e-News for Tax Professionals Issue 2012-47
Internal Revenue Service (IRS) sent this bulletin at 11/21/2012 02:43 PM EST
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Issue Number: 2012-47Inside This Issue
1. 2013 Standard Mileage Rates Up 1 Cent per Mile for Business, Medical and Moving The Internal Revenue Service today issued the 2013 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Beginning on Jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be: • 56.5 cents per mile for business miles driven The rate for business miles driven during 2013 increases 1 cent from the 2012 rate. The medical and moving rate is also up 1 cent per mile from the 2012 rate. The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51. Notice 2012-72 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan. 2. IRS Gives Additional Time to Small, Automatically Revoked Tax-Exempt Organizations Affected by Hurricane Sandy As part of the administration’s efforts to bring all available resources to bear to support state and local partners impacted by Hurricane Sandy, the IRS is postponing the filing date until Feb. 1, 2013, for some small tax-exempt organizations affected by Hurricane Sandy to take advantage of transitional relief when applying for reinstatement of their exempt status. Organizations that did not file a required information return or electronic notice for their taxable years beginning in 2007, 2008 and 2009 automatically lost their tax-exempt status, and must apply if they want to be reinstated. In Notice 2011-43, the IRS provided transitional relief for certain small organizations that were not required to file annual information returns for taxable years beginning before 2007, were eligible in each of their taxable years beginning in 2007, 2008 and 2009 to file a Form 990-N e-Postcard, and applied for reinstatement of tax-exempt status on or before Dec. 31, 2012. These organizations may file an application for tax exemption and, if it is approved, will have their tax-exempt status reinstated retroactively to the date the status was revoked. In addition, these organizations pay a reduced application fee of $100. To be eligible for the Feb. 1 deadline, described in Notice 2012-71, the organization’s principal place of business must be located in the covered disaster area, or records necessary to meet the application deadline must be maintained in the covered disaster area. If an eligible organization files its application for exemption on or before Feb. 1, 2013, it will be treated as if it had been timely filed on Dec. 31, 2012. Organizations located outside the affected areas must apply for transitional relief by Dec. 31, 2012. Organizations located outside of the affected area that think they may qualify for the relief described in Notice 2012-71 need to contact the IRS at 866-562-5227. To take advantage of the extended transitional relief, an organization must apply for reinstatement by filing a Form 1023 or Form 1024, Application for Recognition of Exemption. In addition to the instructions in Notice 2011-43, the organization should write “Notice 2011-43” and “Sandy Relief” on the top of the application form and on the envelope. For information on areas designated as covered disaster areas and tax relief for victims of Hurricane Sandy, visit Tax Relief in Disaster Situations. To check for future announcements, visit Disaster Relief Resources for Charities and Contributors or Help for Victims of Hurricane Sandy. Related Items:
3. IRS Extends Hurricane Sandy Diesel Fuel Penalty Waiver to Dec. 7 for New Jersey and Parts of New York As part of the administration’s efforts to support state and local partners impacted by Hurricane Sandy, the Internal Revenue Service extended the diesel fuel penalty waiver until Dec. 7, for New Jersey and parts of New York. 4. Retirement Plans Can Make Loans, Hardship Distributions to Sandy Victims The Internal Revenue Service announced that 401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Sandy and members of their families. 5. Taxpayer Advocacy Panel (TAP) Releases 2011 Annual Report The Taxpayer Advocacy Panel (TAP) recently released its 2011 Annual Report, highlighting the 41 recommendations and 25 projects TAP provided to the IRS for improving customer service and satisfaction. TAP is a Federal Advisory Committee that makes recommendations to the IRS and the National Taxpayer Advocate. More information about TAP’s 2011 accomplishments is available on TAP’s website, ImproveIRS.org, or the Taxpayer Advocacy Panel page of the Taxpayer Advocate Service (TAS) Tax Toolkit. 6. Get the Latest Information from the Return Preparer Office Join the Dec. 19 IRS Live, Get Prepared: A to Z Details on the Registered Tax Return Preparer Test. 7. Technical Guidance Section 1274.--Determination of Issue Price in the Case of Certain Debt Instruments Issued for Property (Also Sections 42, 280G, 382, 412, 467, 468, 482, 483, 642, 807, 846, 1288, 7520, 7872.) Rev. Rul. 2012-31 This revenue ruling provides various prescribed rates for federal income tax purposes for December 2012 (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, and before December 31, 2013, shall not be less than 9%. 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. Finally, Table 6 contains contains the 2013 interest rate for sections 846 and 807.
REV. RUL. 2012-31 TABLE 1 Applicable Federal Rates (AFR) for December 2012 Period for Compounding Annual Semiannual Quarterly Monthly Short-term
AFR .24% .24% .24% .24% 110% AFR .26% .26% .26% .26% 120% AFR .29% .29% .29% .29% 130% AFR .31% .31% .31% .31%
Mid-term
AFR .95% .95% .95% .95% 110% AFR 1.05% 1.05% 1.05% 1.05% 120% AFR 1.14% 1.14% 1.14% 1.14% 130% AFR 1.24% 1.24% 1.24% 1.24% 150% AFR 1.44% 1.43% 1.43% 1.43% 175% AFR 1.67% 1.66% 1.66% 1.65%
Long-term
AFR 2.40% 2.39% 2.38% 2.38% 110% AFR 2.65% 2.63% 2.62% 2.62% 120% AFR 2.89% 2.87% 2.86% 2.85% 130% AFR 3.13% 3.11% 3.10% 3.09%
REV. RUL. 2012-31 TABLE 2 Adjusted AFR for December 2012 Period for Compounding Annual Semiannual Quarterly Monthly Short-term adjusted AFR .27% .27% .27% .27%
Mid-term adjusted AFR .95% .95% .95% .95%
Long-term adjusted AFR 2.83% 2.81% 2.80% 2.79%
REV. RUL. 2012-31 TABLE 3 Rates Under Section 382 for December 2012 Adjusted federal long-term rate for the current month 2.83% 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.) 2.87%
REV. RUL. 2012-31 TABLE 4 Appropriate Percentages Under Section 42(b)(1) for December 2012 Note: Under Section 42(b)(2), the applicable percentage for non-federally Appropriate percentage for the 70% present value low-income housing credit 7.38% Appropriate percentage for the 30% present value low-income housing credit 3.16%
REV. RUL. 2012-31 TABLE 5 Rate Under Section 7520 for December 2012 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 1.2%
Applicable rate of interest for 2013 for purposes of sections 846 and 807 2.16%
Announcement 2012-44 Purpose This announcement provides relief to taxpayers who have been adversely affected by Hurricane Sandy and have retirement assets in qualified employer plans they would like to use to alleviate hardships caused by Hurricane Sandy. In addition, this announcement provides relief from certain verification procedures that may be required under retirement plans with respect to loans and hardship distributions. The relief provided under this announcement is in addition to the relief already provided by the Service pursuant to News Release IR-2012-83 under § 7508A of the Internal Revenue Code ("Code") for victims of Hurricane Sandy. (See the regulations under § 7508A and Section 8 of Rev. Proc. 2007-56, 2007-34 I.R.B. 388, for a listing of employee benefit-related acts currently postponed until February 1, 2013, because of the disaster.) Background The laws relating to qualified employer plans impose various limitations on the permissibility of loans and distributions from those plans. For example, § 401(k)(2)(B)(i) of the Code provides that in the case of a § 401(k) plan that is part of a profit-sharing or stock bonus plan, elective deferrals may be distributed only in certain situations, one of which is on account of hardship. Section 403(b)(11) provides similar rules with respect to elective deferrals under a § 403(b) plan. Section 457(d)(1)(A) provides that a plan described in § 457(b) may not permit distributions before the occurrence of certain enumerated events, one being when the participant is faced with an unforeseeable emergency. Certain other types of plans or accounts are not permitted to make in-service distributions (distributions to a participant who is still an employee) even if there is a hardship. For example, in-service hardship distributions are generally not permitted from pension plans or from accounts holding qualified nonelective contributions ("QNECs") described in § 401(m)(4)(C) or qualified matching contributions (“QMACs") described in § 401(k)(3)(D)(ii)(I). However, Rev. Rul. 2004-12, 2004-7 I.R.B. 478, holds that if amounts attributable to rollover contributions are separately accounted for within a plan, those amounts may be distributed at any time, pursuant to the employee's request. Section 72(p) imposes certain requirements relating to plan loans. Unless those requirements are satisfied, a loan is treated as a distribution under the plan. In order to make a loan or distribution (including a hardship distribution), a plan must contain language authorizing the loan or distribution. Also, except to the extent a distribution consists of already-taxed amounts, the distribution will be includible in gross income and generally subject to the 10-percent additional tax under § 72(t). Similar rules relating to income inclusion and taxation apply to a distribution from an IRA. Plan provisions and regulations under certain Code sections establish verification procedures that a plan must follow before loans or distributions can be made from the plan. For example, the regulations under § 401(k) set forth certain criteria an employee must meet in order to receive a hardship distribution. A plan may contain procedures designed to confirm that the criteria have been satisfied. Relief As described below, a qualified employer plan will not be treated as failing to satisfy any requirement under the Code or regulations merely because the plan makes a loan, or a hardship distribution for a need arising from Hurricane Sandy, to an employee or former employee whose principal residence on October 26, 2012, was located in one of the counties or Tribal Nations that have been identified as covered disaster areas because of the devastation caused by Hurricane Sandy or whose place of employment was located in one of these counties or Tribal Nations on that date or whose lineal ascendant or descendant, dependent or spouse had a principal residence or place of employment in one of these counties or Tribal Nations on that date. Covered disaster areas are identified as federally declared disaster areas in the News Releases issued by the IRS for Victims of Hurricane Sandy, which are found on IRS.gov at: -- http://www.irs.gov/uac/Newsroom/Help-for-Victims-of-Hurricane-Sandy. Plan administrators may rely upon representations from the employee or former employee as to the need for and amount of a hardship distribution, unless the plan administrator has actual knowledge to the contrary, and the distribution is treated as a hardship distribution for all purposes under the Code and regulations. For purposes of this announcement, a "qualified employer plan" means a plan or contract meeting the requirements of § 401(a), 403(a) or 403(b), and, for purposes of the hardship relief, which could, if it contained enabling language, make hardship distributions. For purposes of this paragraph, a "qualified employer plan" also means a plan described in § 457(b) maintained by an eligible employer described in § 457(e)(1)(A), and any hardship arising from Hurricane Sandy is treated as an "unforeseeable emergency" for purposes of distributions from such plans. For example, a profit-sharing or stock bonus plan that currently does not provide for hardship or other in-service distributions may nevertheless make Sandy-related hardship distributions pursuant to this announcement, except from QNEC or QMAC accounts or from earnings on elective contributions (see below for plan amendment requirements). A defined benefit or money purchase plan, which generally cannot make in-service hardship distributions, may not make hardship distributions pursuant to this announcement, other than from a separate account, if any, within the plan containing either employee contributions or rollover amounts. The amount available for hardship distribution is limited to the maximum amount that would be permitted to be available for a hardship distribution under the plan under the Code and regulations. However, the relief provided by this announcement applies to any hardship of the employee, not just the types enumerated in the regulations, and no post-distribution contribution restrictions are required. For example, regulations under § 401(k) provide safe harbor hardship distribution standards under which a hardship is deemed to exist only for certain enumerated events, and after receipt of the hardship amount, the employee is prohibited from making contributions for at least 6 months. Plans need not follow these rules with respect to hardship distributions for which relief is provided under this announcement. To make a loan or hardship distribution, a qualified employer plan that does not provide for them must be amended to provide for loans or hardship distributions no later than the end of the first plan year beginning after December 31, 2012. To qualify for the relief under this announcement, a hardship distribution must be made on account of a hardship resulting from Hurricane Sandy and be made on or after October 26, 2012, and no later than February 1, 2013. Plan loans made pursuant to this announcement must satisfy the requirements of § 72(p). In addition, a retirement plan will not be treated as failing to follow procedural requirements for plan loans (in the case of retirement plans other than IRAs) or distributions (in the case of all retirement plans, including IRAs) imposed by the terms of the plan merely because those requirements are disregarded for any period beginning on or after October 26, 2012, and continuing through February 1, 2013, with respect to distributions to individuals described in the first paragraph under "Relief", above, provided the plan administrator (or financial institution in the case of distributions from IRAs) makes a good-faith diligent effort under the circumstances to comply with those requirements. However, as soon as practicable, the plan administrator (or financial institution in the case of IRAs) must make a reasonable attempt to assemble any forgone documentation. For example, if spousal consent is required for a plan loan or distribution and the plan terms require production of a death certificate if the employee claims his or her spouse is deceased, the plan will not be disqualified for failure to operate in accordance with its terms if it makes a loan or distribution to an individual described in the first paragraph under "Relief" in the absence of a death certificate if it is reasonable to believe, under the circumstances, that the spouse is deceased, the loan or distribution is made no later than February 1, 2013, and the plan administrator makes reasonable efforts to obtain the death certificate as soon as practicable. Taxpayers are reminded that in general the normal spousal consent rules continue to apply. For purposes of this announcement, "retirement plan" has the same meaning as "eligible retirement plan" under § 402(c)(8)(B). The Department of Labor has advised Treasury and the Internal Revenue Service that it will not treat any person as having violated the provisions of Title I of the Employee Retirement Income Security Act solely because that person complied with the provisions of this announcement. Drafting Information The principal author of this announcement is Eric Slack of the Employee Plans, Tax Exempt and Government Entities Division. Questions regarding this announcement may be sent via e-mail to RetirementPlanQuestions@irs.gov. Part III - Administrative, Procedural, and Miscellaneous
2013 Standard Mileage Rates Notice 2012-72 SECTION 1. PURPOSE This notice provides the optional 2013 standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes. This notice also provides the amount taxpayers must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate (FAVR) plan. SECTION 2. BACKGROUND Rev. Proc. 2010-51, 2010-51 I.R.B. 883, provides rules for computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes, and for substantiating, under § 274(d) of the Internal Revenue Code and § 1.274-5 of the Income Tax Regulations, the amount of ordinary and necessary business expenses of local transportation or travel away from home. Taxpayers using the standard mileage rates must comply with Rev. Proc. 2010-51. However, a taxpayer is not required to use the substantiation methods described in Rev. Proc. 2010-51, but instead may substantiate using actual allowable expense amounts if the taxpayer maintains adequate records or other sufficient evidence. An independent contractor conducts an annual study for the Internal Revenue Service of the fixed and variable costs of operating an automobile to determine the standard mileage rates for business, medical, and moving use reflected in this notice. The standard mileage rate for charitable use is set by § 170(i). SECTION 2. STANDARD MILEAGE RATES The standard mileage rate for transportation or travel expenses is 56.5 cents per mile for all miles of business use (business standard mileage rate). See section 4 of Rev. Proc. 2010-51. The standard mileage rate is 14 cents per mile for use of an automobile in rendering gratuitous services to a charitable organization under § 170. See section 5 of Rev. Proc. 2010-51. The standard mileage rate is 24 cents per mile for use of an automobile (1) for medical care described in § 213, or (2) as part of a move for which the expenses are deductible under § 217. See section 5 of Rev. Proc. 2010-51. SECTION 3. BASIS REDUCTION AMOUNT For automobiles a taxpayer uses for business purposes, the portion of the business standard mileage rate treated as depreciation is 21 cents per mile for 2009, 23 cents per mile for 2010, 22 cents per mile for 2011, 23 cents per mile for 2012, and 23 cents per mile for 2013. See section 4.04 of Rev. Proc. 2010-51. SECTION 4. MAXIMUM STANDARD AUTOMOBILE COST For purposes of computing the allowance under a FAVR plan, the standard automobile cost may not exceed $28,100 for automobiles (excluding trucks and vans) or $29,900 for trucks and vans. See section 6.02(6) of Rev. Proc. 2010-51. SECTION 5. EFFECTIVE DATE This notice is effective for (1) deductible transportation expenses paid or incurred on or after January 1, 2013, and (2) mileage allowances or reimbursements paid to an employee or to a charitable volunteer (a) on or after January 1, 2013, and (b) for transportation expenses the employee or charitable volunteer pays or incurs on or after January 1, 2013. SECTION 6. EFFECT ON OTHER DOCUMENTS Notice 2012-1 is superseded. DRAFTING INFORMATION The principal author of this notice is Bernard P. Harvey of the Office of Associate Chief Counsel (Income Tax and Accounting). For further information on this notice contact Bernard P. Harvey on (202) 622-4930 (not a toll-free call).
Notice 2012-73 PURPOSE This notice alerts taxpayers that the Internal Revenue Service and the Treasury Department expect to issue final regulations regarding the deduction and capitalization of expenditures related to tangible property in 2013, and that the Service and the Treasury Department anticipate that the final regulations will contain changes from the temporary regulations (T.D. 9564, 76 Fed. Reg. 81060-01 [2012-14 I.R.B. 614]). The Service and the Treasury Department anticipate that the final regulations will apply to taxable years beginning on or after January 1, 2014, and will permit taxpayers to apply the final regulations to taxable years beginning on or after January 1, 2012. This Notice also advises taxpayers that shortly after publication of this Notice the Service and the Treasury Department will publish in the Federal Register a Treasury Decision amending the temporary regulations to apply to taxable years beginning on or after January 1, 2014, while permitting taxpayers to apply the temporary regulations for taxable years beginning on or after January 1, 2012, and before the applicability date of the final regulations. BACKGROUND On March 10, 2008, the Service and the Treasury Department issued proposed regulations regarding the deduction and capitalization of expenditures related to tangible property (2008 proposed regulations) in the Federal Register (REG-168745-03, 73 Fed. Reg. 12838-01 [2008-18 I.R.B. 871]). The Service and the Treasury Department received numerous written comments on the 2008 proposed regulations and held a public hearing on June 24, 2008. On December 27, 2011, after considering the written comments and the statements at the public hearing, the Service and the Treasury Department published temporary regulations regarding the deduction and capitalization of expenditures related to tangible property in the Federal Register (T.D. 9564). The Service and the Treasury Department also withdrew the 2008 proposed regulations and published proposed regulations (REG-168745-03, 76 FR 81128-01 [2012-14 I.R.B. 718]) (the 2011 proposed regulations), which cross-referenced the text of the temporary regulations. The temporary regulations generally apply to taxable years beginning on or after January 1, 2012. The Service and the Treasury Department received numerous written comments on the 2011 proposed regulations and held a public hearing on May 9, 2012. The Service and the Treasury Department are considering the written comments received as well as the statements from the public hearing. DISCUSSION In 2013, the Service and the Treasury Department expect to publish final regulations on the tax treatment of amounts paid to acquire, produce, or improve tangible property under sections 162 and 263(a), and on the accounting for, and disposition of, property subject to section 168. The Service and the Treasury Department expect the final regulations to apply to taxable years beginning on or after January 1, 2014, and to permit taxpayers to apply the provisions of the final regulations to taxable years beginning on or after January 1, 2012. Recognizing that taxpayers are expending resources to comply with the temporary regulations, the Service and the Treasury Department are notifying taxpayers that certain sections of the temporary regulations, including the sections listed below, may be revised in a manner that might affect, and in certain cases simplify, taxpayers’ implementation of the rules when the regulations are issued in final form. • De Minimis Rule: § 1.263(a)-2T(g); • Dispositions: §§ 1.168(i)-1T and 1.168(i)-8T; and • Safe Harbor for Routine Maintenance: § 1.263(a)-3T(g). The revisions being contemplated by the Service and the Treasury Department take into consideration all comments received, including comments requesting relief for small businesses. Shortly after publication of this Notice, the Service and the Treasury Department will publish in the Federal Register a Treasury Decision amending the temporary regulations to apply to taxable years beginning on or after January 1, 2014, while permitting taxpayers to choose to apply the temporary regulations to taxable years beginning on or after January 1, 2012, and before the applicability date of the final regulations. Taxpayers choosing to apply the provisions of the temporary regulations to taxable years beginning on or after January 1, 2012, and before the applicability date of the final regulations may continue to obtain the automatic consent of the Commissioner of Internal Revenue to change their methods of accounting under Revenue Procedures 2012-19, 2012-14 I.R.B. 689, and 2012-20, 2012-14 I.R.B. 700. For taxpayers choosing to apply the provisions of the final regulations to taxable years beginning on or after January 1, 2012, the Service and the Treasury Department expect to publish procedures for obtaining automatic consent to change a method of accounting when the final regulations are published. CONTACT INFORMATION For further information concerning this notice, contact Merrill D. Feldstein or Alan S. Williams, Office of Associate Chief Counsel (Income Tax & Accounting), (202) 622-4950 (not a toll-free call). Thank you for subscribing to e-News for Tax Professionals an IRS e-mail service. If you have a specific concern about your client's tax situation, call the IRS Practitioner Priority Service 1-866-860-4259. This message was distributed automatically from the mailing list e-News for Tax Professionals. Please Do Not Reply To This Message To subscribe to or unsubscribe from another list, please go to the e-News Subscriptions page on the IRS Web site. |
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