census tracts.

More information about IRA guidance may be found on the Inflation Reduction Act of 2022 page on IRS.gov.

WASHINGTON – The Internal Revenue Service today reminded American taxpayers living and working outside the U.S. to file their 2022 federal income tax return by Thursday, June 15. This deadline applies to both U.S. citizens and resident aliens abroad, including those with dual citizenship.

Qualifying for the June 15 extension
A taxpayer qualifies for the June 15 filing deadline if:

• Both their tax home and abode are outside the United States or Puerto Rico, or
• They are serving in the military outside the U.S. and Puerto Rico on the regular due date of their tax return.

Qualifying taxpayers should attach a statement to the return indicating which of these two situations applies.

File to claim benefits
Many taxpayers living outside the U.S. qualify for tax benefits, such as the Foreign Earned Income Exclusion and the Foreign Tax Credit, but they are available only if a U.S. return is filed.

In addition, the IRS encourages families to check out expanded tax benefits, such as the Child Tax Credit, Credit for Other Dependents and Credit for Child and Dependent Care Expenses, and claim them if they qualify. Though taxpayers abroad often qualify, the calculation of these credits differs depending upon whether they lived in the U.S. for more than half of 2022. For more information, see the instructions to Schedule 8812, Credits for Qualifying Children and Other Dependents, and the instructions to Form 2441, Child and Dependent Care Expenses.

Reporting required for foreign accounts and assets
Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B, Interest and Ordinary Dividends, to their Form 1040 series tax return. Part III of Schedule B asks about the existence of foreign accounts such as bank and securities accounts and usually requires U.S. citizens to report the country in which each account is located.

In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Specified Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. For details, see the instructions for this form.

Reporting foreign financial accounts to Treasury
Certain foreign financial accounts, such as bank accounts or brokerage accounts, must be reported by electronically filing Form 114, Report of Foreign Bank and Financial Accounts (FBAR), with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).The FBAR requirement applies to anyone with an interest in, or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2022.

The IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is available only through the Bank Secrecy Act E-Filing System. The deadline for filing the annual FBAR was April 15, 2023. However, FinCEN grants those who missed the April deadline an automatic extension until Oct. 15, 2023. There’s no need to request this extension. See FinCEN’s website for further information.

Report in U.S. dollars
Any income received or deductible expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars.

Both FINCEN Form 114 and IRS Form 8938 require the use of a Dec. 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction. Generally, the IRS accepts any posted exchange rate that is used consistently. For more information on exchange rates, see Foreign Currency and Currency Exchange Rates.

Making tax payments
To ensure tax payments are credited promptly, the IRS urges taxpayers to consider the speed and convenience of paying their U.S. tax obligation electronically. The fastest and easiest way to do that is via their IRS Online Account, IRS Direct Pay and the Electronic Federal Tax Payment System (EFTPS). These and other electronic payment options are available at IRS.gov/Payments.

Reporting for expatriates
Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the U.S. during 2022 must file a dual-status alien tax return and attach Form 8854, Initial and Annual Expatriation Statement. A copy of Form 8854 must also be filed with the IRS by the due date of the tax return (including extensions). See the instructions for this form and Notice 2009-85, Guidance for Expatriates Under Section 877A, for further details.

Extensions beyond June 15
Taxpayers who can’t meet the June 15 due date can request an automatic six-month extension by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The IRS encourages anyone needing the additional time to make their request electronically. Several electronic options are available at IRS.gov/Extensions.

Businesses that need more time must file Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns.

Extensions for military personnel
Members of the military stationed abroad or in a combat zone during tax filing season may qualify for an additional extension of at least 180 days to file and pay taxes. More information, like who qualifies, can be found by reading Extension of Deadline – Combat Zone Service Q&As.

Spouses of individuals who served in a combat zone or contingency operation are generally entitled to the same deadline extensions with some exceptions. Extension details and more military tax information is available in IRS Publication 3, Armed Forces’ Tax Guide.

Other resources:

• A free webinar – Americans Abroad: Tax Obligations and Reporting Requirements – will be available on June 13 to offer more information, including a live Q&A session.
• About Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.
• About Publication 519, U.S. Tax Guide for Aliens.

Notice 2023-43 provides guidance on section 305 of the SECURE 2.0 Act of 2022 with respect to the expansion of the Employee Plans Compliance Resolution System (EPCRS). Section 305 expands the Self-Correction Program under EPCRS and requires that Rev. Proc. 2021-30 be revised to take into account the provisions of section 305 no later than two years after the date of enactment of the SECURE 2.0 Act. This notice is intended to assist taxpayers by providing interim guidance in advance of the update to Rev. Proc. 2021-30.

Notice 2023-43 will be in IRB 2023-24, dated June 12, 2023.

Revenue Ruling 2023-11 provides the third quarter interest rates for 2023, including the rates for underpayments and overpayments. The rates for interest determined under Section 6621 of the code for the calendar quarter beginning July 1, 2023, will be 7% for overpayments (6% in the case of a corporation), 7% for underpayments, and 9% for large corporate underpayments. The rate of interest paid on the portion of a corporate overpayment exceeding $10,000 will be 4.5%.

Revenue Ruling 2023-11 will be in IRB 2023-23 dated June 5, 2023.

The IRS is accepting applications for the 2024 Internal Revenue Service Advisory Council (IRSAC) through May 31. The IRSAC serves as an advisory body to the IRS commissioner and provides an organized public forum for discussion of relevant tax administration issues between IRS officials and representatives of the public. IRSAC members are appointed to three-year terms by the IRS commissioner and submit a report to the commissioner annually at a public meeting. The IRS is accepting applications for terms that begin in January 2024. More information, including the application form, is available on the IRSAC webpage.