Forvis Mazars Provides Information on Hurricane Helene & Disaster Relief
The devastation caused by Hurricane Helene has prompted President Joe Biden to approve emergency declarations in Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee, and Virginia. Forvis Mazars wants to help victims understand some of their options that can help rebuild their lives and their livelihoods. Our professionals are available and willing to help you navigate this turbulent time.
Tax Filing & Payment Deadlines Extended
On October 4, 2024, we released an alert detailing the immediate relief the IRS announced postponing deadlines for tax filings and tax payments to May 1, 2025. This includes relief for taxpayers whose tax preparer or records are in the designated disaster areas. Please see the alert for more details.
Forthcoming Forvis Mazars Navigation on Casualty Loss Deductions & Crowdfunding Campaigns
Casualty losses for personal property, real estate, and business property related to federally declared disasters, such as Hurricane Helene, may be deductible for individuals and businesses. The rules are nuanced, so be on the lookout for a soon-to-be-released FORsights™ with information on how the rules can be applied and possibly benefit you.
In the aftermath of these disasters, crowdfunding campaigns tend to materialize to provide fast and convenient ways to support those in need. In another coming FORsights, we intended to provide insight on the tax benefits or detriments to using or contributing to a crowdfunding campaign whether you are an individual or business.
For Business Owners: Nontaxable Disaster Relief Payments & SBA Loans
For employers, we direct you to our FORsights discussing Section 139 disaster relief payments that can be made to employees. These payments are not subject to income tax for the employee while also being tax-deductible for the employer. The payments also are not subject to payroll taxes. This can be a valuable way for employers to support their employees in a tax-advantaged way during a large-scale crisis.
Also, the U.S. Small Business Administration (SBA) provides disaster assistance in the form of loans to businesses and nonprofits. The SBA offers two primary types of business loans:
- Business physical disaster loans provide up to $2 million to cover repairs or replacements of disaster losses not fully covered by insurance, such as buildings, machinery, equipment, fixtures, inventory, and leasehold improvements. This loan is available to businesses or nonprofits of any size. Businesses may also apply for mitigation assistance in the form of a 20% increase in the loan award to make improvements that help reduce the risk of future property damage.
- Economic Injury Disaster Loans (EIDLs) provide working capital to help small businesses meet necessary operating financial obligations that could have been met had the disaster not occurred.
Companies can qualify for both types of loans provided they meet the eligibility requirements. The SBA allows online applications to be submitted at the MySBA Loan Portal. There is also a Disaster Assistance Customer Service Center that can be reached by phone at 800.659.2955 for more information.
FEMA Recovery Resource Roadmap
FEMA has provided an interactive Recovery Resource Roadmap to identify funding sources available to applicants based on the type of resources they are looking for, i.e., economic, housing, health, etc., and recovery challenges, i.e., business resumption, cash flow and capital access, etc. This intuitive tool can help you identify which resources are out there and which may best fit your circumstances.
Lately on the Hill
Vice Presidential Candidates Engage in Debate, Reiterating Economic & Tax Proposals
Last Tuesday, vice presidential candidates Senator JD Vance and Minnesota Governor Tim Walz faced off in a debate, touching on economic and tax campaign policies. The debaters largely reiterated their economic and tax platforms without providing any new details.
When asked about their respective tax proposals, the moderators cited a study1 by Penn Wharton, estimating that the Harris/Walz and Trump/Vance proposals would increase the deficit by $1.2 trillion and $5.8 trillion, respectively, over the next 10 years and asked the candidates how the tax proposals were to be paid for.
Walz responded by emphasizing campaign pledges to provide down payment assistance for housing, a $6,000 newborn child tax credit, and allowing $50,000 startup expenses for new businesses before answering the question, “We’ll just ask the wealthiest to pay their fair share. When you do that, our system works best.”
Vance responded by touting the Tax Cuts and Jobs Act of 2017, arguing that it benefited “middle class and working-class Americans.” Later in the debate, Vance talked about the “heart” of the campaign’s economic plan, describing tax cuts for American workers and families, tax cuts for businesses that operate in the U.S., and penalizing companies that send operations overseas. Vance connected “this additional revenue with higher economic growth.”
The penalties would likely come in the form of tariffs, which the Trump/Vance campaign has proposed as a revenue generator to offset tax breaks, while the Harris/Walz campaign has described tariffs as a “national sales tax.” The president has a fairly broad ability to implement tariffs; however, the asserted revenue generated by them cannot be used by the Joint Committee on Taxation when estimating the cost of proposed tax legislation unless they are to be enacted by Congress.
The Judicial Report
A related-party partnership defends its Section 743(b) basis adjustment that the Commissioner calls a “sham.” Otay Project LP v. Commissioner, No. 6819-20.
A partnership within a family-owned real estate enterprise is disputing an IRS disallowance of a $867 million basis adjustment under §743(b). In a pretrial memo filed by Otay Project LP in the Tax Court, arguments include the express statutory language of the code section and that the IRS cannot invoke the economic substance doctrine.
Section 743(b) basis adjustments are made when a partner’s interest in a partnership is sold or transferred, eliminating the disparity between inside and outside basis thereby preventing duplication of gains. The adjustment is common among partnerships and often results in significant tax deductions. A ruling in favor of the IRS could have widespread consequences for taxpayers who take advantage of such adjustments.
In June, the IRS released an array of guidance targeting certain basis-shifting transactions, including certain transactions resulting in §743(b) adjustments, utilized by partnerships owned by related parties. The IRS asserts that these transactions inflate the basis of assets and, in turn, increase cost recovery deductions or reduce gains on the sale of assets without the presence of any material economic substance other than avoiding federal income tax.
The trial is scheduled to begin on October 15, 2024.
From the Treasury & IRS
Tax Credit & Partnership Final Regulations Intended for 2024 Release
Final regulations on several clean energy credits are set for release before year’s end, according to Aviva Aron-Dine, the Treasury’s acting assistant secretary for tax policy, during a call with reporters. The Inflation Reduction Act (IRA) credits intended to be finalized include: §45Y and §48E clean electricity production and investment credits, §48 investment tax credit, §45X advanced manufacturing production credit, and §45V clean hydrogen production credit.
Aron-Dine indicated that taxpayers will have to wait longer, without a definitive timeline, for guidance related to other clean energy credits, including the §45U zero-emission nuclear power production credit, §45W qualified commercial clean vehicle credit, and §45Z credit for alternative fuel production.
Final regulations intended for release before the end of the year also include rules for the low-income communities bonus credit program and the election under §761 out of partnership tax status.
Released Guidance
Final regulations (T.D. 10007) identify certain syndicated conservation easement transactions as “listed transactions” under §§6111 and 6112. As a listed transaction, disclosures must be filed with the IRS by material advisors and certain participants.
Revenue Ruling 2024-22 provides a determination that Québec, Canada’s Bourse de Montréal (MX), is a qualified exchange under §1256(g)(7)(C).
Revenue Ruling 2024-23 provides a determination that Germany’s European Energy Exchange is a qualified exchange under §1256(g)(7)(C).
Notice 2024-70 extends the replacement period for ranchers and farmers who sold livestock due to droughts in certain counties in 41 states and other locations during the 12 months that ended August 31, 2024. Section 1033(e) qualifies such sales as involuntary conversions eligible for gain nonrecognition when the property is replaced in a certain time frame. The relief extends the replacement period for those that were scheduled to expire at the end of 2024 until the end of 2025.
Notice 2024-72 provides relief for individuals and businesses affected by attacks in Israel. This notice also postpones similar relief provisions that were originally postponed in Notice 2023-71. Affected taxpayers have until September 30, 2025 to file tax returns, make tax payments, and perform certain other tax-related actions.
Notice 2024-73 provides guidance related to the nondiscrimination rules under §403(b)(12) concerning the ERISA long-term, part-time employee rules under a §403(b) plan.
IR-2024-247 provides information on the IRS’ Independent Office of Appeals’ new pilot program for “Corporate Group Mailboxes,” which large businesses with multiple representatives can use to communicate and share records with the representative assigned to their case. The pilot will run from September 30, 2024 through March 31, 2025.
IR-2024-249 requests public comments and has released a new draft Form 7217, “Partner’s Report of Property Distributed by a Partnership.” The form will be applicable to the 2024 tax year and will be used to report a partner’s distribution of property and its basis.
IR-2024-250 announces relief for individuals and businesses affected by severe storms, tornadoes, straight-line winds, and flooding that began on July 13, 2024 in certain counties of Illinois. These taxpayers have until February 3, 2025 to file tax returns and make tax payments.
IR-2024-253 announces relief for individuals and businesses affected by Hurricane Helene in Alabama, Georgia, North Carolina, South Carolina, and in certain counties and cities of Florida, Tennessee, and Virginia. These taxpayers have until May 1, 2025 to file tax returns and make tax payments.
IR-2024-254 grants penalty relief for sales or use of dyed diesel fuel in Alabama, Georgia, North Carolina, South Carolina, and in certain counties and cities of Florida, Tennessee, and Virginia due to Hurricane Helene. The relief is retroactive to September 26, 2024 and applies through October 15, 2024.
IR-2024-256 announces relief for individuals and businesses affected by wildfires that began on June 22, 2024 in the Confederated Tribes and Bands of the Yakama Nation in Washington state. These taxpayers have until February 3, 2025 to file tax returns and make tax payments.
- 1 Guide to the 2024 Presidential Candidates’ Policy Proposals – Penn Wharton Budget Model, upenn.edu.